Banks Quietly Returning to Risky Practices That Caused 2008 Crash

Experts warn private credit markets are showing signs of a looming liquidity crisis

Apr. 17, 2026 at 5:24pm by

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An extreme close-up of gears, levers, and other heavy industrial banking equipment, conveying the intricate and potentially fragile nature of the financial system.As concerns mount over banks' exposure to the opaque private credit market, this industrial-style image evokes the complex, high-stakes financial machinery that could trigger another systemic crisis.San Francisco Today

The Financial Times reported that major banks are failing in private credit markets, raising concerns about a repeat of the 2008 financial crisis. Experts warn the U.S. economy is under stress from President Trump's policies, including the closure of the Strait of Hormuz and rising inflation, leaving the government struggling to finance a large deficit. Banks are now launching credit default swap indexes targeting the opaque $2 trillion private credit market, which some see as a recipe for disaster.

Why it matters

The 2008 financial crisis was triggered by the mispricing of risk in complex financial instruments like credit default swaps. Regulators now have limited visibility into the $2 trillion private credit market, raising fears of another systemic meltdown if underlying loans start to default.

The details

Major banks are reportedly launching credit default swap indexes targeting the $2 trillion private credit market, which experts say is a black box hidden from regulators. This comes as the Federal Reserve has asked banks to detail their exposure to this opaque market, suggesting growing concern. Investors are already pulling money from many private credit funds, hitting withdrawal limits in a sign of a potential 'bank run' behind the scenes.

  • In March, Politico reported investors were pulling money from private credit funds, hitting withdrawal limits.
  • This week, the Federal Reserve demanded major banks detail their exposure to the private credit market.

The players

Logan McMillen

A writer for The New Republic who is sounding the alarm about banks' activities in private credit markets.

Nate Swanson

A former Trump staffer and current senior fellow at the Atlantic Council, who assumes Trump thought the confrontation with Iran would be easy.

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What they’re saying

“The Fed's request that major banks detail their exposure to the private credit market should terrify risk assessors. When macroeconomists picked through the rubble of 2008, many landed on the conclusion that there had been a catastrophic mispricing of risk.”

— Logan McMillen, Writer, The New Republic

“Trump was coming off a 'win' from his June strikes and from capturing Venezuelan leader Nicolás Maduro. In the past, Trump was able to kill Iranian military officer Qasem Soleimani 'with virtually no repercussions,'”

— Nate Swanson, Senior Fellow, Atlantic Council

What’s next

Experts warn that what happens this weekend with the Strait of Hormuz closure could trigger a liquidity crisis that is felt for at least a year or more.

The takeaway

The U.S. economy is under significant stress, and the banks that helped cause the 2008 financial crisis appear to be engaging in risky practices that could lead to another systemic meltdown. Regulators have limited visibility into the opaque $2 trillion private credit market, raising fears of a repeat of the last crisis.