Consider This from NPR Unpacking The U.S. Economy’s ‘Cockroach’ Problem
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Oct 29, 2025 Natasha Sarin, President of the Yale Budget Lab and former Biden administration official, dives into the booming private credit market valued at around $2 trillion. She raises alarms about risky loans from non-bank firms, comparing current trends to the lead-up to the 2008 financial crisis. Sarin explores recent auto-related bankruptcies linked to opaque borrowing and discusses how private credit firms evade post-crisis regulations. She emphasizes the potential systemic risks to everyday investors' finances, urging for stronger regulatory measures over reliance on self-regulation.
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Private Credit's Rapid Rise
- Private credit has exploded to roughly $2 trillion and fills lending gaps left by banks.
- These firms operate largely outside post-2008 regulations, raising systemic risk concerns.
Two Auto Firm Failures Exposed Hidden Debt
- Two recent bankrupt auto-related firms (Tricolor and First Brands) allegedly hid borrowing and committed fraud.
- Lenders reportedly didn't realize how much these firms had borrowed or that collateral was double-used.
Old Securitization Patterns Reappearing
- Finance is slicing and securitizing many cash flows (car loans, leases, bills) into securities like before 2008.
- That same repackaging is migrating into private credit, rekindling familiar systemic vulnerabilities.