The ultimate problem are the lenders to the PE firms: someone is always on the other side of leverage. The big banks make bets on the PE firms' investments by lending them money with little collateral. If these lenders did their HW, the price of such defaults or shocks to cash flow streams would be reflected in interest rates.
Comments
The ultimate problem are the lenders to the PE firms: someone is always on the other side of leverage. The big banks make bets on the PE firms' investments by lending them money with little collateral. If these lenders did their HW, the price of such defaults or shocks to cash flow streams would be reflected in interest rates.