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Stanley Bing at CNN Money blogged about the subprime lending crisis and the falling dollar in his article “Who’s to blame for the credit crisis, the housing slump, the weak dollar, and the fear of recession? It’s a guy named Leonard.”

Yes, Bing, you have me interested. Who the heck is Leonard and why is he responsible? Of course, I am expecting a tongue in check answer from you, but let’s find out… Who is this guy Leonard?

It’s clear this whole subprime mess is much worse than anybody anticipated. Things are crashing. Stuff is burning. The best and brightest minds are at work on how to solve this crisis before it sinks the global economy into a hopeless morass that will plague us all for decades. No, wait. They’re the ones who caused it… I believe it is our duty… to pinpoint blame.

Bing goes on to “interview” the former head of a bank, an investment bank board member and a quant who all send him on the search for Leonard Flanken. Bing happens by Flanken Read the rest of this entry »

Lending money to someone can be a difficult decision. The only two items that should come to mind are the interest rate and likelihood of repayment. Income should be factored into the probability of repayment, but there is more at play than is visible in a profile on Lending Club or Prosper. Take the example of Britney Spears’ lavish spending. Her monthly income is $737K but she has managed to save nothing and spends more than $100K per month on gifts and travel. Britney has a high mortgage payment, but would have a reasonable debt to income ratio. Risk is a much more complex decision than simply the Debt to Income ratio Read the rest of this entry »

According to Club Lending there are several types of risks in lending using Lending Club services. The risks listed are different from the traditional financial investment risks which are foundational enough to deserve to be addressed in a separate post. Below (in the quote sections) is the risk information provided by Lending Club:

Participating in any financial transaction carries elements of risk, and online person-to-person lending is no exception. We strive to create an easy, safe and private environment for people to bypass the banks and borrow or lend money at better rates. Below, we address the main types of risks associated with online financial transactions in general, and explain the measures we have taken to reduce these risks.

I agree with that statement because every investment carries general economic condition risk and inflation risk. However, other investments, such as money market savings or US government bonds, do not carry the same risk as participating in a P2P lending network. P2P lending lenders must carry Read the rest of this entry »