Lending Club plans layoffs, discloses loans to former CEO and family members
latimes.comAs someone who built the most popular iOS / Android app for Lending Club investors [0], I can tell you that since the CEO resigned
- New users have fallen by 50% per month, although of course users to my app are a fraction of total new users, but you can extrapolate
- Total net, users are withdrawing about as much money as users are putting in
- The amount of loans purchased has dropped significantly
So without a doubt, retail investors know what's going on and fear for the safety of their investments.
[0] https://itunes.apple.com/us/app/lendingclub-order/id10461141...
If I may ask, how well is the app doing? You have good revenues?
Off topic question: would an app developer trading on this information be engaged in insider trading?
Yes, ever since this news came out I have been gradually winding down my Lending Club investments.
Do you think your users know you are doing analytics on their transactions?
Can you name a major successful mobile application that you think _doesn't_ use analytics?
I dunno, wouldn't the better question be if I am at all comfortable using a third party app for financial transactions? Because I'm not. But I'm not super concerned about me, I'm curious how the thinking goes when someone decides to collect information about the loans that other people are taking out.
Maybe they are pretty sure that users understand it, the app could have a strong disclosure for all I know.
There is a rich ecosystem of LC apps and services because of LC's open API. The only thing the API's allow you to do is invest in loans and transfer money in and out of your account. I would be quite shocked if any service (such as lending robot) is able to operate without recording any transactions occurring. I hope users wouldn't be offended by the (very general) information revealed above, but I suppose some could.
Presumably LC itself is recording the transactions? It's obvious that apps would want to do so as well, but that certainly isn't a necessity. An app could remember a transaction long enough to ensure that it had posted, and then forget about it forever.
Can you suggest any reasonable concerns with what the app author has disclosed?
Primarily what I allude to in my initial comment, it indicates that they are in possession of specific user information. As I also point out above, I have no idea how informed the users would be about that.
I guess that might not meet all definitions of reasonable concerns.
Now that I think of it I would almost find it scary if they didn't.
All fine with me as long as they are aggregated statistics for a reasonable sized population of users.
The latest disclosures Tuesday, uncovered by a company probe, found that in the last few weeks of December 2009, Laplanche and three relatives took out 32 loans for a total of $722,800. All but three of those loans were repaid in full over the next two months, implying they were taken out to artificially goose Lending Club’s loan origination numbers.
If true, would that be considered fraud?
Nah, that's 'growth hacking' /s.
Really, yes obviously that's fraud but apparently it's perfectly normal as long as you don't get caught.
Artificially inflating the numbers whilst shopping for investments is definitely not acceptable. Pumping money around is an old trick to inflate the visible size of a company, some of these schemes are surprisingly hard to detect (the one here definitely isn't).
I'm somewhat surprised that there was no oversight in place that would have stopped this, that's serious money.
Yep. Self-dealing is always an enormous red flag for fraud and other shadiness, in financial businesses especially.
I feel like almost every startup that "made it" used dark-hat growth hacking tactics to pad their numbers. But the other companies were typically in the consumer internet space. I would expect some additional rules to exist for a highly regulated market like Finance.
There is some truth to Gilfoyle in the season finale of Silicon Valley when he says: "I think I finally respect you as a CEO."
Whether it is or not it doesn't have any relevance to the current state of the company.
They either lacked the internal controls or the morals to stop likely illegal self-dealing.. I wouldn't be first in line to trust their next moves..
Wow, so the crown of the "fintech" movement is just as bad as the banks, and the two biggest Silicon Valley successes of the last decade, Uber and AirBnB, are really just cases of massively successful regulatory arbitrage. Nice innovation!
Please, the handful of irregularities they found at LC doesn't begin to amount to the shady stuff large banks have been caught doing. More importantly if you are a regular investor in LC loans none of the things found have caused investors in LC notes to lose money.
Agreed as much as I love ragging on unicorns LC did not complicity launder money for Mexican drug cartels [1].
[1]:http://www.huffingtonpost.com/avinash-tharoor/banks-cartel-m...
Why not just group the fraudsters and the gangsters together like we normally do? These banks have had about 15x as much time to make that mistake, to me it looks like LC was headed that route.
really? I think if the justice department could prove personal fraud by one of the bank CEOs they'd be alllll over that.
It seems a common way to "disrupt" a market is to find a loophole to call yourself something else so you can avoid all the laws everyone else is beholden to that were put in place for people's protection.
That sounds pretty legitimate if the laws don't actually protect people, and have been corrupted by wealthy interests, such as taxi medallion owners. Or if the laws are outdated.
Ubers are consistently safer than taxis, provide better customer service, don't intentionally take long routes to scam you, actually take credit card instead of pretending their credit card reader is broken, don't refuse to drive you because you have luggage or are going a short distance or are living in a bad part of town, etc etc.
It turns out that Uber's rating system is much better for people's protection than whatever laws and background checks taxis are subject to.
> actually take credit card instead of pretending their credit card reader is broken
After you've arrived at your destination, have you really found any taxi driver who would rather take _no payment_ than a credit card? If all you have is plastic--and if the driver is required to accept that form of payment--then I guess I don't see the problem (for riders). I've had drivers take my credit card # on a carbon copy physical swipe. I've had drivers admit that the card reader actually _did_ work. Unfortunately for them, I've even had drivers accept underpayment in cash because they were legitimately unprepared.
So, when it is unclear whether they are scamming you, your response is: here, have a physical copy of my credit card information? Sure, the liability is with your bank, but still seems like bad decision making.
