Other Lenders Faltering, Too

In the wake of Lending Club’s executive purge, the New York Times adds specifics about the Club’s transgressions. According to, As Lending Club Stumbles, Its Entire Industry Faces Skepticism, CEO (and sailboat racer) Renaud Laplanche had an undisclosed stake in at least one concern seeking loans. Other executives were involved in changing of information on paperwork.

… on Monday, Lending Club announced that Mr. Laplanche had resigned after an internal investigation found improprieties in its lending process, including the altering of millions of dollars’ worth of loans. The company’s stock price, already reeling in recent months, fell 34 percent.

And it isn’t only Lending Club that is hurting.

The company’s woes are part of a broader reckoning in the online money-lending industry. Last week, Prosper, another online lender that focuses on consumers, laid off more than a quarter of its work force, and the chief executive said he was forgoing his salary for the year. …

Wall Street’s waning demand for loans exposed the Achilles’ heel of marketplace lending. Unlike traditional banks that use their deposits to fund loans, the marketplace companies discovered how fleeting their funding sources can be.

Since the start of the year, Lending Club has raised interest rates on its loans three times to sweeten their appeal to investors.

I regularly get mailers from Lending Club, Prosper, Embrace and various debt consolidation outfits – all of which feed the shredder.

In a potentially related vein, a few days ago, Donald Trump made heads explode by suggesting that he might want to renegotiate $19 trillion dollars of US debt. Just about all the traditional and new media outlets rushed to denounce such talk as evidence of Trump’s political inexperience, but on CNBC’s Futures Now show, Euro Pacific Capital CEO Peter Schiff said,

“Trump just admitted on CNBC that America has too much debt to afford a rate hike, and that he wants our creditors to accept less than 100 cents on their Treasuries. In other words, Trump knows a U.S. government default is inevitable.” …

Schiff has long been opposed to the Fed‘s so-called easy money policies. He insists that rather than helping the economic backdrop, the excess liquidity has created fragile asset bubbles so fragile that may send the U.S. spiraling into a recession worse than what occurred during the financial crisis.

One of the dilemmas of being both a social progressive and a believer in energy depletion is that progressives, including Bernie Sanders, confidently assert that the US economy has enough wealth that it should be the rising tide to lift all boats.

Energy depletion gurus, though, predict increasingly hard times for everyone, which puts them in an odd agreement with many conservatives, though for an entirely different reason. I suspect that Donald Trump may be right about US debt, though I suspect some version of austerity will be part of his solution.

Advertisements

Tags: , , , , ,

%d bloggers like this: