Author Topic: Is LendingClub Broken?  (Read 13387 times)

newstreet

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Re: Is LendingClub Broken?
« Reply #45 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!

nonattender

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Re: Is LendingClub Broken?
« Reply #46 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...
A little nonsense now and then is relished by the wisest men.

SLCPaladin

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Re: Is LendingClub Broken?
« Reply #47 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.

P2PFact

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Re: Is LendingClub Broken?
« Reply #48 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

rawraw

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Is LendingClub Broken?
« Reply #49 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

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nmay2k

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Re: Is LendingClub Broken?
« Reply #50 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?

nmay2k

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Re: Is LendingClub Broken?
« Reply #51 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. 

nmay2k

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Re: Is LendingClub Broken?
« Reply #52 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.