First Brands collapse a symptom of spreading financial rot

Nick Beams

The collapse of the auto parts company First Brands, which filed for bankruptcy at the end of last month with debts of more than $10 billion and counting, is not a “Lehman moment” for the US financial system. However, it has brought multiple warnings about the stability of the $2 trillion private credit and the potential for even bigger collapses.

The story of how First Brands owner, Patrick James, went from a secretive small-scale businessman, with a history of defaults and questionable financial practices, to the owner of a business, with connections to some of the biggest names in the financial world is bound up with the rise of private credit over the past decade.

A major report earlier this month in the Financial Times (FT) on the rise of James, detailed how he was able to become the owner of a multi-billion dollar company and acquire a string of luxury homes. It was bound up with a major shift in the US financial system.

“How he raised billions of dollars with little public scrutiny, after moving on from more conventional forms of borrowing, is a story not just of one man’s past practices and the debts and lawsuits that they spawned.

“It is also a reflection of the nearly $2 trillion private credit industry—lending by non-bank institutions that can often be opaque—and the broader risks created by its rise.”

The turn by James to new sources of financing, coincided with the financial debt boom that resulted from the ultra-low-interest rate policies of the US Federal Reserve which began after the global financial crisis and continued for more than a decade.

With money pouring into the financial system, a new breed of financiers arose outside the banking system looking to use the cash on their hands in riskier ventures and willing to “overlook the occasional red flag,” as the FT put it.

“Lenders were now no longer handing him [James] over millions of dollars; they were wiring his businesses billions.”

Then a storm hit in the form of rising interest rates, the Trump tariffs, which have impacted the auto industry, and a tightening market.

One of the main financiers of First Brands was the investment bank Jefferies, well-known for its willingness to chase profits through risker ventures as it sought to use the cash on its hands, and was not bound by regulations that govern banks.

The modus operandi of the firm is perhaps best indicated by the fact that its chief executive, Rich Handler, who has been in the position for 25 years, hails Michael Milken as his “friend, mentor and hero.”

Milken rose to fame in the 1980s as the junk-bond king. He was jailed in 1989 on charges of fraud and insider trading with a sentence of 10 years, subsequently reduced to two, and was ultimately pardoned by Trump in January 2020. Millken’s practices, initially frowned on, have now become standard operating procedure and he is widely regarded as a pioneer of the present-day financial system.

Anxious not to be singled out and well aware that the activities of his firm are widely replicated, Handler has emphasised that First Brands “engaged with a range of banks and Wall Street firms over the last 10 years.”

The collapse of First Brands, preceded by the failure of the auto financing company Tricolor, has brought warnings there could be more shocks to come.

The chief executive of Apollo Global Management, Marc Rowan, whose company helped set in motion the demise of First Brands when it shorted the company’s debt, said he was “not surprised” to see “late-cycle accidents.”

“I think it’s a desire to win in a competitive market that sometimes leads to shortcuts. In some of these more levered credits, there’s been a willingness to cut corners.”

First Brands was financed through collateralised loan obligations (CLOs). This is a procedure in which loans across a range of companies are bundled up and made into a security which is then sliced up and sold off. The logic behind it is that major investors are protected from failure by one or two companies.

The CLOs are highly leveraged as the firms financing them use debt to boost their profits. The FT has noted that in some cases a CLO could be leveraged ten-fold. That is an equity contribution from the firm may be $50 million, supporting a $500 million loan portfolio.

Such an arrangement can bring vast profits provided the value of the underlying asset keeps rising. But it brings major losses if the value of the asset falls.

There are now concerns that if there is a spate of losses via CLOs, this could have a significant impact on Wall Street.

The FT cited the remarks of Andrew Milgram, chief investment officer at Marblegate Asset Management, who said: “Inside credit markets for more than a year, there has been a grudging recognition that there was and is a series of credit problems that could be substantial and dangerous to the overall economy.”

The chief executive of JP Morgan Chase Jamie Dimon echoed some of these concerns even as he reported on record profits, noting the $170 million hit taken by his bank as a result of the Tricolor collapse.

“My antenna goes up when things like that happen. I probably shouldn’t say this but when you see one cockroach there are probably more,” he said.

The notion that the First Brands collapse is the expression of a coming crisis or is a “canary in the coal mine” for the broader financial system has generally been dismissed on the grounds that the amounts involved are small relative to the size of the market. The same, it should be recalled, was also said of the subprime mortgage market in 2007.

