To the Editor: Randall W. Forsyth's column " Stocks Are Back and Economic Data Look Solid. Tariffs Could Spoil It All" (Up & Down Wall Street, May 2) exposes the plethora of crosscurrents challenging today's stock market. Drilling down, however, the real essence is the notion of Jim Bianco's "4-5-6."

The supporting details are complicated, but this is all we need to remember going forward: 4% return on cash, 5% return on bonds, and 6% return on stocks. A useful guideline to manage expectations? Many would proclaim gross oversimplification. My thoughts. To paraphrase Leonardo da Vinci: Never confuse simplicity with lack of sophistication.

Rob Suthe Bethesda, Md.

Crunching Private Credit

To the Editor: Former Federal Deposit Insurance Corp. Chair Sheila Bair is spot on in her critique of private credit (" How Much Risk Lies in the Shadow Banking Sector? We Don't Know," Other Voices, April 30). For years, investors have flocked to this opaque asset class, believing it to be a silver bullet in the investing world -- offering high returns with minimal risk.

This belief defies the timeless axiom that risk and return are inextricably linked. Unfortunately, as with every fad and hot investment du jour, many investors will learn firsthand how risky private credit is.

Jonathan I. Shenkman West Hempstead, N.Y.

To the Editor: Sheila Bair likens private-credit funds to "moles" who hide from "sunshine." The truth: Federal and state regulators have a wealth of data on these loans through several public filings, regulatory filings, and commercial data sets.

This is the result of a fit-for-purpose regulatory framework. Private-credit managers are well regulated by the Securities and Exchange Commission. Prudential regulators have insight into their borrowing through funds' bank counterparties and the ability to control how much leverage is extended. The Financial Stability Oversight Council also monitors fund activities.

Despite Bair's exaggerations, private credit does not pose a systemic risk. As she notes, they have no depositors or government backstop. Funding comes from sophisticated investors who understand investment risk, committing their capital for extended periods of time. This mitigates liquidity mismatches and forced selling, benefiting financial stability by reducing volatility.

Funds do fail, but the losses are borne solely by the fund's investors and do not ripple across the broader financial system, as seen with prior bank failures. Most important, private credit provides capital to businesses of all sizes and generates returns for institutional investors. Rather than being "wary" of it, policymakers should embrace private credit as a driver of America's economic success.

Bryan Corbett President and CEO, Managed Funds Association $(MFA)$ Washington, D.C.

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May 09, 2025 21:30 ET (01:30 GMT)

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