Alternative Asset Managers Fueling Credit Bubble, US Regulator Warns

Tyler Durden's picture

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

This isn’t the first time in recent months we have heard serious warnings of a new and potentially quite dangerous credit bubble. Recall back in September, when Blackstone’s head of private equity proclaimed that “we are in the middle of an epic credit bubble... the good times will not last forever” Well they should know, because according to the article below from Reuters, Blackstone and many other private equity firms are the “alternative asset managers” directly responsible for its creation.

I don’t know about you, but I just can’t wait for another bankster bailout!

From Reuters:

(Reuters) – A U.S. bank regulator is warning about the dangers of banks and alternative asset managers working together to do risky deals and get around rules amid concerns about a possible bubble in junk-rated loans to companies.


The Office of the Comptroller of the Currency has already told banks to avoid some of the riskiest junk loans to companies, but is alarmed that banks may still do such deals by sharing some of the risk with asset managers.

These clowns never learn, and why should they when society just bails them out from their stupidity.

“We do not see any benefit to banks working with alternative asset managers or shadow banks to skirt the regulation and continue to have weak deals flooding markets,” said Martin Pfinsgraff, senior deputy comptroller for large bank supervision at the OCC, in a statement in response to questions from Reuters.


Among the investors in alternative asset managers are pension funds that have funding issues of their own, he said.


“Transferring future losses from banks to pension funds does not aid long-term financial stability for the U.S. economy,” he added.

No, but it’s a great way to transfer risk to the muppets.

Regulators are eyeing a number of risks to the financial system as they aim to prevent a repeat of the mortgage bubble that spurred the 2008-2009 financial crisis. They are not comfortable with different players sharing risk if the total level of risk in the system is getting dangerously high.


That may be happening with leveraged loan issuance, which hit a record $1.14 trillion in the U.S. in 2013, up 72 percent from the year before, according to Thomson Reuters Loan Pricing Corp (LPC).


A measure of the riskiness of these loans has also been rising – the average size of the debt for companies taking these loans in 2013 was 6.21 times a form of cash flow known as EBITDA or earnings before interest, tax, depreciation and amortization, up from 5.86 times in 2012 and the highest since 2007, LPC said.

Have fun cleaning up the mess again serfs.

Full article here.

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TeamDepends's picture

Come on ye force majeur, as we are woefully tired of this charade.

Jack's Digestible Ideas's picture

I'm sad that anything big will have to happen on Monday. However, I have waited 7 years, so I suppose 3 more days won't kill me.

NoDebt's picture

NOW the regulators are worried?  NOW??

Jeez, guys, did you just get back from your vacation in 1995 or something?

TeamDepends's picture

Love it!  Perhaps this will be the day, then they will go ahead and pull the Super Bowl false-flag (come on, you haven't heard about this?) so that THAT will dominate the news-readers teleprompter loop Monday morn, and not Black Friday.  Good times!

Bill - Yes That Bill's picture


You're a friggin' nut...

(Unless of course your prediction/warning/claim turns out to come true... in which case *I* am the friggin' moron.)

new game's picture

looks as though we have been to this point in the chanel three time recently.

what makes this different? taper? fx roiled? sentiment? crapy numbers?

pomo needed NOW!

Pseudo Anonym's picture

re your (wlsh2.png) - elliott waves are bullshit.  look at these geniuses and their wave counting and tell me if they are just a bit off:

Spastica Rex's picture

Animal entrails and tea leaves.

Jack's Digestible Ideas's picture

My oracle bones came in the mail just in time for the New Year.

StandardDeviant's picture

Epicycles; wheels within wheels.

Oh, and non-falsifiable to boot.  Try to get an EW true believer to admit that a given chart doesn't describe one EW pattern or another.  They'll find a way to fit the curve; count on it.

TeamDepends's picture

Alternative asset managers makin' bacon?!?

Dr. Engali's picture

Piggy porn. I thought I was on the SEC's web site for a minute.

Kirk2NCC1701's picture

Says one pig to the other:  "I got your back.  I'm right behind you."

Cognitive Dissonance's picture

If you are an asset manager of serious money there are only two things you can do in an insane economic system such as we have today.

Either dance to the music already playing or create the music others will dance to.

cossack55's picture

I am a manager with slightly more than $31.67 AUM, and even I wear noise-cancelling headphones.

MillionDollarBonus_'s picture

If anyone needs a bailout it's the silverbugz. But since they don't contribute anything to society our government is unlikely to condsider them. 

Spastica Rex's picture

You're dreaming.

Oh, to have Harry Wanger back.

Dr. Engali's picture

Paaallleeeeeasee bail me out so I can buy moar silver.

new game's picture


tyler, is there a chance for an ignore feature?

buzzsaw99's picture

what pfucking alternate universe is pfinsgraff from? it's called business as usual bytchez. ...senior deputy comptroller for large bank supervision... FUCKING LMFAO!!

yogibear's picture

And housing bubble 2.0 on it's way to being pricked.

Obama won't get enough suckers to go for his MyRa (Fed's dump $4 trillion balance sheet treasuries on people).

Next Obama's 401K/IRA thievery, outright taking 10 or20%.

NoWayJose's picture

The problem, of course, is that the asset managers have taken over the paper markets and are able to use massively leveraged products to control prices.  Commodity markets need to return to physical delivery - which is the valid reason to have commodity markets, and which is also the valid reason for airlines and farmers and others to 'hedge' their specific commodity.  Physical delivery is the only real price.

Son of Loki's picture

My banker says he needs a new Hummer...the tires are wearing out on his 2-year old one.

...not to mention his yacht....

StychoKiller's picture

D@mn, and those yacht tires don't come cheep... :>D

Calculus99's picture

A mate of mine has been a heavy buyer in quality Brandy, says it 'never goes down, only up'. That's true if you take the last few decades but I keep asking him to investigate the EXPONENTIAL to see if 15%-20% annual gains can continue for the next few decades.

If he did that, of course he won't, he'd soon realise that if things continue as they have it's not going to be too long for a good bottle to cost half the average UK salary...

Same with London property prices, it's the EXPONENTIAL that's going to shatter many dreams, unless of course you're old fashioned and realise that first and foremost a property is a place to live.


"The greatest shortcoming of the human race is our inability to understand the exponential function."

Albert Bartlett

viahj's picture

the thing about investing in brandy, you can drink your losses

youngman's picture

I said years ago that pension funds would chase returns...they have to..if they projet 8% growth in their models..that have to get it they make this junk up ..and buy it....but they they keep their job and get a bonus at the end of the quarter..because they show a 8% return

PT's picture

I knew that my superannuation would be fucked the instant they made it compulsory.  That's all I needed to know - that it was made compulsory.

Its Only Rock N Roll's picture

BKLN and any of your favorite publicly traded BDC's are some good shorts right now. 



Dewey Cheatum Howe's picture

I guess we are at the point in the story where the rest of the crowd finally catches up and goes oh fuck when they finally pull their heads out their asses. This usually happens right before everything really goes to shit.

Steve in Greensboro's picture

The Fed has been reflating the equity bubble and depressing interest rates since 2008 and now asset bubbles are the fault of "banks and alternative asset managers"?  You must be kidding.

Sardonicus's picture

big crash will make a 2% return on a MyRA look good....especially if you can't lose what you put in.  Wait until they let you contribute your food stamps your MyRA!

falak pema's picture

The case for the bulls summarised in one video at Davos :

Video - Davos 2014: The U.S. Economy Will Suprise Many in 2014 -

300 000 Jobs per month creation all thru 2014....Berkeley Professor Eichengreen clairons his horn "its all GREEN". 

Let see how that plays out!