The sudden collapse of several U.S. companies backed by private credit last fall has intensified scrutiny over the fast-growing, opaque corner of Wall Street lending, with prominent financiers warning of potential systemic risks.

The asset class, which involves lending by nonbank institutions, has exploded from $3.4 trillion in 2025 to a projected $4.9 trillion by 2029. However, the September bankruptcies of auto-industry firms Tricolor and First Brands—and subsequent losses disclosed by banks like JPMorgan Chase—have raised alarms.

“When you see one cockroach, there are probably more,” JPMorgan CEO Jamie Dimon warned in October. Billionaire investor Jeffrey Gundlach later accused private lenders of making “garbage loans” and predicted the next financial crisis could originate in this sector.

Supporters, including Apollo co-founder Marc Rowan, argue private credit fuels economic growth by filling gaps left by banks and offers investors strong returns. Yet critics highlight its lack of transparency and potential for mispriced risk.

“This is a market that is extraordinarily large... and yet it’s not a public market,” said Duke Law professor Elisabeth de Fontenay. “We’re not entirely sure if the valuations are correct.”

Concerns are compounded by banks’ own growing exposure—JPMorgan’s lending to nonbank financial firms tripled to about $160 billion since 2018. Analysts warn increased competition could weaken underwriting standards and lead to broader credit problems.

While no imminent collapse is forecast, the sector’s expanding role in the U.S. financial system raises questions about oversight and stability in a future crisis.