A $140 Million BlackRock Loss Revives Private Credit Worries

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0:18Former CNN anchor Don Lemon was arrested over a protest at a Twin Cities church. Plus, the private credit market is showing some cracks. These funds can drag out the write-downs of their assets because there is this opacity. And so you as an investor may not know that you're sitting on some time bombs in your fund that can turn into a massive loss, as it did in this case. And will Trump's Fed chair pick be a friend to Wall Street? Investors aren't sure. It's Friday, January 30th. I'm Alex Osula for The Wall Street Journal. This is the PM edition of What's News, The top headlines and business stories that move the world today.

1:04Former CNN anchor Don Lemon has been arrested by federal agents over a protest that disrupted a church service in St. Paul, Minnesota earlier this month. Lemon, who now works independently, said he was there as a journalist, not a participant. Lemon's lawyer called the arrest an attack on free speech. The arrest came following pressure from President Trump to prosecute protesters who have clashed with federal agents in the Twin Cities. A magistrate judge last week declined to sign off on a complaint charging Lemon. And a judge ruled today that federal prosecutors can't seek the death penalty for Luigi Mangione, who's charged with killing a UnitedHealthcare executive.

1:43Three pieces of news from the president and the administration. The Justice Department today began releasing its latest batch of documents related to its investigation of Jeffrey Epstein. It's more than three million pages of files with thousands of videos and photos. The Justice Department began the Epstein document dump last month after Congress in November passed a law mandating the release of the files. Also from the Justice Department, the FBI is leading an investigation into whether federal agents who fatally shot Alex Preddy in Minneapolis violated his civil rights. Public outcry prompted the Justice Department to expand what had been a more limited probe.

2:19And President Trump, acting in his personal capacity, has sued the IRS and the Treasury Department. He says the agencies didn't do enough to stop a contractor from leaking his tax returns to the press in 2019. The lawsuit seeks at least$10 billion from the U.S. government that he runs. The White House, IRS, and Treasury Department didn't respond to requests for comment.

2:45The private credit boom on Wall Street is raising some concerns for investors again. One of BlackRock's private credit funds surprised investors last week when it reported a$140 million loss and marked down the value of its holdings by 19 percent. The decline just highlights how hard it is to know how much these investments are worth, even as Wall Street and the Trump administration are pushing to make products like these even more widely available to Main Street investors. I'm joined now by Matt Wertz, who covers credit for the journal. Matt, why are these types of investments so hard to value?

3:18The short answer is in the name. They are private. So they're a corporate loan that BlackRock might make to a small or midsize manufacturer of, like, roof supplies, for example. And so these are loans that this fund makes to these companies, but there's no marketplace to trade them. And as a result of that, there's no clearly available price, and it's up to the discretion of the funds manager to determine what the value of the investment is. More and more corporate loans in this country have moved out of the banking system into these private credit funds, which are super hot and super lucrative for Wall Street.

4:03But they are less transparent than stocks, bonds, or even large corporate loans that banks make and then trade in the market. What does this mean for ordinary investors? What's noteworthy here is how quickly this fund changed its story on what these assets were worth. Just a couple months ago, they and some of the other investments were worth$140 million more. And these are companies that were in trouble for years that this fund in particular has already written down. BDCs are very widely held by individual investors. Matt, one second. Let me just tell listeners, BDCs are business development companies that typically make high interest loans to companies.

4:46And this BlackRock fund we're talking about is an example of one. They're viewed as a source of income. Investors in them are told, you own secured loans backed by hard assets. These funds can drag out the write-downs of their assets because there is this opacity. And so you as an investor may not know that you're sitting on some time bombs in your fund that can turn into a massive loss, as it did in this case. That was WSJ reporter Matt Wertz. Thank you, Matt. Thank you. A spokesman for BlackRock declined to comment.

5:25As we mentioned on this morning's show, President Trump has named his pick to lead the Federal Reserve. It's 55-year-old Kevin Warsh. Wall Street isn't sure what to make of Warsh yet. Many are optimistic that Warsh will preserve the Federal Reserve's independence, even as they're also concerned he might be far from the easy-money kind of Fed chair that President Trump wants. The conflicting views were reflected today by falling stocks, a rallying dollar, and the worst day for gold and silver in more than four decades. Gold fell 11 percent and silver dropped 31 percent. Warsh still has to be confirmed by the Senate, and the government's criminal investigation into current Fed Chair Jerome Powell might complicate that.

6:03Republican Senator Tom Tillis of North Carolina said today that, though he considers Warsh a qualified nominee, he would oppose Warsh's confirmation until the Powell probe is resolved. Coming up, are you trying to eat more protein? Fast, casual restaurant chains want to help you with that. That's after the break.

6:26This is a new era of American innovation. DriveHealth used Google AI to develop an AI-powered agentic nurse that provides real-time support to patients 24-7. Learn more at g.co slash American Innovation.

6:46With just hours to go, the Senate is grinding toward a vote later today to fund the government. If it passes the Senate, it still needs approval from the House, which isn't expected to return until Monday. That means at least a brief partial shutdown of the government is likely.

7:06Many Americans are obsessed with eating more protein. The government now recommends that you eat a whole lot more of it. And restaurant chains like Chipotle and Starbucks are changing up their marketing and their menus to emphasize it. The new turkey and ham protein pocket from Subway. Fresh turkey, Black Forest. Introducing Chipotle's new high-protein menu with real chicken, grilled fresh. New protein refreshers, only at Dunkin'. The companies are hoping that extra protein can help bring in more diners. Market research firm Black Box Intelligence says restaurant traffic fell 1.9 percent last year.

