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Lending Club Discussion => Investors - LC => Topic started by: sigclem on June 05, 2016, 09:32:13 AM

Title: Is LendingClub Broken?
Post by: sigclem on June 05, 2016, 09:32:13 AM
This is a fair question and one I would be curious to hear a reasonable response to.  I have invested in the stock, taken a loan, and most recently advised a friend to try taking a loan as well.  It is the last experience that leads me to believe the company is broken and will have a very hard time recovering.

As of this morning, there were 1,800 loans available for investors (that I could publicly count without being an investor myself).  About 800 of those were 60 month loans.  The demand for 60 month loans appears to completely evaporated.  Lending Club is slowly releasing loans that had applications as late as 30 days ago (last batch of releases appear to be from May 6th).  The demand for 60 month notes is gone.  Does not matter if it is an A loan or an E loan.  It is just gone. 

When a large pool of investors completely shun a material portion of your platform, you are done.  More importantly, what do you think these borrowers are doing?  Do you think they are sitting their waiting for 30 days to get an answer from Lending Club.  Heck no.  They are moving on to different platforms like SoFi or Prosper.  The reality is LendingClub is dying a slow death as it loses thousands of customers daily that it use to convert into borrowers by having the best platform. 

This should concern retail investors and it has definitely made me quickly close the trade I made when I bought LendingClub shares around $4 thinking it was a long term holding.  I see huge risks around this company. 
Title: Is LendingClub Broken?
Post by: Ran on June 05, 2016, 10:10:38 AM
First of all I would recommend one to disclose his/her LC interest when discussing LC's business.
Secondly LC now only releases approved loans on platform, probably started a few months ago or earlier, not tied to the recent CEO scandal, which causes delays for a fair share of loans.
Lastly, it's not true to say the latest loan was submitted on 5/6. I think it depends on the particular loan approval process and whether the loan was released on whole loan market first. For example, https://www.lendingclub.com/browse/loanDetail.action?loan_id=81476119 was submitted on 6/2 but already approved for funding as of today.
Nevertheless, E-G 60m loans funding have been an issue and it should limit its growth but I see no evidence that it will kill LC.
Disclaimer: I am an active LC notes buyer and own negligible value of LC stock
Title: Re: Is LendingClub Broken?
Post by: sigclem on June 05, 2016, 11:17:39 AM
I did disclose my interest.

 - borrower previously
 - stock holder previously (no interest now)
 - paying attention because I just recommended to a friend

Your right you can find a few loans listing quickly in the 60 month category. However the vast vast majority are not listing quickly. Whatever you would choose to argue, the answer has to be that funding availability is an issue today.

These borrowers will not wait. They will go elsewhere. The cost to LC of losing these borrowers will be immense both near and short term.
Title: Re: Is LendingClub Broken?
Post by: GS on June 05, 2016, 05:06:13 PM
Could be in a downward spiral, unfortunately.  The news of the CEO's problems spooked investors, with less investors, the loan numbers must drop, less loans will mean the stock price drops, and the stock price drop will spook the investors, repeat ...

The primary thing LC needs to do is reassure investors, and a BRV seems like a good start.
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 05, 2016, 05:33:25 PM
... has definitely made me quickly close the trade I made when I bought LendingClub shares around $4 thinking it was a long term holding.

First, I think it is important to understand that the decline in LC's stock price mostly is not about LC in particular.  To see this, look at a 2 year (or more) chart showing both LC and ONDK.  (You can do this easily on yahoo finance or google finance.)  Both IPO'd at about the same time, and astoundingly, the two stocks both lost about 80% of their value since IPO.  The two curves almost lay on top of each other!  My conclusion is that market sentiment this area was way overheated at the time of IPO, and has sunk ever since.  So one problem is market sentiment.  I think we're near the bottom of sentiment now, but I can't predict such things. 

Prior to the event, LC was growing really fast.  Roughly doubling loan origination every year.  People have forgotten that the demand difficulties started before RL's resignation.  You could see this by announcements from a number of marketplace lenders, including Ondeck and Prosper.  Prosper went so far as to have a 28% layoff, which is a big layoff.  At this point there had been some little ripples in consumer credit quality, and a significant fraction of hedge funds (small institutional guys) had pulled back. 

2015Q1, prosper reported a -9.1% Q/Q increase in originations, and LC reported a +6.6% Q/Q increase.  LC had been reporting very consistent 15 to 16% Q/Q increases, so this was a bit of a wakeup for those who thought maybe LC wasn't affected.  Now we have the combination of bad stock market sentiment and slowing growth. 

Around this time, most of the marketplace lenders were starting to court the syndicators (big NY banks) and trying to get into the business of selling packages of loans to banks.  That was proceeding well until...

The May 9th event.  Huge negative publicity.  The banks of course all stepped back in unison.  Middle management bank employees who make these decisions can't afford association with a scandal.  It seems likely that this is just a short pause, but I for sure don't have a clue how to guess how long a pause.

The banks are important because banks had grown to be a significant chunk of LC's demand.  The 2016Q1 earnings call presentation shows banks as 34% of revenue!  It seems very likely that LC management is focused on working with the banks, trying to figure out what they need to release the brake and proceed, and trying to provide it.   

Then, as we can all observe, the retail investors (guys who buy notes) have slowed.  Many have stopped investing.  Some are dumping their notes.  Most of these guys just read the popular press and have never looked at the balance sheet.  The popular press these days is mostly uninformed, and just lives to write as salacious a story as possible every day.  From the perspective of people who read this stuff and believe it, I can understand their reaction.  Its only logical... when something doesn't quite smell right, you back off a bit.

The big problem here, as you identified is reduced demand.  For 2016Q2 I'm predicting a 30% reduction in originations Q/Q.  Because LC has not yet had a layoff, we know that Q2 expenses must be tracking pretty closely with Q1 expenses.  From this simple math, we see that Q2 earnings will show a significant loss.  I'm thinkin' maybe $30M loss.

Now the balance sheet is in really good shape.  $860M of cash.  After that loss they'll still have $830M of cash.  The balance sheet can handle the loss I'm predicting, and a lot more bad news, just fine.

However, for you, the stock investor, you're faced with a difficult situation.  I wouldn't call the company "broken", as it still cranks out good competitive product, but the growth story is certainly broken, and this makes the stock broken.  You have negative sentiment building over the last two years, now fright about consumer credit (overblown but real), scandal, and major customers hesitating ... the loss of previously-magnificent sales growth.  Its a pretty bad scene.

For a stock investor, the question is: When does this recover?  I can't answer that, so I'm not an investor in LC's stock.

If I was sure that the economy was expanding, and I was sure that consumer credit would continue to get better, that would help me believe that recovery could be soon, but I'm unsure about these things.  I figure there's a pretty good chance that we're entering a recession.  Consumer credit is the best right now that it has been in many years, so it seems likely that we may be at a peak, and credit gets worse from here.  If that proceeds as I predict, it likely won't boost enthusiasm in general, so won't be the catalyst you seek for stock price recovery.

