Here’s What Happens When Credit Markets Go Dark

There’s been a lot of talk about private credit in recent years. The market has exploded in size, and there are worries that it could be a bubble that eventually bursts and sparks disaster. But there are other negative effects from private credit that might already be happening. In a new paper called “The Credit Markets Go Dark,” co-authors Harvard Law School professor Jared Ellias and Duke University School of Law professor Elisabeth de Fontenay argue that the $1.5 trillion market for private credit is already having a big impact on the economy — and not in a good way. They say that the rise of private credit marks a seismic change for corporate governance and dynamism. This transcript has been lightly edited for clarity.

Key insights from the pod:
Interest in researching private credit — 04:54
The evolution of the credit market — 06:49
What problems does the private credit market solve? — 11:53
Possible benefits of private credit financing — 17:00
Possible downsides of private credit financing — 20:43
Private credit and equity valuations — 25:45
The efficacy of existing bankruptcy law — 27:00
Private credit in bankruptcies and liquidations — 30:14
Will bankruptcy law change to accommodate private credit? — 35:16
Incentives and flexibility within private credit — 38:16