Is Private Credit the Pin That Pops the Bubble?

Is private credit the pin that pops the market bubble? The short answer is no—but that’s the wrong question entirely. Private credit is now a $1.8–$3.5 trillion market, rivaling the entire U.S. leveraged loan and high-yield bond markets combined. It’s direct lending, shadow banking, and middle-market finance all rolled into one, and firms like Ares, Apollo, Blackstone, Blue Owl, and Morgan Stanley are at the center of it. Business development companies (BDCs), are gating redemptions. Pension funds, insurance companies, and retail investors are all exposed. And the Financial Stability Board issued a formal warning in May 2026.

So what is private credit, how did it get this big, and what does it actually mean for the broader economy if it seizes up? In this episode, Max breaks down the entire private credit ecosystem—from its origins in post-2008 regulation to the mechanics of SOFR-linked floating rate loans, PIK interest, covenant-lite structures, and the $410–$540 billion in bank lending that ties the whole system together. We look at the BDC redemption crisis of 2025 and 2026, the First Brands and TriColor fraud cases and Jamie Dimon’s cockroach comment that won’t go away.

Resources

J.P. Morgan: Understanding Private Credit

Bloomberg Television: Why Private Credit Is Not a Financial Crisis Threat

Blackstone: What’s Really Happening in Private Credit? Expert Answers

CNBC Television: Inside Alts: Private credit fears resurface

CNBC Television: This is the start of a big crisis for private credit, says Verdad’s Rasmussen

The Federal Reserve: Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications

Federal Reserve Bank of Boston: Could the Growth of Private Credit Pose a Risk to Financial System Stability?

IMF eLibrary: Chapter 2 The Rise and Risks of Private Credit in: Global Financial Stability Report, April 2024

Financial Stability Board: FSB warns on private credit vulnerabilities

NAIC: How State Insurance Regulators are Responding to Growth in CLOs and Private Credit

Bloomberg: Ares Private Credit Fund Caps Redemptions After 14% Seek to Exit

Bloomberg: Apollo Caps Private Credit Fund After 17% Request to Exit

Bloomberg: Private Credit Is Still a Hot Asset for Bond Investors Buying Debt

Bloomberg: Morgan Stanley Caps Private Credit Fund After 11.6% Exit Request

Bloomberg: Cliffwater Private Credit Fund Stung by 17% Redemption Requests

Bloomberg: Blackstone Limits Withdrawals From $79 Billion Private Credit Fund BCRED

Bloomberg: Private Credit BDC Redemptions Exceed Fundraising for First Time