But as a column in the Australian Financial Review noted, even as it backed the assertion that it was not the start of a systemic crisis, the First Brands fallout did raise two questions.

“First, how on earth could a no name, relatively small company borrow so much money from the smartest people in the room, and no one noticed a problem until it was too late?”

The second question, it said, related to the recent fall in the share prices of some of the private capital giants which have dropped by as much as 14 percent since mid-September. Did this indicate that “there are more unexploded hand grenades such as First Brands out there”?

The International Monetary Fund certainly thinks so. In its Global Financial Stability Report issued last week, it noted that “banks are increasingly lending to private credit funds because these loans often deliver higher returns on equity than traditional commercial and industrial lending.”

It said while global financial markets appeared calm there were shifting grounds in the financial system that would raise vulnerabilities if the risks were not addressed.

One of these shifts was the expanding role of non-bank financial institutions, with increasing ties to the major banks, both in government bond markets and corporate debt markets.

“Such links,” it said, “raise the specter of excessive risk taking and interconnectedness in the financial system.”

In other words, while the major banks are not directly involved in riskier investments, they are increasingly lending to private capital firms which are, and as the First Brands experience has revealed, can be hit with significant losses.

Explosion at factory in Bashkiria, Russia kills 3 workers

Clara Weiss

An explosion at the factory Avangard in the city of Sterlitamak in the Republic of Bashkiria, Russia, on October 17 took the lives of three workers. At least six more were wounded. Five of the wounded workers are still hospitalized, one of them in serious condition. The three workers who were killed were all women, one of them as young as 23. The other two leave behind children. Production at the facility, which produces ammunition and military equipment, continued despite the horrific disaster that destroyed an entire building.

The Republic of Bashkiria is located between the Ural Mountains and the Volga River. With around 280,000 inhabitants, Sterlitamak is the region’s second-largest city and an important industrial center, especially for the chemical industry.

Russian factory explosion [Photo: @strkoroche/Telegram]

While authorities have not given an official reason for the explosion, they have initiated a criminal case into the “neglect of safety practices.” Many Russian press reports declared that workers were to blame for the explosion. However, the governor of Bashkiria, Radii Khabirov, implicitly admitted that the disaster occurred due to outdated equipment. He acknowledged that “the factory is quite old but fulfills important tasks for the state.” He promised that the authorities would aid the factory with maintenance work.

Saturday’s explosion marks the third significant accident at the factory in just over a year. In early October, a female worker suffered severe burns from a fire. In August 2024, three workers died in an explosion during maintenance work.

The explosion is the latest in an unending series of factory disasters throughout the world. Just in the last 10 days, this has included an explosion at a Tennessee munitions factory in the US, which killed 16 workers, a garment factory fire in Bangladesh, which also killed 16, and a construction site collapse in Madrid, Spain, that killed four.

Almost 35 years after the Stalinist destruction of the Soviet Union in 1991 and the restoration of capitalism, Russia records a particularly high fatality rate for workplace accidents. According to official figures, as of 2024, Russia has about 3,000 to 4,000 work-related deaths each year, a ratio of five deaths for every 100,000 full-time workers. For comparison, in the US, where the WSWS has extensively documented industrial carnage, the official ratio is 3.5 deaths for every 100,000 full-time workers. Just recently, on August 17, a major factory explosion at a factory in the Riazan region took the lives of at least 28 workers, wounding over 100.

The latest factory explosion in Bashkiria sheds light not only on the industrial slaughter in Russia but also on the social relations prevailing in the country amid the war in Ukraine. Since the 2022 invasion of Ukraine by the Putin regime, which was deliberately provoked by NATO, Russia has geared much of its industrial production toward the war effort. The Avangard factory is one of many affected by this shift.

Founded in 1943, during the Soviet Red Army’s struggle against the Nazi invasion, the Avangard factory has long specialized in the production of equipment, parts and tools for Russia’s oil and gas industry, but it also produces explosives. Since 2022, it has shifted strongly toward military production and has significantly expanded its workforce. Now, the Avangard fulfills state orders for military equipment and weapons and the creation and modernization of ammunition. In 2023, it was taken over by the state-owned military giant Rostec, which is headed by Sergei Cheremezov, who is also a full member of the Russian Military Academy.