I don't see a catalyst in the near future, so I'm not an investor in LC's stock.  I do see it is beaten down, so I'm tempted, but frankly, I don't have a story for you that predicts where it should go from here.

At some point, the banks will turn back on.  I don't know if that's 1 month away, or 3 years away.  If some big banks were to turn back on, and originations would stabilize or go up in some quarter in the not-too-distant future, that would of course be a big positive.

Meanwhile, there are now a number of investor lawsuits (mostly just because the stock price has gone down), and regulators, not to be left out, are piling on.  These are distractions to management.  By that I mean that these things reduce the time management can spend managing your company, in other words these things reduce their effectiveness.  I can't predict what degree of harm they will cause.

On the subject of getting customers of various kinds unscared and back in buying mode... We have this problem that Sanborn is not a natural communicator, as Laplanche was.  This makes it unlikely that he will pull off a PR miracle.  Many have noted Sanborn's lack of communication with the retail investor community.  If I could speak with him I would shake him and tell him how far he needs to go in this direction.  (Really far... not business as usual...  I would tell him to bombard customers with more information than they are asking for.  I would have him report monthly loan origination numbers, much as retail stores issue monthly "same store sales".  Hell, maybe even daily.  I would have him speak to us about the suggestions customers are making.  Even if he can't tell us what is going on wrt them, he could tell us what suggestions he has heard, so customers don't get so damn frustrated believing that he hasn't heard them when 100's are asking for a BRV. ...)  I don't speak with him, so I can't.  To be clear: He has a really difficult job.  I don't know whether he can handle it.  Time will tell.

Try as I will, I can't handicap this race.  If I had the bucks, I might be inclined to buy the entire company.  If I were in control, I'm pretty sure I could make it profitable at the current origination level.  I would have to lay off at least 1/3 of the employees to make it work, and that would surely make me unpopular as heck.  (Of course anybody buying the company now would have to deal for many years with all those stock investor lawsuits, which is at least ugly.)   Its a great time to be a lawyer tho.

However, I still like the product, and I'm still buying notes.  I've slowed down, as many have, to give me time for head scratchin', but I'm still buying the product.

As I've tried to explain here before, I don't look at the earnings report for Jack in the Box before I order a burger.  I've decided that it's a good product, and I consume it. 
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 05, 2016, 07:09:25 PM
As I've tried to explain here before, I don't look at the earnings report for Jack in the Box before I order a burger.  I've decided that it's a good product, and I consume it.

I understand what you are trying to say but that is a really awful analogy. Your relationship with Jack in the Box ends once you eat the burger. Your relationship when you buy a note from LC might be as long as 5 years.
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 05, 2016, 07:49:30 PM
As I've tried to explain here before, I don't look at the earnings report for Jack in the Box before I order a burger.  I've decided that it's a good product, and I consume it.

I understand what you are trying to say but that is a really awful analogy. Your relationship with Jack in the Box ends once you eat the burger. Your relationship when you buy a note from LC might be as long as 5 years.

Eating at a restaurant subjects you to risk of death, which is worse than risk of losing some money.  Bad food can kill you.  After that, you stay dead for much longer than 5 years.  So don't brush this off so lightly.

I've decided that the LC product is ok.  And, yes, I do realize that I'm buying 5-year notes.

The main concern that I see repeatedly expressed here is that during that 5 years, LC might enter bankruptcy.  They might.  However, I consider that possibility to have a very very low probability.  Even if that were to occur, I hold the senior obligations of the company, and I have a commitment (right there in the prospectus) that LC will not take on indebtedness senior to my notes, so I will hold senior obligations of the company at time of the supposed bankruptcy, which likely means I would come out ok, even in this extremely low probability scenario.

Nonattender and others repeatedly remind me that in the meantime, management might go insane and take on huge debt for some stupid purpose.  (This debt would be equally ranked with my notes.)   Such behavior might cause LC to be highly leveraged and at some point possibly unable to meet its obligations, at which time they would go bankrupt and I could lose money.  True.  This could happen.  I just don't see that as likely within the next few years.  Note that this requires the conjunction of several events (LC spends all its cash, LC takes on big stupid debt, LC spends it all on stupid stuff that produce little earnings, LC can't make the payments, LC files for bankruptcy, there isn't enough left to fully repay me)  That's about seven distinct steps.  I just don't see a high probability of all of those things happening.  You can assign probabilities to those steps if you like, then multiply all those probabilities together and see what you get.  Its a small number. 

Why would I take any risk at all?  Because this investment is paying me more than 9%/year, whereas corporate bonds I'm willing to take pay 1.5% to 2.5%, CDs pay under 1%, etc. 

Other risks I face include nuclear war, drought, famine, terrorism, Zika virus, superbugs, fire ants, killer bees, North Korean cyber-criminals, ongoing moral degradation, the ever-growing welfare state, addiction, medical errors, air pollution, global warming...  I try to not let these things get the best of me.

Full disclosure: I have cut back on the Jack-in-the-Box burgers while I try to lose a little weight.

Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 05, 2016, 09:09:34 PM
Eating at a restaurant subjects you to risk of death, which is worse than risk of losing some money.  Bad food can kill you.  After that, you stay dead for much longer than 5 years.  So don't brush this off so lightly.

rolling eyes.
 
A tree might fall on your house and kill you while you are buying a note on the LC website too. (I can't find specific stats on trees killing people inside of houses, but the number of people killed by falling trees and branches dwarfs the number killed by under-cooked burgers.)

You are trying too hard to defend your horrid analogy; I don't know why you can't simply admit it that was bad. Inability to admit fault is par for the course for Americans these days though, so i'm not surprised.
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 05, 2016, 09:21:20 PM
You are trying too hard to defend your horrid analogy; I don't know why you can't simply admit it that was bad.

I think you're just hung up because I don't bite on your offense over burgers.  You picked a detail to attack, rather than the thrust of the argument.

Let me say it another way: My decision to buy a company's product and my decision whether to buy a company's stock are unrelated.  I don't generally look at company earnings before buying a product.  (Might make an exception for a company in such deep crisis that it is suffering huge losses ... Tho I did buy a GM car a few years ago during just such a crisis.)  I routinely buy products from companies whose stocks I don't want to own and vice versa.

So there it is without reference to burgers.
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 05, 2016, 10:19:55 PM
Let me say it another way: My decision to buy a company's product and my decision whether to buy a company's stock are unrelated.  I don't generally look at company earnings before buying a product.  (Might make an exception for a company in such deep crisis that it is suffering huge losses ... Tho I did buy a GM car a few years ago during just such a crisis.)  I routinely buy products from companies whose stocks I don't want to own and vice versa.

So there it is without reference to burgers.

