Marketplace - A private credit market boom

Episode Date: February 26, 2026

The private credit market has grown fivefold since 2008 — it’s somewhere near the $2 trillion-mark globally. In this episode, we explain why policies aimed at alleviating the Great Recession triggered an explosion of non-bank lenders, and why their loans are riskier for the economy than traditional loans. Plus: Analysts expect wholesale inflation cooled a bit in January, retailers fret over a late-winter slump, and stock market predictions are sort of like baking a cake. Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

That line about neither a borrower nor a lender be. With apologies to one that William Shakespeare, the economy just doesn't work like that. From American public media. This is Marketplace. In Los Angeles, I'm Kai Rizzell. It is Thursday. Today, this one is the 26th of February. Good as always to have you along, everybody.

This economy, this one specifically the U.S., the global economy to almost all other countries as well, run on debt. Credit, national or sovereign debt, the bills, bonds, and notes that governments sell. Individual debt, car loans and mortgages. Corporate debt as well, because companies sell bonds, too, you know. Increasingly, though, companies are trying to get their hands on more capital by going to what are called private credit markets, borrowing money from big investors or money managers, rather than actual banks. According to the Federal Reserve, the private credit market has exploded since the 2008 financial crisis. Exploded is my word, not theirs. It's five times bigger now than it was back then. Somewhere near the $2 trillion mark globally. The last couple of weeks, though,

the private credit market has gone a little bit sideways, and economists and analysts aren't totally sure what to make of it. Marketplace is Daniel Ackerman starts us off. After the financial crisis, regulation forced big banks to tighten up their lending practices. Elizabeth Defantenei of Duke University says that made it harder for some companies to get loans. And so this has really created an opening for private credit funds to step in. She says private lending can be riskier than bank loans or corporate bonds, but Laura Veldcamp of Columbia University says that's part of the appeal. Typically, you'll get a higher rate of return in private credit.

Investors tend to be the ones with an appetite for that kind of risk. So you might have an endowment fund. You might have a wealthy person who tries to, trying to achieve more diversification. As for the companies receiving those loans, Gerald Cohen of UNC says... A significant amount of private credit has been in the software industry. Which, he says, shouldn't be a surprise. Software firms are often startups too small to sell bonds or may not meet requirements for bank loans. Cohen says the problem right now is that software companies are threatened by the development

of artificial intelligence. Because AI just can be able to develop all our software. Do we need software companies anymore? Those fears caused share prices for private credit managers to drop in recent weeks. By itself, that's not a huge deal, says Columbia's Laura Veldcamp, but... Maybe this is the canary in the coal mine. Veldcamp says there could be ripple effects. Like remember those big banks, the one's too big to fail?

Veldcamp says they sometimes lend to the very private credit managers who make those riskier loans. And while we're nowhere near a private credit collapse, The concern is that this is just the beginning and that this is a more widespread phenomenon. But she says it's still too early to tell. I'm Daniel Ackerman for Marketplace. We're going to turn now from the vibes of the financial markets to some of the hard data of this economy, the January producer price index, specifically. It's going to be upon us tomorrow and is going to feed into the data stream that the Federal Reserve is watching

as it tries to figure out which is the bigger economic boogeyman right now, aggressive price gains or anemic job gains. Marketplace of Mitchell Hartman has our preview. Let's start with a simple definition. Producer price inflation is wholesale inflation. It's not the one that faces consumers, but it dictates decisions that companies have to make and how they're raising prices. Ross Mayfield is an investment strategist at Baird, which is a marketplace underwriter. He expects tomorrow's report to show PPI cooled off a bit in January and continue to to be driven by rising prices for services.

Services inflation, it's typically the thing the Fed cares more about because it's more reflective of the underlying economy, you know, the labor market. And which services are driving wholesale inflation? Here's Scott Helstein at investment firm Global X. Utilities and energy. Interestingly, utilities have also been driving consumer prices higher. Blame power-hungry data centers in part for that. We've also seen professional services,

everything from accounting to waste management, driving prices. Where there's been sharp goods inflation is for raw materials and other inputs for manufacturing in construction that face high import taxes. It's pretty staggering. Ken Simonson is chief economist at Associated General Contractors of America. Construction was definitely hit hard by the tariffs on aluminum, steel, and copper. Prices up 28, 17, and 11 percent last year. Also sharply higher appliances and furniture.

