Why Bankers See Dollar Signs in Private Credit’s Meltdown

0:03Alex Ossola:A Republican proposal offers to restore funding to the Department of Homeland Security, except for$5 billion for ICE. Plus, a new survey of CFOs has some good news for workers worried that AI will take their jobs. Over and over, every new technology, people say, oh, it's going to destroy jobs. And yet we have more and more jobs, like jobs have not disappeared. So why would AI be different than pretty much every other technology that ever happened? And the private credit meltdown is a big risk for big banks and also an opportunity. It's Tuesday, March 24th. I'm Alex Osula for The Wall Street Journal.

0:39Alex Ossola:This is the PM edition of What's News, the top headlines and business stories that move the world today.

0:48Alex Ossola:Republican senators have proposed a deal to fund the Department of Homeland Security, but without$5 billion for ICE. The offer moves lawmakers closer to a compromise to end the six-week-long funding lapse. The situation has deteriorated in recent days. Unpaid TSA agents skipping work has caused long security lines at airports. Senate Minority Leader Chuck Schumer says Democrats are preparing a counteroffer that includes demands for changes to immigration practices. So it's unclear whether relief for travelers is coming anytime soon. Sunday's collision between an Air Canada regional jet and an emergency truck at New York's LaGuardia Airport is the tragedy aviation authorities have sought to prevent.

1:28Alex Ossola:Federal data shows that between 2021 and 2025, there were 26 serious near-misses on the runway. U.S. aviation safety has long been viewed as the global gold standard. Jacob Passi, who covers travel for the journal, is here now with more. Jacob, why have regulators been more concerned about close calls lately? So there's been a lot of attention paid to air traffic control staffing. U.S. Transportation Secretary Sean Duffy said that wasn't actually a concern in this case with LaGuardia, that the facility there is adequately staffed. But nationwide, air traffic control staffing has been a concern.

2:05And as a result of that, you're seeing a lot more stress put on controllers who are in the workforce. They're working long hours, and we just don't have the full workforce that we need. Technology is another consideration. The radar technology used at airports was outdated in many cases or just not in place. Air traffic controllers were having to visually identify planes on runways rather than having a radar that would accurately tell them where all aircraft were located at a certain point in time.

2:35Alex Ossola:The National Transportation Safety Board said this afternoon that it was investigating several potential problems that could have caused the LaGuardia collision. The fire truck involved didn't have a transponder on it. That means an automatic runway warning system didn't work properly. And they're also interviewing the air traffic controllers who were working the midnight shift when the collision happened. That's a shift that's raised a lot of concerns about fatigue. Jacob, what else can you tell us about LaGuardia in particular? The investigation is still ongoing, so we don't really know exactly what was to blame for this particular incident.

3:07But the folks we spoke with also talked about how LaGuardia is a complicated airport to fly in and out of. It's on a really small piece of land right along the East River, boxed in. There's no room to expand there. And it's in basically the busiest airspace in the country. So there's a lot of factors that go into flying in and out of LaGuardia. And it's been an airport of concern for a while now.

3:33Alex Ossola:What are the kinds of changes that regulators are trying to make to reduce the likelihood of collisions or close calls? So they're implementing new technology at a lot of airports. They're installing surface radar technology that will allow air traffic controllers to have a sense of where all aircraft and other vehicles are located on the runways. We're also seeing a focus on staffing, trying to get more air traffic controllers into the workforce so that the folks who are in those jobs aren't overburdened and aren't having to do multiple jobs at once. But it takes a number of years to be certified.

4:10So it's not something that they can change overnight. So those are the main areas of focus.

4:16Alex Ossola:That was WSJ reporter Jacob Passi.

4:23Alex Ossola:In Washington, the Pentagon is planning to deploy about 3 ,000 soldiers from the Army's elite 82nd Airborne Division to the Middle East to support operations against Iran. Officials caution that there's no decision yet on whether to put boots on the ground in Iran. Speaking this afternoon to reporters, President Trump said Iran would, quote, like to make a deal. Yesterday, Iran denied it was in talks with the U.S. and today hit Israel, Kuwait, Bahrain, and Saudi Arabia with fresh attacks. Tehran officials worried that diplomatic attempts to secure a ceasefire could be a trap. And Energy Executive Alan Armstrong is the newest U.S.

4:59Alex Ossola:senator. Oklahoma Governor Kevin Stitt chose him to fill Mark Wayne Mullen's seat. Mullen, as you heard this morning, was just confirmed as Secretary of the Department of Homeland Security. Armstrong's appointment keeps the Senate's Republican majority at 53 to 47. He'll hold the seat until an election in November. Coming up, big banks play both sides in the private credit meltdown, while CFOs say AI is only likely to take certain kinds of jobs. More after the break.

