$7B Exits Rock Private Credit as Trump Eyes 10% Rate Cap

• $7B pulled from US private credit as bankruptcies mount.
• Trump pushes rate cap plan, sparking fears of market fallout.

On January 17, 2026, Cryptopolitan reported over $7 billion in withdrawals from private credit funds, driven by mounting instability following the bankruptcies of First Brands and Tricolor. Investor confidence has deteriorated, exposing vulnerabilities in the private credit market, valued at approximately $2.3 trillion.

First Brands Group, an auto parts manufacturer, filed for Chapter 11 bankruptcy in September 2025. The company disclosed liabilities between $10 billion and $50 billion, while holding assets between $1 billion and $10 billion. Investigations revealed that First Brands employed off-balance sheet financing strategies to conceal its financial troubles.

Meanwhile, Tricolor, a subprime auto lender, filed for Chapter 7 in the same month amid allegations of fraudulent loan practices. Reports highlighted issues including falsified loan data, double-pledging of collateral, and systemic irregularities. These scandals have further heightened concerns about risk within the private credit market.

Major fund firms such as Apollo, Blackstone, and Ares saw withdrawals amounting to approximately 5% of their portfolios. Analysts warn that declining interest rates could reduce returns on floating-rate loans, prompting dividend cuts and a potential ripple effect on public stock markets.

Adding to economic debate, President Trump proposed a temporary 10% interest rate cap on credit cards in a social media announcement. Market leaders have sharply criticized the plan, claiming it could restrict access to credit and destabilize consumer spending.

Industry groups, including the Electronic Payments Coalition, estimate the cap would impact 82% to 88% of cardholders, reducing limits or denying credit entirely. JPMorgan CFO Jeremy Barnum warned that such disruptions could harm economic stability.

Supporters counter that the measure could save Americans billions annually while easing financial burdens for lower-income individuals. Reports suggest bipartisan interest, with President Trump and Senator Elizabeth Warren engaging in discussions, though congressional approval would be required for implementation.

The convergence of investor withdrawals from private credit funds and debate over Trump’s rate cap proposal underscores growing financial instability. As turmoil spreads, challenges across credit markets risk broader impact on economic stability and credit availability.