Simmons says all this has led clients to hold off on starting new construction projects from factories to houses. I'm Mitchell Hartman for Marketplace. Here's one more consumer price-related item for you. Home mortgages. Freddie Mac said this morning that the average rate on a 30-year fixed-rate mortgage has dipped below 6% for the first time in three and a half years. 5.98% is the actual number, so not a whole lot below 6, but at this point, the housing market will probably take what it can get. On Wall Street today, yet another example of no good deed going unpunished. I mentioned yesterday that the AI chip giant Nvidia blew past revenue and earnings expectations.

Well, today in the capital markets, the company shares off 5.5%. Why, you ask? Well, it's because traders just don't seem to believe that the company, and, Maybe the whole AI industry actually is going to be able to keep on going like this. Elsewise, it was mixed on the major indices. We will have the details when we do the numbers. Consumer confidence in this economy has rebounded a little bit because mostly people are feeling just a smidge better about the labor market.

Overall, though, confidence is still low-ish, which makes this a tough environment for businesses and a typically tough time of year because January and February are, are always slow. Marketplaces Kristen Schwab has more now on how retailers have been coping with retail's slow season. Little Blue Macaron in Raleigh, North Carolina, sells its namesake colorful cookies, brown butter vanilla, lavender and honey, almond and berry jam. But owner Allison Vick, has been selling a lot less of them lately. We're seeing regular customers. We know they're purchasing patterns and we come in and we see that they're scaling back. Instead of buying a dozen

cookies, they'll buy two. Instead of ordering a latte, they'll get drip coffee. And Vic says, this isn't just a winter drop-off. The pattern started before the holidays. So she's trying to cut costs. She renegotiated prices with her packaging supplier. She's cut down on some employees' hours, which means she's working more. My husband and myself, we can be in this business, helping open early or stay open later if we need to, without it impacting our bottom line as much. Retailers right now are anxious. Because, says Sonia Lipinski at Alex Partners, consumers are anxious. They're feeling full. They're feeling poor. They've really just been depleted. The cold and snow that's hit a lot of the country has made it hard to think about, say, buying new shorts for spring.

Tariffs and inflation are still top of mind. Plus, says Monani Vivek Horowitz, a marketing professor at NYU. It's hard to get excited about, you know, a new, phone launching or a new makeup launch because there's just so much distraction with global events, global politics. So instead of pushing new products during the slow season, Horowitz says she's seeing retailers step back a bit and look at the bigger picture. Retailers are using this time to test and learn? They're taking stock of inventory, re-evaluating pricing, and strengthening ties with customers. Alice and Vic at Little Blue Macaron has been used. doing all of the above. She recently partnered with another local business to host a terrarium

making class in her cafe. And that benefits both of us because they have a place to operate their small business and do these pop-up events. And we have maybe new customers who have never been in the shop before and hopefully they'll turn into a repeat customer. Because the more people pull back on spending, the more customer she needs to make up for the losses. I'm Kristen Schwab for Marketplace. We do, as you know, the numbers every day on this program, where the major indices landed for the day, how some big and or interesting companies did. Before we get there, though, usually hear me say something like this. Wall Street today, traders did what they do on a Fed day when what the central bank is going to do is already priced in. That is, we all knew what was going to happen.

We will have the details. Yeah, when we do the numbers. Priced in was the relevant phrase there. When news happens, and the market. don't react much. Like that Fed Day a couple of weeks ago, there was that big announcement. Pallas Press Conference and Wall Street basically yawned.

I do dabble in baking a little bit. That's Sasha and Darte, Professor of Finance at the University of Pennsylvania's Wharton School. Baking, I hear you say? So I would say that the analogy to baking when we talk about baked in is pretty appropriate.

