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“The real threat is not private credit but Washington’s insatiable appetite for control over every market innovation that arises to fill the vacuum created by the last round of government intervention. Congress and the administration should reject Warren’s latest demands and push in the opposite direction, streamlining regulation to make bank lending more viable, not private credit less so. Markets allocate capital far better than politicians. Let them work.” — Phil Kerpen, President of American Commitment
Capital Markets Require Protection From Elizabeth Warren
By Phil Kerpen, President of American Commitment
Real Clear Markets
May 20, 2026
Senator Elizabeth Warren has never seen a private financial institution she didn’t want to seize control of, and her latest obsession is with private credit, the burgeoning sector of non-bank lenders that increasingly finance small and medium-sized businesses. In her May 13, 2026 letter to Treasury Secretary Scott Bessent and SEC Chairman Paul Atkins, the Massachusetts socialist warns hysterically of a fabricated “private-credit-induced financial crisis” and demands sweeping new government controls that would choke off the availability of capital by extending the exact cost drivers that restrained banks from making these kinds of loans.
Private credit consists of direct loans made by non-banks to medium-sized businesses, providing them tailored financing with greater certainty and flexibility than broadly syndicated markets. These loans fill a vital gap created by over-regulated traditional banks that retreated from lending after Dodd-Frank, Basel III capital requirements, and multiple layers of big-government rules. Private credit provides flexible capital that supports business growth, job creation, and economic innovation without a dime of taxpayer risk. Warren cites the rapid growth of this sector to over $2 trillion as a risk, but what it really indicates is that this is a growth business because it meets a vital economic need.
Warren, the architect of the Consumer Financial Protection Bureau that would supposedly solve all of our financial ills, launches the same jeremiad against every source of capital. This is the playbook she has used against banks, credit card companies, and consumer lenders. She is openly hostile to all private-sector business and consumer lending – but loves government loan programs.
Her latest letter urging regulation ignores basic facts. Private credit has grown precisely because markets work. It efficiently matches willing lenders with borrowers that regulated banks cannot or will not serve. Redemption gates and liquidity terms are fully disclosed upfront. The negotiated restrictions during market stress that she decried are standard contractual features, not systemic dangers. They exist to ensure capital raised for long-term deployment can continue to fulfill its purpose.
It’s true that in the first quarter of 2026, private credit defaults inched up to 2.73 percent, according to Proskauer, but overall lender losses were still minimal. Strong returns overall show that default risks have been well-priced. Private credit last year returned 9.3% according to a tracker from the firm Cliffwater, in line with 20-year annualized returns of 9.6%.
Warren’s claim that government intervention is necessary for safety has already been thoroughly debunked. Her argument that financial regulators must conduct a stress test of private credit’s interconnectedness to the broader economy is especially bizarre because the Federal Reserve completed precisely that exercise last summer and concluded that even in the event of a severe economic shock, the industry would not impair banks or the wider financial system. The Fed affirmed the finding this month, issuing a report that said risks from private credit are “limited and manageable.”
No wonder, then, that the sharpest investors, including the pension funds of teachers and other government workers Warren purports to champion, are increasing their investment in private credit. Public pension funds in recent years have increased their allocation to private credit from 2.9% in 2020 to 4% in 2024, per Preqin.
Yet Warren is pushing to block Americans without access to a pension from adding private credit to their own retirement accounts. That would deny most of us the benefits of higher returns and lower volatility we would get by investing in the most broadly diversified vehicles, which logically includes private equity and private credit along with publicly traded securities. Warren cannot reasonably assert both that these lenders extract too-high returns and that the benefit of those returns should be available only to the privileged few. Blocking access is wealth destruction disguised as consumer protection.
The real threat is not private credit but Washington’s insatiable appetite for control over every market innovation that arises to fill the vacuum created by the last round of government intervention. Congress and the administration should reject Warren’s latest demands and push in the opposite direction, streamlining regulation to make bank lending more viable, not private credit less so. Markets allocate capital far better than politicians. Let them work.
Phil Kerpen is the president of American Commitment, a conservative 501(c)(4) organization which he founded in 2012.
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