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H.R. 4167, Restoring Proven Financing for American Employers Act 1 (May 2, 2014)

handle is hein.congrec/cbo1603 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE COST ESTIMATE May 2, 2014 H.R. 4167 Restoring Proven Financing for American Employers Act As ordered reported by the House Committee on Financial Services on March 14, 2014 H.R. 4167 would allow financial institutions to invest in debt securities known as collateralized loan obligations (CLOs) that include the ability to participate in the removal or replacement of an investment manager or advisor. Institutions also could hold any CLO issued in January 2014 for an additional two years. Enacting H.R. 4167 would affect direct spending and revenues; therefore, pay-as-you-go procedures apply. However, CBO estimates that those effects would not be significant over the next 10 years. Implementing this legislation would not affect discretionary spending. A CLO pools together business loans and passes the cash flows through to different classes of investors. Under current law, bank holding companies and insured depository institutions (hereafter referred to as banking entities) may not invest in CLOs issued or overseen by hedge funds or private equity firms if the investor has an ownership interest, including the ability to select or control managers. Federal rules exempt CLOs backed solely by loans from this restriction; however, if such CLOs contain bonds, equity interests, or other assets they would be disqualified from that exemption. Under current law, banking entities must divest impermissible CLOs by July 21, 2015. On April 7, 2014, the Federal Reserve announced that it would extend the compliance deadline by two years (to July 21, 2017) for CLOs issued before the end of calendar year 2013. H.R. 4167 would allow banking entities to hold CLOs in which investors can participate in the removal for cause and the selection for replacement of a manager or advisor. The legislation also would codify the Federal Reserve's plans to extend the compliance deadline for certain CLOs by two years and would expand the pool of eligible securities to include CiL~s issued in January 2014.

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