Cheremezov is a prime representative of the Russian ruling class, in whose interests the Putin regime invaded Ukraine. Like Putin, Cheremezov worked for the Soviet secret service, the KGB, the principal state agency tasked with defending the social privileges of the parasitic Soviet bureaucracy against the working class. Cheremezov and Putin met while both were working on KGB assignments in East Germany in the 1980s. Soon after the 1991 dissolution of the Soviet Union, Cheremezov, again alongside Putin, began to work for the administration of Boris Yeltsin, whose “shock therapy” plunged the vast majority of the working class into abject poverty.

In 2007, Putin appointed Cheremezov as the head of the newly formed Russian Technologies Corporation, now Rostec. A major conglomerate, Rostec oversees hundreds of facilities that form part of Russia’s large military-industrial sector. Cheremezov also serves on the board of several other major state-owned corporations, including Aeroflot Russian Airlines, and the oil giant Rosneft. Revelations by the Panama Papers indicate that over the course of the past decades, he and his family have amassed personal wealth of likely over $1 billion.

This wealth was accumulated on the backs and over the bodies of the working class. The oligarchy that arose out of the Soviet bureaucracy simply plundered the state assets that had been produced by the working class since the 1917 October Revolution.

A recent study by economists from the Moscow Higher School of Economists found that 66 percent of Russians earn below 40,000 rubles per month, or around $415. As of 2025, the combined wealth of Russia’s at least 146 billionaires amounts to $625.5 billion, with the top two billionaires holding fortunes of almost $29 billion each. This is the equivalent of 27 percent of the country’s GDP, a much higher level of wealth concentration even than in countries like Brazil, China or the US. These billionaires were able to increase their wealth by some $20 billion in 2024 and 2025, as hundreds of thousands of Russians and Ukrainians have been dying in a fratricidal war.

These same oligarchs have also allowed the relatively advanced industrial and social infrastructure of the Soviet period to fall apart, with deadly consequences for the working class. As in the case with Avangard, the overwhelming part of Russia’s industrial facilities still date from the Soviet era and have been extremely poorly maintained, a major reason for the high number of workplace accidents and fatalities. Because of the poor maintenance of housing stock, Russia also records one of the largest figures of fire-related deaths each year. In 2023, there were at least 7,500 fire-related deaths, 90 percent of them stemming from domestic and residential fires. The country’s fire fatality rate is 2.5 times the global average.

The Avangard factory fire is a stark illustration of the fact that the Putin regime invaded Ukraine not to protect the working class from imperialism but to protect the interests of the oligarchs against what they saw as unacceptable interference with their own profit interests by imperialism.

New far-right prime minister installed in Japan

Ben McGrath

On Tuesday, Japan’s parliament installed Sanae Takaichi, the new leader of the Liberal Democratic Party (LDP), as prime minister. The elevation to power of this ultra-nationalist, pro-war figure comes with a new ruling coalition that is rapidly pushing establishment politics even further to the right.

Sanae Takaichi celebrates after winning the Liberal Democratic Party leadership election in Tokyo, October 4, 2025. [AP Photo/Kim Kyung-Hoon]

The LDP and the right-wing nationalist Nippon Ishin no Kai agreed to form a government following the exit from the ruling coalition of long-time LDP junior partner Komeito on October 10. The two parties finalized their agreement on Monday after Ishin had also held possible coalition talks with the main opposition Constitutional Democratic Party of Japan (CDP) and the Democratic Party for the People.

Takaichi became prime minister with 237 votes in the lower house of the National Diet, which included the LDP’s 196 seats, Ishin’s 35 seats and a handful of other votes. She defeated her next closest opponent, Yoshihiko Noda, leader of the CDP, who received just 149 votes. Despite the totals, the new ruling bloc will lead a minority government, two seats shy of a majority.

Takaichi replaces Shigeru Ishiba who resigned in September following disastrous showings for the LDP in the October 2024 general election and the July upper house election, in which the LDP lost its majorities in both houses of parliament.

The establishment media both in Japan and abroad have hailed the fact that Takaichi is the first woman to become the country’s prime minister, claiming there is a progressive quality to her administration. This serves to distract from Takaichi’s far-right-wing record as well as the upcoming attacks on the working class that are being prepared.

Furthermore, Takaichi’s elevation to power was a highly anti-democratic process. The broad population had no say in her election as LDP president nor in electing her to be prime minister. She was selected by the highest levels of the state as the bourgeois parties hashed out behind the scenes who would become prime minister.

