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Is Private Credit Becoming the Public’s Problem?

Given the explosive growth of private credit over the past 15 years, it is understandable that regulators and central bankers are taking a greater interest in the industry. But a recent US court ruling suggests that some authorities have already overreached, and are focusing on the wrong dimension of the problem.

LONDON – It is not often that a judgment from the Fifth Circuit Court of Appeals in New Orleans provokes outrage in the pages of the Financial Times. But that is what happened earlier this month. A ruling in favor of the National Association of Private Fund Managers and co-plaintiffs against the US Securities and Exchange Commission, noted Gillian Tett, whose book Fool’s Gold was one of the more perceptive analyses of the global financial crisis, “sparked jubilation among many financiers and dismay from progressive and consumer protection groups.”