Lloyd Blankfein is warning that the fast-growing private credit market may be headed for a reckoning that looks uncomfortably familiar. The former Goldman Sachs chief, who ran the firm from 2006 to 2018, said on a News podcast that the $1.8 trillion sector “sort of smells like that kind of a moment again.”
“I don’t feel the storm, but the horses are starting to whinny in the corral,” Blankfein said, adding that the market is “due for a kind of a reckoning.” He also drew a direct line to the mortgage crisis, saying, “Everyone says, ‘Oh, the world’s not leveraged,’” before adding, “That’s exactly what everybody said in the mortgage crisis, until you suddenly discover that there was a lot of mortgage risk in Iceland.”
The warning lands at a sensitive moment for a corner of finance that expanded after 2008, when tighter bank regulations left a lending vacuum that private credit rushed to fill. These are direct loans made outside public markets by non-bank lenders to companies that cannot or will not borrow from traditional banks. For years, the business was largely the province of sophisticated institutional investors, including pension funds, endowments and sovereign wealth funds.
That backdrop is why Blankfein’s remarks matter beyond one market call. Private credit loans are hard to value, rarely marked to market and often nearly impossible to sell in a downturn. Losses can surface gradually over months or years rather than all at once, the way they did when Lehman Brothers collapsed. And the warnings are coming as the International Monetary Fund found that by the end of 2024, more than 40% of private credit borrowers had negative free operating cash flow.
The tension is that the product is no longer staying in its old lane. President Trump signed an executive order last August opening 401(k) plans to alternative assets including private credit and private equity, and BlackRock said it planned to launch a 401(k) target-date fund in the first half of this year with a 5% to 20% private investments allocation. At the same time, private credit funds are making multiyear loan commitments while offering quarterly redemptions, a structure that can test even a market built for long-term money.
Blankfein’s comments do not amount to a forecast of an immediate crash. But they do suggest that one of Wall Street’s favorite products since 2008 is carrying more strain than its marketing admits, and that the next stress test may not arrive all at once.
