Remember the 2008 collapse? Our friends on Wall Street and their allies in the US Treasury have a new one in the works. In 2008 it was the Collateralized Debt Obligations (CDOs) that brought the economy down. This time it’s another new similar invented villain, Collateralized Loan Obligations (CLOs). They are very much like CDOs, but instead of home mortgage loans they involve leveraged loans made to troubled businesses whose debt burden is already maxed out CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world.
At present there is more than $1 trillion of leveraged loans outstanding. The majority are held in CLOs. Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin say they have managed to move the risk of leveraged loans outside the banking system as was done for CDOs, but that is a lie says this article.