Steve Liesman

Economic and financial analyst reporting on the Federal Reserve, market risks, and macroeconomic trends.

Mentions

Appeared in

Discussed in

Key positions and views

The growth of the opaque private credit market is a potential systemic risk and a direct, perhaps unintended, consequence of post-2008 banking regulations.

AI represents a recent and fundamental disruptive threat to the software industry's business model by automating coding and empowering non-technical employees to perform development tasks.

The Federal Reserve's ability to conduct monetary policy is significantly constrained by both external political pressure and deep internal divisions among its governors.

Systemic risk is not just about the amount of money at risk but is critically amplified by market opacity; he formalizes this as 'Systemic Risk = Value at Risk * Opacity'.

Economic shocks can come from unexpected policy decisions, such as tariffs, which he reports nearly caused a financial meltdown in the repo market, a risk that was not widely appreciated at the time.

Podcast consensus on Liesman

Points of consensus

▶The Federal Reserve's policy-making is heavily influenced by political pressure and complicated by significant internal disagreements among its governors regarding the management of its balance sheet and interest rates.May 2026

▶Regulatory actions, such as the Trump-era tariffs and post-crisis banking regulations like Dodd-Frank, have produced significant unintended consequences, including job losses, near-crises in financial markets, and the migration of risk to less-regulated sectors like private credit.

▶The risk of long-term inflation expectations becoming 'unanchored' is a primary and acknowledged concern for the Federal Reserve, especially after allowing inflation to persist above its target for several years.May 2026

▶Opacity in financial markets, such as the private credit sector, acts as a critical multiplier of systemic risk, obscuring the true 'Value at Risk' until a crisis emerges.

Points of debate

▶Liesman highlights a debate within the Federal Reserve on how to manage its balance sheet, contrasting Kevin Warsh's proposal to shrink it while cutting rates with Chris Waller's view that a reduction must be tied to lower bank reserve requirements.May 2026

▶He presents the conflict between the software industry's argument that AI cannot fully replace human functions and the market's recent realization that AI's ability to automate coding could fundamentally disrupt the industry's business model.May 2026

▶Liesman notes a divergence in views on the impact of oil price shocks: the Federal Reserve staff's general view is that negative effects are offset by producer investment, which contrasts with concerns from others, like the Kansas City Fed's Jeff Schmidt, that such shocks could unanchor inflation expectations.May 2026

▶He points to a tension between the Federal Reserve's current deregulatory efforts for the banking sector and the concern that prior regulations may have simply pushed systemic risk into opaque, non-bank markets like private credit.May 2026

Key themes

▶Federal Reserve Under Political and Internal PressureMay 2026

Liesman details how the Federal Reserve navigates intense political influence, citing a quashed subpoena against Chair Powell that was deemed politically motivated by Trump's tweets, and a senator blocking nominees. He also highlights internal policy divisions among governors on issues like interest rates and the balance sheet.

The Fed's operational independence is being actively challenged, creating significant policy uncertainty that complicates market forecasting and investment strategy.

▶The Migration of Systemic Risk

Liesman posits that post-crisis banking regulations may have been overly restrictive, pushing lending activities into the less-regulated and opaque private credit market. He also recounts how Trump-era tariffs nearly triggered a meltdown in the repo market, illustrating how non-banking shocks can create systemic threats.

Analysts should look beyond traditional banking institutions for the next source of systemic risk, focusing on opaque markets where risk is a product of value and opacity, as per Liesman's theorem.

▶The Evolving Impact of Energy ShocksMay 2026

Liesman analyzes the modern economic impact of oil price fluctuations, calculating the massive wealth transfer from a $35/barrel increase and noting the US now has a domestic oil economy the size of Saudi Arabia's. He contrasts the current situation with 1973, stating oil would need to hit $550/barrel for a similar effect, yet warns a geopolitical crisis could still spike prices to $150-200.

