In the 1950s and ’60s, a strange thing happened to the U.S. dollar: It left home. The Marshall Plan saw billions of dollars leave the United States to rebuild Europe. Those dollars deposited in banks outside America—mostly in London—became known as “Eurodollars,” operating beyond the reach of the Federal Reserve and U.S. banking regulators with their own rules. While U.S. banks faced transparency requirements, Eurodollar institutions did not. This was, in practice, the wild west of finance: enormous sums moving with minimal oversight, perfectly suited to laundering, sanctions evasion, and quiet financing for illicit purposes.
HSBC, a major player in the Eurodollar market, provides an illuminating case study. The bank paid a then-record $1.92 billion settlement in 2012 after admitting it failed to stop at least $881 million in Sinaloa and Norte del Valle cartel drug proceeds from moving through its U.S. arm, on top of processing transactions for sanctioned regimes in Iran, Libya, Sudan, and Cuba. Leaked records later revealed the bank continued moving suspect money for years afterward, even while under court-monitored probation.
The Eurodollar market thrived precisely because it sat outside a regulatory perimeter built for domestic banks. Today, a similar dynamic is reassembling itself—not offshore but within the “shadow banking” system of private credit. Private credit—lending by non-bank institutions rather than traditional deposit-taking banks—has exploded from roughly $158 billion in 2010 to an estimated $2 trillion to $3.5 trillion globally today. The Financial Stability Board has warned that the sector’s “complexity, leverage, and interconnectedness could amplify stress in adverse scenarios,” posing risks well beyond the private credit funds themselves.
Default rates in this sector have already climbed past six percent by some measures, even as the Federal Reserve Chair has publicly downplayed contagion risk for now. What makes this moment different from 2008 or the original Eurodollar era is who’s doing the lending: corporations themselves, including Apple, increasingly function as de facto financial institutions. These companies extend credit and manage enormous cash positions with the reach of sovereign-scale financial actors but none of the transparency obligations of a bank or state. Business consultant Marjorie Kelly noted in The Divine Right of Capital that by 2001, 51 of the world’s 100 largest economic entities were corporations rather than nation-states—enterprises with revenues rivaling GDPs while legally treated as “private” property. That imbalance has only grown more pronounced since then, with 74 of the top 100 economic entities being corporations by 2026.
Whenever capital finds a channel outside the regulatory architecture built for past crises, it moves there, and oversight lags years behind. It took decades and multiple laundering scandals to seriously reckon with Eurodollar markets. Private credit and corporate shadow lending are running the same experiment again—this time at greater scale—with the same unresolved questions: How much is happening that nobody can see, and how much will it cost to find out?
The federal government has no constitutional authority to regulate commercial banking. Yet prior to the Securities and Exchange Commission’s creation in the 1930s, states governed securities trading with “blue sky laws” to protect depositors and detect bank insolvency. These guardrails encouraged public confidence in financial institutions. The shadow-banking system removes those guardrails, leaving no way to measure the health of opaque institutions controlling our financial situation.