Hi, I'm Carl Tannenbaum, chief economist for Northern Trust.

In the old days, there weren't very many places you could get a loan. If the bank turned you down, you'd be thrust into the murky world of payday lenders and pawnshops. If you were really desperate, you'd get funds from a shark, who charged you a rate of 5% per week.

Today, non-bank lending is much more respectable. Known as private credit, this sector of finance is growing very quickly. To its supporters, private credit gets capital to borrowers more cheaply and one that offers attractive returns to investors. To its detractors, it is a potential source of systemic risk that needs to be better monitored and controlled.

Banks aren't what they used to be. Over the past several decades, depositors have increasingly moved to investment products, and borrowers have moved to raise capital directly from the financial markets. An increasing regulatory burden has made it difficult for traditional lenders to compete with non-bank intermediaries.

Private credit is a natural extension of this trend. Firms engaged in this space raise funding, hire underwriting teams, and make direct loans to smaller businesses that don't have market access. The attraction to borrowers includes tailoring of terms and conditions, as well as flexibility in working through delinquency if it occurs. The attraction to investors is led by strong returns.

Nonetheless, regulators around the world have significant concerns about private credit. For one thing, it is hard to gauge what is going on in this space. While banks have to file quarterly reports that provide details on their lending, private credit funds have no public disclosure requirements, and provide their investors with very little portfolio information.

The private credit channel has never really been tested by a significant credit downturn, which leaves room for doubt on how it would fare under adversity. Several layers of leverage link the sector with traditional banks, creating the possibility of contagion. Further, revelations of trouble in the private credit arena might trigger psychological reactions that could spread quickly through the financial markets.

Those in the industry defend themselves by noting that private capital can be a source of stability in bad environments. Distressed debt funds step in to acquire loans which are faltering, placing a floor under debt prices and providing price discovery amid illiquidity.

All things considered, private lenders are certainly not sharks preying on unsuspecting borrowers, but they could leave a trail of unsuspecting victims in a worst-case scenario. Better to know what's going on beneath the waterline before trouble surfaces.

And that's The View From Here.