2019 Golden Turkey Awards

Dechert LLP
Contact

Dechert LLP

As is our tradition here at Crunched Credit, each year, about this time, we award our Golden Turkey Awards.  Once again, I must say that we are utterly blessed with so many worthy candidates. The truly deserving have once again wrangled with vision and astounding persistence to earn a spot on our acclaimed list.  To those of you who we must disappoint, please accept our sincerest apologies. We recognize and applaud the half-witted things that you did so breathtakingly well, just not as well as this year’s winners. There is always next year!

So, as we get ready for the season of cheer, let’s all take a moment of silence to pour one out for our 2019 winners:

The Self-Inflicted Wound Award… goes to Killing LIBOR.  This hot mess has already gotten our attention here at CrunchedCredit.  Read our recent commentary, Killing LIBOR, a Victory for Irrational Rectitude if you really want to marinate in outrage.  It makes the top of our list because of the breathtaking idiocy of disrupting a $350 trillion global finance market because we finally noticed and were outraged by something which has been true, and we knew had been true, since the inception of LIBOR (There’s gambling going on here?  I’m shocked, shocked!).  LIBOR is a made up rate, folks; the rate at which big banks would borrow if they did borrow, except they don’t borrow.  It’s a rate supported by very few underlying real transactions and we’ve been good with that for 30+ years.  And then we discovered a couple of British bakers diddling the rate for their own pecuniary benefit and lost our minds.  Punish the bankers?  Sure, but while we’re at it, let’s punish the entire market!  On the dopy scale, that’s right up there with the Great Leap Forward, 7th Earl of Cardigan (perhaps a better sweater than soldier), telling his light brigade, “Hey chaps, let’s go charge those pesky cannons, how hard can that be?” or, whatever the hell they were thinking in St. Petersburg when they put Rasputin in charge.  What a mess.  Now we’re going to have to transfer billions and billions of dollars of financial products from legacy LIBOR to this new rate, cooked up by the ARRC, known as SOFR.  Worse, we’re replacing a rate in which we have all been comfortable pricing financial assets for decades, because it was perceived to contain a baseline of macroeconomic risk, to a riskless Treasury repo rate that pairs poorly with most financial products.  It’s not Y2K, and for the avoidance of doubt as the Brits (an Award winner in their own right!) might say, I’m not talking my book.

The Dysfunction Award… goes to, as it does every year, our national government.  Has it been getting worse?  Name-calling and vilification from both sides of the aisle has actually become the only thing our gloriously elected representatives seemingly can do well.  The threat of revanchist China, the trade war, the middle east, the North American Free Trade Treaty, the deficit, the budget, tax and education policy, infrastructure and all those other pesky things that governments are supposed to do, remain undone and there is little prospect that Washington will get back to business.  As our recent post The Calamity of the Weaponized Narrative contends, this transcendence of vilification over actually doing anything can’t end well.

The Hey, I’m Still Impotent…er… Important Award… goes to the United Kingdom (with a very close second place finish by the European Union).  The sun long ago set on the British Empire when everything they did, whether for good or ill, was consequential.  But, looky, looky, they can still make a world class mess out of things, can’t they?  BREXIT.  I could make an argument that decoupling the United Kingdom (to the extent there still is a United Kingdom) from the dysfunctional polity of Europe and its Department of motor vehicle quality government in Brussels, might be, in the long run a good thing (but we’re all dead in the long run, right?), but what is incontrovertible is that they are making a hash of it in the here and now.  Hope it all works out, but the world needs another shock to the efficient operation of financial markets right now like it needs a social disease, but let’s not just blame our friends the Brits.  The European Union also is complicit in this mess and neither side is entitled to anything other than derision for how they have gotten to this current state of affairs.  Okay, the Europeans are pouty because the Brits started it, and I get that, but be adults here and get over it.  Isn’t there a lingering concern out there that maybe the European Union just doesn’t work anymore?  A zombie construct staggering after an implausible vision?

The Why Don’t You Like Me? Award… goes to the Financial Account Standards Board (FASB).  This group of academic gnomes sitting in leafy Wilton is perhaps the single greatest reason that no one can understand a financial statement anymore.  It’s a place where vision trumps practical utility and there is perhaps no better example of that than the FASB’s current championing of the Current Expected Credit Loss (CECL) standard set to be implemented beginning in 2021.  CECL is based on the beautiful but flawed notion that the current incurred loss model of accounting for the performance of financial assets where losses are booked only when it’s apparent that losses will be incurred, is dangerous and contributed to the failings of the Great Recession.  The answer?  It’s simple, isn’t it?  Book a loss when you make a loan.  Huh?  You can’t even really say that without a bit of an eye roll, can you?   Come on, I’m challenging you.  A silly idea at best, an unintentional pro-cyclical idea at worst and an idea whose implementation will cost a gazillion dollars.  Maybe it’ll employ a lot of accountants and perhaps that’s the actual point here.  See CrunchedCredit’s defenestration of this silly rule in Beany and CECL.