Considering that most warranties aren't worth much, and most products we buy are priced orders of magnitudes below a typical LC investment, of course considering the company's financials before purchase is silly. But that is entirely unlike a major purchase or large financial investment.; an LC investment isn't remotely like buying a burger, or a light bulb, or even a TV.


Title: Re: Is LendingClub Broken?
Post by: lascott on June 05, 2016, 11:41:29 PM
Let me say it another way: My decision to buy a company's product and my decision whether to buy a company's stock are unrelated.  I don't generally look at company earnings before buying a product.  (Might make an exception for a company in such deep crisis that it is suffering huge losses ... Tho I did buy a GM car a few years ago during just such a crisis.)  I routinely buy products from companies whose stocks I don't want to own and vice versa.

So there it is without reference to burgers.

Considering that most warranties aren't worth much, and most products we buy are priced orders of magnitudes below a typical LC investment, of course considering the company's financials before purchase is silly. But that is entirely unlike a major purchase or large financial investment.; an LC investment isn't remotely like buying a burger, or a light bulb, or even a TV.
How about the analogy of buying a Tesla car ... those that do better believe in the company and that it will continue.  Else, they better hope someone is there to support the car (collect/disperse note payments).
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 05, 2016, 11:42:20 PM
Considering that most warranties aren't worth much, and most products we buy are priced orders of magnitudes below a typical LC investment, of course considering the company's financials before purchase is silly. But that is entirely unlike a major purchase or large financial investment.; an LC investment isn't remotely like buying a burger, or a light bulb, or even a TV.

I think we're gonna simply have to disagree.
Title: Re: Is LendingClub Broken?
Post by: RT45 on June 06, 2016, 02:17:39 AM
Enough with the forum trolling.

Fred93 - thanks for the long and thoughtful post. Always impressed with how much you've shared in the past.

The more facts, links, screenshots, examples, fine print etc. shared the better everyone will be vs. personal opinions.
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 06, 2016, 07:51:34 AM
Nonattender and others repeatedly remind me that in the meantime, management might go insane and take on huge debt for some stupid purpose.

Stupid like... levering up that cash to fund multiple billions of loans every Q?

Remember that the last innovation in this industry was the "hybrid" model.
("Nobody will buy all these loans!  Hey, I know; we'll just do it ourselves!")

That reminds me of the story about how Archimedes sat in his bathtub, pondering his problem, then took an irregularly shaped vessel, dipped it into the water, filled it, drank from it, and then noticed that the water level in the tub had gone up by exactly the volume of...

Oh, wait... That's not how the story goes.  I'm always getting confused. ;)

BTW, despite my confusion, I am working up a new course that's entitled:

'Mathematical Ethics for The Engineering-Minded (and Likewise Confused)'

The first day, I'm going to break the class of 250 into 60 groups of 5 and call each group of 5 a "board of directors".  But I've made a mistake, you say!  There are 50 people missing!  I've done the math wrong!  No, no... I'm not that confused; bear with me.  I will tell the boards to select a Chairman.  I don't care, vote for the guy with the reddest jacket. Then, I will instruct each board that one new member will be joining their board and that, I, as the sole stockholder of the company, expect that they will just continue on about business as usual and represent my fiduciary interests just as justly and fairly as they had before.  This is where those 50 "extra" people come in, and each one is a student loan officer from Sallie Mae who holds the very fate and continued attendance and eventual graduation of every other student board member, including all of those who were elected "Chairmen", in their hands, or, to put it in the vernacular, "has them in their pocket", so to speak...  Yes, you're right, I can fail the students who don't continue to act as my fiduciaries - but, while I can give them an F in one class, the student loan officers can cut off the dough and send them home (mortgaged as it may be) - no yachting for you, young man!  Back to your dorm room, pack up - and turn in those blucher mocs!  It's gonna be fun!  Let the games begin!

That's as far as I've gotten.  Can you finish it for me and let me know how it turns out?  I'm interested in whether or not the members to whom other members owe money are perhaps afforded some strange sort of undue influence or deference or special treatment of any kind.  It's gonna be hard to measure for, I can tell you that.  Especially with no clear sets of rules / no centuries of precedent about how to behave.  I mean, there are NO real world scenarios like this, in all of recorded history, and there's certainly no such thing as an entire field called "politics", despite the crap that fills up my news feed and TV screen --- it's just a thought experiment, purely abstract!

Why, just the other day, I saw some engineering-billionaire-type parrot what some Oxford philosophy dope pissed in his ear about how the whole world is just a video game!  So, obviously, I have no point.

*bell rings*

Dis-missed.
Title: Re: Is LendingClub Broken?
Post by: LonghornSF on June 06, 2016, 10:52:18 AM
Quote
: My decision to buy a company's product and my decision whether to buy a company's stock are unrelated. 

If you buy a burger from BK and they go bust the next day it doesn't affect your purchase or the value you received at all. If LC goes bust tomorrow it has a huge impact on the value of the products you bought (or invested in). Similarly, if you buy a Tesla or Apple phone today and they go out of business tomorrow the value of your purchase takes an immediate hit.

It's pretty simple. Would you want to buy a SAAB automobile right before then went out of business, or a Nokia phone which no developer supports anymore? In some cases, what happens to the supplier after your purchase has a huge impact on the value of your product.

That's where your ridiculous "buying LC notes is like buying a burger" analogy falls apart.
Title: Re: Is LendingClub Broken?
Post by: sigclem on June 06, 2016, 11:00:45 AM
The question I am not seeing answered is what happens to the thousands of borrowers who just say screw it and don't wait for 30 days for LendingClub to list their loan.  They are likely gone forever.  The most profitable borrowers for LendingClub are the repeat borrowers.  I would also imagine they are the least risky in most cases, if they have paid off a loan and shown an ability to repay. 

I would actually argue they should be taking some of their $850M in cash and funding a ton of loans if they need to.  The cost of acquiring a customer is significant.  These customers who don't wait for 30 days for their loan to be listed will have had a terrible experience and be gone forever.

I think the next 30 days are make or break for LendingClub, and for those of you who have had success earning a return on your investment buying notes.  Discover Personal Loans or SoFi, or any others with adequate capital, will end LendingClub if they don't quickly figure out how to fund their backlog of loans.
Title: Re: Is LendingClub Broken?
Post by: SLCPaladin on June 06, 2016, 12:34:28 PM

I would actually argue they should be taking some of their $850M in cash and funding a ton of loans if they need to.  The cost of acquiring a customer is significant.  These customers who don't wait for 30 days for their loan to be listed will have had a terrible experience and be gone forever.

I think the next 30 days are make or break for LendingClub, and for those of you who have had success earning a return on your investment buying notes.  Discover Personal Loans or SoFi, or any others with adequate capital, will end LendingClub if they don't quickly figure out how to fund their backlog of loans.

