The Real (and Revolting) Definition of Private Credit

You think your retirement is safe?

Justin W. Bancroft | April 29, 2026

After the 2008 financial crisis, global regulators forced banks to hold more backup capital against risky loans.  Traditional lenders pulled back.

This doesn’t mean demand for corporate debt disappeared; it just moved.  Non-bank funds (such as those run by BlackRock, Blackstone, Blue Owl Capital, and JPMorgan Chase) raised billions from pensions, endowments, and wealth managers, then stepped in to fill the gap.  Private credit now exceeds $2 trillion globally, up from $400 billion in 2015.

They promised steady yields.  They promised safety.  They promised...

But “private” means something specific in finance.  It means no independent buyers and sellers setting market value.  No public exchange.  When a loan sits in one of these funds, its worth isn’t discovered by the market.  It is decided by the people who hold it.

This process is called “mark to model.”  Generally Accepted Accounting Principles (GAAP) accept it.  Auditors sign off on it.  No one else sees inside.

Private credit is, essentially, in MBA speak, a closed-loop system of reciprocal incentive validation.  To the average person, it looks like a room full of students grading their own homework while the teacher is out.  In reality, it is a circular activity, usually conducted in a somewhat jerky manner, where the participants take turns manually stimulating their own “internal marks” to avoid the jagged reality of a loss.

In a normal market, if a borrower can’t pay, he defaults.  The pain is sudden.  In private credit, the motion happens when the lender and the borrower agree to a PIK (Payment-in-Kind) toggle.  Instead of paying cash interest, the........

© American Thinker