Wall Street Credit Clash: Dimon’s “Cockroach” Remark Sparks Bank vs Private Credit Feud

A war of words has erupted between Wall Street’s biggest players as cracks appear in the credit markets. After JPMorgan CEO Jamie Dimon likened recent credit losses to spotting “one cockroach” — implying more problems ahead — leaders from the private credit world fired back, igniting one of the most public rifts yet between traditional banks and alternative lenders.

The Spark: JPMorgan’s Loss and Dimon’s Warning

The feud began after JPMorgan Chase & Co disclosed a US$170 million loss linked to auto lender Tricolor Holdings, part of a broader rise in credit costs during the third quarter.

“It’s not our finest moment,” Dimon admitted, warning that when losses appear in one corner of the market, “there’s never just one cockroach.”

Dimon cautioned that some nonbank lenders have weaker underwriting standards, and that when a downturn hits, credit losses could be “higher than normal.”

Private Credit Fires Back

That comment didn’t sit well with private market leaders.

Blue Owl Capital CEO Marc Lipschultz hit back, saying banks were behind the Tricolor and First Brands Group loans that triggered the blowups.

“Dimon should be scouring his own books if he wants to squash more bugs,” he said, adding that criticism from banks reflects “parochial interests” threatened by private credit’s rise.

Lipschultz’s defense echoes the sentiment of an industry that has exploded into a US$1.7 trillion global market, increasingly competing with banks in corporate lending.

“Blackstone’s market cap exceeds that of most financial institutions. Of course, some people don’t like it,” he said.

Growing Tensions: The New Credit Power Shift

The dispute underscores how private credit firms have reshaped Wall Street’s financing landscape.

While banks once dominated leveraged loans, private lenders now underwrite massive corporate deals directly — often with looser disclosure requirements but higher yields.

This “co-opetition” has blurred boundaries:

• Banks like JPMorgan and Goldman Sachs often finance or partner with private credit funds,

• Yet they are also losing clients to them as companies seek faster, more flexible loans.

Now, with signs of credit stress emerging, both sides are quick to deflect blame.

Market Context: Cracks Beneath the Surface

Recent losses highlight growing stress across credit markets:

• Private credit funds are trading at discounts to their net asset values, suggesting investors doubt full recovery of capital.

• Payment-in-kind (PIK) loans — where borrowers defer interest payments — are rising, especially in Business Development Companies (BDCs).

• Blue Owl’s BDCs now hold 14% of assets in PIK, and its stock is down 27% year-to-date.

Despite this, Blue Owl executive Jonathan Lamm insists fundamentals remain solid:

“The only reason the sector should trade off like this is if massive defaults were coming — and we see no evidence of that.”

Industry Leaders Defend Private Credit

At the CAIS Alternative Investment Summit in Beverly Hills, private credit executives pushed back on Dimon’s remarks:

• Apollo’s John Cortese: The troubled deals were bank-led, not representative of private credit.

• Blackstone President Jon Gray: “To extrapolate two transactions to the entire private credit market seems a little bit odd.”

• Carlyle CEO Harvey Schwartz: “Private markets get called the shadow system — but I’ve never seen a shadow this bright.”

Ares Management’s Joel Holsinger added that direct lenders typically hold loans on their own books, forcing them to do deeper due diligence:

“The level of work is dramatically more extensive. Some of these blowups could have been avoided.”

Investor Takeaway: Who’s Right — the Banks or the New Lenders?

• Banks argue that private lenders’ looser risk controls could amplify credit losses in a downturn.

• Private credit firms counter that banks’ own syndicated loans are where cracks are showing first.

• Both sides face pressure from higher rates, slowing growth, and rising defaults in consumer and industrial sectors.

As Dimon put it bluntly:

“When there’s a downturn, you’ll see credit losses in certain categories — that’s just reality.”

Bottom Line

The Dimon-Lipschultz feud signals a turning point in the battle for credit dominance.

With US$1.7 trillion in private lending now rivaling banks’ loan books, the coming credit cycle will determine who’s better prepared — the regulated giants of Wall Street or the fast-moving private market upstarts.

For investors, that means watching closely where the next “cockroach” appears.