I completely agree with you. LC is in between a rock and a hard spot: they can't afford to have approved loans go unfunded but if they start funding from their own balance sheet it puts them in a precarious situation. I think the lesser of two evils is to risk loans going unfunded. They absolutely can't afford for a backlog of loans to appear on the platform. This is extremely costly and damaging for multiple reasons: unfunded borrowers go elsewhere resulting in wasted marketing dollars from lost customers; LC loses origination revenue and the future loan servicing revenue that comes with it; a funding shortfall further enforces the narrative that there is something inherently wrong with the quality of the notes on the platform. All of this leads to a vicious cycle.

Either LC needs a big institutional investor to step up. If and when this occurs, they need to publicize it loud and clear so that knock-on effects will occur and more institutional investors and retail investors feel at ease. LC needs to to simultaneously entice wary retail investors to come back even while they are courting institutional money. I think that is what they are trying to do with the IRA incentive and the cash incentive for new loans. How effective these measures are remains to be seen. But if these measures are woefully inadequate, they may not get a second chance to staunch the flow of capital leaving the platform.

I'm sort of baffled that the BRV hasn't been announced. The only real downside I see to putting this in place is that, rather than shore up confidence, announcing the creation of a BRV runs a risk of having the opposite effect. The very news of a BRV at this point in time may bring unwanted media attention. Spooked share holders may ask, "Why does LC need to do this? Are things worse than I realize?"
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 06, 2016, 01:29:17 PM
I'm sort of baffled that the BRV hasn't been announced.

It's an uncertainty-killer, for sure.  One would think that finance and econ guys would understand that uncertainty is the enemy...

But maybe some bean-counter-without-a-soul did some math and it turns out to cost them less to just offer a 1% bonus to retail.

"Hey, yeah, I'd like to actually, you know, own the stuff that I'm buying?  Can you guys do that or's that like asking for the moon?"

"Well, sir, I can't help you with that, but we are offering a one-time 1% bonus that could boost your returns, quite substantially..."

"Huh.  Well, I wanted to ... I read this stuff and it says... 1% you say?  Is that like on, just new money I put in, or, like, on every..."

(***and there goes the BRV, thank you for calling Comcast, where we both respect and appreciate you as our loyal customer***)
Title: Re: Is LendingClub Broken?
Post by: AnilG on June 06, 2016, 01:53:11 PM
It is just a matter of priority. There are limited management resources to dedicate to a project so LC management has to decide where to spend their limited resources. There are about 150,000 retail lenders, even if average account balance was $20,000, there is only $3 billion in provided capital by retail lenders. Assuming everyone lent to 36 month loans, it only leaves $1 billion in retail capital for loan originations every year. Pursuing several dozen institutional lenders that could each put in more than a billion a year is more cost-effective with better return on effort and better use of limited resources and thus focus of management.

I'm sort of baffled that the BRV hasn't been announced.

It's an uncertainty-killer, for sure.  One would think that finance and econ guys would understand that uncertainty is the enemy...

But maybe some bean-counter-without-a-soul did some math and it turns out to cost them less to just offer a 1% bonus to retail.

"Hey, yeah, I'd like to actually, you know, own the stuff that I'm buying?  Can you guys do that or's that like asking for the moon?"

"Well, sir, I can't help you with that, but we are offering a one-time 1% bonus that could boost your returns, quite substantially..."

"Huh.  Well, I wanted to ... I read this stuff and it says... 1% you say?  Is that like on, just new money I put in, or, like, on every..."

(***and there goes the BRV, thank you for calling Comcast, where we both respect and appreciate you as our loyal customer***)
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 06, 2016, 02:51:40 PM
The question I am not seeing answered is what happens to the thousands of borrowers who just say screw it and don't wait for 30 days for LendingClub to list their loan.  They are likely gone forever.  The most profitable borrowers for LendingClub are the repeat borrowers.

I don't think that's how the business works.  There are very few repeat borrowers. 

To obtain borrowers, LC has to advertise, work thru loan acquisition channels such as brokers, etc.  The can modulate the rate at which borrowers arrive by modulating the level of their advertising and other borrower acquisition activity.  When the sudden dip in demand occurred, there were borrowers in the input queue in greater numbers than demand could support, so a few were disappointed.  That's not excellent, but its not an ongoing problem, because LC can just advertise less, pay sources less, and the next week fewer will arrive, better matching demand.

Managing this supply vs demand is a normal everyday part of LC's operation.


Quote
Discover Personal Loans or SoFi, or any others with adequate capital, will end LendingClub if they don't quickly figure out how to fund their backlog of loans.

I don't think there is any backlog of loans at this point.
Title: Re: Is LendingClub Broken?
Post by: sigclem on June 06, 2016, 04:06:28 PM
Fred93 - thanks for the insight.

My first question on the forum was trying to figure out was in regards to a friends loan, that applied on May 20th, which I could not see on the platform.

I guess I should define backlog as in - loans where people have applied but the loan is not available on the retail platform.  As I look today, specifically at D rated 60 month loans, the application dates for those loans is May 8th.  The date is increasing by 1 day (in general) each day that passes.  So tomorrow I expect to see May 9th. 

I am defining this as a backlog of loans.  There are more D rated 60 day loans that have been applied for, then LendingClub is allowing to reach the platform.  Significantly more if you consider that the current dates are May 8th.

I could be missing something but it feels like supply exceeds demand significantly (in the 60 month loan department)
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 06, 2016, 04:24:32 PM
I guess I should define backlog as in - loans where people have applied but the loan is not available on the retail platform.

Difficult to figure that way, because you don't see all the loans.  LC splits 'em into "whole" vs "fractional" marketplaces, and you only see the fractional.  (I assume ... I don't actually know anything about you.)  Historically around 2/3 go to the whole marketplace, so that's a lot you don't see.  So just because you don't see a loan, doesn't mean its in a backlog.

There's a strange change that was made in the early part fo 2016 which confounds this.  In the past, loans would go to the whole loan marketplace, and then if they hadn't been purchased there in 24 hours they would fall to the fractional market.  They stopped doing that.  I don't know why.  I asked, but got some dumb answer.  I figure it was just "the guy" who does the allocation trying something different.  Seems like the wrong thing to me, because under this policy a loan might get stranded in the whole loan marketplace and not bought by anyone.  I haven't looked at the data recently to see if they kept this policy or have returned to the old policy. 

We used to be able to gain insight into things like this by processing the historical data files.  They contained fields showing application date, etc, so you could compute statistics on days-to-fund, etc.  At some point a few years ago LC got concerned that competitors could use such data for competitive purposes, so they redacted the dates so they all show the first day of the month.  Hideous, but that's what they did.


Quote
As I look today, specifically at D rated 60 month loans, the application dates for those loans is May 8th.  The date is increasing by 1 day (in general) each day that passes.