While the US economy is more resilient to energy shocks than in the past, geopolitical flashpoints like the Straits of Hormuz remain a potent source of tail risk for inflation and economic stability.

▶AI as a Fundamental Disruption to SoftwareMay 2026

Liesman identifies the market's recent realization (within the last 60 days) that AI can automate coding as a major disruptive event for the software industry. He describes new tools that empower any employee to be a coder, blurring traditional roles and challenging the established business model.

Investors should re-evaluate the long-term moats and valuation models of software companies, as the core value proposition of specialized coding expertise is being directly challenged by AI.

Source episodes

Sentiment over time

Not enough data for timeline

Changes over time

1970s

Liesman references this period as a time when high oil prices led companies like Exxon to use excess profits for unsuccessful diversification into non-core businesses.

Post-2008 Financial Crisis

He suggests that banking regulations like the Dodd-Frank Act, implemented in this era, may have pushed lending outside the regulated system, fueling the growth of the private credit market.

Trump Administration

Liesman reports that tariffs implemented during this time led to the loss of 100,000 manufacturing jobs and nearly caused a meltdown in the repo market. He also notes intense political pressure on the Fed, with Trump's tweets being used as evidence in legal proceedings.

Post-Pandemic

He points to data showing that lower and middle-income households, which had seen income gains, are now beginning to show signs of financial stress.

Recent (Last 60 days)

Liesman claims the market has only very recently realized the disruptive potential of AI to automate coding and upend the software business model.

Present

He reports that Fed Chair Powell is signaling no imminent policy changes, his term is set to expire on May 15th, and the oil market faces a potential supply crisis depending on events in the Straits of Hormuz.

Suggested prompts

How does Steve Liesman's theorem (Systemic Risk = Value at Risk * Opacity) apply to the current private credit market versus the 2008 mortgage crisis? &nearr;Based on Liesman's reporting, what are the primary political and economic arguments for and against the Federal Reserve's independence? &nearr;What are the second-order effects on the broader economy if AI, as Liesman suggests, significantly automates coding and disrupts the software industry? &nearr;According to Liesman's analysis, how have the roles of domestic production and geopolitical risk changed the way an oil price shock would impact the US economy today versus in the 1970s? &nearr;

Key concepts

Federal Reserve Policy 1 ep Systemic Risk & Financial Regulation 1 ep Energy & Oil Markets 1 ep Artificial Intelligence (AI) Disruption 1 ep Trade & Tariffs 1 ep Inflation 1 ep Political Influence on Economy 1 ep Consumer Financial Health 1 ep

Notable quotes

“And I was talking to people inside the repo market, the generalized collateral repo market and those sort of things. And they said, we were close, Steve. We were close to a meltdown. And if he had not backed off it, we might have gotten there.”

Steve Liesman · Is Private Credit the Next Systemic Crisis? Steve Liesman Weighs In | The Real Eisman Playbook Ep 53

“I've heard stories that say or predictions April 1 and now I hear maybe the middle of April that if we don't get this resolved in those couple of weeks then you're dealing almost exclusively with a stock problem and then you have a potential asymptotic reaction in the oil market where prices go you know 150 200 if you don't resolve it by then”

Steve Liesman · Is Private Credit the Next Systemic Crisis? Steve Liesman Weighs In | The Real Eisman Playbook Ep 53

“A judge quashed a subpoena in a criminal case against Federal Reserve Chair Jay Powell after the Fed argued the investigation was politically motivated, citing 100 tweets from Donald Trump demanding lower interest rates.”

Steve Liesman · Is Private Credit the Next Systemic Crisis? Steve Liesman Weighs In | The Real Eisman Playbook Ep 53

“powell used the phrase policy is quote in a good place”

Steve Liesman · Is Private Credit the Next Systemic Crisis? Steve Liesman Weighs In | The Real Eisman Playbook Ep 53

Report last updated: May 4, 2026

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