Taking out 7-8 figure loans to exercise start-up options in a private company in a time of decreasing valuations and market uncertainty sounds like a pretty poor idea.
For ex: Stripe has marked itself down ~50% over the last year. Suppose you think the haircut should be more like the 70% comps like SQ and PYPL have taken, and build that into the X%. Then on top of that loss buffer, you prudently demand an illiquidity premium and a profit margin. That arithmetic doesn't leave much room for the employee to retain any stock.
I would think banks would do this again? But perhaps with a longer IPO window? Like the banks that would do this would also likely participate in the IPO anyways ...