Will the growing troubles in private credit precipitate a broader financial crisis? As a veteran of the 2008 subprime lending meltdown, I’m extremely hesitant to say no. Nonetheless, I don’t think it’s likely.

First, the biggest writedowns so far have been associated with outright fraud — a phenomenon that, troubling as it may be, isn’t likely to be pervasive. If the companies in question, First Brands and Tricolor, hadn’t pledged the same collateral to multiple counterparties, they would have failed much earlier with much smaller cumulative losses. Thus, most writedowns will probably be less severe if and when they happen.

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