I'm thinkin' that you're seeing the last of the applications that came (in too much volume) just about the time RL's resignation hit the news.  The volume of new listings jumped down at that time (in response to reduced demand I presume), and is now slowly increasing again. 
Title: Re: Is LendingClub Broken?
Post by: AnilG on June 06, 2016, 04:35:05 PM
Supply exceeding demand is temporary phenomenon caused by May 9th event. Since then, LC has significantly scaled back borrower acquisition efforts and increased investor acquisition efforts. You can see this by just watching the banner ads on different p2p lending, finance, investing sites and blogs. As LC already had committed to borrowers through direct mail channels and paid for borrowers leads through referral channels, as long as borrowers are willing to wait, LC is listing their loans on the platform. Once this bulge of borrowers acquired from marketing efforts that were already underway by May 9th dissipates, we will see more balanced supply and demand. Few years ago the typical wait for borrowers was 7-10 days for loans to be funded and issued. I expect we are returning to those norms.

Fred93 - thanks for the insight.

My first question on the forum was trying to figure out was in regards to a friends loan, that applied on May 20th, which I could not see on the platform.

I guess I should define backlog as in - loans where people have applied but the loan is not available on the retail platform.  As I look today, specifically at D rated 60 month loans, the application dates for those loans is May 8th.  The date is increasing by 1 day (in general) each day that passes.  So tomorrow I expect to see May 9th. 

I am defining this as a backlog of loans.  There are more D rated 60 day loans that have been applied for, then LendingClub is allowing to reach the platform.  Significantly more if you consider that the current dates are May 8th.

I could be missing something but it feels like supply exceeds demand significantly (in the 60 month loan department)
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 06, 2016, 06:03:58 PM
Nonattender and others repeatedly remind me that in the meantime, management might go insane and take on huge debt for some stupid purpose.

Stupid like... levering up that cash to fund multiple billions of loans every Q?

Remember that the last innovation in this industry was the "hybrid" model.
("Nobody will buy all these loans!  Hey, I know; we'll just do it ourselves!")

More "hybrid" laundry baskets being (sort of, grudgingly) disclosed by other lending platforms...

http://www.cnbc.com/2016/06/06/on-deck-and-intuit-funding-setup-resembles-lendingclub.html

I feel bad for the guy whose job it is to now try to tell regulators that these really aren't 'banks'.

Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 06, 2016, 06:58:09 PM
More "hybrid" laundry baskets being (sort of, grudgingly) disclosed by other lending platforms...
http://www.cnbc.com/2016/06/06/on-deck-and-intuit-funding-setup-resembles-lendingclub.html

Not clear.

From Ondeck's 10Q...
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In the second quarter of 2015, we acquired a 55%  interest in On Deck Capital Australia PTY LTD ("OnDeck Australia") with the remaining 45% owned by non-affiliated parties. In the third quarter of 2015, we acquired a 67% interest in Lancelot QBFOD LLC with the remaining 33% owned by Intuit Inc. ("Intuit"). We entered into the transaction involving OnDeck Australia with local partners to facilitate providing financing products to small businesses in Australia. We and Intuit jointly invested in Lancelot QBFOD LLC to provide integrated access to line of credit financing to Intuit customers utilizing Intuit's customer data. We consolidate the financial position and results of operations of OnDeck Australia and Lancelot QBFOD LLC. The noncontrolling interest, which is presented as a separate component of our consolidated equity, represents the minority owners' proportionate share of the equity of the jointly owned entities. The noncontrolling interest is adjusted for the minority owners' share of the earnings, losses, investments and distribution.

So when they say they "jointly invested in Lancelot" does that mean they own part of a venture that makes loans using money from some 3rd party source, or do they mean that their own money funds the loans?  This makes a huge difference to me. 

The article writer and you are presuming it is the later.   

Also they don't tell us the amount of money involved.  That matters a lot too.

A little more disclosure would help.

By the way, I agree with you about part of this issue.  The lending industry, and the hedge funds guys, and probably banks, have all manner of (... I'm searching for a polite word...) complexities under the covers that us normal folks don't see and don't normally understand.  I'm learning a lot more about these things lately, not only because of things going on at LC, but also in a small lender I invested in awhile back.


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I feel bad for the guy whose job it is to now try to tell regulators that these really aren't 'banks'.

For me, banks hold deposits, and are government-insured, so must follow rules from their insurer (the government).  I do realize there are a wide ranging set of opinions, including issues such as systemic risk and "too big to fail" and whatnot.  But for me, the answer is pretty simple.  If the government had kept the rules simple, there wouldn't be any TBTF banks.  I'm for keeping the rules simple (simpler) now.  Deposits = bank regulation.
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 06, 2016, 08:50:21 PM
A little more disclosure would help.

A lot more.  And if this level of disclosure ("an arrangement exists, characteristicless and of unknown magnitude/structure") is what the public companies feel they can reasonably disclose, one has to wonder what some of the private companies are doing & not disclosing.

Quote
By the way, I agree with you about part of this issue.  The lending industry, and the hedge funds guys, and probably banks, have all manner of (... I'm searching for a polite word...) complexities under the covers that us normal folks don't see and don't normally understand.  I'm learning a lot more about these things lately, not only because of things going on at LC, but also in a small lender I invested in awhile back.

The oldest line on that is "the art of banking is to conceal risk"...  If this industry is really 'new', a lot more transparency could do.

Quote
For me, banks hold deposits, and are government-insured, so must follow rules from their insurer (the government).  I do realize there are a wide ranging set of opinions, including issues such as systemic risk and "too big to fail" and whatnot.  But for me, the answer is pretty simple.  If the government had kept the rules simple, there wouldn't be any TBTF banks.  I'm for keeping the rules simple (simpler) now.  Deposits = bank regulation.

Yeah, the non-deposit-taking is the sort of argument of last refuge.  That goes out the window when you find out that xyz entities that are buying the loans are levering up.  How do they do that?  Through a deposit-taking, FDIC-regulated bank.  It's indirect & abstracted out by a degree or two, but the effective reality is the same (maybe worse, as it concentrates the risk into larger, discrete entities rather than spreading it out - they're kind of effectively stealing the banks' diversification ability/functions, too, in a way, if you think about it from a regulatory/bank angle).  LC, in the old days, used to have a line with SIVB - Renaud referred to that as "priming the pump", back then - which was a point of contention until they got enough buyers to fund all of the loans (or, at least, said that they did) and then they became a "marketplace"...  Everyone else became one, too - at least in PR.  Now I don't know - and I also suspect that most people running these entities (and the various agencies who don't know if they're supposed to be regulating them) don't know either - what to call them, how to treat them, etc...  A coupla months ago there was the "Marketplace Lending Association" to distinguish between "good" (less-risky) platforms that had actually had marketplaces / didn't hold credit risk and "bad" (risky) ones which didn't have marketplaces / did hold credit risk...  Now, who knows what the hell is going on with any of them, public or private...

Apparently, not even the people running the largest of them know what business it is that they're in or have any idea what to call it...

