Economics
Powell Says Leveraged Lending Isn't Posing a Crash Threat
- Powell notes crisis similarities, but says system is strong
- Fed needs to know who is investing in all the CLOs, he says
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Federal Reserve Chairman Jerome Powell agrees that the torrid market in high-risk corporate loans looks a lot like the mortgage industry in the run-up to the subprime crisis, but he says U.S. regulators are watching closely this time around and the financial system is better shielded.
In a sweeping analysis of leveraged lending Powell delivered a response to critics who argue that the Fed is asleep at the switch as another catastrophe looms. Despite obvious warning signs in these risky business loans, the central bank chairman said, the $1.2 trillion market doesn’t represent a current threat to the financial system.