Wall Street is worried the private credit bubble will burst
thetimes.com
thetimes.com
I am not sure that is for certain, with these private debt "facilities" (as the OP calls them). Seems like that's a big question.
Related (I am aware does not answer the question), the OP suggests this credit was pursued precisely because "increased regulations and capital requirements made it more challenging for traditional banks to issue certain types of loans."
>"increased regulations and capital requirements made it more challenging for traditional banks to issue certain types of loans."
Basel III requirements post-GFC made it expensive for banks to hold riskier loans so private credit was born.
While some regulations post the GFC were necessary, it seems like a bunch of the rules just pushed this risk (bad loans) onto the balance sheets of non-banks. Not sure if it was worth it, especially given the large hit to worldwide productivity.
> In early September it was reported that Apollo Global Management had amassed a short position against the debt of First Brands Group, meaning that it stood to profit if the auto parts maker failed to continue paying its debt.
> The news caused a rush for the exit and the value of its debt started collapsing, before a bankruptcy process was initiated to bring some order to what appeared to have become the equivalent of a bank run. First Brands said that its Chapter 11 cases pertain solely to US operations and it expects its global operations to continue uninterrupted.
Makes me think of the subprime mortgage crisis. Everyone seemed to agree that it was fine to issue loans to an auto parts company so it accumulated multiple billions USD worth of loans before anyone finally noticed that it might not be able to repay the money it was borrowing.
Too big to fail = put out all fires.
You don't, that's the idea.
What we’re seeing today with these quasi-public markets and even the AI mania is exponentially worse. We’re playing chicken with the whole economy, and the marginally effective regulatory regime has been completely gelded.
On the other side of the coin. Two of the most powerful barons of the era believe they are eradicating the Antichrist and colonizing mars, respectively.
It's quite possible that the drive towards central clearing kills someone e.g. by warehousing too much in one place/lack of discretion in margin requirements for a central house etc
This isn't just me the internet rando saying this. Steve Eisman (the character the big short is based on) has been covering the large banks for 30 years and said on his podcast that for the first time in his career he sees no problems in those banks.
Banking regulation drawn under Obama one are the main reason why US big banks financial are sane and not over-leveraged. I bet those will disappear slowly, then all at once. Given no one seems to be working on obvious insider trading cases (AMD weird trade pattern just before OpenAI announcement), I'm not sure the annual stress tests will even be looked at next year.
Billions of Dollars 'Vanished': Low-Profile Bankruptcy Rings Wall Street Alarms
https://www.nytimes.com/2025/10/10/business/first-brands-ban...
It's a bit weird how there isn't more interest in this story here and/or that there isn't much more noise about it in news other than the core business media
Seriously, how much more of this can people stand before we just flip out and go crazy?
Any bank that asks for a federal bailout should get immediately nationalized no questions asked.
If you're too big to fail, you're too big to be run by executives with golden parachutes.
FTX used their investments and depositor's holdings to pay customers and creditors (a very arguably discounted rate).
OP describe the USG paying back customers and creditors.
If you look at the entire market you will find that the private sector actually does not demand high returns. Instead, the government needs high returns because it has not properly funded its pension liabilities. Thus, it floods the market, and then unscrupulous financiers take the money with promise of high returns. The entire thing is messed up.
For example, public employee retirement systems constitute 30-40% of all hedge fund investments. They need more than the 7% real return from the S&P. CalPERS needs a 13% return to meet its obligations.
There is no investment on the market that can return 13%. Thus, CalPERS (and others) give money to these 'hedge funds' and private capital banks who promise them these money. Eventually, the banks go bust. THe government realizes that letting them fail makes their situation even more precarious and bails them out. Of course, the reason the government is incentivized to do this is because public sector unions hold disproportionate influence and will oust them if they don't get paid.
Would seem cheaper to do handouts directly to the retired?