Promoting Job Creation and Reducing Small Business Burdens Act

Floor Speech

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Mr. SCHWEIKERT. Mr. Speaker, I will try to speak fast. I have missed
all of you in my couple years' absence.

Have you ever had a moment where you are heading towards the
microphone and you are starting to wonder if some of the debate you
have been just listening to is a little bit tongue-in-cheek?

Can we do a quick explanation of CLOs, these collateralized loans? It
is commercial paper. That is what the vast majority of it is. It has
been around for a very long time.

Now, here is the absurdity that is coming in. If I have commercial
paper that is made up of marginal loans, 2 years from now the bank
continues to get to own that. But if that paper, that collateralized
managed debt actually has a covenant in it that, if something goes
wrong, I get to reach in and grab some of the equity of the company,
all of a sudden they can't hold that. So the more secure CLOs you don't
get to own in 2 years; the more marginal you do get to keep on the
banks' books.

This is, first, absurd. But it is perfectly rational to say: Look,
why don't we take this part that expires in 2 years and push it out 2
more years so there can be an orderly unwinding of a fairly absurd
rule? But the rule is the rule.

So a lot of this debate around the CLOs, I am sorry, it is great
hyperbole, but it has almost nothing to do with what the actual product
does. And understand, over the last 20 years, CLOs that were AA or
higher, not a single instrument went bad.

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