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Wall Street is worried the private credit bubble will burst
- nick__m 1y agohttps://archive.is/SBM15 https://archive.is/SBM15
- Neywiny 1y agoWe need failure. Just like forest fires, we need controlled burns of dead wood
- nick__m 1y agoTo reuse your analogy, I fear that the forest wasn't managed properly and that the coming fire will do a lot more damage than a controlled burn. And I have no idea when it's going to start nor how to fireproof my investments !
- moandcompany 1y agoToo big to burn
- actionfromafar 1y agoControlled burn = good regulations. Too big to fail = put out all fires.
- bfg_9k 1y agoRegulations are what lead to private credit being what it is today. Post Dodd-Frank banks are unable to take on a lot of the lending risk with these style of transactions anymore which paved the way for asset managers to create the shadow banking system that exists today.
- deleted 1y ago[deleted]
- pixl97 1y agoThen you'll find a new set of regulations on private credit at some point in the future.
- dapperdrake 1y agoThe lending risk is the same. It doesn’t really matter what color the rug has. Stop sweeping.
- bfg_9k 1y agoIt's most certainly not the same. An asset manager going broke because they bought some bad loans is infinitely better off for the public at large than a bank becoming insolvent and depositors losing their money.
- walleeee 1y ago> And I have no idea when it's going to start nor how to fireproof my investments ! You don't, that's the idea.
- Terr_ 1y agoThe hypercolony of wood-termites, on the other hand... :p
- dyauspitr 1y agoSlow controlled burns that don’t bring down the ecosystem. For a hypothetical person in their late 50s, they’re looking forward to having their retirement go to shit and not recover before they’re dead.
- skopje 1y agoYeah I was a burn-it-all-down person too when I was in my 20's. It hits differently now after 40 years of work and the desire to retire and play with my grandkids. I guess in the current batch of 20'something's eyes that makes me The Man. I admire their spirit but scoff at their lack of empathy, the same lack I had. Fucking irony.
- eloisius 1y agoMight be better than putting it off until the discontent grows to the point that the young generation sees it fit to kill us off or confiscate everything we have and leave us standing in breadlines and living in collectivized apartments.
- skopje 1y agoTell me what to do. I go to protests. I vote. I volunteer for Indivisible. What ELSE should I be doing?
- m0llusk 1y agoKeep the focus on the evidence and the science. We have Picketty's book on Capital, Peter Turchin's research exposing elite capture and elite overreach, and perhaps most important the experience of digging our way out of the great depression with strong regulations, high taxes, and pervasive unionization of labor. Promoting the idea that we understand what is going on, have been here before, and know ways out can be very empowering.
- skopje 1y ago
- malshe 1y agoUnfortunately the government will bail out the billionaires and no new lesson will be learned. Exactly like what happened during the Great Financial Crisis.
- Spooky23 1y agoI remember my dad who was a great investor always said that and it was one of the things that disturbed him about QE and letting some of the big banks survive. 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.
- missedthecue 1y agoInterestingly, the big banks today are some of the best run financial institutions in history. The real garbage in today's banking sector is in the mid-cap banks who went heavy into commercial real estate loans.
- Bratmon 1y agoSaving this for next time the big banks fail and demand a government bailout.
- mhh__ 1y agoI don't know what it would be, e.g. pretty major dislocations go untouched because the banks can't deploy capital into them like repo in 2019. 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
- Spooky23 1y agoAgreed. In my city some midrange bank is financing a new commercial office space - the surrounding blocks are practically vacant. That whole category is practically useless for much anything other than allowing chinese people to get cash out of china.
- digdugdirk 1y agoOut of curiosity - what is the definition of a "well run financial institution"? I could imagine plenty of well run criminal organizations that make all sorts of profit via a combination of human trafficking and protection rackets. But is there an industry recognized understanding of what the best run financial institution would be?
- EA-3167 1y agoRight or wrong it would be political suicide for anyone with a shred of power to say that. Quite understandably the “dead wood” burning takes a lot of lives with it, and the people on fire tend to be understandably distressed and angry.
- rchaud 1y agoYou can get jail time if you're found to be responsible for causing the forest fire. That's what's needed in finance, otherwise it's just a matter of time until the next "financial innovation" befalls the economy.
- anon291 1y agoThe issue is this: the main driver of demand for higher-than-market returns is government pensions, and these cannot fail.
- kg 1y ago> The financial distress the company now finds itself in can be traced back to early August, when it was seeking to raise another $6 billion in loans. Through that process, investors started to raise questions about the numbers being presented. > 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.
- deleted 1y ago[deleted]
- SilverElfin 1y agoI wonder if these companies would be solvent if shorts from companies like Apollo didn’t tip them into failure by setting off a bank run
- dapperdrake 1y agoTheir thermodynamic bound is finite either way.
- aardvarkr 1y agoShorts are people pointing out bad activity in the market and making it public. I’d prefer the bad actors get called out
- nradov 1y agoI think you're confused about causality. When an investor takes a short position on a company that doesn't impact the company's balance sheet. First Brands Group isn't a bank.
- dyauspitr 1y agoEveryone is trying to make out like a bandit and get theirs before Trump brings this whole thing down crashing and burning.
- deleted 1y ago[deleted]
- hank1931 1y agoIncluding the Trump family
- toasterlovin 1y agoReading 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.
- zerosizedweasle 1y agoI 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.
- pastureofplenty 1y agoSomeone 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-investigation-faced-financial-struggles-foreclosure/ https://sfstandard.com/2025/10/09/family-four-murder-suicide...
- locallost 1y agoI understand tragedies happen, bad choices leading to these type of outcomes, but can never accept when children suffer. They did nothing wrong.
- rr808 1y agoOne 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.
- jrochkind1 1y ago> 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."
- cantor_S_drug 1y agoThere are loan companies which will lend to importers to pay the Trump's trade war tariffs. It's debt through and through.
- deadbabe 1y agoGovernment will just write a fat check and bail them out while the people of America take it on the chin. Seriously, how much more of this can people stand before we just flip out and go crazy?
- doctorpangloss 1y agoFTX ended up paying back all of its customers and many of its creditors. Truth is you don’t know how any particular process is going to play out until it happens. Do you have any idea for an alternative to process?
- Bratmon 1y ago> Do you have any idea for an alternative to process? 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.
- lesuorac 1y agoDidn't you both just describe a different process? 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.
- deleted 1y ago[deleted]
- anon291 1y agoOf course they will. The main investors in these high-risk ventures is government defined-benefit pensions. There is no way government will let its own pensions fail. 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.
- ChrisArchitect 1y agoFinally one of your First Brands stories stuck eh OP? 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
- ChrisArchitect 1y agoMore recently: Billions of Dollars 'Vanished': Low-Profile Bankruptcy Rings Wall Street Alarms https://www.nytimes.com/2025/10/10/business/first-brands-bankruptcy-wall-street.html https://www.nytimes.com/2025/10/10/business/first-brands-ban...
- deleted 1y ago[deleted]