Goldman Sachs warns of potential global credit crisis amid $5 trillion private lending boom

Goldman Sachs has warned of growing risks in the global credit market, particularly from the private lending sector, which now exceeds US$5 trillion in value. The bank cautioned that a wave of defaults could trigger widespread financial instability.

According to a Bloomberg report, John Waldron, President of Goldman Sachs Group Inc., voiced concerns over the rapid expansion of global credit during the past decade — especially in private credit markets.

“If things go badly, defaults will not be good news,” Waldron said. “Everyone in the financial system will feel the impact.”

He noted that most of the growth in global lending has occurred in private credit, followed by high-yield bonds and leveraged loans.

Credit fraud scandals spark alarm

The credit market has been shaken by a series of alleged fraud cases over recent weeks, exposing potential weaknesses in the system.

• Zions Bancorp and Western Alliance Bancorp revealed on 16 October 2025 that they had fallen victim to fraudulent loans linked to troubled commercial real estate funds.
• Tricolor Holdings, a subprime auto lender catering to borrowers with poor credit histories, filed for bankruptcy last month.
• First Brands Group, a major automotive parts supplier, also filed for bankruptcy amid fraud allegations.

These failures have inflicted losses on lenders and investors alike. JPMorgan Chase & Co. reported a US$170 million loss tied to Tricolor’s collapse.

Jamie Dimon, CEO of JPMorgan Chase, warned that “there may be more cockroaches out there,” implying that these incidents could signal deeper, hidden problems across the financial system.

Private credit under scrutiny

Waldron added that the recent volatility and losses may indicate “stress building up at the lower end of the economy,” where heavy borrowing has surged.

The spate of credit fraud scandals has heightened tension between traditional banks and private lenders. Some private credit firms argue that banks are unfairly attacking their business models.

Marc Lipschultz, Co-CEO of Blue Owl Capital Inc., hit back, saying:

“These fraud cases originated in the banks themselves. They should clean up their own books before criticising others.”

Waldron concluded that both private credit providers and banks operate within a single, interconnected financial ecosystem:

“I don’t really understand why we talk about private credit as one thing and bank lending as another — it’s all part of one system,” he said, warning that if financial stress intensifies, “no one will be immune from the fallout.”