Private credit or direct lending soared in popularity after the 2008 recession when regulators cracked down on banks, but now, companies backed by direct loans are beginning to fail. Fears surrounding private lenders and their legitimacy are coming to a head.
Private credit is lending outside the traditional banking system. It exploded because regulation crushed banks, and when you choke off lending inside the banking system, the market simply moves outside of it. Now the cracks are showing. MSCI reported that write-downs on senior loans inside private credit have tripled since 2022. The $3.4 trillion in loans is expected to grow to $4.9…
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