Not sure this makes sense. The example of leveraged loans is quite distinct from residential mortages, for example. Also, the credit risk of the latter is pawne

Not sure this makes sense. The example of leveraged loans is quite distinct from residential mortages, for example. Also, the credit risk of the latter is pawned off onto the federal gov't in the US. Either way, banks should be banks. They should be taking the risk they underwite. Shares and bonds are a slightly different animal than asset backed secured loans, but they are now essentially all treated alike: things to pawn off with zero net book exposure. Investment banks structured as partnerships also had downside risk -- that is one of the main structural differences in a legal sense -- and that also should not be overlooked. Lasltly, private capital being more illiquid does not display the option-like pricing response to Vol that comp tied to public equity does.