A bit on the nose, perhaps, but stay with me on this one, because once all the ingredients are mixed together and the cakes in the oven. What's going to come out when the timer goes off is already decided. It's baked in. The market works kind of the same way. Once news or more accurately anticipated news gets baked in, by the time the news actually happens, it isn't really new news. So for example, when the Fed makes its announcement about monetary policy rates and the path of monetary policy going forward, we don't always see a big market reactions. Sometimes mortgage rates don't move much or other rates or stock prices don't move a

whole lot. So taking this analogy just a little bit farther, when markets don't move a whole lot on what otherwise would have been big news, what it means is that Wall Street has a pretty good recipe. What are the ingredients here? That would be the data. That would be things like job reports, the latest inflation numbers. So right now, traders are baking in the January jobs report, the latest consumer price index, the Fed's favorite PCE. and all of the other less headline-grabbing data points that they want to use to, say, take a guess at what the Fed is going to do next. When you put those, you mix those different pieces of data together. What you come up with is a forecast.

That's kind of like the batter. And if they get that batter right, we're just not going to see a big reaction. But as everybody who's ever baked can probably relate to, sometimes you just get the batter wrong. If we forgot in a crucial ingredient, maybe if we overlooked house first, prices, then our cake might fall flat. You get the ingredients wrong or you leave one out. What comes out of the oven can be a surprise. It happened, actually, at the beginning of the pandemic.

Nobody, nobody had an emergency interest rate cut on their list of ingredients in March of 2020. And when that happened, a sizable half a percentage point cut by the Fed, by the way. Traders reacted, shall we say, with extreme volatility. But there is nuance here, too, because sometimes it's not that you've gotten the wrong it's that you've measured wrong. You could have the same people looking at the same information, but if we can't agree on how to put that information together, if we have different narratives about the significance of the jobs numbers

versus consumer sentiment and so on, we can come up with different forecasts. Now, think about the data that's gone missing or late because of government shutdowns, and staffing cuts at the very agencies that produce those data, we're kind of baking the cake just eyeballing the ingredients. If you don't have a complete recipe, maybe you have all the right ingredients in front of you, but you don't know the proportions, you don't know the right order to add them in, basically how to put things together. You might have, you know, had a chance to get to the right recipe. But if you're missing maybe the knowledge or skills in order to get there, then it might not work out.

That is to say, a cake is only as good as its recipe, a forecast is only as good as its parts. and it's all about the ingredients. But first, let's do the numbers. Dow Industrial is up 17 points today. We'll call that percentage-wise flat 49,499. The NASDAG dropped 273 points. That is 1.2% finished at 22,000 to 878. See also technology, Nvidia?

Hello? The SMP 500 gave back 37 points, about a half percent, 69 and 8 there. Daniel Ackerman was talking about private credit markets. Blue Owl Capital is the asset management. firm that sparked a bit of panic this week when it changed the rules for some of its investors. Blue Owl Capital tickle tickle, ticker symbol, not tickle, ticker symbol, O-WL, that's a good one. Shrank one and a tenth percent. Today, Apollo Global Management, that's another private equity firm decreased two and four-tenths percent.

Blackstone declined about two-tenths, one percent. A new smartphone forecast says sales are going to drop by almost 13 percent in 2026. That is a lot, a lot. It's because of a shortage of memory chips. Here's the quote, the tariffs in pandemic crisis seem a joke compared to this. That's from a researcher at IDP, the company that did the analysis. Apple down about a half percent today, Alphabet. They do Google's Android and Pixel contracted 1 and 8 tenths percent.

You are listening to Marketplace. This is Marketplace. I'm Kai Risdahl. When you think about the economy of Los Angeles, the first industry that comes to mind is surely entertainment. Then maybe technology, some aerospace and defense. but on a cold and rainy morning last week, we got to peek into a more unsung slice

of the economy around here, about 20 minutes east of downtown in South Elmonte. Stop, private space, employees only. Hi. Sorry to barge in, but it's rainy outside. It's nice and warm and dry in here. Hi, I'm Kai. Hey, Kai Joe.

Nice to meet you. Hi, good. Nice to meet you. How are you? Good. That's Shana Samuels and Joe Willis. They are a husband and wife team, co-owners, too, of a clothing

company called City Threads. It's a small warehouse kind of space full of tables covered with fabric, about eight people working away on sewing machines. This is one of our sewing factories we've been working with for almost 15 years. Right now they're working on a bunch of swimwear. Tell me about your company, first of all. Okay, well, City Threads is the largest American-made clothing brand for kids. We do 100% cotton, 100% organic cotton basics, and all sorts of styles. We do t-shirts and leggings and underwear, anything you can think of. Production for city threads happens in Los Angeles. There are something like 45,000 garment workers in this city. But clothing manufacturing as a whole has mostly moved overseas.

