Podcast Summary: Halftime Report — "Cracks Forming in the Private Credit Market?"

CNBC | Host: Scott Wapner | Air Date: October 17, 2025

Overview

This episode centers on emerging concerns within the private credit market amid volatile market conditions and record-high rallies. The panel—comprised of Scott Wapner, Bryn Talkington, Steve Weiss, Jason Snipes, Bertha Coombs, Steve Liesman, Joe Terranova, and Steve Kovach—debates whether recent credit events signal isolated incidents or possible systemic risks, especially relating to non-bank lenders and regional banks. The conversation also delves into the roles of regulatory changes, bank–private market interconnectivity, and the Federal Reserve's potential response.

Key Discussion Points & Insights

1. Private Credit Market Under Scrutiny

[01:01–07:00]

• Background:
  • Several high-profile bankruptcies (Tricolor, First Brands) and declining performance in "alts managers" and Business Development Companies (BDCs) (e.g., Ares, KKR, Blue Owl, Blackstone) have triggered market concerns.
• Panel Views:
  • Bryn Talkington: Maintains the issue is overblown; highlights transparency in BDCs and believes current selloffs present a buying opportunity ("I think a year from now, I can look back and have a 20% total return in an asset class that I know." [04:45]).
  • Steve Weiss: Cautious but not alarmist. Stresses private credit’s lack of regulation and the need to "know who you're partnering with” as asset managers may be motivated by fees, not quality ("We don't know where the tide is right now..." [07:07]).
  • Scott Wapner: Pushes back on the narrative that private loans aren't inherently riskier, even if more transparent ("Loans made in the private credit and private loan market are probably more risky..." [08:14]).

2. Risk Assessment—Systemic or Idiosyncratic?

[08:14–15:57]

• Risk Debate:
  • Bryn: Emphasizes stronger underwriting standards among private lenders like Blue Owl, comparing leverage in BDCs (1.5–2x) to pre-2008 banks (50–60x).
  • Scott: Warns of repeating past mistakes of misplaced confidence, referencing parallels with 2008.
  • Bertha Coombs (News Update) [11:13]:
    • "This is a common thread among Tricolor, First Brands and now this latest situation with Zions and Western Alliance."
    • NDFI (Non-Depository Financial Institutions) loans make up a significant slice ($1.2 trillion) of FDIC institutions’ books, marking increased bank–private lender interconnectedness.
  • Jamie Dimon (via panel): His "cockroach theory"—rarely is there only one problem—frames the panel’s skepticism about the risk being isolated.

3. Banking System Interconnectivity and Regulatory Blind Spots

[12:54–15:45]

• Goldman Sachs’ John Waldron (via Scott Wapner):
  • "I don’t really understand why we’re talking about private credit as one thing and lending in the banking system as another thing. There’s one system. If there’s pain to come, everybody in that system will feel that." [13:12]
• The rise of NDFI lending connects private and traditional banks more closely than many realize.
• Focus intensifies on regional banks' exposures and potential fraud (Zions, Tricolor, First Brands).

4. Implications for Regional Banks & Institutional Exposure

[16:20–21:38]

• Jason Snipes: Sees demand for private credit driven by regulatory changes and investors chasing yield; doesn’t predict “broad-based contagion.”
• Joe Terranova:
  • Holds multiple regional bank positions.
  • Notes that momentum in regional bank equities, which began rallying in April/July 2024, is ending: “It’s coming to the end of the road.”
  • Positive provisions data from regional banks and Ally Financial suggest credit stress isn't yet systemic.

5. Federal Reserve’s Response & Policy Impact

[22:25–26:28]

• Steve Liesman:
  • Raises the possibility of credit issues pushing the Fed to cut rates sooner.
  • Notes NY Fed research: Non-bank financials could present risks in an extreme scenario, but their overall footprint remains manageable.
  • If “shadow banking” issues bleed into the regulated system, the situation changes dramatically.
• Discussion: The panel speculates that regulation (post–Dodd-Frank) may have inadvertently driven riskier activity into the unregulated “shadow banking” sector.

