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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

#181

Post by themgt »

sciencesama wrote: post #140
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 ?

As Buffett said, "only when the tide goes out do you learn who has been swimming naked" - luckily, skimming the news, there's no obvious huge exogenous macroeconomic shocks on the horizon that could cause "the tide to go out" so to speak, so everything should be ok for now.

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

#182

Post by overtone1000 »

boringg wrote: post #167
kelp6063 wrote: post #122

Unless I'm misunderstanding something, this isn't that big of a number in the larger scale of US banking; According to the numbers in the article that's only about 2.5% of all bank lending (300B/1.2T, with the 1.2T being ~10%)

Update: original comment should be. 300B/1.2T*(10% of bank funds) = 2.5%. If I'm reading comment correct. Also I believe the whole private credit ecosystem is about 1T. In a catastrophic scenario: if the whole asset class went to 0 (on the banks asset sheet they would lose 2.5% - absorbable pain assuming its not leveraged through creative financial mechanisms). I would wager that risk is more concentrated on certain…

And then that 25% is 10% of US banks' entire lending portfolio, so private credit is about 2.5% of their entire portfolio.

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

#183

Post by AnimalMuppet »

spwa4 wrote: post #131
lenerdenator wrote: post #27

Earlier quoted context omitted.

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.

> That's because debt IS money. Literally.

OK.

> If you create debt, you have created wealth.

No, you have created money. Money is not the same as wealth. If you create money without creating wealth, then it's inflationary.

Just a minor nit. The rest of your post I agree with.

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

#184

Post by spacecadet »

mikkupikku wrote: post #45
spacecadet wrote: post #33

Earlier quoted context omitted.

I mean people have been saying a crash is coming for years... Consumers recklessly purchased homes and cars at double their value, while relocating for remote work that was never long term in the eyes of their employer. Sounds like a receipt for disaster or a repeat of 2008- however, so much has changed since 2008... whatever happens, Black Swan! Hope "you" have your ducks in a row... As for AGI, lol. A box of matmul…

[flagged]

What cope? I work in AI, write code with AI, promote the use of AI... Im just a pragmatic realist man. Not a delusional cool aid drinker...

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

#185

Post by sehansen »

JumpCrisscross wrote: post #99

Reason this number caught my eye: last year the Fed's stress tests found "loss rates from [non-bank financial institution] exposures (i.e., the percentage of loans that are uncollectible) were estimated at 7%, under a severe recession in scenario one" [1]. That's the scenario in which unemployment goes to 10%, home prices crash by 33%, the stock market halves and Treasuries trade at zero percent yield [2]. [1] https:…

The categorization the Fed uses for NBFI is broader than private credit. E.g. if a hedge fund gives a loan to a private company, that's not private credit because hedge funds seem to have their own category. And lending backed by securities is also in a different category, it seems.

So I guess the Fed expects these other kinds of lending to be safer than private credit?

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

#186

Post by AnimalMuppet »

SoftTalker wrote: post #35
lenerdenator wrote: post #27

Earlier quoted context omitted.

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

In fact we rewarded them. We bailed them out by printing a lot of money. We then printed more money during the pandemic to pay people to stay home and watch Netflix. Probably a lot more examples. All that money flowing around that has no basis in actual productivity or value created. It's got to correct at some point. One of the corrections is how much more everything costs now, but I don't think that has fully absor…

> We bailed them out by printing a lot of money.

We did. We created about $4 trillion. That just about neutralized the $4 trillion that evaporated in the crash, and the result was that we did not go through a deflationary collapse. You know that they did not create too much, because inflation was basically nothing for the next decade. It was flat until Covid.

Covid... yeah, that was inflationary.

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

#187

Post by boringg »

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

There are limited ways to short these positions which would probably add some fuel to the fire.

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

#188

Post by irishcoffee »

AnimalMuppet wrote: post #186
SoftTalker wrote: post #35

Earlier quoted context omitted.

In fact we rewarded them. We bailed them out by printing a lot of money. We then printed more money during the pandemic to pay people to stay home and watch Netflix. Probably a lot more examples. All that money flowing around that has no basis in actual productivity or value created. It's got to correct at some point. One of the corrections is how much more everything costs now, but I don't think that has fully absor…

> We bailed them out by printing a lot of money. We did. We created about $4 trillion. That just about neutralized the $4 trillion that evaporated in the crash, and the result was that we did not go through a deflationary collapse. You know that they did not create too much, because inflation was basically nothing for the next decade . It was flat until Covid. Covid... yeah, that was inflationary.

I appreciate your posts generally, you have a lot of good insights.

Do you think replacing that 4T was a good call? I'm struggling to see how it was the right play.

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

#189

Post by boringg »

JumpCrisscross wrote: post #154
sciencesama wrote: post #140

Earlier quoted context omitted.

But what will break the clock ?

> what will break the clock ? So unlike money-market funds, these private-credit funds can gate withdrawals and extend and pretend by turning cash coupons into PIKs. So I don't actually see credit concerns directly driving liquidity issues for the banks that didn't hold the risk on their balance sheet glares Germanically . Instead, I think the contagion risk is psychological. Which is an unsatisfying answer. But if t…

I believe the gated feature can be waived though it causes a precarious situation. It ends up with same psychology of a bank run -- people (institutions) concerned because they can't access funds or they think that the queue to exit a failing fund is too long - filled each quarter (i.e. by the time they redeem NAV has collapsed).

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

#190

Post by superxpro12 »

wussboy wrote: post #58
SoftTalker wrote: post #35

Earlier quoted context omitted.

In fact we rewarded them. We bailed them out by printing a lot of money. We then printed more money during the pandemic to pay people to stay home and watch Netflix. Probably a lot more examples. All that money flowing around that has no basis in actual productivity or value created. It's got to correct at some point. One of the corrections is how much more everything costs now, but I don't think that has fully absor…

I would argue the second instance (pandemic) was much more nearly what a good government should do than the first one

All that money directly led to housing inflation that still hasn't settled. The PPP loans were all forgiven (which massively favored business owners and upper class).

Meanwhile student loan forgiveness was overruled by the supreme court.

It's really hard to ignore the implication that it ended up being more like a wealth transfer than anything else.

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