Posted by JumpCrisscross 2 hours ago
> The default rate among U.S. corporate borrowers of private credit rose to a record 9.2% in 2025
Emphasis added. Headline makes it sound like retail credit, not corporate specifically.
*Edit: Not misleading, just an unfamiliar term/usage from my perspective. I'm not a finance guy so didn't know the difference and assumed others wouldn't either. Mea culpa.
I'm not saying they are right. But it's like if you posted an article called "Python Is Eating the World" on a non-tech side and people got mad because they thought the article was about a wildlife emergency. Fair for them to be confused, but maybe not fair to accuse the title of being misleading (at least not intentionally).
I’m coming at this loaded with jargon, so excuse my blind spot, but why would the term private credit bring to mind anything to do with retail specifically?
(The term private credit in American—and, I believe, European—finance refers to “debt financing provided by non-bank lenders directly to companies or projects through privately negotiated agreements” [1].)
[1] https://corporatefinanceinstitute.com/resources/capital_mark...
If a layman is unfamiliar that "private credit" is about business debts, and therefore only has intuition via previous exposure to "private X" to guess what it might mean, it's not unreasonable to assume it's about consumer loans.
"private insurance" can be about retail consumer purchased health insurance outside of employer-sponsored group health plans
"private banking" is retail banking (for UHNW individuals)
But "private credit" ... doesn't fit the pattern above because "private" is an overloaded word.
Makes sense. Thanks. Private here is as in private versus public companies.
Yes.
It surprises me that most people would read "private credit" to mean "retail credit" by default, but I also come to this loaded with jargon so I guess would defer to others on this. But to be clear, the title is not misleading to anyone who has any familiarity with the financial markets.
Out of curiosity where do you primarily get your news?
A lot of the datacenter buildout has been financed with private credit [1].
> financial blackpilling
?
[1] https://www.bloomberg.com/news/articles/2026-02-02/the-3-tri...
someone not knowing the definition != misleading title
Definitely think we’re in for a rough year financial prospects wise, and doesn’t even feel like we recovered from the 2008 crash properly.
Instead everyone hates on Goldman Sachs. Sure, Goldman Sachs deserves hate, but of the big banks they were the _least_ guilty of the crash in 2008. Not saying they were saints, but in 2008 they were the least bad.
0: This list only covers banks, not non-banks like Countrywide Financial: https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_U...
> Obama promised to do it
The legislative produced Frank-Dodd...which Trump and Republicans later scaled back...
So that govt money went to the wealthy to buy up houses (Californians bought real estate in the Midwest as investments and it drove up housing prices along with small immigration to these states)
Farmers etc benefited from bailouts when they were doing very well. It was a large blunder.
Between the latter and the former I believe the former was a much smarter choice in the medium to long term.
The internet working didn't make the Dotcom bubble not happen. Investors don't know anything about the new investment space and most of them are going to get hosed eventually. It's going to happen, and it'll be bad for people who are betting on it not happening.
> A box of matmuls isnt going to solve any real problems, so far, as you point out- is can barely write software
Code monkey cope.
That's the scenario in which unemployment goes to 10%, home prices crash by 33%, the stock market halves and Treasuries trade at zero percent yield [2].
[1] https://www.mfaalts.org/industry-research/2025-fed-stress-te...
[2] https://www.federalreserve.gov/publications/2025-june-dodd-f...
The Fed is measuring the loss on bank loans to the private-credit lenders. A 10% portfolio loss shouldn't result in those lenders defaulting to their banks.
By my rough estimate, one can halve the portfolio loss rate to get the NFBI-to-bank loss rate. So a 10% portfolio loss means we're around a 5% expected long-run loss to the banks. Which is still weirdly high, so I feel like I must be missing something...
tick-tock, tick-tock, tick-tock...
> Private credit refers to loans provided to businesses by non-bank institutions—such as private equity firms, hedge funds, and alternative asset managers—rather than traditional banks .
Is that correct?
So if these companies go under does anyone care? If they go under are they a systemic risk to the economy like the banks in 2008 that got a taxpayer bailout?
From that newseltter:
> At the Financial Times, Jill Shah and Eric Platt report:
>JPMorgan Chase ... informed private credit lenders that it had marked down the value of certain loans in their portfolios, which serve as the collateral the funds use to borrow from the bank, according to people familiar with the matter. >...
>The loans that have been devalued are to software companies, which are seen as particularly vulnerable to the onset of AI. ...
From what i can tell the problem isn't that an individual who had cash to invest in a private (tech in this case) company goes down
the problem is that a company "private credit firms run retail-focused funds (“business development companies” or BDCs)" which took out a bunch of loans to invest in private tech companies is now having the underlying assets that they got those loans against (long term investments in private tech companies) valued lower.
the link im missing is what happens when people who also invested in BDCs want their money back, where their actual money is locked up in long term investments made to private tech companies, and their ability to get loans is now valued lower. I think this is called a "run" where if someone starts pulling money out, and ultimately you cant, then its a race to get your money out before others do, which applies to both the individuals and the institutional loans.
Note: my quotes are from the bloomberg newsletter i mention, which helped me, not the OP article. And i am writing as much to clarify my own thinking as from a place of understanding. I welcome clarification.
