Gareth Henry makes a valid point in that private credit often plays an important role in keeping institutions afloat in a world economy. The financial crisis of 2008 is proof of what can befall the stock market in a single day of falling stocks. Stocks fell 777 points and investors panicked. Add to that the insolvency of two giants of Wall Street as Bear Stearns and Lehman Brothers faltered. Goldman Sachs was also gasping for air. Warren Buffet, worth billions, interceded and offered Goldman Sachs an emergency loan worth $5 billion. Gareth Henry on Quantitative Investing.
Buffet came out on the good end of the deal. He charged Goldman Sachs 10 percent, along with gaining the right to convert his loan to Goldman Sachs preferred shares of stock. His bailout saved Goldman Sachs and gave the Federal Reserve an opportunity to devise a rescue plan for Goldman Sachs. Buffet made a $3.7 billion dollar profit on his loan. Buffet’s loan opened up the doors to private credit, and the practice is still in play today.
Gareth Henry holds the opinion that public credit takes on a more favorable opinion when markets are in trouble. He has always pulled his knowledge from his love for mathematics, economics, and the management of risk. When the stock market makes adjustments, it can wipe out huge shares of personal and corporate assets. Those with access to private credit have a life line that can save the day.
Private credit is never involved in public trading. Private credit lending comes from individuals, and not banks. Private credit can also take on the form of bonds, loans, notes, or other private security dealings such as real estate, debt, and structured financing. As an expert in the field, Gareth Henry understands the private credit space. Gareth Henry also has his finger on the pulse of the industry. Direct lending is also on the rise as traditional lending sources, like banks, have curbed their lending practices.
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