In the classic comedic bit from the early 1960’s, Mel Brooks, as a two thousand year old man, is asked what he thought mankind’s greatest invention was. “Saran Wrap,” he answers promptly. Not the discovery of space? “That was good,” he admits.

We’re not sure what the venerable Mr. Brooks would say today if posed the same question, but we would cast our vote for the CLO.

OK, maybe collateralized loan obligations haven’t had the same historic impact as penicillin, microchips, or PEZ dispensers, but they have certainly transformed the leveraged loan landscape.

As our Chart of the Week shows, the shift of “risky assets” from bank balance sheets to the shadow banking universe is nothing new. While Volcker and risk retention rules are the latest headwinds to plague regulated institutions, this migration has been going on for twenty years.