Dimon’s ‘Dumb Things’ Remark Frames Debate Over Private Credit
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It doesn’t matter that you can swim better than everyone else if you’re all standing on the deck of the Titanic. This analogy might seem unduly alarmist except that some of the world’s premier financiers are making statements about loan leverage and private credit that evoke the Great Financial Crisis — an era when even the healthiest lenders were dragooned into bailout schemes designed to rescue their less prudent rivals.
Jamie Dimon at JPMorgan Chase says there are current parallels to the years leading to the 2008 convulsion. “I see a couple of people doing some dumb things,” he said, recalling that Wall Street missed the signals the last time around because everyone was making a lot of money, and now once again, “the rising tide is lifting all boats.” Why doesn’t everyone see the risk the same way? Perhaps because Dimon is part of a dwindling cohort of senior bankers who actually experienced the GFC and its frothy runup in the preceding years. It’s been two decades— which means there are veteran, highly accomplished mid-career bankers running major operations now who have no first-hand idea what Dimon is talking about.
He has reason to be concerned, by one reckoning, with credit spreads around historic lows. At UBS Group, strategists say private credit could see default rates surge as high as 15%. Bain & Co. said private equity’s profit drought is near the worst since 2008; Boaz Weinstein is stirring concerns by highlighting Blue Owl’s woes, and he sees “the wheels coming off” from private credit markets. There’s plenty of pushback from private market practitioners, including Brookfield’s Bruce Flatt, who says loans to software companies aren’t a systemic issue despite the threat from artificial intelligence. Bank of America is committing $25 billion to private credit deals.
This does nothing to douse the concern that AI is coming for your job. Anthropic’s Claude agent shows aspirations to become an investment banker. And even if you’re spared in the abstract, AI may be coming for you personally: Deutsche Bank and Goldman Sachs are planning to use it to enhance trading surveillance and catch misbehavior.
If that’s not you, HSBC has good news for good performers: The bonus pool was increased to the highest in at least a decade. And if you’re at Deutsche Bank, you still have room to call ‘em like you see ’em: George Saravelos, who drew official US ire for calling into question the future of US assets, is still there and vowing to continue doing independent research. In other career news, if you need a full night’s sleep, perhaps you might want to choose a career that doesn’t involve banking. — Rick Green