Mostly, no, which is exactly why private credit has become so big in recent years: they are making the loans the banks can't or don't want to make, because the banks are subject to a bunch of additional regulations, which are designed to reduce the probability of banks going bust and having to be bailed out.
But it can be difficult to judge second order effects in finance. It's possible that a lot of private credit houses going bust would indirectly and perhaps unexpectedly hurt the broader economy. An obvious one being companies that are reliant on private credit going bust because their financing needs can no longer be met.
Also, with this administration in the US I wouldn't entirely rule out bailouts for some of the more politically connected private lenders.
Banks needs to disclose the % of non-performing home, auto, business loans to rating agencies and regulatory bodies so their credit risk is known, and so regulators they can set rules on how loose or tight lending criteria should be in the industry. With 'financial innovation' like tranched mortgage bonds rolling up thousands of mortgages at various levels of credit risk into one, they can be traded without anyone actually knowing what the default risk is.
With private credit, there is no disclosure requirement because the lenders are not banks. PC is financing the entire AI datacenter boom, without which GDP growth in the US is effectively zero. If PC defaults rise, the bottom could rapidly fall out of the S&P 500, which is already being hit by the oil price crisis, and affect people's 401Ks and retirement savings.
Banks have lend to these institutions as they couldn't lend themselves. Might be systematic risk.
Lot of pension capital is tied to these vehicles. So they go under. Many people won't be getting their pensions in short or long term...
This is nowhere near as bad as the 2008 crisis, no. The banks don't really use the checking/savings account money for this. If you've invested in something that either invests in Private Credit or is reliant on Private Credit, then it'll suck for you personally.
...
One teeny tiny extremely important detail: Private Credit is bankrolling the AI industry's datacenter construction. If anything happens to significantly increase interest rates, several datacenter companies and Oracle go bankrupt. The other big tech firms have taken on lots of debt as well so expect spending cuts there too, even if they survive.
The systemic risk isn't in "bankers fucked it up again", it's in the AI bubble.
"Private credit" is an idea that has been hot in finance for the last several years, originating from the great financial crisis (GFC). After the GFC, regulations made it very hard for banks to make business loans with any kind of risk anymore. So instead, new non-bank institutions stepped in to make loans to businesses. These "private credit" institutions raise money from investors, and lend it to businesses.
The investors are usually institutions who are OK with locking up their money long-term, like insurance companies and pension funds. This all seems a lot safer than having banks making loans: banks get their funding from depositors, who are allowed to withdraw their deposit any time they want. So a bank really needs to hold liquid assets so they are prepared for a run on the bank, and corporate borrowing is not very liquid. Insurance companies and pension funds have much more predictability as to when they actually will need their money back, so can safely put it in private credit with long horizons.
It's not quite so clean, though.
It's actually common for banks to lend money directly to private credit lenders, who then lend it out to companies. But when this happens, typically the bank is only lending a fraction of the total and arranges that they get paid back first, so it's significantly less risky than if they were loaning directly to the companies. Of course, the non-bank investors get higher returns on their riskier investment.
And the returns have been pretty good. Or were. With the banks suddenly retreating from this space, there was a lot of money to be made filling the gap, and so private credit got a reputation for paying back really good returns while being more predictable than the stock market.
But this meant it got hot. Really hot.
It got so hot that there were more people wanting to lend money than there were qualified borrowers. When that happens, naturally standards start to degrade.
And then interest rates went up, after having been near-zero for a very long time.
And now a lot of borrowers are struggling to pay back their loans on time. And the lenders need to pay back investors, so sometimes they are compromising by getting new investors to pay back the old ones, and stuff. It's getting precarious.
Meanwhile a lot of private credit institutions are hoping to start accepting retail investors. Not because retail investors have a lot of money and are gullible, no no no. 401(k) plans are by definition locked up for many years, so obviously should be perfect for making private credit investments! Also those 401(k)s today are all being dumped into index funds which have almost zero fees, whereas private credit funds have high fees. Wait, that's not the reason though!
But just as they are getting to the point of finding ways to accept retail investors, it's looking like the returns might not be so great anymore. Could be a crisis brewing. Even if the banks are pretty safe, it's not great if pensions and insurance companies lose a lot of money...
"Most of the private credit loans were floating rate and tied to the federal funds rate, which has persisted at a high level over the past three years. Fitch pointed to this as a catalyst for last year's defaults."
I guess it is fair to say the federal funds rate has persisted at a high level over the past three years now isn't it?
https://www.macrotrends.net/2015/fed-funds-rate-historical-c...
Also interesting to note, "Fitch recorded NO defaults in the software sector last year. The rating agency noted it categorizes software issuers into their main target market sectors when applicable."
For example, we decided to keep our vehicle for another 4-5 years instead of buying a new one. The same Hyundai vehicle of the same model, but different year (2026 v.s. 2020), has gone up 8,000 CAD (10K CAD considering tax), with a much higher rate (5.99% v.s. 0%). There is no way I'm buying another car in the foreseeable future. We can definitely afford it, but we won't.
The whole world has pushed up prices of food, housing and pretty much everything higher. This is the real problem -- although I wouldn't say it is the root problem.
i dont think the inflationary seventies and eighties are great lodestar
low interest rates are historically a sign of a stable polity and economy. so if anything, we want the conditions for prolonged low interest rates, rather than prolonged high interest rate.