Fed's comments on risk-retention positive for CLOs, says Wells Fargo

Tuesday, November 09, 2010

In a research report published last week, Wells Fargo says that the newly released Federal Reserve study on risk retention is a positive development for the CLO market

Comment by: Anonymous. Posted 13 years ago [2010-11-10 00:48:52]

Based just on this description - without having read the Fed article - the logic seems lacking. Is the Fed saying that a bank selling a CLO deal knows that it's a "good" deal while another bank selling an ABS CDO knows it's a "bad" deal? So only the bank selling the latter need retain some risk? The other part about having a manager who benefits in fees from good performance is superfluous since most CDO types work like that.

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