May 19, 2020 - The large and rapid decline in economic activity, and the equally large and rapid fiscal and monetary response, demonstrates the importance of advocacy in the LSTA’s mission. Critically, in a time when rescue programs are developed in days, we must be even more nimble.  To do so, the LSTA is implementing a “Rapid Response Advocacy Strategy”. We discuss the history and future of advocacy below.

The History: Prior to the 2008 financial crisis, the LSTA’s main focus was on documentation, data and operations. The association was born to regularize a nascent market whose benefits and flaws resulted from its innate flexibility. We focused on solving complex problems like standardizing trading documents, streamlining and shortening settlement cycles. We made progress, but never fully tamed the beast before the financial crisis nearly killed it. It was then that advocacy became a key element in the LSTA’s mission.  Intent on banning the business cycle – or at least flattening a different curve – Congress passed Dodd-Frank Act. This, in turn, created a host of complex and often counterproductive regulations, many presenting existential threats to nearly all our members. Advocacy for the asset class, for lenders, loan funds and CLOs became at least as important as the unresolved problems of documentation, operations and data.

Through efforts to educate and inform, the LSTA became a well-recognized and well-regarded presence in Washington. We have important dialog with leadership and staff at the key financial regulatory agencies and with members of Congress and their staff.

The Balancing Act: The pandemic aside, the diversity of our membership adds layers of complexity in managing our advocacy in a manner that is fair to all parties, even in a business as usual environment. For example, because of their like-minded members, the ICI (Investment Company Institute) or the BPI (Bank Policy Institute) can be more single-minded in their advocacy, both during a crisis and during normal times. In contrast, the LSTA always must be mindful of competing goals of members. To address this, we have established deliberate and methodical processes of our various committees.

The (Even More) Nimble Future: In a normal world, those committees have done a good job of threading the needle both in our general advocacy and in our judicial advocacy. But these are not normal times; it is not likely to be business as usual for quite a while. We must maintain governance and control of our advocacy efforts, but we must not waste time, while legislation and rule making is being made on a “war-time” footing. To manage our advocacy efforts we must create an enhanced, but streamlined, governance process that permits us to quickly consult with membership and receive feedback to add value and avoid missteps. To thread said needle, we asked the LSTA Board of Directors and the executive committee to designate or deputize members and their staff to work with LSTA staff on key issues as they emerge.

We hope for better times, but for the time being, hard work and attention to detail is our best defense.

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