7:38Kelly Clunan covers corporate news for the journal and is here to tell us how protein became the new industry watchword. So, Kelly, I'm struck by the form that some of this protein stuff is taking. There's protein foam, protein pockets. What is the unifying element among these things? Yeah, a lot of these companies are really just trying to capitalize on consumers' growing interest in protein. These protein offerings really kind of run the gamut. It's a big variety. There's more traditional offerings like Chipotle double or triple chicken or steak in their existing bowls. At the same time, having like a standalone side of chicken or steak that's new to their menu.

8:18Then we also have a lot more kind of creative options like Papa John's protein infused pizza dough or Dunkin' and Starbucks high protein milk options for their lattes. So it sounds like some of the stuff that is on these menus is new, like the protein pizza dough, and some of it is sort of like a repackaged version of what already was there, like a cup full of chicken, right? Yes, exactly. These aren't necessarily always new offerings. A lot of it is just putting more marketing dollars behind it and really putting these items in protein-focused menus. It's not really like a high-risk thing for these restaurants to try out.

8:56So in the case that it does resonate with people, it could really help sales and help traffic. Charging a premium for protein could help reinvigorate sales. But is there any indication the new menu items are increasing visits to restaurants? Analysts are still waiting to see what that's going to look like. Starbucks was early to unveiling their protein-focused offerings in the fall. They've said so far that awareness among consumers is still low. But in some cases, their protein offerings are driving increased traffic. and bringing some customers back for repeat visits. And the people that I talk to seem pretty interested in the more value-oriented protein offerings.

9:35Chipotle's Chicken Cup and Subway's Protein Pockets, those typically go for under$4. And a lot of consumers have been put off by high prices. So seeing protein options that are a little cheaper is something they're very interested in. That was WSJ reporter Kelly Clunan. Thanks, Kelly. Thanks so much. Great to be here.

9:59In Ukraine, President Volodymyr Zelensky said he supported the pause on strikes on energy infrastructure proposed by the U.S. Russian strikes on Ukraine's power grid in recent weeks have left hundreds of thousands without power or consistent heat, while Ukraine has targeted Russia's oil refineries. An energy truce would be the first tangible result from the U.S.-mediated push for peace in Ukraine. And Cuba is losing a key oil supplier, Mexico, after pressure from President Trump. Mexico had already paused its shipments there before the president yesterday issued an executive order for tariffs on any country that exports oil to Cuba.

10:36Cuba is in danger of running out of fuel, threatening economic collapse. The Journal has reported that the Trump administration is looking for ways to topple its government this year. And you can hear more about the push for regime change in Cuba on this weekend's episode of What's New Sunday. And speaking of oil, today Chevron and Exxon both reported their smallest annual profits since 2021, as a growing glut of crude has weighed on prices. President Trump wants Chevron, Exxon, and other companies to rebuild Venezuela's oil industry. But Chevron said today that it's too early to determine the company's long-term outlook on Venezuela.

11:12It's the only major U.S. oil company currently active in the country.

11:19And finally, tomorrow is the last day of January. And if you've been feeling like the month has been one crisis after another, well, I'd agree with that. Have a listen. The U.S. staged a raid on Venezuela overnight that culminated in the capture of the country's president, Nicolas Maduro. The Department of Homeland Security said an ICE officer shot and killed a woman today. President Trump tells Iranian protesters that, quote, help is on its way. Sweden, France and Germany are sending troops for military exercises in Greenland. With a decision on military action apparently on pause, the U.S. has turned to economic pressure on Iran.

11:55Framework of a future deal on Greenland. Minneapolis reels after federal agents kill another U.S. citizen. The White House border czar says he's working on drawing down immigration officers in Minneapolis. So if the news cycle this year has you dizzy, you're not alone. WSJ Washington coverage chief Damian Paletta calls it the Washington whiplash, and it could come with consequences for the Trump administration. When you have a crisis every five minutes, people start tuning it out because they have to live their lives. We're just a few weeks into this year, and already we've seen so many events that were either precipitated by the White House or involved Washington in some way.

12:32And I think it's setting the tone for a really hectic and possibly quite confusing year ahead of the midterms. One of the reasons this is important is Americans like certainty. Americans like stability. There's a sense this could become a liability for the White House and Republicans. And that's What's News for this week. Tomorrow you can look out for our weekly markets wrap-up, What's News in Markets. Then on Sunday, as we mentioned, we'll be talking about Cuba. And we'll be back with our regular show on Monday morning. Today's show is produced by Pierre Bien-Aimé with supervising producer Tali Arbel.

13:05Michael LaValle wrote our theme music. Jessica Fenton is our technical manager. Aisha El-Muslim is our development producer. Chris Zinsley is our deputy editor. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osula, wishing you a relaxing end to this month. Thanks for listening.

13:58Thank you. landscape and offering perspectives from Morgan Stanley's leading economists and strategists. It's one of the only daily podcasts providing real-time commentary from a financial institution on the day's biggest questions and topics. And with most episodes under five minutes long, market clarity can fit seamlessly into your daily routine. Staying informed has never been easier. Listen and subscribe to Thoughts on the Market on Spotify, Apple Podcasts, YouTube, or wherever you get your podcasts. Thank you.