TOP OF THE AGENDA
Wait – Isn’t It Actually A Leveraged Borrowing Problem, Not A Leveraged Lending Problem?
Some have attributed leveraged lending as a source of macroeconomic risk and perhaps a potential future crisis. As the story goes, many American companies are overleveraged – that is, their debt levels exceed their net income by unhealthy amounts. As a result, the next recession will see more defaults than ordinary, with greater job losses and other economic effects. But if this is the problem, it is a borrowing problem, not a lending problem. Leaving aside whether that diagnosis is correct (and there are many reasons to believe it is not), the prescriptions being offered appear wildly inappropriate for the diagnosis. On June 4, the House Financial Service Committee Consumer Protection and Financial Institutions Subcommittee held a hearing on leveraged lending.
5 Stories Driving the Week
1. Federal Reserve Releases Stress Test Schedule
The Federal Reserve announced that it will release the results for the supervisory stress tests conducted as part of the Dodd Frank Act on June 21, and on June 27, it will release the results for the Comprehensive Capital Analysis Review. As a reminder, BPI previously published a blog showing that the Federal Reserve’s stress test scenario is much more severe than the 2007-2009 financial crisis.
2. Financial Stability Board Issues Report on Market Fragmentation
In Case You Missed It
|6/11/2019 — House Subcommittee Convenes Student Loans Hearing|
|6/11/2019 — House Financial Services Committee Holds Markup|
|6/12/2019 — Cato Hosts Financial Regulation Conference, FDIC Chairman McWilliams Speaks|
|6/20/2019 — House Subcommittee Holds Hearing on Proposals to Strengthen Securities Enforcement|
|6/20/2019 — House Financial Services Holds Board Diversity Hearing|
|11/19/2019 – 11/21/2019 — The Clearing House + BPI 2019 Annual Conference|