by Wolf Richter
Credit bubble reflates. PE firms back at it. Investors go blind.
“Leveraged loans” that banks extend to junk-rated over-leveraged companies are too risky to keep on their books. They sell them to institutional investors. Or they slice and dice them and repackage them into Collateralized Loan Obligations (CLOs) and sell those to institutional investors. Leveraged loans trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them.