alt Hacker NewsTo private credit firms. Most of what banks do is private credit, the news is them funding private credit firms.
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I don't know a lot about finance. What is the definition/significance of "firm" in this context (if that's not a complicated question)?
Isn’t private credit defined in part as “lending by non-banks”?
Like, when a bank originates a mortgage, that mortgage gets traded, much like private debts don’t.
That's not correctly stated. "Private Credit" is defined as non-bank lending. Banks are doing "public" lending in the sense of being regulated. Private lending is any sort of financial instrument issued outside of those guard rails.
It's generally felt to be risky and volatile, but useful. Basically, it's never illegal just to hand your friend $20 even if the government isn't watching over the process to make sure you don't get scammed. This is the same thing at scale.
No, there is a huge difference:
- when a bank creates a loan, this has an effect on money supply in total
- when a private credit company "gives" a loan, it has no effect on total money supply and from balance sheet perspective its an accounting exchange on the asset side