Andy Barr: “I thank the gentleman from New Jersey, and I thank the gentleman from Massachusetts for his contribution to the debate.…”

“I thank the gentleman from New Jersey, and I thank the gentleman from Massachusetts for his contribution to the debate. It gives us an opportunity to actually analyze what exactly we are talking about here. We are not talking about the risky assets that were contributing factors to the financial crisis. If this were junk, as the gentleman from Massachusetts describes it to be, the default rate on CLOs would have been much higher over the last 20 years. But the default rate on CLOs over the last 20 years, including during the financial crisis, was less than half of 1 percent. Not one of the nearly 4,000 notes rated AAA or AA ever defaulted in CLOs. Part of the reason for this strong, durable performance of CLOs is because CLOs are very different from the troubled assets that fueled the financial crisis. CLOs are distinct because, number one, they are based on diverse assets, commercial loans that are well diversified across the industry. These are solid, diversified loans, and they are typically secured loans. Secondly, there is an alignment of interest between CLO investors and the CLO managers. The managers actually have skin in the game. Finally, third, there are significantly greater transparency features to CLOs and disclosure since the commercial loans here, the secured commercial loans, are issued by companies that report financial information on a regular basis to investors, and they are required to provide regular financial reports with the SEC.…”