I'm top quoting NA because this is a load of bullshit.
I guess nonattender never heard of NINJA loans.
No Income
No Job
or Assets
And Citi bought asstons of them when they purchased Countrywide, and Angelo Mozillo dealt heavily in liar loans. If Citi just sent over a half-witted accountant to review the paper Countrywide was peddling they would have seen it. The thing is C already knew they were buying a turd when they bought CFC but CFC also wrote a bunch of VIP loans to just about everybody on the Senate Banking Committee so they figured something good would eventually come out of it a year or so after the crisis settled.
Their fatal mistake was not knowing how stinky the turd was at at the time of sale, CFC hadn't yet gotten a lot of turds off of its books and sold off to the i-bankers to repackage into CDOs, so Countrywide was eating the losses directly instead of transferring the assets over for some other fall guy to eat (i.e. your mom's pension fund). I guess Vikram or his hired bean counters weren't the smartest people in the room.
At least with Chris Larsen I'll give him more slack for being gullible in his own marketing... at least for the first year Prosper existed.
(I was going to make this reply in another thread, but I think it fits better in this one.)
You guys toss around all these silly numbers about X% of loans have defaulted, but that's an incredibly dopey (in its ability to mislead) metric to look at, given that every payment is money.
How about the fact that 23.19% of every dollar lent on Prosper has disappeared as a net charge-off -- that's $44.4 million dollars. Is that a "silly number" too? Add in another 2.02% that is 1+ months late, and more than 1 out of every 4 dollars ever lent is gone.
Bank of America CC chargeoffs were at ~15% (and trending higher) the last time I looked, which was
about eight months ago, CitiGroup was ~11% (also trending higher), and delinquency rates, industry-
wide (similar to the 1+ months late you refer to), were running at around 6%, at the end of the year.
Moody's is projecting that these trends will continue (read: get worse), all the way into middle 2010.
(I notice that you watch unemployment figures closely, do you think those might be a macro-signal?)
The banks have professional analysts and monstrously tweaked credit decisioning algorithms to make
their lending decisions for them (not individuals), and were doing only slightly better than us "people",
who, relatively, started into the lending business yesterday (and in a RECESSION), and, also, lenders
here, in many cases, chased after the high rates and bid (starry eyed), on loans of low credit quality,
which were clearly marked as such, but which are now not allowed to even list since lenders couldn't
control themselves (that sound familiar, macro?) and would often ignore risk, in pursuit of high return.
I know I certainly did, at times - I clearly remember lending $80 to "evildick66" an autofund at 29%...
So, I guess the takeaway is that "greed", as a contagion, was not limited to banks and/or wall street,
and that has impacted the bottom lines found at many such firms, just as it has w/P2P lender returns,
which is why you get things like new regulations for banks, and MUCH tighter credit qualifications @ P.
Though if you want to play the "big-sounding-bad-number" game, then the scale which "professionals"
have been working at, lately, offers "different" dollar-denominated loss numbers, since 11% of citibank
revolvings will lead you not with a puny sounding "$44.4 million" but with numbers more like "$X Billion".
(The same logic applies if you look at it in terms of "number of loans" that banks will be charging off...)
(If you assume that some % of borrowers will default, which is truth, the # of loans charged off rises.)
-t
