November 2, 2021 - The Loan Syndications and Trading Association (LSTA) today issued the following statement regarding the Stop Wall Street Looting Act of 2021 introduced in Congress by Senator Elizabeth Warren (D-MA) on October 20, 2021:

The Stop Wall Street Looting Act of 2021 would re-impose “risk retention” on managers of collateralized loan obligations (CLOs), effectively reversing the 2018 decision of the U.S. Court of Appeals for the District of Columbia Circuit. When considering legislation to make changes to the corporate debt market, we encourage members of Congress and other policy makers to thoughtfully consider established market facts and documented data. Failure to recognize fact-based arguments could have profoundly negative economic consequences for the United States economy.

Among the facts:

• CLOs have performed well for over 30 years, including through the 2008 financial crisis and the Covid-19 pandemic.
• The interests of investors and CLO managers are fully aligned through the structure of CLOs. CLO managers do not reap excessive fees and the majority of their fees are only paid if investors get paid first.
• Regulators and the Government Accounting Office (GAO) have all concluded that neither syndicated loans nor CLOs are systemically risky.
• In ruling that CLO managers are not subject to risk retention (LSTA v. Securities and Exchange Commission), the U.S. Court of Appeals concluded that CLOs already achieved the goals sought by Congress at the time through the incentives and transparency already built into the CLO structure.
• Reimposing risk retention on managers is a solution in search of a problem and would add needless costs and friction to the ability of American companies to raise capital.
• The corporate loan market in the U.S. is vital to the nation’s economic well-being. The syndicated loan industry contributes over $2.7 trillion in economic output and employs over 10 million Americans – and generates economic activity in every Congressional district across the U.S., resulting in over $288 billion in federal and state tax revenue.
• The syndicated loan market provides more than $1.3 trillion in financing for American companies with millions of employees.