The Fed is proposing new rules to allow big banks to hold billions less in capital.
The reason? To keep lending from migrating to private credit.
Interesting timing.
Private credit is having a moment. Blue Owl halted redemptions. Western Alliance is suing Jefferies. Investors are nervous.
So…the plan is to make banks safer by…letting them take on more risk?
This is a trade.
One form of systemic risk for another.
Private credit started life as the safe, regulated alternative to banking. Now there are cracks. Just as they appear, banks get regulatory relief to win back business.
Great timing?
The risk doesn’t disappear. It just jumps from private credit back to the banks taxpayers bailed out in 2008.
Who’s watching the whole system? Regulators are looking at banks. They’re checking on private credit.
Is anyone looking at the gaps between them?
That’s where the next crisis is likely to come.
This is the extraction economy in motion. Insiders capture the upside. Regulators forget why the rules were put in place. Rules ease.
Taxpayers assume the risk.
The Fed doesn’t understand what it’s unleashing.
It’s a pattern: the people running the system aren’t the ones paying for its failures.
The question isn’t whether the bill on all this risk will come due. The market has seen enough moments to know a correction is coming.
The question is: who gets paid before the correction and who’s left holding the bill?