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Comment by toasterlovin | Hacker News Reader

Reading the details in another article, it seems like this was just old fashioned fraud. They used the same collateral for multiple loans and they were hiding other debt from lenders. Any loan agreement they signed would have required an affirmation that they weren’t doing either of those. They probably also went to some lengths to hide what they were doing, since payments to lenders would show up on bank statements, which underwriters certainly would have looked at.

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I think the point here is that a lot of money has been lent out under loose conditions where there was very little scrutiny of the borrower.

Someone I used to work for was borrowing all kinds of money with seemingly little scrutiny and when she couldn't pay it back the worst possible thing happened. https://sfstandard.com/2025/10/09/family-four-murder-suicide...

I understand tragedies happen, bad choices leading to these type of outcomes, but can never accept when children suffer. They did nothing wrong.

One of the reason companies like staying private is that they do not have to provide all the public reporting that listed companies do. You can argue lots of public reporting is a waste of time and possibly gives competitors information they'd prefer to keep secret, but it does provide extra light on sketchy activity.

> which underwriters certainly would have looked at.

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."

A credit facility is a lengthy and detailed agreement that certainly includes checking for other debt and checking for liens on the collateral. Liens are usually documented by a UCC filing which is public information.

Traditional banks are required to conduct deeper reviews, often looking at UCC filings, lien searches, and bank statements. Private debt lenders may not apply the same level of scrutiny unless explicitly required by their internal policies

>"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.

Literally banks. Banks did this historically (cf. Richard Werner), and it would try to be solved with various regulation after a crisis. Now "private credit" is doing their best to create money (credit) from thin air (cf. Bank of England paper), without being officially banks. It will be shut down, inevitably.

Well in theory private lenders don’t have depositors, so there’s no average joes to protect.

The lenders aren't the only one needing protection. Society does as well. We don't need another 2007.

The trouble is that the banks are lending these private lenders the money, so any large issues are gonna hit the banks hard, with consequent impacts on the money.

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.

The private lender fails and the bank records losses is definitely better than the bank failing.

When the central bank talks about systemic risk, too big to fail, etc - depositors are the least of its worries, if it worries about them at all (FDIC has that covered)

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