I think the only thing upon which they can all probably agree is what they definitely don't want to be called - but certainly do look like.

One of the morals of the story may wind up being:  If you don't want to be (or be called) a "bank", do not go hire a bunch of bankers.

Like anyone else in any other profession, they have a tendency to want to do what they are used to doing --- and it's nothing "new".


ETA:  I might owe Cagney/SoFi another look...  While they're doing the captive fund thing, too, and their operations/structure looks a bit like it's too bank-y, their marketing/messaging, while vague, at least seems to be grappling with these conceptual issues - before anyone else.  They might be halfway to some sort of decent innovation, if they don't tangle themselves up in financial engineeering... I mean, they are at least trying to get their customers laid - instead of screwing them.  That's certainly not bank-like. ;)
Title: Re: Is LendingClub Broken?
Post by: Rob L on June 06, 2016, 09:26:22 PM
Ya gotta love him. What's this LC stuff anyway; Money for Nothing? When all is said and done we're all "Brothers in Arms"; no?
http://www.markknopfler.com/ (http://www.markknopfler.com/)
Title: Re: Is LendingClub Broken?
Post by: SLCPaladin on June 06, 2016, 11:43:06 PM
Out of curiosity, how would you react if LC did decide to start using some of their balance sheet to buy its own loans? Would this be a good or a bad thing? As for myself, I can't decide. Part of me wants LC to buy a portion of their own loans and embrace the whole hybrid approach (you know, the whole idea of "being willing to eat your own dog food"). Peter alluded to this in his latest post on Lend Academy, although he cited different reasons for his embrace of a hybrid model.

If LC bought some portion of their loans, it would signal to me that - at least in theory - they would pay more attention to underwriting, or at the very least they would adapt more when they noticed a deterioration of credit quality. It might also make me more of a willing partner in loans.

On the other hand, if LC did start buying loans en masse, either out of necessity or change in strategy, it could lead to cherry-picking or some other form preferential treatment for LC's notes. For this reason, were LC ever to begin buying notes, I would want them to do so in agnostic sort of way, say X% of all fractional loans.

I can't really decide if this is something that I would like to see as a retail investor, but it was just something I was thinking about and would be curious to hear from others.
Title: Re: Is LendingClub Broken?
Post by: jennrod12 on June 07, 2016, 12:54:49 AM
If LC starts buying loans en masse, that will make quick work of their cash reserves - hence the worries about bankruptcy.

Jenn
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 07, 2016, 01:25:45 AM
If LC bought some portion of their loans, it would signal to me that - at least in theory - they would pay more attention to underwriting, or at the very least they would adapt more when they noticed a deterioration of credit quality. It might also make me more of a willing partner in loans.

What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.
Title: Re: Is LendingClub Broken?
Post by: fliphusker on June 07, 2016, 02:00:47 AM
If LC bought some portion of their loans, it would signal to me that - at least in theory - they would pay more attention to underwriting, or at the very least they would adapt more when they noticed a deterioration of credit quality. It might also make me more of a willing partner in loans.

What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.
For me, that would have the opposite effect.  That note is going unfunded for a reason.  I do not want the undrafted free agent being a starter for my team.  So hope that NFL analogy carries over. 
Title: Re: Is LendingClub Broken?
Post by: Fred93 on June 07, 2016, 02:38:40 AM
What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.

This seems strange to me.  I equate "good underwriting" with an outcome where chargeoffs occur at about the expected rate.  Your scheme would have LC buy loans when they haven't managed the supply/demand balance perfectly.  Managing this balance is one of their jobs sure, but it isn't at all the same as underwriting.
Title: Re: Is LendingClub Broken?
Post by: dompazz on June 07, 2016, 08:25:28 AM
What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.

This seems strange to me.  I equate "good underwriting" with an outcome where chargeoffs occur at about the expected rate.  Your scheme would have LC buy loans when they haven't managed the supply/demand balance perfectly.  Managing this balance is one of their jobs sure, but it isn't at all the same as underwriting.
Exactly.  When LC starts buying their own loans, they now have an incentive to manage new loans towards their desired risk preference, not ours.
Title: Re: Is LendingClub Broken?
Post by: Rob L on June 07, 2016, 09:29:30 AM
....  I do not want the undrafted free agent being a starter for my team.  So hope that NFL analogy carries over.

Unless his name is Malcolm Butler.
Title: Re: Is LendingClub Broken?
Post by: fliphusker on June 07, 2016, 09:49:20 AM
....  I do not want the undrafted free agent being a starter for my team.  So hope that NFL analogy carries over.

Unless his name is Malcolm Butler.
1 INT in the SB does not make a superstar.  Butler started only one game the year they won the SB, for a reason. 
Title: Re: Is LendingClub Broken?
Post by: SLCPaladin on June 07, 2016, 10:57:23 AM
If LC starts buying loans en masse, that will make quick work of their cash reserves - hence the worries about bankruptcy.

Jenn

That is a good point. In the short run, I certainly don't think LC should deploy their cash to buy loans unless they have exhausted all their funding avenues and concluded that to allow loans to go unfunded would be riskier than to deploy their own cash. We are witnessing the value of LC having a big cash buffer during turbulent times. But let's say that they were to buy loans (at some future, post-crisis date), it's not as if the cash would be evaporating from their balance sheet like it were an ill-fated marketing initiative. LC would have an income-producing asset.

In the long-run, and once this storm has passed, it could prove to be a superior way to generate revenue. Granted, this would represent a shift in LC's model and it would may necessitate a leaner corporate structure and conscientiousness regarding expenses at every level. It would certainly change the growth trajectory from targeting % instead of multiples. Personally, I RL recognized this and is part of the reason he was orchestrating the whole Cirrix shenanigan. The way it all went down was not good (an understatement, to be sure), but I think there is something to be said about LC's revenue not being solely dependent on originations and servicing revenue.
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 07, 2016, 11:28:40 AM
What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.

This seems strange to me.  I equate "good underwriting" with an outcome where chargeoffs occur at about the expected rate.  Your scheme would have LC buy loans when they haven't managed the supply/demand balance perfectly.  Managing this balance is one of their jobs sure, but it isn't at all the same as underwriting.

They shouldn't be managing the balance within the bucket. The buckets should contain notes with the same substantial chargeoff risk. They aren't (I don't think) intentionally putting a few gems down in E to balance up for notes that they know should have been G. It might well be that people's filters can find the better notes within a bucket, but ideally (my opinion) for LC to be attractive to a broad investor base, there should be NO need to filter at all.

So if LC committed to buying the rest of all loans that investors don't fully fund, that is a pretty big statement from LC saying that all loans within a bucket are substantially equal.
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 07, 2016, 11:32:47 AM
Exactly.  When LC starts buying their own loans, they now have an incentive to manage new loans towards their desired risk preference, not ours.

