Fed’s Cook Keeping Close Eye on Private Credit, Asset Valuations

Federal Reserve Governor Lisa Cook said officials should monitor how unexpected losses in private credit may spread to the broader US financial system due to the “increased complexity and the interconnections” with leveraged firms.

Cook said Thursday that she is focused on what could be learned from increased usage of payment-in-kind arrangements as seen in recent bankruptcies.

“The likelihood of observing additional cases like those recently in the news increases when size of exposure and level of complexity in these arrangements are not transparent, when a sector experiences periods of rapid growth, and when these arrangements have not been through ...