David Schweikert: “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…”

“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.”