Takaichi represents the far right of what is already a right-wing party. She is a prominent member of the ultra-nationalist organization Nippon Kaigi. The group promotes historical revisionism and remilitarization and calls for so-called “patriotic” education, or in other words, education that whitewashes and minimizes the war crimes of Japanese imperialism in the 20th century. It also advocates abolishing democratic rights for the working class while opposing gender equality for women.

Takaichi has also made regular visits to the Yasukuni war shrine, including this past August 15, the anniversary of the end of World War II in the Pacific. Yasukuni is closely connected with Japanese militarism. Just like Nippon Kaigi, the shrine promotes a revisionist history of Japanese imperialism and its crimes. Fourteen class-A war criminals from World War II are enshrined at Yasukuni. The last sitting prime minister to visit the shrine was Shinzo Abe in December 2013.

Takaichi was politically close to Abe. She served in numerous cabinet positions in Abe’s first stint in office from 2006 to 2007, as well as during his longer period in power from 2012 to 2020. During Abe’s time in office, he pushed through constitutional “reinterpretations” and military legislation to allow Japan to wage war overseas, in violation of Article 9 of the constitution.

Takaichi’s last cabinet position was as minister of state for economic security under Fumio Kishida, who pledged to double military spending to 2 percent of GDP by 2027. Kishida also further aligned Japan with the United States and South Korea in a de facto trilateral military alliance in preparation for launching war against China.

Takaichi is not planning to simply continue the agenda of her predecessors, but in alliance with Ishin has already pledged to rapidly accelerate war planning and remilitarization in line with the demands of the Japanese ruling class and the Trump administration in Washington.

Ishin, for all of its talk of pursuing “reforms” or opposing “corruption” in the past, has always shared the LDP’s goal of remilitarization and constitutional revision in order to wage war and attack democratic rights. In line with this, Ishin’s proposed populist measures will quickly be jettisoned as well.

Hirofumi Yoshimura, the head of Ishin, stated on Monday that the LDP and his party “share the same national vision and the desire to strengthen Japan. As a reformist party, we want to push forward the reforms we’ve advocated so far.”

These “reforms,” contained in the inter-party agreement signed Monday, include the early revision of three core military documents that were announced in December 2022 as part of Japan’s remilitarization program: the National Security Strategy, National Defense Strategy and Defense Buildup Program. These programs were originally slated to run for approximately ten years. They also included the plan to double military spending.

However, as the US pushes for war with China, Tokyo’s plans are increasingly seen as insufficient both in Washington and in Tokyo. Trump has demanded allies in the Asia-Pacific like Japan and South Korea increase their military spending to as much as 5 percent of GDP.

New Foreign Minister Toshimitsu Motegi stated in regards to military spending, “It’s not about the amount or the ratio to GDP. What matters is the substance of our defense capabilities.” In other words, the Japanese ruling class is dispensing even further with any limitations on its military spending after decades of maintaining a military budget of approximately 1 percent of GDP. Such limits reflected fears in the ruling class about the broad anti-war sentiment of the working class.

Takaichi has now strongly hinted that her administration will hike military spending soon, though she has not publicly given an exact figure. This will no doubt be under discussion when Trump visits Japan from October 27 to 29. Increased military spending will undoubtedly mean cutbacks to essential social services including education, health and welfare programs.

Should the increased budget be pushed through, Tokyo intends to continue developing and deploying long-range missiles. The Defense Ministry already announced at the end of August that it plans to deploy upgraded Type-12 missiles for the first time to the city of Kumamoto in March. With a range of 1,000 kilometers, this would put China’s east coast and most of North Korea in the crosshairs.

Tokyo also intends to develop submarines capable of vertical missile launches as well as subs with “next-generation propulsion systems,” which is widely considered a reference to nuclear-powered vessels. Other revisions under discussion include removing the remaining restrictions on exporting military equipment overseas and building up Japan’s military industrial base.

To carry out this further remilitarization, the LDP/Ishin coalition intends to revise Article 9 of the constitution, in particular by deleting its second paragraph, stating that “land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized.”

Peru’s new president brutally represses mass protest, leaving one dead and 100 wounded

Armando Cruz

Demonstrators on the streets of Lima, October 15 [Photo by Santos500p / CC BY-SA 4.0]

Repression unleashed against a massive mobilization opposing the recently installed government of José Jerí in Perú resulted in one person killed by the police, one in a coma and over 100 injured (including 11 journalists). Jerí, a 38-year-old lawyer who was elected as a congressman for the Somos Perú party, ascended to the presidency through constitutional succession after serving as the president of Congress. He replaced then-President Dina Boluarte who was removed overnight on October 10th. He is the eighth Peruvian president in less than a decade.

