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[112233]

"we need to revolutionize the way banking is done"

I agree. if prosper and the recent financial collapse have taught me anything, its that we need as much information as possible and that we actually have to stop and examine it instead of being lazy and using a made up number (or in prosper's case, a letter grade). Unfortunately for CL, this "revolution" doesnt mix well with prosper and other p2p companies.

[Nora_Lenderbee]

Follow-up:
I still think it's fucked up that Prosper declares "SUCCESS!!!" just because a loan originated and the borrower got the funds dispensed.

Indeed.  You've hit on one of their most basic attitude problems.

It's consistent with the attitude that the borrower is the customer, while the lenders are . . . not customers.

[Tokyo Joe]

http://blog.prosper.com/2009/08/18/the-financial-anatomy-of-a-porn-star/

http://www.facebook.com/home.php?filter=lf#/ProsperPink?v=wall&ref=search

OK'd for lobby

Prosper is obviously confusing "transparent" with "invisible" again.

[christoofar215]

"we need to revolutionize the way banking is done"

I agree. if prosper and the recent financial collapse have taught me anything, its that we need as much information as possible and that we actually have to stop and examine it instead of being lazy and using a made up number (or in prosper's case, a letter grade). Unfortunately for CL, this "revolution" doesnt mix well with prosper and other p2p companies.

Automated risk management just does not work.


I worked at USAA back before the whole field of "Risk Management" even formed, and then in the early stages of it (late 90s) the early adopters (insurance companies, like USAA) where gaga with "OMG!   We can use these models to automate what these really expensive actuaries do.   After all, all they do for us is manage a rate file the computer uses to calculate premiums, right?"


During that same year a huge tornado wiped out a few square miles near downtown Oklahoma City, then there was a bunch of unexpected east coast hurricanes soon after that and P&C took a big hit.   The models consider an insured's credit score, but does it automatically pinpoint that during your commute you drive through several 100-year floodplains and you have a nasty habit of driving around the barricades and getting yourself into a pickle?   No...............


The whole idea that all you need is a credit report to determine if someone will pay you back has been proven TOTALLY WRONG by this major economic collapse---which was based on lending products tuned for automated risk management.    "We will price the product based on the risk this person presents to the business... and that is all you need."


Where were the risk management experts when mega-old institutions were backstopping bonds sitting on top of big-ass mortgage loans where the borrowers didn't even bother to read the paperwork, much less show the bank where they were going to get the money to repay the loan 2-5 years out?   (WGAF about 30 years out... we're just talking about repaying the first couple years worth of payments which didn't even happen on a lot of these loans).



Prosper is no different, except Prosper will get no bailout from Obama.   And borrowers can get relief through bankruptcy.  Lenders get nothing for their trouble, time and expense.

[christoofar215]

The SEC doesn't regulate statements about sassiness.

 

[nonattender]

Automated risk management just does not work.

If only there were some way to fix it, replace it, or to try to do both at the same time on a massive scale,
including giving a massive tweak to the incentive (say ownership?) for actually doing a good job of pricing.

Hmm...

-t