Former Goldman Sachs CEO Lloyd Blankfein has warned that the growing private credit market could lead to a financial crisis similar to the one in 2008, potentially affecting retail investors and the broader economy.
In an interview on Bloomberg’s “Big Take” podcast, the renowned moneyman said the $1.8 trillion private credit sector involves risks from hidden leverage, lack of liquidity and opaque assets.
He compared the situation to the subprime mortgage crisis, noting that these investments are increasingly being offered to individual investors through retirement accounts.
“We’re getting close to the end of the late stages of cycles on this, and we’re due for a kind of a reckoning,” Blankfein said.
He expressed concern that firms are promoting these products to retail clients just as risks are rising.
Private credit refers to loans made by non-bank lenders to companies, often outside traditional regulatory oversight.
Recent issues include souring loans at firms like BlackRock and the insolvency of UK lender Market Financial Solutions last week, amid allegations of fraud and improperly pledged assets.
A 2025 executive order by President Donald Trump eased rules allowing private credit and equity investments in 401(k) plans.
Goldman Sachs, where Blankfein served as CEO from 2006 to 2018, has partnered with T. Rowe Price to offer such products to retirement savers.
Blankfein pointed to parallels with 2008, saying: “I wonder where there’s hidden secret leverage.
“Now everyone says, ‘Oh, the world’s not leveraged.’ That’s exactly what everybody said in the mortgage crisis until you suddenly discover that there was a lot of mortgage risk in Iceland.”
He added: “It sort of smells like that kind of a moment again. I don’t feel the storm, but the horses are starting to whinny in the corral.”
Blankfein’s tenure at Goldman included navigating the 2008 crisis. In 2010, the bank paid $550 million to settle Securities and Exchange Commission charges over misleading investors on a subprime mortgage product, without admitting wrongdoing.
In testimony before Congress, Blankfein emphasized that Goldman’s clients were sophisticated institutions, not retail investors.
The exec, now 71, warned that losses for individual investors could provoke strong regulatory and government responses.
“When you lose money for individual consumers — i.e., taxpayers and citizens — people in government get very, very upset. Regulators get very, very upset,” he told the Bloomberg podcast.
Other industry leaders share similar concerns.
JPMorgan Chase CEO Jamie Dimon recently criticized competitors for making risky loans to struggling companies, calling such moves “dumb things” that prioritize short-term gains over long-term stability.
Markets showed signs of unease Friday, with the KBW Bank Index dropping the most since April, reflecting investor worries about private credit vulnerabilities.
Goldman Sachs has stated that its private credit funds for retail investors have low redemption risks and limited exposure to high-risk sectors like software firms affected by artificial intelligence.
The private credit market has grown rapidly as investors seek higher yields amid low interest rates. However, critics argue that reduced transparency and increasing retail access could amplify systemic risks if economic conditions worsen.
Regulators are monitoring the sector, but no major new restrictions have been imposed yet. Investors and policymakers are urged to watch for signs of stress, such as rising defaults or liquidity shortages.
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