The tragic toll from the October 15 demonstration bears a grim resemblance to the killing of 49 civilians who mobilized to protest the parliamentary coup that removed the pseudo-left nationalist president Pedro Castillo, which led to his vice president, Boluarte, ascending to power. 

Then, as now, the repression was not about defending “order and social peace” but about sending a message to imperialism and the multinationals operating in the country that the new government would defend capitalism and guarantee the profits extracted from the exploitation of Peruvian workers.

The reaction of the newly installed President Jerí to the bloodshed in the streets of Lima was to solidarize himself with the Peruvian National Police (PNP) and declare a state of emergency in Lima and the neighboring port city of Callao. Presented as an anti-crime measure, the decree is clearly aimed at suppressing popular opposition. It suspends basic democratic rights and places the two cities under the control of the PNP and the Armed Forces.

The protest took place amid an escalation of strikes and mobilizations that began last month—including a transport strike, the 60,000 health workers' medical strike, and the “Generation Z” protests—against the despised Boluarte government and the infamous alliance of far-right parties which dominate Congress, in practice establishing the policy agenda which Boluarte attempted to impose over the last two years. They now clearly expect Jerí to faithfully obey or risk being removed in an express manner, just as with Boluarte. 

Far-right congresswoman Patricia Chirinos—one of the country's most hated figures—stated to an Ecuadorian journalist a year ago: “We can limit some things in her (Boluarte's) behavior and her decisions. (...) As the Congress of the Republic, we are here to correct her (...) and since we have the mechanism of the vacancia (removal) she could leave at any moment.” 

Chirinos, with her typical cynicism and shamelessness, made it clear that it is virtually irrelevant who is elected or selected as president; the far-right parties entrenched in Congress will establish the policies that dominate the country.

Boluarte’s removal, far from representing any concession to the overwhelming hostility that made her the least popular president in Peruvian history, was driven in large part by the jockeying by different right-wing factions in preparation for elections five months from now.

The October 15 mobilization was primarily called by youth collectives attempting to emulate the “Generation Z” protests that have overthrown governments elsewhere in the world. Transport unions, which had conducted blockades and strikes in recent months to ask the government to address the wave of extortion and violence they suffer, largely decided to abstain from the mobilization.

The General Confederation of Workers of Perú (CGTP) declared its support and participation, stating that Jerí's ascension “only represents a change of figures” and criticized his vote for laws that weakened the justice system and favored organized crime. However, the CGTP and other union confederations have for decades opposed any attempt to confront the decline in workers' living and labor standards—the real reason behind the increase in crime and violence—by mobilizing the working class and uniting their struggles.

The union affiliation rate in Perú is one of the lowest in the region, with a general figure of barely 8 percent of salaried workers, and around 5 percent in the formal private sector. For the so-called “Generation Z,” major struggles by the union and mass affiliation to them ceased to exist years before they were born.

On October 15, protesters marched in the afternoon along the main avenues of central Lima leading to Abancay Avenue, where Congress is located. As night fell, the police began their attack with tear gas and shotgun pellets aimed at the body. The apparent justification for this was the attempt by a group of protesters to burn and throw an effigy of a giant violin—a symbol referencing accusations of sexual violation against Jerí—at Congress. 

The police repression and the open use of firearms were well documented on social media. Around 11 PM, reports state that a group of protesters discovered an undercover police officer and chased him. He stumbled and, in a panic, used his weapon to shoot, killing Eduardo Ruiz, a 32-year-old rapper from the San Martín de Porras district. Another protester, Luis Reyes, was struck in the head by a tear gas canister, destroying part of his brain and forcing doctors to induce him into a coma.

Initially, the national police, the government and their media allies declared that there were no undercover police officers in the protest and that Ruiz was attacked by another demonstrator. These lies crumbled when it emerged that parking lot cameras had captured the event. The police officer was identified as Sub-Officer Luis Magallanes, who was hospitalized because, after the shooting, he was chased down and beaten by the protesters. 

In a clear act of cover-up, Interior Minister Vicente Tiburcio declared that the authorities will use Law 32130, which grants more power to police officers in investigations, to handle the case.