Episode summary
We Asked the Top Financial Plumbing Blogger Why 2008 Isn't the Risk — and What Is
Excess Returns
· · 1 hr 4 min · Guests: Marc Rubinstein
Summary
Marc Rubinstein argues that the real risk in private credit is not a 2008-style banking panic, but a slower build-up of opacity, leverage, and liquidity mismatch. He says the Fed is right that redemption gates limit the chance of a classic run, yet those gates can still hurt investors, damage managers’ reputations, and reveal how much private credit has moved from institutions to mass affluent retail buyers.
The conversation uses Blue Owl’s redemption problems as a case study, along with HSBC’s loss tied to Atlas and MFS, to show how private credit can become a layered system of bank leverage, fund leverage, and borrower leverage. Rubinstein says post-2008 regulation pushed risk out of banks and into private credit, hedge funds, trading firms, exchanges, and insurers, creating a denser but less visible financial web.
He also points to bank earnings as evidence that consumer confidence and consumer behavior are diverging: sentiment looks weak, but spending and delinquencies remain resilient. On fintech, he describes Revolut as a rare global scale-up that grew fast by starting with FX and payments, then had to balance growth with compliance and banking discipline. He closes by saying the market is still overly anchored to the 2008 playbook, while the more interesting risks may now sit in government bonds, private markets, and the links between them.
Key takeaways
- Marc Rubinstein says private credit redemption gates reduce the odds of a classic run, but they still create reputation risk, investor lock-in, and potential knock-on effects.
- He argues post-2008 regulation pushed lending and trading risk out of banks and into private credit, hedge funds, exchanges, and trading firms, expanding the system’s complexity rather than eliminating risk.
- Rubinstein says the HSBC loss tied to Atlas and MFS shows how leverage and concentration can hide inside a “layer cake” of bank-to-private-credit financing.
- He says bank earnings currently show a sharp gap between very weak consumer confidence and still-resilient spending and credit performance.
- Rubinstein thinks the market is still too focused on the 2008 banking-crisis template, even though the bigger risks may now be outside bank balance sheets, including government bonds and private markets.
Notable quotes
“the biggest source of risk is emanates from the place where where you're not looking”
“Don't assume that there's no correlation. Often correlations will spike when you least expect them”
“They are both competitors and collaborators”
“what you thought you knew at the time you knew nothing”
How the episode opens
I regularly speak to people still managing money and many of them say that they don't recall a time when they've been as confused as currently. One of my kind of axioms of financial analysis is that growth is bad in finance. One thing we learned from the financial crisis back in 2008 2009 is that the biggest source of risk is emanates from the place where where you're not looking.
increasingly mass affluent investors um who in many cases have been put into these funds by advisers and there are various incentive structures around that who probably should have read the small print. Don't assume that there's no correlation. Often correlations will spike when you least expect them.
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use or better questions lead to better decisions. I'm joined today by the author and creator of what has to be the must readad financial plumbing newsletter in all of finance. That's a comment.
He's been on fire lately with private credit, some tech company takes, and yeah, we might even talk insurance, which only he can make insurance as interesting as he does. creator and author of the net interest newsletter on Substack, Mark Rubenstein. Welcome to Access Returns.
Thanks, Matt. Great to join you.
Straight straight to the deep end before your World Cup visits. You can be critical of the Fed, I think, for a little bit longer. So, they said that private credit redemption risks are limited and manageable.
You've been writing about for a while. What do you think the Fed's seeing? Why are they saying it?
What are they missing? It's reminiscent, isn't it, of subprime being contained, but they know that. So, they are not going to be making as bold a statement having not done the work.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit redemption risk
- hidden leverage
- bank regulation spillover
- insurance and private credit incentives
- financials market structure
Companies and tickers mentioned
- OWL
- HSBC
- APO
- Blue Owl
- HSBC
- Apollo
- Athene
- Silicon Valley Bank
- Credit Suisse
- Revolut
- Jane Street
- SVB
- Atlas
- MFS
Watch the episode
Watch “We Asked the Top Financial Plumbing Blogger Why 2008 Isn't the Risk — and What Is” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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