The Wrap: Public Markets Rally; Private Credit Will Become Equity
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In this week’s edition of “The Wrap,” we feature our view of the top events in Washington and on Wall Street over the past week. Don’t forget to watch “The Wrap with Chris Whalen” on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing.
April 17, 2026 | Bank earnings this week have been mostly what we expected, with income up, reported credit loss rates continuing to trend lower and most banks refusing to provide additional disclosure on private credit exposures. As the private credit mess proceeds in the weeks and months ahead, a lot of the “debt” in these deals will turn into equity – which is what it should’ve been all along.
Goldman Sachs (GS) increased its Q1 2026 provision for credit losses to $315 million, a nearly 10% rise year-over-year and its highest since 2020, driven by impairments in wholesale loans and corporate lending rather than consumer debt. But it also reflects the fact that unlike Morgan Stanley (MS) and the other large advisory firms, Goldman takes a lot of credit risk on its book.
Despite strong earnings, the rise in loss provisions at Goldman and other banks reflects concerns over commercial real estate and potential inflationary risks. Even as the problematic credit card relationship with Apple (AAPL) slowly fades from memory, Goldman may see higher credit losses from its subprime commercial portfolio. Ponder the fact that Goldman’s gross yield on its loan book is ~ 10%, 2x JPMorgan (JPM) and higher than Citigroup (C).
Source: FFIEC
Speaking of commercial real estate, Bill Moreland at BankRegData reports that the three largest lenders on non-owner occupied commercial real estate, Wells Fargo (WFC), JPMorgan & Bank of America (BAC), all saw an increase in their delinquency rate.
“While a bit early to definitively state, it's possible we're starting to see a 'second wave' of delinquencies from prior loan modifications,” Moreland notes. Every asset size category of bank below $50 billion in assets saw an increase in commercial delinquency as well. As faithful readers of The Real Deal, we can testify that many legacy commercial properties continue to trade at a discount to the last valuation,
Financial markets rallied as the prospects for a negotiated deal with Iran seemed to move forward. Stocks turned higher after Trump posted on Truth Social that Israel and Lebanon reached a 10-day ceasefire agreement, lifting hopes for a break in the Middle East conflict. As of April 16, the S&P 500 and Nasdaq Composite have reached new all-time highs, surpassing previous records despite ongoing geopolitical tensions in the Middle East.
The S&P 500 is up 3% over the past five trading days, while silver futures are up 4% and gold was up just 0.5%. The Invesco KBW Bank ETF (KBWB) bank ETF was basically unchanged over the past week, as investors seem to be uncertain about what to do with financials. That said, we anticipate a strong rally in the financial markets after the weakness of the past month.
In Washington, federal Judge Richard J. Leon ruled that aboveground construction on President Trump’s White House ballroom must halt until lawmakers authorize the new wing. The White House construction project, which is considerably more modest than Fed Chairman Jerome Powell’s bombastic remodel of the central bank’s HQ on Constitution Avenue, is now on hold indefinitely.
Of course, the Fed never asked the Congress for permission to spend 10x the $500 million or so that President Trump wants to spend to create yet another ballroom in Washington. Meanwhile, President Trump has threatened to “fire” Powell if the Fed Chair does not depart at the end of his term in May. Sad to say, the President does not have the power to remove Fed chairman, a task that lies entirely with the national Congress.
To that point, noted researcher Peter Wallison of American Enterprise Institute writes this week in Law & Liberty:
"The Supreme Court seems to have adopted a theory of the constitution that will essentially eliminate the separation of powers as the central structure of the US Constitution, in favor of an idea called the unitary executive. The case was argued in December, in a case called Trump v. Slaughter, and a decision is expected in June or July. Given its historic significance, it has not received the attention it deserves in the media."
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