What we’re seeing today with these quasi-public markets and even the AI mania is exponentially worse. We’re playing chicken with the whole economy, and the marginally effective regulatory regime has been completely gelded.

On the other side of the coin. Two of the most powerful barons of the era believe they are eradicating the Antichrist and colonizing mars, respectively.

I am not sure that is for certain, with these private debt "facilities" (as the OP calls them). Seems like that's a big question.

Related (I am aware does not answer the question), the OP suggests this credit was pursued precisely because "increased regulations and capital requirements made it more challenging for traditional banks to issue certain types of loans."

If you look at the entire market you will find that the private sector actually does not demand high returns. Instead, the government needs high returns because it has not properly funded its pension liabilities. Thus, it floods the market, and then unscrupulous financiers take the money with promise of high returns. The entire thing is messed up.

For example, public employee retirement systems constitute 30-40% of all hedge fund investments. They need more than the 7% real return from the S&P. CalPERS needs a 13% return to meet its obligations.

There is no investment on the market that can return 13%. Thus, CalPERS (and others) give money to these 'hedge funds' and private capital banks who promise them these money. Eventually, the banks go bust. THe government realizes that letting them fail makes their situation even more precarious and bails them out. Of course, the reason the government is incentivized to do this is because public sector unions hold disproportionate influence and will oust them if they don't get paid.