I think investors broadly would prefer that notes be consistent within the grades so that extra filtering is unnecessary. I realize that many (an likely a large majority) of people on this forum would rather retain the ability to find the best notes within a grade.
Title: Re: Is LendingClub Broken?
Post by: SLCPaladin on June 07, 2016, 11:48:04 AM
Quote
So if LC committed to buying the rest of all loans that investors don't fully fund, that is a pretty big statement from LC saying that all loans within a bucket are substantially equal.

Agreed. I remember listening to a podcast that Peter had with RL a few years ago where he discussed the issue of underwriting and individuals using filter data to get better returns ("secret sauce"). RL countered that they (LC) had all the data and that overtime, opportunities for filtering and producing better returns would (in theory) disappear because LC could analyze the same data and take this into account in their underwriting. In other words, the possibility of "beating the average" should disappear. This has certainly proven true with the whole active vs. passive strategy for stocks and bonds. Buffett has been very vocal about how passive indexing has consistently outperformed the so-called experts ("Hedge funds are good for Wall Street, bad for investors").

The idea of adverse selection has always been one of my dilemmas when investing at LC as a retail investor. With the myriad professional services and bots that pick notes, there is always a lingering feeling that I might be getting stuck with the sub-par notes because I don't have the time, nor the technical expertise to write algorithms to skim the creme de la creme. The idea that I may be getting stuck with sup-par loans because I don't have the right filter makes me leery of investing on the platform. I think it discourages me from actually deploying more cash. If I knew that LC was willing to pony up their own cash and buy notes, that would signal to me that I could be confident in buying notes, even if I wasn't willing to analyze spreadsheets upon spreadsheets trying to concoct some "secret sauce."
Title: Re: Is LendingClub Broken?
Post by: LonghornSF on June 07, 2016, 01:40:24 PM
LC buying notes would be a bad idea since it would increase LC's risk, which would further undermine retail investors' confidence, which would increase LC's risk, on and on. They really need to implement a BRV first before putting their own capital to work buying loans.
Title: Re: Is LendingClub Broken?
Post by: dompazz on June 07, 2016, 01:55:20 PM
Exactly.  When LC starts buying their own loans, they now have an incentive to manage new loans towards their desired risk preference, not ours.

I think investors broadly would prefer that notes be consistent within the grades so that extra filtering is unnecessary. I realize that many (an likely a large majority) of people on this forum would rather retain the ability to find the best notes within a grade.
Not what I meant, in anyway. 

I agree with Fred93, underwriting should strive to have each loan rating have an expected loss rate.  A1 loses less than A2, etc.  That's the job of underwriting, find the the appropriate risk bucket and price it accordingly.  I think that is your point as well.  Cool, we all agree.

The marketing department's job is to find borrowers.  They need to balance supply of loans in each underwriting bucket with investor demand.  If there is a supply / demand mismatch, then marketing can attempt to find supply to meet it or let underwriting know so that they can adjust the price of risk.

LC is operating as a market place.  They are making a market in personal loans, matching buyers (big and small) and sellers (borrowers in this case), and helping to find the appropriate price.

When LC starts to buy their own loans, the job of the marketing department begins to change.  They now are looking for loans to satisfy their internal demand.  It creates an incentive to meet that internal demand over investor demand.  It creates an incentive to skew the price of risk in their favor.  It makes the marketplace less efficient.  That is not good for me and it is not good for the borrower. 
Title: Re: Is LendingClub Broken?
Post by: bobeubanks on June 07, 2016, 02:28:17 PM
When LC starts to buy their own loans, the job of the marketing department begins to change.  They now are looking for loans to satisfy their internal demand.  It creates an incentive to meet that internal demand over investor demand.  It creates an incentive to skew the price of risk in their favor.  It makes the marketplace less efficient.  That is not good for me and it is not good for the borrower.

I think we mostly agree. But my proposal wasn't that LC would be looking for loans that meet an internal demand. It would be LC saying, "we are confident in our pricing and will buy these if and ONLY if no one else does." It could certainly morph into a whole-scale change in the LC business model, and if that happened, I agree it would be bad for investors.
Title: Re: Is LendingClub Broken?
Post by: mchu168 on June 07, 2016, 03:43:54 PM
LC should invest in loans as long as the returns exceed their cost of capital.  Unfortunately, I think their cost of capital is way higher than 7-8%, so I would not advocate this path.

If buying loans is management's idea of their best alternative to deal with loans going unfunded, then they should put themselves on the block and hope that JPM takes them out. It's as simple as that imo.
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 07, 2016, 05:18:11 PM
If buying loans is management's idea of their best alternative to deal with loans going unfunded, then they should put themselves on the block and hope that JPM takes them out. It's as simple as that imo.

I saw Jamie Dimon a couple of days ago after he'd gotten back from a week or so in California.  I don't think he wants them.  He's a cool customer, though.  You never know.  But it'd be pretty shocking to see him pay a multiple of their market cap when he could clone them, like everyone else with a bank charter seems to be doing lately, for a lot less money and with a whole hell of a lot less of a legal mess...
Title: Re: Is LendingClub Broken?
Post by: sommers on June 08, 2016, 07:01:17 AM
Exactly.  When LC starts buying their own loans, they now have an incentive to manage new loans towards their desired risk preference, not ours.

I think investors broadly would prefer that notes be consistent within the grades so that extra filtering is unnecessary. I realize that many (an likely a large majority) of people on this forum would rather retain the ability to find the best notes within a grade.
Not what I meant, in anyway. 

I agree with Fred93, underwriting should strive to have each loan rating have an expected loss rate.  A1 loses less than A2, etc.  That's the job of underwriting, find the the appropriate risk bucket and price it accordingly.  I think that is your point as well.  Cool, we all agree.

The marketing department's job is to find borrowers.  They need to balance supply of loans in each underwriting bucket with investor demand.  If there is a supply / demand mismatch, then marketing can attempt to find supply to meet it or let underwriting know so that they can adjust the price of risk.

LC is operating as a market place.  They are making a market in personal loans, matching buyers (big and small) and sellers (borrowers in this case), and helping to find the appropriate price.

When LC starts to buy their own loans, the job of the marketing department begins to change.  They now are looking for loans to satisfy their internal demand.  It creates an incentive to meet that internal demand over investor demand.  It creates an incentive to skew the price of risk in their favor.  It makes the marketplace less efficient.  That is not good for me and it is not good for the borrower.
EXACTLY --it has the potential/probability to put L C's interest at odds with their investors (they take the cream).  My understanding of this business is that L C was to serve as the intermediary / broker--PERIOD. 
I hope that in the interest of growth they do NOT morph into a lender (in an effort to maintain market share in the P2P space). 
Title: Re: Is LendingClub Broken?
Post by: newstreet on June 08, 2016, 09:27:40 AM
Nonattender and others repeatedly remind me that in the meantime, management might go insane and take on huge debt for some stupid purpose.

