On March 20, Sen. Elizabeth Warren, D-Mass., disclosed to certain news outlets that she had sent a letter, dated March 19, to Steven T. Mnuchin, secretary of the treasury, in his capacity as chair of the Financial Stability Oversight Council (the FSOC), requesting information about the leveraged lending market and the risks posed by leveraged loans in light of the deteriorating financial and economic conditions amid the spread of coronavirus disease 2019 (COVID-19). The FSOC is charged with identifying risks to the financial stability of the United States, promoting market discipline and responding to emerging risks to the stability of the United States’ financial system.
The information sought by Warren is (i) a description of how the FSOC is monitoring the risks associated with leveraged loans, particularly with respect to the rapidly deteriorating economic conditions; (ii) the FSOC’s assessment of risks to the financial system and the economy as a whole related to leveraged loans; (iii) the FSOC’s assessment of risks to individual industries that are exposed to leveraged loans and how these industries could be impacted if these loans were to fail; and (iv) data for 2020 and each of the next ten years on the volume and maturity dates of leveraged loans across different institution types and industries.
Warren requested delivery of this information to her by April 2.
The full text of Warren’s letter can be found here.