Key insights
- The author argues that private credit mirrors the 2008 crisis, with banks indirectly funding risky loans through private credit funds. These funds lend to overleveraged companies, package loans into CLOs, and sell them to insurance companies and pension funds. High default rates, negative free cash flow among borrowers, and redemption requests at major funds like Blackstone signal potential instability. Rising oil prices and persistent inflation exacerbate the risk, potentially triggering a crisis.
I think I had a Mark Baum moment today regarding everything that’s happening with the Iran war and private credit and I would like your insight. Tell me to go fuck my self and how wrong I am please…
After 2008 regulators told banks to stop making risky loans. So they did. Kind of. Instead of lending directly to people and companies that can’t pay them back, banks started lending to private credit funds who do the dirty work for them. 40% of total bank loan growth in 2025 went to non-bank financial institutions. Exposed to $4.5 trillion between US and European banks.
These private credit funds then lend to overleveraged companies, package the loans into CLOs, sell tranches to insurance companies and pension funds, and everyone collects their fees. 20% of the entire US insurance industry’s assets are now sitting in private credit products. The same insurance industry that’s supposed to be the safe boring money.
The risk didn’t leave the banking system. It just took a detour through a middleman so everyone could pretend it did.
Now look at what’s happening underneath. 40% of private credit borrowers have negative free cash flow. Actual default rates are closer to 9% but payment -in-kind accounting lets funds pretend borrowers are paying when they’re not. They just add the unpaid interest to the principal and call it performing.
Blackstone’s $82 billion flagship fund just got hit with $6.5 billion in redemption requests. A BlackRock CLO breached its collateral triggers. Funds are gating withdrawals left and right. Jamie Dimon said when you see one cockroach there’s probably more.
And that was BEFORE oil went to $170 physical and the Fed got trapped between inflation and recession. Now every overleveraged company in these portfolios is getting crushed by energy costs while the one thing that could save them, rate cuts, isn’t coming because CPI is ripping higher from the oil shock.
The 2008 chain was: bad mortgages, CDOs, banks, AIG, bailout.
The 2026 chain is: bad corporate loans, CLOs, private credit funds, insurance companies, banks who lent to all of them.
Same structure. Same incentives. Same opacity. Nobody knows who holds what. Nobody wants to ask because the fees are too good. Sound familiar?
DB has 30% of its loans to non-bank financial institutions versus 8% European average. They just disclosed a $30 billion private credit book. Citi has the highest systemic amplification factor of any bank at 14.8x meaning a shock at Citi ripples 15 times through the system. Both are sitting right at the center of this web.
The Iran war didn’t create this. 15 years of yield chasing and regulatory arbitrage created this. The war is just the match to the kerosene tank and whether the building can stand. CLO triggers are already breaching. Funds are already gating. Defaults are already at records. And the energy shock
hasn’t even fully hit earnings yet. That comes in April.
Tell me I’m wrong. I genuinely want someone to explain how $4.5 trillion in bank exposure to shadow lenders holding loans to companies with negative cash flow in the middle of an energy crisis ends well.
Positions: DB $20P 7/17, C $48P 7/17, TUR $27P 5/15. Because it’s not 2008 again. It’s the sequel.