Only about 3% of all of the clothing and shoes sold in the United States are made in the United States. That's from the American Apparel and Footwear Association. How long have you been doing this? Almost 25 years. This is your idea way back in the day, right? Yes. This was my idea. was in graduate school for composing for TV and film and I started

the line and every time he had a break I'd be like can you just help me for a little bit and then he graduated from that program and he said I'll give you six months and here we are 25 23 years later whatever it is yeah wow

tell me how it works because you are a small right it's only like eight-ish tenish people tops right in your company proper yeah There's two of us, and then we have seven employees in our office full-time. But the whole infrastructure of manufacturing around town, it ends up being hundreds of people. We basically use like, this is one-sowing contractor, and you can see how she has, you know, a certain amount of employees here. And then we also have, there's a couple more stores.

It's always interesting to me when I come to a place like this in Los Angeles. And we are, I'm just going to duck my head out in the rain. We are in a very nondescript, no offense, strip mall in South Omanee, right, in the greater Los Angeles area. Yeah. And this place is a huge garment hub, like for the entire U.S. economy. There's a lot of nooks and crannies. Yeah, that's exactly right. People are surprised how unglamorous the fashion business here is, you know, we're not facing the public really too often.

We're facing customers. You know, you have pretty gritty office buildings and warehouses where all the stuff is getting done. seven people on your office staff, but you have clearly a network of contractors, right? Yes. That's a management process. That's a sourcing challenge. It's all kinds of things for you to run the business, right? Yes.

Yeah, I would say that when we first started out, you know, you're looking for just someone who knows, can sew the styles that you're doing. Like at the time, Lucky Brand was a big brand in L.A. at the time when we started, they no longer manufactured America, but at that time they did. So a lot of the contractors around town were doing Lucky Brand. And we're like, oh, that's kind of like a high-quality brand. They do cotton basics. That's similar to what we're doing. So we'd get referred to like a sewer who was doing Lucky Brand. And then they would do our stuff.

And then they'd be like, oh, I know a die house who also dies for Lucky Brand. Oh, great. Okay, so we'll go check them out. There's a lot of moving parts. There's a lot of... I mean, cutters and dyers and sowers and... Yeah. Right?

Yeah. Yeah. I mean, there's multiple ways to do manufacturing. At first, it's easier to start. You said there's a company will do a full package for you. So you just say, here's the styles we want to make. You show them, like your samples and like, oh, we'll make these for you. We'll take care of it from beginning to end.

And that, in theory, would be easier unless they screw up your stuff. Which happened. Are you speaking from experience here? Yeah, absolutely. You're the small fish and you just don't make it onto the sewing machines because they're sewing somebody else. Somebody who's bigger and more important. You want to see some of our samples. I was just going to say, I want to walk around in just a second.

But I guess the first question is, um, The United States, for a whole lot of reasons, is an expensive place to do the kind of work that you're doing. You could outsource it. You could send it to Southeast Asia. You could send it to a zillion different places and have it be cheaper per piece and thus improves your profit margin, all that, jazz. You're looking at me skeptically. Well, I feel like here we can see it every step of the process. We buy the fabric.

The fabric goes to the cutter. If there's a mistake, we see it there, and we repair it. Yeah, I mean, our production managers here all the time. Actually, sorry. So it's interesting. So you, all right, so let's walk around now. Okay. Sorry, I'm being very disjointed.

It's because I'm freezing my y'allias off. We have a couple of piles of fabric here. We've got a pile of gray stuff and we've got a pile of pink stuff. What am I looking at? I think the rash guards. Yeah, these are. Like the kids wearing on the beach and stuff? Yeah, this is swim.

Oh, sure it is, yeah. Just being in the fabric, yeah. Sun protection is a great thing. My wife is big on those. Yes, yes. Our kids hated them, but that's a hold of them. Yeah, but you don't want to, like, you send your kid to camp, you don't want to have to worry about sunscreen. I hear you.

