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US private credit defaults hit record 9.2% in 2025, Fitch says

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Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#131

Post by spwa4 »

lenerdenator wrote: post #27
bargainbin wrote: post #22

Luckily debt will be solved by the power of AGI, right? Just one more data centre! One more GPU! It can nearly write a basic three tier application with only 10 critical security vulnerabilities all by itself! Definitely think we’re in for a rough year financial prospects wise, and doesn’t even feel like we recovered from the 2008 crash properly.

We didn't recover from the 2008 crash properly because we didn't introduce consequences for those who created it.

That's because debt IS money. Literally. If you create debt, you have created wealth. These people weren't punished so they could get back to creating new debt as quickly as possible. The problem with credit defaults, especially private credit defaults, isn't that some private creditors lose some money, it's that twice that amount of money is destroyed, and disappears from the economy entirely.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#132

Post by RobRivera »

cs702 wrote: post #116

Trouble has been brewing in private credit for quite a while, but lenders and investors have been reluctant to write anything down, resorting to all kinds of "extend and pretend" games to avoid write-downs.[a] tick-tock, tick-tock, tick-tock... --- [a] https://news.ycombinator.com/item?id=47351462

What kind of trouble is brewing from the migration of partner capital committment to credit based on NAV?

What is the risk, probability of actualizing the risk, and the outcome of actualized risk?

The ticktock ticktock routine reads like baseless fearmongering to me.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#133

Post by rchaud »

lizknope wrote: post #102

I've never heard the term private credit so I googled it. > Private credit refers to loans provided to businesses by non-bank institutions—such as private equity firms, hedge funds, and alternative asset managers—rather than traditional banks . Is that correct? So if these companies go under does anyone care? If they go under are they a systemic risk to the economy like the banks in 2008 that got a taxpayer bailout?

It is a systemic risk because its size and credit risk is opaque, like mortgage-backed securities were in 2008.

Banks needs to disclose the % of non-performing home, auto, business loans to rating agencies and regulatory bodies so their credit risk is known, and so regulators they can set rules on how loose or tight lending criteria should be in the industry. With 'financial innovation' like tranched mortgage bonds rolling up thousands of mortgages at various levels of credit risk into one, they can be traded without anyone actually knowing what the default risk is.

With private credit, there is no disclosure requirement because the lenders are not banks. PC is financing the entire AI datacenter boom, without which GDP growth in the US is effectively zero. If PC defaults rise, the bottom could rapidly fall out of the S&P 500, which is already being hit by the oil price crisis, and affect people's 401Ks and retirement savings.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#134

Post by JumpCrisscross »

RobRivera wrote: post #98
JumpCrisscross wrote: post #94

Yeah, I'm going down a bit of a rabbit hole this morning. Turns out Wells Fargo's $59.7bn of private-credit lending is equal to 44% of its CE Tier 1 capital [1]. Meanwhile, Deutsche Bank got back to being Deutsche Bank while I was not looking [2]. [1] https://www.sec.gov/Archives/edgar/data/72971/00000729712500... [2] https://www.reuters.com/business/finance/deutsche-bank-highl...

Deutsche gonna Deutsche. Recruitment tables should just have a banner that reads 'we've already spent your bonus on legal fees, here's some chocolate'

I'm re-running some of the Fed's stress tests and, somehow, still find myself flabbergasted that DB is at the top of my risk list. Despite only having $12bn of exposure, if they see a 60% loss on that risk alone (assuming 60% recovery and 1.5x leverage), they breach their 4.5% capital requirement. That's the lowest threshold I'm finding across all of the banks the Fed stress tests.

Now 50% loss means wipe out. But given the size of the portfolio, there is also the concentration risk. A single private-credit firm going bust shouldn't take out a bank. But that seems–seems!–to be what I'm seeing.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#135

Post by voidfunc »

NickC25 wrote: post #130
plagiarist wrote: post #121

Government removes regulations, economy collapses, government bails out the wealthy, quants get ski trips and bonuses while families starve.

And to make matters worse, those who remove regulations then get voted out, but show up on infotainment "opinion" shows disguised as news broadcasts....and whine that those who were voted in to fix the mess aren't fixing the problem fast enough , so those who caused the problem should be voted back in. And lo and behold, they get voted back in, to cause more damage.

Its a big beautiful system!

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#136

Post by rvz »

Looks like we have another problem in the banking system once again, even before AGI has even been fully realized.

We are definitely in the year 2000 in this cycle [0] and between now and somewhere in 2030, a crash is incoming.

Let's see how creative the banks will get to attempt to escape this conundrum. But until then...

Probably nothing.

[0] http://news.ycombinator.com/item?id=45960032

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#138

Post by NoboruWataya »

lizknope wrote: post #102

I've never heard the term private credit so I googled it. > Private credit refers to loans provided to businesses by non-bank institutions—such as private equity firms, hedge funds, and alternative asset managers—rather than traditional banks . Is that correct? So if these companies go under does anyone care? If they go under are they a systemic risk to the economy like the banks in 2008 that got a taxpayer bailout?

> So if these companies go under does anyone care? If they go under are they a systemic risk to the economy like the banks in 2008 that got a taxpayer bailout?

Mostly, no, which is exactly why private credit has become so big in recent years: they are making the loans the banks can't or don't want to make, because the banks are subject to a bunch of additional regulations, which are designed to reduce the probability of banks going bust and having to be bailed out.

But it can be difficult to judge second order effects in finance. It's possible that a lot of private credit houses going bust would indirectly and perhaps unexpectedly hurt the broader economy. An obvious one being companies that are reliant on private credit going bust because their financing needs can no longer be met.

Also, with this administration in the US I wouldn't entirely rule out bailouts for some of the more politically connected private lenders.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#139

Post by ajross »

gzread wrote: post #118

To private credit firms . Most of what banks do is private credit, the news is them funding private credit firms.

That's not correctly stated. "Private Credit" is defined as non-bank lending. Banks are doing "public" lending in the sense of being regulated. Private lending is any sort of financial instrument issued outside of those guard rails.

It's generally felt to be risky and volatile, but useful. Basically, it's never illegal just to hand your friend $20 even if the government isn't watching over the process to make sure you don't get scammed. This is the same thing at scale.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#140

Post by sciencesama »

cs702 wrote: post #116

Trouble has been brewing in private credit for quite a while, but lenders and investors have been reluctant to write anything down, resorting to all kinds of "extend and pretend" games to avoid write-downs.[a] tick-tock, tick-tock, tick-tock... --- [a] https://news.ycombinator.com/item?id=47351462

But what will break the clock ?
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