Here’s how it works: Banks can’t make risky loans anymore. So funds do it instead. Nobody grades the funds. The funds grade themselves. BlackRock marked a loan at 100 cents on the dollar. One month later, the borrower declared bankruptcy. Total loss on $150M. That’s not a one-off. That’s what happens when lenders grade their own paper. Bloomberg just published a deep dive on the credit market. The pattern is hard to ignore. Post-2008, regulators made risky lending expensive for banks. So the lending didn’t stop. It moved. Into private credit funds, junk bonds, leveraged loans. A $4.2 trillion market built on yield-hungry capital from pensions, insurers, and sovereign wealth funds. Private credit alone went from $500B to $1.3T in five years. Now read this list and tell me it doesn’t rhyme with 2007: Too many funds chasing too few deals. So lenders compete by giving away their own protections. PE firms keep ownership while creditors eat 30%+ losses. Loans get valued quarterly, by the people holding them. Small rating agencies stamp thousands of deals with skeleton crews. UBS’s chairman compared the ratings game directly to subprime-era arbitrage. Jamie Dimon warned about “cockroaches” in lending books after two major blowups last fall. A $10B auto parts fraud. A failed subprime lender. Both backed by big-name funds. In 2024, a record 33 US companies with $500M+ in debt restructured in ways that wiped out creditors while preserving equity. Another 23 did it in 2025. Maybe it’s a slow burn. Losses hiding in fund valuations for years, showing up as disappointing returns and weakened balance sheets. Or maybe a liquidity shock triggers a wave of redemptions and every fund tries to exit illiquid positions at once. In a crisis, correlations go to one. Either way, the people holding the bag are the last to find out. The music is still playing. Same song, different band. Full article from Bloomberg linked below. Especially if you hold anything that touches private credit.​​​​​​​​​​​​​​​​ https://lnkd.in/eM_-nWhE