I couldn't comment on the dailyfinance site, so I'll post it here... Thanks for linking the article.
Alex Salkever,
I find your comparison between Prosper and the banking crisis to be unsupported in your article. Specifically, the social ties that Prosper _did_ manage to allow -- specific knowledge of individual borrowers and their circumstances prior to investment -- was precisely that which you decry for not being present in mortgage-backed bonds. This is not to say that there aren't comparisons to be drawn between the personal crisis of your lending portfolio and the greater banking crisis. The first major comparison is that, contrary to what we were told when we were lending, these were largely stated-income loans. Prosper did little if anything to verify information outside of a credit report. While I cannot prove it (due to the restrictions you mention) I suspect that there was fairly significant fraud in borrower listings. The second major similarity I saw was greed overshadowing common sense. When you compare the listings on Prosper to those on Kiva, You neglected to compare the interest rates charged. I fail to see how anyone can consider charging 30% (or even more!) on a loan to be "helping [their] fellow man" and yet in the higher-risk areas, these rates were common. I wonder, had lower rates been charged, whether fewer of these loans would have ended up in default. When bankers chased after impossible returns, it lead to the banking collapse. When lenders on Prosper did the same, inevitably they saw their anticipated windfall evaporate.