The constant attacks coming from the Left on capital markets and the wealthy are bad for America. Instead of celebrating entrepreneurs and investors as job creators bringing about public goods, they’re derided as “malefactors of great wealth,” just as they were in the time of President Teddy Roosevelt.
It’s time the parasites of the public square started to appreciate the role these people and institutions play in keeping America healthy, wealthy, and strong. Take the issue of private credit, which has recently come under attack by academicians and other so-called deep thinkers as a drain on the system.
They’re wrong, but that’s almost evident. It typically takes one of two forms: direct lending by private investors, usually to mid-sized companies backed by sponsors, or asset-based financing, which is structured investment products collateralized by hard assets, ranging from airplanes to credit cards and cell towers.
ECONOMY LOST 92,000 JOBS IN FEBRUARY: THE KEY FACTS AND FIGURES
It’s fast, it’s quick, and it’s a source of private funding. That’s what often makes it attractive. It’s a much less cumbersome way to secure the infusion of cash than going the traditional bank route. It’s a way for what some folks operating in what’s called “the real economy” to secure funding on short notice or for short terms on the kinds of things to which Wall Street and the Big Banks have lately been turning a blind eye, like capital-intensive energy and digital infrastructure projects and commercial and equipment finance critical to economic expansion.
They haven’t been looking the other way because these are bad investments, far from it. And, although they are not without risk, sometimes considerable, a review of the economy’s performance over the last decade shows these kinds of projects are exactly where you’d have wanted your money manager to invest your cash whenever possible.
Unfortunately, due to organized pressure from public policy organizations pushing an ESG investment strategy on major investment houses, these vital projects often found themselves unable to secure the financing they needed, which is why they turned to private credit.
Investors benefit from higher returns than they do from comparable liquid credit alternatives. Bringing them right up to borrowers eliminates the need for intermediaries. It provides a greater incremental yield that some experts say can be more valuable in lower-rate environments.
It’s also good for the rest of us. It leads to factors that drive economic growth. For example, since it aids oil exploration, new fields are found and exploited, which means more drilling, which produces more crude, which, when refined, increases supply and reduces the price we all pay at the pump.
The increase in size of private credit’s footprint in the marketplace has been driven by benefits like these, which is exactly why some people oppose it getting any bigger without at least imposing enough regulation on it to choke it off from its role as a source of finance for innovators in the energy and tech worlds.
Contrary to what they say, it would be a mistake to allow this to happen. Private credit strengthens financial stability by diversifying lending and dispersing risk beyond the government-backed banking sector. Allowing sophisticated private investors (including pension fund managers, endowments, and sovereign wealth funds) to invest directly in projects disperses the risk more broadly, with the downside costs no longer borne solely by taxpayers or retail depositors.
To put it another way, imagine how much better off we all would have been if the subprime mortgage loans that went belly up in 2008 hadn’t been backed by all of us but had been held privately. It’s true people who shouldered the risk would have borne the brunt of the collapse instead of us taxpayers who funded the numerous bailouts, but it’s also true that, had more of those loans been sourced backed to private credit rather than the big banks, the problem might never have gotten as big as it did and the risk never might have risen so high because the people lending the money would have recognized sooner that it was a bad investment. That’s why private credit often has stricter lending standards than banks, since managers hold loans until they’re paid off and bear all of the credit risk.
When you remove moral hazard from the equation, you increase the risk that a catastrophe will occur, and not just because, as the Office of Financial Research found in its 2025 report to Congress: “Financial stability vulnerabilities associated with private credit appear low because private lenders are not very leveraged, and most have financing that is locked up for long periods.”
DEMOCRATS’ NEW AFFORDABILITY CHAMPION SPANBERGER HAS NO RECORD OF CUTTING COSTS YET
It’s quite simple, really: Private credit offers stable credit without liquidity risk. Longer-term investments in private funds align with the longer-term duration of the loans they underwrite. Investors have limited redemption rights, which help prevent a liquidity squeeze or an asset “fire sale.”
Private credit funds offer a stable line of credit, especially when compared to the big banks. We need more of it, and the Trump administration ought to be even more aggressive in encouraging its adoption as a source of project funding. If America is going to lead the world in the industries of tomorrow as it did the industries of yesterday, the start-ups developing the technologies to do that need to be funded. The government shouldn’t do it. Banks often won’t, and for reasons that have nothing to do with the financial soundness of a proposal. The future depends on alternative sources being available, which is why private credit should be allowed to grow rather than be treated as a liability that exposes us all to additional risk.
Economist and commentator Steve Moore has written extensively on matters related to economic growth. The chairman and founder of Unleash Prosperity, he is a vocal advocate and leader of the American free-market movement.