Powell and Buffett Split on Private Credit Contagion Risk to Banking

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Who are you going to believe about whether private credit is a threat to the financial system, Jerome Powell or Warren Buffett? The Fed chairman said that while people are going to lose money, he doesn’t see a systemic risk. The Sage of Omaha by contrast sees signs of fragility in the banking system because of ties to nonbanks. Each view has support from lesser gods: DZ Bank is in Buffett’s camp, calling private credit a major risk for the US economy. Moody’s sounded a note of caution, as did the Bank of England and the head of Japan’s banking lobby. Powell’s corner includes Apollo Global Management’s Jim Zelter and anyone else holding some of the $1.4 trillion of private credit extended to nonbanks.