I get asked about private credit worries all the time. Isn’t there too much money chasing too few deals? Isn’t it the next bubble waiting to pop?

I get it. Private credit—lending done by investors rather than banks—has rapidly expanded. It has roughly tripled in assets in the past five years, and now consists of more than $1.7 trillion.

But growth alone doesn’t make a bubble. What we are seeing reflects structural shifts in banking and the economy, not speculative excess.

When I started my career as an investment banker in the 1990s, there were more than 14,000 banks in the U.S. Today, there are about 4,000. Regulations like Dodd-Frank and Basel III pushed many banks to the “moving business”—distributing the loans they originated—rather than the “storage business” of holding them on their balance sheets. Private-credit investors filled the void created by banks’ retreat from lending.

Meanwhile, the borrowing needs of America’s midsize companies, which are private credit’s core customers, have more than doubled, in line with gross domestic product growth. Private credit isn’t inflating beyond the natural bounds of the economy; it is growing with it.

Critics often cite this growing need for debt as a red flag. But the data say otherwise. For over a decade, total leveraged credit—bank loans, high-yield bonds and direct lending—has equaled roughly 21-25% of GDP, sitting today near 23%. That’s right down the middle of the fairway. In true bubbles—think 1920s America, 1980s Japan, 2000s subprime—credit growth outpaced GDP by 30-50%.

There have been several high-profile defaults recently: the sudden bankruptcy of used car dealer Tricolor, followed by the collapse of auto parts supplier First Brands, which carried $10 billion in debt. Some observers have pointed to these as signs of overextension. In reality, these failures are rooted in publicly traded bank loans that lack much of the company-specific diligence and structural protections that are prevalent in the private credit markets. So, while the private credit market is not immune to companies underperforming or failing, the recent situations don’t point to a lax underwriting environment or, more pertinently, a bubble.

Likewise, headlines tying business development companies’ stock declines to overextension are misplaced. Recent weakness reflects the impact of the Federal Reserve cutting rates on distribution yields, not deteriorating credit quality.

And far from being the next systemic risk, the landscape appears safer than in the past. Private-credit funds are lightly levered—often less than 1x—with duration-matched assets and liabilities. They are subject to oversight from the Securities and Exchange Commission and the Financial Industry Regulatory Authority. They don’t borrow short and lend long, which was the mismatch that caused Silicon Valley Bank’s collapse. The structure itself is sound.

Private-equity firms use private credit to finance many of the midsize companies they acquire—the very businesses at the heart of America’s growth engine. Here’s the math that keeps me bullish. Global private-equity funds hold roughly $2.5 trillion in dry powder, much of which will require private-credit financing. Private-credit funds hold only about $500 billion in undeployed capital. That imbalance points to undersupply, not oversupply.

Private credit isn’t a bubble—it is a response to regulatory change, market concentration, and the real capital needs of private enterprise. The doomsayers see rapid growth and cry “bubble.” They are wrong.

Private credit marks a structural reshaping of American finance—making credit more accessible, more tailored, and more resilient.