Private Credit Could Spark Psychological Contagion, Barr Warns

Federal Reserve Governor Michael Barr said stress in private credit could spark “psychological contagion” leading to a broader credit crunch, once again warning against loosening the reins on Wall Street at a time of rising risks.

In an interview with Bloomberg News, Barr said that while direct links between banks and private credit do not yet appear “super worrisome,” there were other areas of concern such as the insurance sector’s overlaps with private lenders.

“Then you also have the problem of kind of psychological contagion,” he said. “People might look at private credit, and instead of saying ‘this is an ...