I'm seeing articles describing an uptick in a risky sort of corporate lending.

This article, for example.

Do you see this as a cause for concern?

I have a rule of thumb about articles on the financial services industry. Any article where the heading or first paragraph includes the word “lucrative” is a load of crap.

I believe the current status of leveraged loans has close to zero potential risk to the safety of the banking system. There has, however, been a noticeable increase in the amount of leveraged lending by non-bank financial companies. We will no doubt see defaults in this sector in the next downturn, But I do not see the kind of vast ripple effect from this that there were from the issues with in the banking industry in 2007 to 2011. It is really just a fact that during a financial downturn some companies get hurt. I don’t think this is really news.

But i am not Jon...

I don't think it has the potential to damage the broader economy or the banking system as a whole like the mortgage crisis did ten years ago.

It used to be there were two ways companies could borrow money - bonds, which were sold to investors using banks as intermediaries, and loans, which were financed directly by the banks, IOW the loan sat on their balance sheets.

But these 'leveraged loans' are traceable and are mostly sold off to investors, like bonds are. The banks keep very little of it around.

It has it's own boom and bust cycle but it won't take out banks and doesn't have much of a direct link to the broader economy the way mortgages do. When the recession comes, investors in high yield bonds and leveraged loans lose a lot of money, and nobody needs to feel sorry for them.