March 12, 2019 - Last Tuesday we informed members that we had submitted a letter to the editor at Bloomberg Opinion responding to Satyajit Das’s March 2 op-ed “The Bomb That Blew Up in 2008? There’s a New One.”

Over the next three days we went back and forth with Bloomberg editors on how best to publish the letter. We were finally informed Friday morning that the letter would, conditional on our approval, be published in the form copied below. We were also informed that the letter would be published only on the Bloomberg terminal.

While we were disappointed that the editor would not agree to publish the letter in its original form or on the public Bloomberg website where the original op-ed was published, we concluded that the letter as now written gave us the only chance of publication, which we greatly desired. This does not alter our opinion, as we originally asserted, that the article contained many factual errors, misleading observations, and erroneous conclusions.

The point-by-point rebuttal mentioned in the original note to members can still be found here.

To the editor:

Re: Satyajit Das’s column “The Bomb That Blew Up in 2008? There’s a New One” (March 2):

Das’s argument that collateralized loan obligations (CLOs) pose outsize danger to the economy contained misleading observations and conclusions.

For instance, Das noted that Bank of England Governor Mark Carney and former Federal Reserve Chair Janet Yellen have both “warned about potential risks,” but failed to note that Carney and Yellen have stated clearly that the financial system is presently robust enough to absorb a downturn in the leveraged loan market and that CLOs therefore do not pose a systemic risk to the economy.

Elsewhere, Das claims that the loans underlying CLOs “aren’t well-understood.” We disagree. Corporations whose loans underlie CLOs are highly transparent; issuers provide audited financial statements and regular updates to investors that offer a great deal of visibility into their financial health—a far cry from the opaque mortgages beneath the CDOs that preceded the financial crisis.

Perhaps Das’s interpretations would in themselves not be so harmful. But when they are used to draw the conclusion that a cyclical downturn could be amplified by CLOs—instruments that weathered the last financial crisis exceptionally well—creating contagion and causing another crisis, they should be highlighted and subjected to scrutiny.

Lee Shaiman
Executive Director
Loan Syndications & Trading Association

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