Private credit risks to be assessed by US government watchdog

Core Insights - The US Government Accountability Office (GAO) is evaluating the risks associated with the private credit industry, which is valued at $1.7 trillion, indicating increased scrutiny from Washington regarding its impact on the broader economy [1][2]. Group 1: GAO Assessment - The GAO's examination is a response to a request from US Senators Elizabeth Warren and Jack Reed, and a draft report is expected to be released in the spring [2]. - The report will analyze the interconnections between the private credit industry and the broader financial system, as well as how federal agencies monitor and mitigate risks to financial stability [2][3]. Group 2: Data Collection - The assessment will include interviews with federal agencies such as the US Federal Reserve and the Securities and Exchange Commission, along with private credit market participants including funds, banks, investors, and credit rating agencies [3]. Group 3: Concerns Over Ratings - Senator Warren has previously expressed concerns regarding the potential inflation of ratings for private debt instruments, which could threaten the larger financial system [4]. - Egan-Jones Ratings Co., identified as a major player in private credit ratings, has faced scrutiny for its optimistic ratings of various private credit loans [4].