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Wall Street Deaf to Federal Reserve Warnings on Leveraged Loans

May 1, 2019, 1:18 PM

U.S. regulators told banks and investors that it was OK to make riskier loans to companies. Now they’re having trouble reining in the excesses that resulted.

In the first quarter, banks and investors helped bring some of the highest debt levels of this decade to leveraged buyouts and other acquisitions. Lenders are letting companies aggressively massage measures of their profits when posting them for credit investors. And more and more lender protections are being watered down.

Those trends have some regulators worried. In December, Federal Reserve Governor Lael Brainard called out “a notable deterioration in underwriting standards” for borrowings...

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