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\n A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York on March 18, 2026.<\/p>\n
ANGELA WEISS\/AFP via Getty Images\/AFP<\/p>\n
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ANGELA WEISS\/AFP via Getty Images\/AFP<\/p>\n
The risky lending business known as “private credit”<\/a> is causing some very public problems for banks and investors \u2014 with implications that go far beyond Wall Street.<\/p>\n “Private credit” refers to an opaque but fast-growing corner of the financial world: When private-equity firms and other companies that aren’t banks lend money to businesses, such as software companies<\/a> and auto lenders<\/a>. Banks often are more reluctant to lend directly to these businesses, which they see as riskier bets \u2014 but they’re still exposed<\/a> to them, because banks do lend to private credit firms. <\/p>\n The private credit sector has been growing for years, and is now estimated to be a $3 trillion industry, according to Morgan Stanley<\/a>. But its mounting problems are also becoming increasingly visible, especially after two companies backed by private credit companies declared bankruptcy<\/a> in September. Those bankruptcies raised concerns about how carefully private credit firms were vetting the companies they lend to \u2014 and how they, and the banks and investors that finance them in turn, would get their money back.<\/p>\n “When you see one cockroach, there’s probably more,” JPMorgan Chase CEO Jamie Dimon, whose bank had also financed<\/a> one of the failed companies, warned during an October<\/a> conference call.<\/p>\n More “cockroaches” have been skittering out of the private-credit woodwork in recent weeks. Blue Owl<\/a>, one of the largest and most prominent private-credit lenders, in February said<\/a> it would sell off $1.4 billion in assets in order to give money back to some of its investors. The announcement was intended to reassure Blue Owl’s investors \u2014 but instead, it sparked widespread panic<\/a> about a collapse in private-credit assets. (A spokesman declined to comment.)<\/p>\n Now more investors<\/a> in several private credit firms are\u00a0trying to pull their money<\/a> out of the industry \u2014 and the panic is spilling over into the stock market.<\/p>\n Blue Owl’s shares have fallen about 40% since the start of the year. The shares of other big private credit companies, including KKR, Apollo, and Blackstone, are also down by 20% or more.<\/p>\n “When everyone is rushing to the door at the same time, there’s an inherent panic that occurs that also affects sentiment. I think we’re seeing some of that here,” says investor Olaolu Aganga, head of portfolio construction for Citigroup’s wealth-management division.<\/p>\n Wall Street’s private credit angst is related to its AI anxiety <\/p>\n This growing panic comes at a time when U.S. investors have already spent months swinging between terror and delight \u2014 especially over tariffs, the runaway artificial intelligence boom, and, most recently, the war in Iran and its shock to global oil prices.<\/p>\n So as Wall Street swings<\/a> from record high to selloff and back again<\/a>, private credit’s onetime promise has turned into another source of market instability.<\/p>\n “It’s [only] March, and we’ve had AI angst, private credit angst, and now we have a war \u2014 so there’s a lot of angst,” Aganga says.<\/p>\n Some of the private credit angst is directly intertwined with AI. Big Tech companies and their bets on artificial intelligence have powered the stock market for years \u2014 but investors are increasingly worried<\/a> about whether and how much those investments will pay off. At the same time, they’re also worried that AI will soon render many software companies obsolete \u2014 and private credit companies are big lenders to those software companies.<\/p>\n “Everyone’s terrified. They don’t know who the winners are. They don’t know who the losers are,” says Jared Ellias, a law professor at Harvard and coauthor of an academic paper<\/a> about private credit.<\/p>\n “The great fear is that private credit is going to turn out to have financed a lot of the losers, and then those private credit funds are going to be left with huge losses,” he says.<\/p>\n How private credit’s problems threaten ordinary people <\/p>\n In the short term, Wall Street’s private credit selloff is cutting into the retirement accounts of some individual investors<\/a> \u2014 including those who have bought into private credit companies<\/a> through mutual funds or their 401ks.<\/p>\n![\"The](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/03\/1773918191_91_.jpeg\")
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