So unlike money-market funds, these private-credit funds can gate withdrawals and extend and pretend by turning cash coupons into PIKs. So I don't actually see credit concerns directly driving liquidity issues for the banks that didn't hold the risk on their balance sheet glares Germanically.
Instead, I think the contagion risk is psychological. Which is an unsatisfying answer. But if there are massive losses on e.g. DBIP and DB USA halts withdrawals, then the 2% stock loss Morgan Stanley suffered when it capped withdrawals [1] could become a bigger issue.
I believe the gated feature can be waived though it causes a precarious situation. It ends up with same psychology of a bank run -- people (institutions) concerned because they can't access funds or they think that the queue to exit a failing fund is too long - filled each quarter (i.e. by the time they redeem NAV has collapsed).
As Buffett said, "only when the tide goes out do you learn who has been swimming naked" - luckily, skimming the news, there's no obvious huge exogenous macroeconomic shocks on the horizon that could cause "the tide to go out" so to speak, so everything should be ok for now.
I can't understand how anyone can do such a job for any length of time. I worked at a PC repair shop back in the 90s, fixed some dude's PC, and I saw a bunch of CSAM stuff (a lot, like thousands of pics, all children). I reported it to the local cops, then the FBI got involved, and that's the last I heard of it. My point is that the memory of those pics haunt me to this day. And I only saw a handful of pics, over, maybe, a period of about 2 minutes. To do that all day, everyday - how could one not become an alcoholic?
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