including $Blackstone (BX.US)$、$Ares Management (ARES.US)$Major private credit institutions on Wall Street, including the aforementioned, are facing sharp questioning from Democratic members of the U.S. House Financial Services Committee. The investigation focuses on how these institutions and their investment funds market, value, and manage this asset class.
According to informed sources, the committee's office has recently sent inquiries to several large institutions, with a particular focus on how they operate sensitive aspects of private credit vehicles, such as$Belden (BDC.US)$One of the informed sources stated that the recipients of the inquiry also include$Apollo Global Management (APO.US)$、$Blackrock (BLK.US)$、$Blue Owl Capital (OWL.US)$、$The Carlyle Group (CG.US)$and$KKR & Co (KKR.US)$。
Insiders revealed that the questions cover sales practices, leverage levels, fee structures, incentive mechanisms, audit arrangements, risk management, and potential economic vulnerabilities. These inquiries indicate that concerns over the $1.8 trillion private credit market are beginning to spread from Wall Street investors to Capitol Hill. Previously, some funds imposed redemption restrictions due to client concerns over alleged borrower fraud and the potential impact of artificial intelligence on certain businesses, such as software manufacturers. Lawmakers’ offices subsequently began collecting relevant information.
According to documents, the inquiry begins by listing more than twenty general questions, followed by additional questions specifically tailored to the business characteristics of individual institutions. Some questions focus on specialized issues that have recently drawn attention on Wall Street.
For example, one question addresses the use of Payment-in-Kind (PIK) interest. Insiders indicated that under this arrangement, borrowers can fulfill obligations by increasing debt rather than paying cash interest. This practice may delay the exposure of financial stress for companies but could ultimately lead them into deeper debt distress.
Amid increased scrutiny from Democrats, regulators under the Trump administration are taking steps to make it easier for 401(k) retirement accounts to invest in alternative assets such as private equity. This week, the U.S. Department of Labor proposed a new draft rule. The proposal implements Trump’s previous executive order, focusing on establishing a “safe harbor” system for plan fiduciaries, reducing their regulatory burden and litigation risks associated with introducing alternative assets like private equity and cryptocurrencies. The regulation emphasizes granting fiduciaries greater discretion, allowing them to pursue higher risk-adjusted returns after fees, provided the decision-making process adheres to the principle of “prudent presumption.”
It is reported that in August 2025, Trump signed an executive order opening 401(k) accounts to investments in alternative assets such as private equity, real estate, and cryptocurrencies. This move aims to provide American workers with more investment options, believing that alternative assets can offer competitive returns and diversified income.
Meanwhile, as concerns over liquidity, transparency, and lending discipline have shaken investor confidence in the $1.8 trillion private credit sector in recent weeks, insiders revealed that the U.S. Treasury plans to hold a series of high-level consultations with domestic and international insurance regulators in the coming weeks. This action marks the beginning of substantive evaluation measures by the regulatory layer led by Treasury Secretary Bessent, targeting the growing risk exposure of insurance companies in the private credit sector. The insider disclosed that since January, Bessent has been planning to initiate regular and ongoing consultations with insurance regulators starting in the second quarter of this year.
The first meeting may be announced as early as Wednesday. Based on the meeting’s outcomes, participants will determine the direction of future cooperation, aiming to enhance fact-based and transparent regulation of private credit institutions as their interactions with regulated financial institutions increase. Although the Treasury does not have direct regulatory authority over the insurance industry, it is attempting to play the role of a “convener,” integrating state and international regulatory resources to establish an information exchange platform addressing the risks of illiquid assets to prevent systemic financial risks.
Insiders stated that Treasury officials are eager to hear feedback from regulators on issues such as increased leverage at the fund level, consistency in private credit ratings, the use of offshore reinsurance, and liquidity in private credit market investments. They added that any policy recommendations will only be issued after a series of consultations.
Editor/Melody