I'm a redhead. You are speaking my wife's language. We make, these are swim leggings. Is that like rash guards for legs? Rast guards for the legs. Okay, can I just say, though? No kid wants to wear leggings to the beach and come on. Oh, my gosh.

But if they are already sunburned and you are on vacation and you want to keep playing. You'll pay the price? Yeah. All right. Fair enough. So, we have piles of fabric. They have come from the cutter, right? Correct.

Yeah, it comes from the cutter just in tied up bundles. And then the sewer has to sort of organize them by color and size. So this is unsewn? Yeah, that's like a bundle and sewn right here. How do you know? Because there's no... Well, there's no... Well, there's no... There's no...

Oh, that's true. Yeah. Shana and Joe walked me through all of the contractors that work on a piece of clothing before it's ready to ship out of their warehouse in downtown Los Angeles. Their business counts on parents coming back as kids grow, buying a t-shirt or pants and the next size up. Everything cost pretty much between 20 and 40 bucks. It's a balance, they said, between keeping things at a reasonable price point while also making quality stuff here. You guys grew up here? Yeah. Correct. Yeah. Your grandmother had a store. Yeah. Your grandparents

were in like clothing and garments and stuff. They worked in the, in the garment industry different ways. And you went to like Santa Monica High School or something, right? And then you see Santa Cruz. Okay, so you've seen the garment thing in L.A. for, I don't know, 40-ish years, give or take, right? Talk to me about how it's changed and where you think it is now, right? Just because manufacturing America is changing all that stuff. Yeah, well, my grandfather was in the shoe, but they were both in leather. One was a cutter for leather coats. I know that the industry, there was a lot more manufacturing going on here.

So all the contractors that we used now, they were around back then, and they're still here. I mean, a lot of them probably closed, but the ones that are still here, making do by having a smaller staff, a smaller factory, but there's still enough of an infrastructure here that we can still do it. There's not just one die house or one cutter or one sewer. There's a big enough group that multiple lines can still produce, and there's still competition for price. Right.

And I do think also, like, people could start clothing lines, but they could also start sewing factories. I mean, we're in this room. I mean, we should say it's not a big room, right? I mean, it's just sewing machines. It's pretty, like, barebows. But it's a business. It's going concerned, right?

Yeah. You were clearly not their only customer. They've got other people they work. Right. Yeah. And so there is that ecosystem. Yeah. Any part of the ecosystem is still here.

Yeah. I mean, if someone was starting a clothing line, I would say started here. We knew people who had, you know, the story has always started here. And then when I wanted to cut costs, I went overseas. Right. Right, right, right. For us, it didn't work that way. And I think for other people, it's, I guess it's sort of like how you design it.

Sometimes I think it's like, how many bells and whistles do you want to put into a garment? Because each thing you add in, is an added price. So if you keep it simple, you can keep the pricing lower here. Thanks, you guys. I really appreciate it. Thank you. Thank you. Thank you. This final note on the way out today, a reminder that the global economy never strays far from global politics, or maybe it's the other way around, I don't know. Today's episode brought to you by whatever is happening with Iran and President Trump. Petroleum products are our barometers of choice.

Brent North Sea crew, the global benchmark, a hair over. $70 a barrel today. Gas at the American pump, $2.98. Our daily production team includes Livy Burdette, Andy Corbin, Maria Hollenhorst, Sarah Leeson, Sean McHenry, Michaela Sia, and Sophia Terenzio. Willstorys a supervising senior producer, and I'm Kai Risdahl. We will see it tomorrow, everybody. This is APM. America's housing system is under strain from natural disasters to the rising cost of shell. The challenges we face and the solutions we embrace will shape how we live for the next hundred years. I'm David Brancaccio, host of The Marketplace Morning Report, and I've been working with this Old House radio hour on a special podcast episode that explores how Americans are reimagining housing in this changing world.

It's called Building Tomorrow, from wildfire-resistant houses in California to tiny home communities in Texas to a super-duper energy-efficient house in the Northeast, this special blends innovation, new business models, and personal stories to explore how resilience, affordability, and our climate reality are redefining what home looks like. To listen, go to Marketplace Morning Report in your podcast app.