Trump Push to Open 401(k)s to Private Credit Faces Rising Risk

Private Credit Draws New Scrutiny

Trump administration officials this month advanced a broader push to ease financial regulation, scaling back scrutiny of hedge funds, encouraging financial firms to experiment with artificial intelligence and criticizing what they see as burdensome rules.

But a growing source of concern in Washington and on Wall Street was not discussed during the public session of the Financial Stability Oversight Council: private credit. The once-booming lending market has recently shown signs of shakiness, raising fears that more investors could soon be exposed to a new financial risk.

Retirement Proposal Nears

Those concerns could come to a head as soon as this week, as fund managers, lobbyists and lawmakers await a Labor Department proposal that would allow alternative assets such as private credit investments to be included in Americans’ retirement accounts.

The proposal would stem from President Trump’s executive order last year calling for the inclusion of “alternative assets” in 401(k) plans. Supporters see the move as a way to potentially boost returns for ordinary investors.

Critics Warn of Broader Risk

Critics argue that adding such investments to retirement accounts could put savers’ funds at risk and further unsettle the financial system if private credit funds continue to weaken.

“Private credit is the latest flashing warning sign for our economy,” Senator Elizabeth Warren of Massachusetts, the top Democrat on the Senate Banking Committee, said in an interview. “This is a moment to take immediate action to tighten the reins on Wall Street, but the Trump administration’s approach is to push these risky assets into people’s retirement accounts.”