walkinwood
Thinks s/he gets paid by the post
I just read this article in the Atlantic. I'm not very knowledgeable about the complexities of our financial system, but this rang a few alarm bells.
Should it?
I hope it isn't behind a paywall.
https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/
Should it?
I hope it isn't behind a paywall.
https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/
And who owns a lot of CLOs? The big banks, of course. Oh, but they're rated AAA. Haven't we heard that before?After the housing crisis, subprime CDOs naturally fell out of favor. Demand shifted to a similar—and similarly risky—instrument, one that even has a similar name: the CLO, or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world. These are loans made to companies that have maxed out their borrowing and can no longer sell bonds directly to investors or qualify for a traditional bank loan. There are more than $1 trillion worth of leveraged loans currently outstanding. The majority are held in CLOs.