Dr. Doolittle’s Pushmi Pullyu Award… goes to the Federal Reserve (and we award this with some sympathy).  For those of you bereft of children or grandchildren, Dr. Doolittle’s Pushmi Pullyu was an animal with a head at both ends.  Which way is forward?  We’re certainly addicted to the Fed put.  So every time a governor speaks, mutters, winks or is flatulent, the market moves.  That itself is a horrible burden and materially a new thing.  On the other hand, how would you like to be Chairman Powell getting Twittered by the White House every other day?  Can’t be fun, can it?  Who knows whether the Fed was right or wrong when they hiked Fed funds in late 2018, and then rapidly reversed course and lowered it in 2019.  I certainly don’t know what’s going on and I’m more that somewhat concerned that in their little Ph.D. burdened heart of hearts, they don’t either, and therein lies my sympathy.  I don’t think anyone knows what’s happening to this economy any more, as all the traditional verities have broken down and Monday, Wednesday and Friday, we’re on the cusp of a recession; on Tuesday or Thursday, we’re about to have 3 more years of glorious expansion.  And those poor sods have to publically put a stick in the ground every other month.  Opportunities for embarrassment are manifest.  Data dependent?  Data bedazzled?  Maybe just data confused.

The Please Be the Next Y2K Award… goes to the incredibly random yield curve.  OMG – the yield curve has inverted.  Doom is at hand.  Really?  One day this past summer when the curve first inverted, the market sold off 800 points.  What was that about?  Since the economic consensus is that an inverted yield curve merely indicates a recession is likely within the next 12-24 months, what possible sense was there to the markets selling off the day it was announced?  AI run wild?  The Borg?  By the way, we at CrunchedCredit have sort of figured out there is a recession coming soon (how about that for insightful) in any event.  The next recession has been two years away for the past six years, and let’s be clear, we will have a recession.  But when?  In any event, the yield curve has now uninverted and there’s more than a passing suspicion among the economic consigliere that the inverted curve may have lost its predictive mojo.  An inverted yield curve has preceded every recession in the past 60 years.  It’s also predicted 12 out of the last 8.  This one is Y2K.

The Wicked Witch of the West Award… goes to the incredibly shrinking conduit CMBS market.  It’s the ice cube in the broken freezer.  From a 2008 high of almost $190 billion, and following a complete collapse in the muggy environs of the Great Recession, it seems the conduit market can’t get out of second gear.  With $40 billion in 2018 and an expected kick ass total of $46 to $48 billion in 2019, it might be too soon to conclude that the business has been entirely marginalized, but the trend line is not great.  I’ve said this before and I’ll say it again; the borrowers don’t like us much.  The CMBS industry was born to provide higher proceeds on a non-recourse basis to B and C properties in secondary and tertiary markets and the pain of dealing with the structural crankiness of the CMBS model was offset against the benefits of getting a deal done which might not otherwise get done and done with higher proceeds and at lower cost.  When that’s no longer the value proposition, the cranky clunky and annoying structure of the conduit market is all people see.  Everyone knows the model needs to change, and yet we don’t get it done.  Oh, sure, we nibble around the edges of the servicing paradigm, but it’s fundamentally not working.  We wrote about this back in It’s Time to Fix Securitization: Are We Dinosaurs Staring Into the Tar Pit? as a clarion call to get after it and fix it.  Crickets… oh, well.  I do CRE CLOs.

The Frankenstein’s Monster Award… goes to Risk Retention.  Another victory of a good theory over market realities.  This was supposed to make the world safe for securitization, which had become a dirty word during the Great Recession.  If the securitizers had to eat their own cooking, the cooking would be better and all would be well.  Didn’t work.  Never could.  Never would.  Did it change behavior?  Certainly there is no data to support such a sunny conclusion.  Has it cost a great deal of money?  Boy oh boy.  The amount of energy (legal fees), management attention and structural pretzel making that the risk retention rules have birthed is extraordinary.  The problems associated with this dopey idea are legion, but let’s just start with this notion of why in the world is it a really good idea that our prudentially regulated banks should end up holding entirely illiquid assets?  How is that in any rational universe a good idea?  And, by the way, why hasn’t someone ginned up enough courage to go to the regulators and say could you fix what’s wrong here?  The fact that we haven’t is a story in and of itself.

The Rorschach Test Award… goes to Donald J. Trump and Congressman Adam Schiff for each being broadly loathed by almost half the country.  Extraordinary.  This is one of those Man in the High Castle things where alternate universes sit side by side, each with their own soundtracks of Fox News and CNN.  Politics has always been personal, but we’re sort of at the point where the lovers and loathers know very little about what policies these men actually champion (to the extent they do – and that’s a separate problem); they just hate the sonofabitch.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP
Contact
more
less

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.