Billions of Dollars 'Vanished': Low-Profile Bankruptcy Rings Alarms on Wall Street

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2. The waves are going to ripple out

But it is not solely the sum of the potential losses that has so many financiers on edge. Many of the loans to First Brands originated from the booming, loosely regulated world of “private credit.”

Unlike traditional banks, private credit lenders say, they have the ability to lend quickly because they understand complicated, risky businesses and do not need to worry about repaying ordinary depositors or reporting public earnings.

Trillions of dollars have been plowed into private credit over the past decade, principally from pension funds, endowments and other groups that rely on such investments to fulfill obligations to retirees and the like.