When John Donne wrote the famous book, No Man is an Island, he most certainly wasn't thinking about residential mortgage credit.  But the idea of interconnectedness has universal applicability and lies at the heart of the SEC's newly released report titled "U.S. Credit Markets Interconnectedness and the Effects of the Covid-19 Economic Shock."  This report, issued on October 14, 2020, describes in detail the stresses experienced by the credit markets immediately following the shutdown of the US economy in early March 2020 in response to COVID-19.  The report is thorough and data driven.  It identifies a cohort of approximately $54 trillion of credit issued and outstanding in the US financial system at the end of 2019 and traces the flow of that credit through various intermediaries during the period of time studied by the report.  The data in the report supports a widely-held view that credit markets are interdependent, directly linked through a myriad of complex, interconnected transactions.

The report studies several different markets to illustrate their level of interconnectedness, namely, (i) short-term funding markets, (ii) corporate bond markets, (iii) leveraged loans and CLO markets, (iv) municipal securities markets, (v) residential mortgage markets and other consumer lending markets and (vi) the commercial mortgage markets.  With respect to each of these markets, the report examines COVID-19-induced stresses of different types, which fall into three categories.

Downloads –

Download Document 

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe - Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2020. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.