The nearly overnight collapse of a Cleveland company, now under federal investigation for fraud, should be a cautionary tale for Ohio’s public pension funds’ dangerous practice of investing in private credit.

Auto parts giant First Brands filed for bankruptcy after revealing more than $2 billion can’t be accounted for. First Brands used loans from private capital companies funded by pensions like Ohio’s to acquire competitors and consolidate the industry.

It appears that cash flow from First Brands sales were pledged as collateral on more than one loan, bringing the U.S. Department of Justice into the bankruptcy process.

Private credit loans bring less diligence than required by a regulated bank. Since the global financial collapse in 2008 and the taxpayer-funded bank bailout it require

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