Jamie Dimon of JPMorgan Raises Alarm Over $2 Trillion Industry’s Influence on Wall Street

The private credit industry has Wall Street’s most powerful banker sounding the alarm, with JPMorgan & Chase & Co. (JPM) CEO Jamie Dimon saying its growth is a “recipe for a financial crisis.”

Private credit refers to loans made directly by private equity firms and investment managers, not via banks or bond markets. The sector surged to about $2 trillion in assets by 2025, putting it in league with the leveraged loan and high-yield bond markets in size.

“Private credit is built on optimism and opacity. That’s a risky combo,” Stoy Hall, financial advisor and CEO of Black Mammot, told Investopedia, “Dimon’s waving the flag early, and honestly, more folks should be paying attention instead of chasing double-digit returns without understanding the full downside.”

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Diamond’s Public Warnings

JPMorgan CEO Jamie Dimon has emerged as a leading critic of unchecked private credit expansion. In July 2025, Dimon described private credit as potentially “dangerous,” drawing parallels to the loose lending that preceded the 2008 financial crisis. He warned that this market has grown up in “a zero-rate fairy tale” (the low rates of the 2010s) and “hasn’t been tested in a true recession.”

A 2025 Federal Reserve financial stability report backs up Dimon, noting that private credit loans typically come with looser terms, lower interest coverage, higher leverage, and weaker buffers compared to public market loans.

How a Downturn Would Ripple Beyond Private Lenders

Using Dimon’s own bank as an example, Hall said, “Just because the loan’s not on Chase’s books doesn’t mean the pain won’t show up in unemployment, slowed growth, and investor panic.”

The private credit explosion began in earnest around 2015, when private-equity firms channeled hundreds of billions in capital from pension funds and endowments seeking better returns through direct corporate lending. But the growth of private credit is evident across the economy. Many midsize U.S. enterprises, particularly those too risky for banks, rely on private lending. This stems from a long-term breakdown in traditional financing channels. According to Derrick Barker, CEO of real estate fintech firm Nectar, “The only deals that can get done are deals where you can get a Wall Street fund or bank to finance, which means you have to have a $20 million equity check.”

The gap between institutional capital and community banking has created a vast “missing middle,” Barker said, where many businesses struggle to access traditional financing, driving them toward private credit alternatives.

Should liquidity dry up, the damage could affect the broader financial system, not just through the businesses needing it, but also through knock-on effects: lower payrolls, unemployment spikes, and shrinking growth that often result from a credit crunch.

Is Private Credit the Next 2008?

Dimon isn’t the only one to see uncomfortable similarities with the late-2000s crisis: rapid growth, loose standards, unregulated “shadow banks,” and widespread yield chasing. “Private credit today is echoing the junk bond boom of the late ’80s and the pre-2008 mortgage crisis,” Hall said. “It’s being fueled by institutional investors desperate for returns … like in ‘08, everyone’s too busy collecting fees or returns to ask: what if this borrower can’t pay us back?”

Dimon has specifically referenced Bear Stearns and Lehman Brothers as cautionary examples, emphasizing how this “wild lending spree” could transform into a systemic shock if conditions deteriorate.

How Investors Should Navigate the Private Credit Minefield

Unlike traditional banks, private credit funds operate largely outside the rigorous oversight that governs deposit-taking institutions. While regulators are starting to pay closer attention—the U.S. Securities and Exchange Commission made private credit disclosures a 2025 priority, and Federal Reserve researchers are warning of systemic risks—the oversight framework remains incomplete. That could be a problem. “If you’re not regulating risk, you’re just delaying the explosion,” Hall said.

Most private credit products are not available to retail investors, but for accredited investors, the regulatory gap means extra due diligence is essential—including for retail investors interested in new products becoming available to them. Managers track records rigorously, focusing on experience in prior downturns when regulatory backstops won’t be there to help. Diversify across credit strategies and understand lock-up periods, as private credit investments typically can’t be sold quickly during market stress.

If you’re a borrower, refinance debt while markets remain accessible and rates are relatively stable. Consider strengthening cash flows, limiting nonessential expenditures, and securing backup credit facilities if concerns about a private credit market squeeze increase.

The Bottom Line

The private credit industry’s explosive growth to $2 trillion represents both opportunity and significant risk. While these loans can provide valuable financing to businesses that traditional banks won’t serve, the sector’s loose standards and minimal oversight echo dangerous patterns from past financial crises.

For investors, this means carefully vetting fund managers, diversifying holdings, and preparing for potential illiquidity during market stress. Jamie Dimon’s warnings suggest that private credit could face a reckoning, and the question is whether the broader economy is prepared for the fallout.