U.S. Large-Cap Banks: Jason Goldberg's Bank Brief | Volume 23, Issue 93 | 5.26.26

Research evidence excerpt

U.S. Large-Cap Banks: Jason Goldberg's Bank Brief | Volume 23, Issue 93 | 5.26.26

to the broader U.S. financial system.

While the threat of a liquidity crisis driven by private lending looks minimal, several

potential secondary risk channels warrant close attention, it states. U.S. private credit’s

rapid expansion and growing interconnectedness with the broader financial system mean that

any stress is unlikely to stay fully self-contained, it says. As funds in the U.S. have scaled up,

private lenders have relied more heavily on short-term funding, leverage, and operational links

to traditional financial institutions. Still, it notes money market funds and the U.S. banks

appear healthy. Still, banks’ vulnerability to private credit weakness thus appears very

limited, there are several secondary channels that could expose banks. Balance-sheet

linkages between private-lending institutions and banks are one space to watch. Bank loans to

non-depository financial institutions (NDFI) have risen to nearly $2trn, up from around $1.2trn a

year ago. Structured finance is another potential transmission channel. Some ABS may

carry indirect exposures to private-lending activity. The risk is that credit stress could be

dispersed throughout these instruments’ layered structures, making exposures harder to

trace and potentially amplifying pressure if the value of the underlying collateral falls, it

states

Tax refund benefit could fade while gas prices remain elevated. Article in today’s FT titled

“US consumers face looming spending squeeze as Trump tax rebates fade” saying US

consumers are just months away from a cash crunch as tax refunds from the Trump

administration run out and surging fuel costs from the Iran conflict cascade through the

economy.