How JPMorgan is betting on a risky lending boom it helped warn against

A sign outside the headquarters of JP Morgan Chase & Co in New York. (Courtesy: Reuters file photo)

Jamie Dimon, the chief executive of JPMorgan Chase, has warned that Wall Street’s hottest lending trend—private credit—could spark a financial crisis. Yet in a strategic twist, he is investing $50 billion into the same space. Private credit refers to loans made directly to companies, often highly indebted ones, by non-bank entities. These loans bypass traditional banks and are lightly regulated. The market has grown nearly 100-fold since 2006, reaching $700 billion in 2024. And JPMorgan, the largest US bank, now wants a bigger piece of it, the Wall Street Journal reported.

Dimon sees echoes of 2008—yet sees opportunity in crisis

In a February event at the Loews Hotel in Miami Beach, Dimon compared today’s private credit frenzy to the subprime mortgage bubble that triggered the 2008 collapse. He pointed out that risky lending, done poorly, leads to systemic failures. But instead of staying away, Dimon has decided to prepare for a meltdown by investing strategically—hoping to profit from any fallout the way JPMorgan did after the 2008 crisis.

JPMorgan once had a head start—and lost it

Back in the 2010s, JPMorgan had an early lead in private credit through its hedge fund unit Highbridge, run by Scott Kapnick. The fund filled the gap left by risk-averse banks post-2008 by lending to small and mid-sized companies. But regulators tightened rules, internal conflicts grew, and by 2015 Kapnick spun out the business for over $1 billion. That firm—now called HPS Investment Partners—became one of the world’s largest private-credit players. Dimon later admitted letting it go was a major mistake.

Why banks got sidelined—and what’s changing now

While JPMorgan was thriving through traditional lending, private equity firms like Ares, Apollo, and Blackstone ramped up direct lending. They offered companies faster funds with fewer restrictions—albeit at higher interest rates. By 2021, private lenders were financing massive deals, cutting out banks from their historic role in leveraged buyouts. Analysts say regulatory leniency has recently allowed banks to re-enter the space. JPMorgan is now using its own balance sheet to do so, starting with $10 billion in capital.

Inside JPMorgan’s comeback strategy

Dimon first tried to rebuild the private credit arm through the asset management division under Mary Erdoes. But that plan was scrapped by 2022. Now, JPMorgan’s investment bankers are offering direct loans themselves, holding them on the bank’s books or partnering with funds like Soros Fund Management. One of the biggest deals so far: financing Sycamore’s $2.6 billion purchase of Walgreens’ Shields unit, a risky loan JPMorgan wouldn’t have traditionally done.

The stakes: profit and risk in equal measure

JPMorgan says its dual model—offering both syndicated and private credit options—helps it serve clients better. Yet Dimon has cautioned that much of the private credit market is funded by retail investors through annuities and insurance-linked products. If these risky loans go bad in a downturn, small savers could get hurt. He told Congress in 2023 that this activity was moving outside regulatory view and warned in 2024 there could be “hell to pay.”

Betting on a crisis—but with a parachute

Dimon believes the credit market is overheated, calling it a “bad risk” this May. But he’s also confident that if it collapses, JPMorgan will be in a prime position to acquire distressed assets and profit—just as it did in 2008. His dual view captures the essence of Wall Street: caution and calculation, risk and reward, fear and fortune.