From London: As Australians woke on Monday morning, a familiar voice from Wall Street was doing the rounds of the financial press with a warning that ought to concentrate minds in Canberra and in the offices of every major superannuation fund in the country.
Lloyd Blankfein, who led Goldman Sachs through the 2008 financial crisis, is ringing alarm bells as Wall Street steers cash from savers into its latest lending boom: private credit. In a series of high-profile interviews timed to coincide with the release of his memoir, Blankfein has deployed some deliberately unnerving language. Speaking with Citadel's co-chief investment officer Pablo Salame, he said: "I don't feel the storm, but the horses are starting to whinny in the corral."
His core concern is hidden leverage. "I wonder where there's hidden secret leverage," he said, adding: "Now everyone says, 'The world's not leveraged' — that's exactly what everybody said in the mortgage crisis until you suddenly discovered that there was a lot of mortgage risk in Iceland." "It sort of smells like that kind of moment again," he added.
In an interview with the Financial Times, Blankfein warned that a lack of a major "shakeout" since 2008 had left people less cautious. "The longer it takes between reckonings, there is a potential for a more severe reckoning," he said.
Blankfein cautioned that the "shadow banking" ecosystem is driving the global economy toward another crisis by operating outside the strict regulations governing traditional banks, and he specifically criticised private credit lenders for their recent moves to open complex investments to everyday savers at a time when market conditions are becoming increasingly unstable. As he told Bloomberg: "When you're dealing with opaque illiquid assets like credit, that's a place that one would clearly have to look."
Why Australia should pay close attention
For Canberra, and for the millions of Australians whose retirement savings sit inside superannuation funds, the warning is not abstract. Australia's private credit market grew by 9 per cent in 2025 to reach $225 billion, driven by increased appetite from family offices, high-net-worth individuals, retail investors, and superannuation funds. Demand is expected to remain strong this year, "most notably from Australia's $4.3 trillion superannuation funds," according to Peter Szekely, managing director at Tanarra Credit Partners.
The outgoing chair of the Australian Securities and Investments Commission (ASIC), Joe Longo, has already warned that the private credit sector could be the source of Australia's next financial market collapse. ASIC has identified that private markets are opaque, and that Australia has limited regulatory reporting outside superannuation, meaning constrained supervision and potential heightened risks for investors.
From October 2024 to August 2025, ASIC conducted a surveillance review of 28 private credit funds, covering listed, unlisted, retail, and wholesale funds. The regulator found that significant improvements in practices were required, highlighting issues including inconsistent and unclear reporting that masked portfolio risks, opaque interest margins and fee structures, and weak governance with poorly managed conflicts of interest.
In Britain, the private credit market has grown by 56 per cent since 2015 to $185 billion, making it the second largest after the United States. Peers in the House of Lords warned at the beginning of the year that the Treasury was being too passive about the risks posed by that rapid growth.
The case for sanguinity — and its limits
Blankfein's warnings are sobering, but they are not without credible counterpoint. Australia's prudential regulator, APRA, has noted that private credit does not pose a systemic risk, given its small share of housing-sector lending. The Reserve Bank of Australia has noted that private credit accounts for about 11 per cent of business lending and around 2.5 per cent of total business debt, with non-bank lenders representing about 6 per cent of financial system assets. The RBA's view is that risks to financial stability remain constrained given the sector's small size.
Those figures provide genuine reassurance. Defenders of the private credit model also point out that private credit has delivered consistently strong risk-adjusted returns, outperforming public credit markets such as leveraged loans and high-yield bonds. Operating alongside bank lending, private credit enhances financial market efficiency and economic growth by supplying capital in areas where traditional bank lending may be constrained, enabling borrowers to finance complex or innovative projects while offering investors diversification benefits.
These are legitimate points, and sceptics of Blankfein's warning note that senior financiers promoting memoirs have their own incentives to generate headlines. But the structural concern he identifies — that the distance between stress events breeds complacency, and that complacency allows risks to accumulate unseen — has an uncomfortable historical pedigree. JPMorgan chief Jamie Dimon has also issued a related warning, calling private credit a potential "recipe for a financial crisis."
The honest assessment sits somewhere between the bulls and the alarm-ringers. APRA has raised concerns about superannuation funds' exposure to private credit, particularly around opaque valuations. ASIC has made poor private credit practices one of its 2026 enforcement priorities. The fact that regulators are moving does not mean a crash is imminent; it does mean the period of minimal oversight is ending. Whether that transition happens smoothly, or only after a correction forces the issue, depends largely on whether the financial sector heeds warnings from people who have seen this movie before — and remember how it ends.