5:37Alex Ossola:We've been talking on the show lately about private credit, that asset managers are facing a reckoning as individual investors pull out of private credit funds. Over the past few days, Apollo Global Management and Aries Management both limited redemption requests from investors. For big banks like JPMorgan Chase, though, the picture is a little more complicated. Their exposure to private credit comes with risks, but also opportunities. For more, I'm joined now by Alexandra Saidi, who covers banking and finance for The Journal. Alex, investors' skepticism about software companies has been part of what's behind this exodus from private credit.

6:11Alex Ossola:How exposed are big banks to these software companies? Yeah, they have certainly some exposure. For example, bank-originated loans probably account for around 10 percent of all outstanding software credit. In the private credit space, though, it's much higher. It's around 30 percent. Banks just couldn't underwrite loans to software companies, mostly because they weren't profitable. Banks are required by law to make safe loans, whereas these private competitors, which aren't regulated, they leaned into software and banks were kind of on the sidelines. Some were a little envious. Now we're in a position where the banks have less exposure and certainly have some more opportunity because of that.

6:52Alex Ossola:But big banks do also have private credit firms as clients. How do they navigate that conflict? Yes, on the one hand, the private credit and private capital firms are really important customers. They bring in fees from deals that the bank originates. The banks also lend to these private credit funds directly. But like I alluded to earlier, they've also been this kind of unregulated competitor that has taken market share from them. So it does make it a little difficult diplomatically when you have one part of the bank. that's sort of cheering on their own efforts to take market share while the other is saying, hey, we're your friends.

7:29We're going to help you out. But these are huge financial conglomerates. They serve millions on millions of customers. And part of that is going to be a little bit of an internal conflict, and they've just got to work through it.

7:43Alex Ossola:So what kinds of opportunities does trouble in private credit leave open for big banks now? So they're already pitching clients on opportunities to short private credit exposed stocks. If you look at all these publicly traded funds that have sold off, also you have publicly traded companies that do a lot of private credit themselves. All of those stocks have gone down and the bank has told its savvy hedge fund clients, hey, like you can get in on this. On top of that, if the private credit funds are unable to lend because they're so busy meeting redemptions or facing skepticism from their investors about their existing portfolio, they might not want to commit more capital right now.

8:22We haven't quite seen that play out just yet. It's yet to be seen if the private competitors will be fully out of the market, leaving the room totally open to the banks, or if it's going to be a little more complicated. But this is certainly beneficial to the bank market. And I think they're going to try to capitalize on it while they can.

8:40Alex Ossola:That was Journal reporter Alex Saidi. Thanks, Alex. Thank you.

8:48U.S.

8:49Alex Ossola:stocks retreated today, with the Nasdaq leading the declines and closing down 0.8 percent. Alex just told us about private credit worries. Well, news of more investors asking to pull their money out weighed on alternative asset managers today. Meanwhile, Brent crude the international oil benchmark rose more than 4 % to above$104 a barrel.

9:12Alex Ossola:FedEx said today that it's launching a same-day delivery service called FedEx Same-Day Local that offers two-hour and end-of-day delivery directly at checkout. Retailers are trying to give customers a wider range of choices on shipping. Amazon said last week it was expanding its own fast delivery options. And in tech, we're exclusively reporting that OpenAI is discontinuing the app for its video platform, Sora. The company has been trying to simplify its operations by focusing on AI's business and coding applications ahead of a potential IPO later this year. America's chief financial officers have some good news for workers, at least some of them.

9:50Alex Ossola:A new survey of 750 CFOs found that AI had essentially no employment effect in 2025, And most expect that AI will account for just a few job cuts this year, mostly in clerical and administrative roles. Jobs that are considered highly skilled, like architects and engineers, are more likely to be safe, especially if workers can use AI to their advantage. WSJ economics reporter Justin Lehart says CFOs are uniquely positioned to understand how AI is being used in a company. CFOs are counted the beans of all the CEOs' dream, right? They're the ones who are really, you know, paying attention to where capital is being deployed in their company, really just what the P &L is, and thinking through the nuts and bolts of what's going on with their company.

10:34Alex Ossola:Justin says that there were different prospects for workers depending on not just their job, but also the size of the company where they work. It did show that larger companies were more likely to be laying off workers than smaller companies were. Larger companies are established. They've been around for a long time. There's not as much room for expansion. You're thinking about, well, how can I become more efficient? And that means getting rid of workers. Whereas smaller companies were more likely adding workers because of AI. And you think about them, they have more room to grow. They're saying, oh, AI is an opportunity.

11:16it is a way to give workers superpowers so that I could one day become one of those big companies.

11:24Alex Ossola:And that's what's news for this Tuesday afternoon. Today's show was produced by Pierre Bien-Aimé and Amani Moise with supervising producer Tali Arbel. I'm Alex Osula for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

11:46Thank you.