You’ve probably heard the term "shadow banking" tossed around in the back of Uber rides or on frantic CNBC segments. But when Jamie Dimon, the guy who steered JPMorgan Chase through the 2008 wreckage, starts using words like "cockroaches" and "hell to pay," it’s time to actually pay attention.
Honestly, the private credit boom has been the financial world's favorite shiny toy for nearly a decade. It’s basically a massive pot of money—around $1.7 trillion to $3 trillion depending on who you ask—where non-bank lenders give loans to companies that can’t or won't go to a traditional bank. It's fast. It's flexible. And according to Dimon, it might just be the next place where the wheels come off.
Jamie Dimon Private Credit Concerns: The "Cockroach" Theory
In late 2025, during an analyst call that sent a bit of a shiver through the sector, Dimon dropped a line that’s already becoming legendary in banking circles. He said, "When you see one cockroach, there’s probably more."
He wasn't talking about a kitchen infestation. He was talking about the sudden collapse of firms like the auto lender Tricolor and car parts supplier First Brands. Both were heavily backed by private credit. When these kinds of "shadow" entities start folding, Dimon’s antenna goes up.
The core of the issue is transparency. Or the total lack of it.
When JPMorgan makes a loan, there are a million regulators breathing down their necks. They have to disclose risks. They have to hold certain amounts of capital. Private credit funds? Not so much. They operate in a sort of regulatory twilight zone. Dimon is worried that because we can't see what's on their books, we don't know how bad the rot actually is until the building starts leaning.
💡 You might also like: Canada Tariffs on US Goods Before Trump: What Most People Get Wrong
Why he thinks there could be "Hell to Pay"
It’s a blunt phrase. Dimon used it during a Bloomberg interview, and it wasn't just for dramatic effect. He’s specifically looking at what happens when the "benign" credit environment we’ve enjoyed for years finally turns ugly.
For a long time, interest rates were basically zero, and everyone looked like a genius. But now? Rates are higher, and some of these private loans were written with "loose covenants." That’s fancy talk for "the lender didn't put many rules on the borrower."
Dimon’s fear is a "recipe for a financial crisis" if things aren't managed right. He’s flagged several specific red flags:
- Opaque Ratings: We're trusting these funds to grade their own homework.
- Aggressive Leverage: Some funds are borrowing a ton of money just to lend it out, doubling the risk.
- Illiquid Vehicles: If you’re an investor in these funds, you might be locked in for five to ten years. If the market crashes, you can't just hit "sell."
The Great Hypocrisy? JPMorgan is Diving In Anyway
Now, here is where it gets kinda weird. While Dimon is out here sounding the alarm, his own bank is pouring billions into the same sector.
In early 2025, JPMorgan Chase set aside a fresh $50 billion specifically for direct lending. They aren't just watching from the sidelines; they want to be the biggest player on the field.
📖 Related: Bank of America Orland Park IL: What Most People Get Wrong About Local Banking
Is Dimon talking out of both sides of his mouth? Maybe a little. But it’s more nuanced than that. He acknowledges that "parts of direct lending are good." He’s not saying the whole asset class is evil. He’s saying that the execution is what matters.
JPMorgan’s strategy is basically: "We have the best bankers and the most data, so we can do private credit safely, while the 'not so smart' players are going to get slaughtered."
It’s a classic big-bank move. Criticize the market risks while simultaneously trying to take over the market. By leveraging their 2,000+ commercial bankers, they’re hunting for middle-market deals that used to go to companies like Apollo or Blackstone.
What Most People Get Wrong About the Risk
There is a common misconception that private credit is just "Subprime 2.0." That’s probably too simple.
Unlike the 2008 mortgage mess, private credit isn't usually funded by "hot money" that can vanish overnight. These are long-term commitments from pension funds and insurance companies.
👉 See also: Are There Tariffs on China: What Most People Get Wrong Right Now
However, the risk is real in the valuation department. In public markets, you know what a bond is worth every second of the day. In private credit, the fund manager basically says, "Yeah, we think this loan is still worth 100 cents on the dollar."
The Department of Justice and the SEC have already started sniffing around "creative" marks in private portfolios as of early 2026. If it turns out these funds have been fluffing their numbers to keep fees high, that’s when the "hell to pay" starts.
The Symbiotic (and Messy) Relationship
Interestingly, banks and private credit aren't just rivals anymore. They’re becoming "frenemies."
Lately, we’ve seen a trend where banks originate the loans and then sell pieces of them to private credit funds. It’s a win-win for now. The bank gets the fee, and the fund gets the deal flow. But if a recession hits, who is responsible for the cleanup?
Dimon has hinted that when the cycle turns, the adjustment will be "sharper than expected." He's basically telling everyone to check their parachute before they jump.
Actionable Insights: How to Navigate the "Cockroach" Era
If you're an investor or a business owner looking at this space, you can't just ignore the loudest voice on Wall Street. Here’s how to handle the Jamie Dimon private credit warnings without panicking:
- Watch the "Vintages": Loans made in 2021 and 2022 (when money was free) are much riskier than loans being made right now in 2026. The older stuff is where the "cockroaches" live.
- Don't Chase the Highest Yield: If a fund is offering you 12% when everyone else is at 9%, there’s a reason. They are likely taking on weaker companies or using more leverage.
- Verify the Valuations: If you're invested in a Business Development Company (BDC) or a private fund, look at how often they write down their assets. If they never take a loss while the rest of the market is struggling, that’s a massive red flag.
- Focus on Asset-Backed Credit: Dimon’s team has actually spoken positively about asset-backed finance—loans backed by real, hard stuff like equipment or real estate—rather than just "cash flow" loans to tech startups.
- Mind the Liquidity Mismatch: Never put money into a private credit vehicle that you might need back in a hurry. These things are designed to be "hotel California"—you can check in, but you can almost never leave when the fire alarm goes off.
The bottom line? Jamie Dimon isn't trying to kill private credit. He’s trying to survive it. By calling out the bad actors now, he’s positioning JPMorgan to be the one standing when the music stops. Whether you're a retail investor or a corporate CFO, the smartest move is to start acting like a regulator: ask for more data, question the valuations, and keep some cash on the sidelines for when the "hell to pay" finally arrives.