The five regulatory agencies charged with implementation of the Volcker rule came under fire from U.S. legislators on Tuesday over the Volcker rule’s treatment of collateralized loan obligations (CLOs), an issue the regulators said was at the top of their list of unintended consequences. In more than three hours of testimony, the heads of the five agencies – the Federal Reserve, Office of the Comptroller of the Currency, Securities Exchange Commission, FDIC, and Commodities Futures Trading Commission – found themselves on the defensive over why CLOs were considered to be “covered funds” under the rule, and therefore, not allowed. CLOs often bundle together leveraged loans made to companies, but sometimes include other securities to help boost returns for investors. Members of the House panel argued that CLOs have the same characteristics as TruPS CDOs, which were exempted by the agencies in January after intense industry pressure. In response to the criticism from legislators,
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