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vtBrunson (45.66)

Live Long... Don't Prosper

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January 13, 2009 – Comments (8)

I've rewritten this post several times before submitting it (Cause it just makes me so angry and I had to take the swear words out).

So for the red meat:

The S.E.C. has decided to shut down Prosper.com a site that allows normal folks to invest in people and businesses via loans (naming there interest rate).

If the S.E.C allowed this we'd be cutting out those middlemen (Banks) and we can't have that... 

Details  

Podcast about it on NPR (PlanetMoney)

I'll post my arguments as comments (because it's probabaly going to be a rant) 

8 Comments – Post Your Own

#1) On January 13, 2009 at 3:44 AM, kaskoosek (99.82) wrote:

Prosper.com more like Bankrupt.com

There is a reason the SEC is closing it, VT you should do your research on this one.

Being a lender at prosper.com is like playing roulette, but with lower odds. You can not diversify individual risk like banks do.

Add to that the following.

 

Prosper deletes everything! October 21st, 2008

What a shame.Once again to quell dissent,Prosper deletes all info under the guise of quiet period.Removing info submitted by users is a pathetic lame attempt to delete history once again.Those of the newer people to Prosper may not realize there was an old forum with 400,000 posts that they completely took down.

 

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#2) On January 13, 2009 at 4:08 AM, kaskoosek (99.82) wrote:

On November 24, 2008, the SEC found Prosper.com to be in violation of the Securities Act of 1933. As a result of these findings, the SEC has imposed a cease and desist order on Prosper.

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#3) On January 13, 2009 at 5:27 AM, threepaweddog (30.78) wrote:

Prosper.com may have died, but lendingclub.com recently received SEC approval.  

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#4) On January 13, 2009 at 6:58 AM, dwelllewd (28.28) wrote:

The SEC is requiring these companies to register under the securities act.

Don''t you think a company that is a merchant or broker of investments as well as servicer of loans should be required to register?!?

>>> under the terms of the notes, Prosper has the sole right to act as loan servicer of the notes. In this capacity, Prosper collects repayments of loans and interest, contacts delinquent borrowers for repayment, and reports loan payments and delinquencies to credit reporting agencies. Prosper also exclusively manages the process of referring delinquent loans to collection agencies for payment, and selling defaulted loans to debt purchasers. <<

 

I'm all for small government. As we (hopefully) move toward that ideal, a level playing field is critical.

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#5) On January 13, 2009 at 10:54 AM, vtBrunson (45.66) wrote:

Thank you all very much for your comments  (... you've  cut my rant in half...and possibly saved me from a meltdown)

My problem with the SEC in this situation is:

1) You'd think they would focus on the big fish like the Bernie Madoffs which were completely overlooked for years (And plenty of people suspected he was crooked...) Instead, they go after the little guys, and anyone offereing something new and/or innovative.  Hedge Funds available only to the super rich are able to make up their own rules... but us common folk can't join in that party... instead the SEC will step in and save us from ourselves.

2) dwelllewd asked whether I think it is a good idea that that Prosper register... my response is "no".  Because:
  a) Prosper is not writing you a note, they are only providing you with a means to connect with people who want to barrow.  Its unsecured debt, so, name your own price. 
  b) seems to me... this is the real "free market" 2.0. Yes you might get swindled, (but that happens in the stock market which is supposedly being monitored and legislated anyways...) instead of trying to expand it's power and reach, the SEC should focus on it's current job.  What exactly is requiring Propser.com to register going to help? (I'm synical that Cox & Co. would actually be able to make this more safe given their track record)   

3) If you've never read Creating a World Without Poverty: Social Business and the Future of Capitalism I'd recommend it. basically the author describes providing loans to people in need all over the world (in his situation he provides loans to the very poor...) and the suprising finding is that the default rates for those extremely poor people was better (meaning less defaults) than those comonly provided to consumers and businesses by the "normal Banks".

4) At first, I have no doubt that people will get grifted (some internet swindlers will figure out a way to screw you and take your money)... Eventually, though either Prosper figures out a way to stop this, or noone will use it (and another site will come along and figure out how to do this) BTW hat tip to threepaweddog lendingclub.com does seem to be up and running)

5) kaskoosek wrote:
Being a lender at prosper.com is like playing roulette, but with lower odds. You can not diversify individual risk like banks do.

I went to the site and looked at some folks who did provide loans... if i can put up $100 bucks at a time to different barrowers (at 12%), isn't that diversifying?  Maybe I'm missing something (please let me know) 
 
6) I'd rather put my money towards my fellow Americans trying to improve their situation (by starting businesses, getting out of debt, etc.) than to buy stock that gets diluted by the CEO using "mark to infinity" accounting to pay himself millions he doesn't deserve... 

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#6) On January 13, 2009 at 1:32 PM, kaskoosek (99.82) wrote:

vtBrunson

 

You can diversify if you have like 500 grands, but when trying to bid, you must give him the whole loan amount.

For example if a guy want 5 grands, you will provide him with the whole amount since you and only you did the bidding.

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#7) On January 13, 2009 at 3:01 PM, vtBrunson (45.66) wrote:

kaskoosek (99.48) wrote:  

You can diversify if you have like 500 grands, but when trying to bid, you must give him the whole loan amount.

That's not what I am seeing... I went to the site and clicked on a random person... here is what I saw (individuals offering bids as low as $50...) You might believe it is risky, but putting money in the market is risky (You only get the illusion of safety as people have figured out recently) 

http://www.prosper.com/lend/listing.aspx?listingID=257404

If you have information that proves to the contrary, I'd like to see it... Thanks

Here are some "winning bids":
Free_NRG 8.80% $62.48 $62.48 Jan-05-2008 10:23 AM 
jcd222 8.80% $50.00 $50.00 Jan-05-2008 5:31 AM

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#8) On January 13, 2009 at 8:43 PM, appcoder (< 20) wrote:

Sorry kaskoosek, vtBrunson is correct.

I'm sorry that I was late to the party at prosper. I threw in approximately $650 buying portions of 12 loans, with an average return of 15.25% -  not bad, huh?

As a lender, you make a bid of at least $50, and indicate your lowest acceptable rate. The starting rate is actually set by the potential borrower. If enough money is bid, by multiple lenders, to fully fund the loan, then newer bids have to start at lower rate. You can get pushed out when the loan can be funded at a rate lower than your minimum.

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