The financial system is reliving 2008 - this time with car loans. Mia Wong on Behind the Bastards traces how private credit firms like Tricolor issue subprime auto loans to borrowers traditional banks reject, then bundle them into securities just like mortgage-backed bonds before the housing crash.
These loans feed a $1.3 trillion shadow banking market with no FDIC protection or public oversight. JP Morgan already lost $170 million on these instruments. The risk multiplies as firms use the same loans as collateral for more debt - a chain only stable while payments keep flowing.
"The mechanics are identical to the 2008 housing bubble."
- Mia Wong, Behind the Bastards
Redemption limits expose the illusion of access. Most private credit funds allow just 5% of capital withdrawn per quarter. When panic hits, investors can’t get their money - the cash is locked in seven-year loans to shaky firms and subprime lenders, gone for all practical purposes.
Wall Street isn’t trying to stop it. JP Morgan, Barclays, and others now trade credit default swaps tied to Blackstone and Apollo funds. These bets profit if the funds fail - the same banks that helped build the machine are now wiring its detonator.
"The economy has become a casino where the most profitable move is betting on destruction."
- Molly Conger, Behind the Bastards
Pension funds and insurers, chasing yield in a low-return world, are deep inside. If the collapse spreads, ordinary people pay again - not through bailouts, but through lost savings and frozen assets.
