[Federal Reserve Governor Cook Warns of Potential Risks in Private Credit and Hedge Funds]
Federal Reserve Governor Cook stated that the increasing complexity and interconnectedness of leveraged companies require officials to pay attention to the potential impact of unexpected losses in private credit on the U.S. financial system. She mentioned that recent bankruptcies of private companies in the automotive industry have exposed unexpected losses and exposures among banks, hedge funds, and specialized financial firms. Cook also pointed out that the expansion of hedge funds in the U.S. Treasury market and asset valuation levels represent potential vulnerabilities. Despite issues such as elevated asset values, the growth and complexity of the private credit market, Cook believes the financial system remains resilient. However, emerging vulnerabilities associated with technological changes may require prudent responses.