Stupid like... levering up that cash to fund multiple billions of loans every Q?

Remember that the last innovation in this industry was the "hybrid" model.
("Nobody will buy all these loans!  Hey, I know; we'll just do it ourselves!")

That reminds me of the story about how Archimedes sat in his bathtub, pondering his problem, then took an irregularly shaped vessel, dipped it into the water, filled it, drank from it, and then noticed that the water level in the tub had gone up by exactly the volume of...

Oh, wait... That's not how the story goes.  I'm always getting confused. ;)

BTW, despite my confusion, I am working up a new course that's entitled:

'Mathematical Ethics for The Engineering-Minded (and Likewise Confused)'

The first day, I'm going to break the class of 250 into 60 groups of 5 and call each group of 5 a "board of directors".  But I've made a mistake, you say!  There are 50 people missing!  I've done the math wrong!  No, no... I'm not that confused; bear with me.  I will tell the boards to select a Chairman.  I don't care, vote for the guy with the reddest jacket. Then, I will instruct each board that one new member will be joining their board and that, I, as the sole stockholder of the company, expect that they will just continue on about business as usual and represent my fiduciary interests just as justly and fairly as they had before.  This is where those 50 "extra" people come in, and each one is a student loan officer from Sallie Mae who holds the very fate and continued attendance and eventual graduation of every other student board member, including all of those who were elected "Chairmen", in their hands, or, to put it in the vernacular, "has them in their pocket", so to speak...  Yes, you're right, I can fail the students who don't continue to act as my fiduciaries - but, while I can give them an F in one class, the student loan officers can cut off the dough and send them home (mortgaged as it may be) - no yachting for you, young man!  Back to your dorm room, pack up - and turn in those blucher mocs!  It's gonna be fun!  Let the games begin!

That's as far as I've gotten.  Can you finish it for me and let me know how it turns out?  I'm interested in whether or not the members to whom other members owe money are perhaps afforded some strange sort of undue influence or deference or special treatment of any kind.  It's gonna be hard to measure for, I can tell you that.  Especially with no clear sets of rules / no centuries of precedent about how to behave.  I mean, there are NO real world scenarios like this, in all of recorded history, and there's certainly no such thing as an entire field called "politics", despite the crap that fills up my news feed and TV screen --- it's just a thought experiment, purely abstract!

Why, just the other day, I saw some engineering-billionaire-type parrot what some Oxford philosophy dope pissed in his ear about how the whole world is just a video game!  So, obviously, I have no point.

*bell rings*

Dis-missed.


"Vote for the guy with the reddest jacket"......dude!
Title: Re: Is LendingClub Broken?
Post by: nonattender on June 08, 2016, 12:17:15 PM
"Vote for the guy with the reddest jacket"......dude!

Yeah, I'm getting bored, so, it gets more colorful...
Title: Re: Is LendingClub Broken?
Post by: SLCPaladin on June 08, 2016, 01:19:50 PM
You've convinced me that, on balance, I don't think it would a good idea for LC to buy loans from the platform. First, I don't think would be prudent from a risk management perspective. Second, I think it could undermine confidence from the investors, as they would come to see themselves in competition with LC. It would definitely set up potential conflicts of interest. It would be analogous to AirBnB purchasing up houses to rent them out on their platform. This would put them in direct competition with other market participants.

The only way that I think it could work is if LC's loan buying followed strict, pre-determined rules that were transparent and readily available to all market participants. And only in a crisis. To my knowledge, LC doesn't have a lender of last resort, other than their balance sheet. As was suggested, if LC were to buy unfunded loans, I would prefer that they only buy unfunded loans on the fractional platform. Better though to manage supply and demand as Fred93 has aptly pointed out.
Title: Re: Is LendingClub Broken?
Post by: P2PFact on June 08, 2016, 07:18:32 PM
Right now lc web site is literally broken...



We're Sorry

The Lending Club website is temporarily unavailable.

Thanks for your patience, we'll be back online soon.
Copyright 2006-2015. All rights reserved.
Lending Club, 71 Stevenson, Suite 300, San Francisco, CA 94105, USA
Title: Is LendingClub Broken?
Post by: rawraw on June 12, 2016, 06:55:26 AM
I think investing in LC has to be either a m&a story or a redesign of the business model. These both are hard to guage without management meetings with LC

Sent from my SAMSUNG-SM-G935A using Tapatalk

Title: Re: Is LendingClub Broken?
Post by: nmay2k on June 14, 2016, 11:09:36 PM
As I've tried to explain here before, I don't look at the earnings report for Jack in the Box before I order a burger.  I've decided that it's a good product, and I consume it.

I understand what you are trying to say but that is a really awful analogy. Your relationship with Jack in the Box ends once you eat the burger. Your relationship when you buy a note from LC might be as long as 5 years.

Ok, so what about buying a SUV with a 5 year loan? Do you check Ford's stock performance before you buy?
Title: Re: Is LendingClub Broken?
Post by: nmay2k on June 14, 2016, 11:20:34 PM
The question I am not seeing answered is what happens to the thousands of borrowers who just say screw it and don't wait for 30 days for LendingClub to list their loan. 

I think the next 30 days are make or break for LendingClub, and for those of you who have had success earning a return on your investment buying notes.  Discover Personal Loans or SoFi, or any others with adequate capital, will end LendingClub if they don't quickly figure out how to fund their backlog of loans.

It is like buying a burger or a car. If you like Mercedes you will buy one and that Subaru because of the stock price. I am not switching to these other platforms as an investor. Didn't like prosper, or SoFi. There is some brand loyalty here. Now Proper has laid off and I do not think they are doing much better since the LC debacle. When you are the leader, you tend to stay the leader in good and bad times. Sure they are going to feel the pain from the 5/9 event. But like anything else, they will learn from it and be stronger for it. It's a setback for sure like the VW emissions issue but they are probably not going to kill them. 
Title: Re: Is LendingClub Broken?
Post by: nmay2k on June 14, 2016, 11:31:54 PM
What would really signal confidence in their underwriting would be for them to buy the remainder of any loan not funded within a certain time frame.

This seems strange to me.  I equate "good underwriting" with an outcome where chargeoffs occur at about the expected rate.  Your scheme would have LC buy loans when they haven't managed the supply/demand balance perfectly.  Managing this balance is one of their jobs sure, but it isn't at all the same as underwriting.
Exactly.  When LC starts buying their own loans, they now have an incentive to manage new loans towards their desired risk preference, not ours.

LC buying loans is bad for the retail investor. They should stick to the p2p only. Once they buy loans, they will buy those loans they think they can sell rather than loans we want. This will be heavily weighted to the D loans. Once you have a large amount of D loans, you want to get rid of them pronto. This means you will cater to the institutional investor who can quickly buy your inventory of risky loans. So if they buy loans they might as well get out of p2p business.