6. Market Dynamics and Takeaways

[26:34–28:10]

• Weiss & Talkington: Warn that low lending rates and ample capacity may have fostered riskier loan books, with private credit moving into higher-risk segments.
• High Yield Market: Talkington notes little stress in public high-yield debt compared to private credit—"I just think there’s a lot of confusion here and people are just pummeling the illiquid BDC..." [27:23].

Memorable Quotes & Moments

• Steve Weiss: "We don’t know where the tide is right now. We know that we’re seeing some signs that are heightened...It’s never, never just one incident or two." [07:07]
• Bryn Talkington: "I have a very high level of confidence in the firms. Like people have confidence in JP Morgan’s underwriting ability. You have to have confidence in these private companies’ ability to underwrite." [09:02]
• Bertha Coombs: "...it’s really garnering this microscope on the interconnectivity between the private markets and the regulated banking institution." [12:39]
• Scott Wapner (quoting Goldman's John Waldron): "There's one system. If there's pain to come, everybody in that system will feel that." [13:12]
• Jason Snipes: "...I think six months from now we won’t be talking much about it." [17:15]
• Joe Terranova: "...it damaged momentum, it damaged sentiment and reflected in the way the market’s trading today." [20:00]
• Steve Liesman: "By definition, the next credit event happens in a place you weren’t looking at." [22:25]

Segment Timestamps

| Timestamp | Segment Description | |--------------|--------------------------------------------------------------------------------| | 01:01–04:01 | Setting the stage: Credit concerns, market volatility | | 04:01–08:14 | Deep dive on BDCs, private credit: Transparency vs. risk | | 08:14–10:58 | 2008 GFC analogies, leverage, and regulation | | 11:13–14:43 | Bertha’s update: NDFI/FDIC, regional banks, fraud concerns | | 15:45–16:20 | Panel: Are issues contained or wider-spread? | | 16:20–21:38 | Regional banks’ momentum, panelists’ positions and outlook | | 22:25–26:28 | Liesman on Fed, shadow banking, bank regulation, rate cut probabilities | | 26:34–27:54 | Private lending rates, risk capacity, high yield vs. private credit health | | 27:54–32:30 | Portfolio moves: Bank of America, IonQ, Apple, market legacy discussions | | 37:58–39:55 | Bitcoin and crypto: Volatile leverage, de-risking discussion | | 42:41–43:55 | Biotech (IBB), pharma pipeline M&A, American Express commentary | | 45:17–45:43 | Final trades: BMNR call strategy, Autozone, FTAAviation |

Notable Panelist Moves

[30:01–45:43]

• Weiss: Sells Bank of America, doubles down on Goldman instead.
• Talkington: Closes IonQ position ("...these stocks make no sense on any valuation metric..."), gives bullish option play on BMNR, remains pragmatic on Tesla.
• Snipes: Trims Apple, adds to biotech ETF (IBB), likes AutoZone, maintains Abbvie and American Express positions.

Market Context & Closing Commentary

• Santoli & Joe Terranova [40:31–42:05]:
  • Market appears nervous but not in panic; "escape with less damage" amid October volatility.
  • No "urgent selling" in regional banks signals no immediate crisis, but earnings season could shift sentiment.
• Gold & Freeport McMoRan [43:55–44:44]:
  • Gold outperforms; Freeport’s upside seen as limited until Indonesian mine restarts.
• Panel Final Trades [45:17–45:43]:
  • Highlights from each panelist, with Brin sharing an actionable crypto option strategy.

Overall Takeaways

• Current private credit stress events are not yet seen as systemic by the panel, but the risks of interconnectedness and opacity between banks and private credit warrant attention.
• Regulatory changes after 2008 have reshaped where risk resides, creating “shadow” market vulnerabilities.
• The panel remains mostly cautious but not panicked, suggesting continued due diligence—especially as earnings approach and the Fed’s next moves come into sharper focus.

For listeners and investors, this episode delivers a textured view of today’s credit market concerns—balancing risk, potential overreaction, and the complex interplay between private and regulated lending.