US corporate debt could amplify economic downturn, Kaplan says


“Historically high” US corporate debt levels could amplify the severity of a downturn in the economy, Robert Kaplan, president of the Federal Reserve Bank of Dallas, says in an economic letter.

Kaplan warns that because non-bank investors and loan mutual funds collectively bought 80% of the securitised leveraged loan packages issued in 2018, a disruption to the creation of such packages could increase the likelihood that the leveraged loans remain on banks’ balance sheets.

He says this could

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