I don't see the problem:
- You are using "scamming" as a binary yes/no behavior, when in fact there is a huge difference between lying about a faulty machine and committing credit card fraud. The most likely reason for the lie (not "scam", that's too strong of a word here) is to avoid the credit processing fee. And that's _if_ they are lying in the first place. There simply isn't much (risk-adjusted) benefit for the driver to escalate that situation into credit fraud.
- The information on a hard-copy swipe is identical to a magnetic swipe and also the information provided to any online merchant (i.e. CC#, name, expiration; not CVV). Why should I be any more worried about this information on a piece of paper vs. the risk of a card skimmer at a gas station? Or a security breach of any one of the multitude of online retails who I have _ever_ shopped with?
- As you stated, the risk goes to the bank, as I am not liable for fraudulent transactions on my card. In fact, there's actually risk going to the driver as well: without an immediate approval, they don't know if I'm handing them a worthless card!
- The implication from your statement seems to be that... you wouldn't pay the driver, who has already rendered services and is capable of accepting valid payment from you. Is that what you mean? If so, that is not OK.
Protect people! Ha! The laws covering cabs require them to go into undesirable areas so those that can't afford a full car can still get around, accept cash payments for those unable to get credit, vehicle inspections, and so on. When you say protect people, do you just mean the people in your bubble where everyone has a card?
Taxis in many cities will refuse to go somewhere (e.g. JFK, South London, outer Beijing, ...) even though they are legally obligated to take you anywhere. There is little recourse. The driver's medallion won't be taken away for breaking the conditions of the monopoly.
If that were true, I would expect the experience of using Uber to be identical to using a taxi, or for AirBnBs to be identical to hotels.
They're different experiences and certainly innovating. Just because they had to overcome legislation to grow does not mean that regulatory subversion is their only benefit.
Uber lacks the safety precautions taxis do, and they're leaving cities who mandate the level of accountability taxi companies have. AirBnB customers have reported heavy amounts of racism and bigotry, things that wouldn't fly very far very fast in the hotel industry.
Regulatory subversion is what gives them the margins to operate, and if a few people get hurt or discriminated against, I'm pretty sure Uber and AirBnB are okay with that trade-off.
> Uber lacks the safety precautions taxis do,
Name those precautions and how exactly they relate to safety.
> AirBnB customers have reported heavy amounts of racism and bigotry
Millions of people stay in AirBnBs and the vast majority of them have positive experiences. There's no evidence of rampant racism or bigotry and any host who acted that way would be kicked off the platform.
This continued insistence that Uber and AirBnB are categorically inferior to legacy companies and only profit by skirting (useful) regulations is ridiculous. If taxis were better than Uber, why would anyone ever use Uber?
Exactly
People have dreamt about on-demand car hailing for a long time, but it's always been a pipe dream - building the two-sided network is such too hard and too expensive, and a small network is just not worth using as a consumer. How is this not innovation?
Most of the innovation there was in the cell phone[1]. You've been able to order a car by phone in major metros for longer than those have been around. In fact, Uber started off as an app for using those very services.
Props to Uber for execution, but all the pieces were there.
[1]-edit: some in the smartphone, but most in the old "makes calls" cell phones
The older I get the more I realize execution is simply all that matters.
A zillion people had the same basic idea for Uber. They made it a reality, and made it Not Suck(tm).
The user experience prior to Uber for ordering a car via phone was absolutely horrific.
I've heard it said many times: ideas are a dime-a-dozen, execution is everything.
Execution and timing. Uber had a big advantage in being new & shiny just as the market was ready for it. They tried it multiple times and the first few it failed to gain any traction.
>Props to Uber for execution, but all the pieces were there.
Much innovation looks very easy from an ex-post perspective. Putting wheels on a suitcase etc.
I hate wheeled suitcases. If I have to drag it I've packed too much.
Ummm... as a matter of fact, Uber was only a black car service until Lyft (and perhaps others) started P2P service. Uber was a fast follower in that space.
I have been able to pick up a phone and call the cab company for decades.
yeah, but unless you're in a city like New York (possibly a handful of others) the wait is FOREVER. In Phoenix it was routine to have to wait half an hour or more. Same in SLC. It's awful. Uber and Lyft reduced the wait to a fraction of the time with better, quicker and cheaper service.
I don't disagree with you, but your statement is incomplete without acknowledging these were also illegal services.
Sure, but these are stupid laws.
Wow, I forgot we set up our society so tech developers got to decide what kind of society we wanted. Laws requiring cabs to serve disadvantaged areas? Accept cash so people without credit could get around? Provide safe living spaces, up to code, for visitors from out of town? How disconnected from reality are you?
Furthermore, what kind of precedent does flaunting legitimate laws set? Thankfully Austin was able to have some balls and not allow that shit to fly.
I've spent plenty of time waiting for my Uber as well: lots of "your car is 5 minutes away for 15 minutes".
Uber isn't as brilliant as they want us to believe they are.
"Your car is five minutes away. It is currently on a freeway driving away from you at 50 miles per hour. Now it is six minutes away".
This complaint makes no sense to me. You just call the taxi company further in advance of when you need the ride. If you know it's always around a 30 minute wait, just call 45 minutes ahead of time and tell them the time you need picked up.
Phoenix & SLC are also not cities in which people are likely to rely on on-demand ride sharing. Most people own their own car especially if they care about being able to determine exactly when they engage in transiting.
Further, in all of the non-mega / non-already-has-developed-rapid-transit-system cities I've been in, apart from one single city (San Francisco), the wait time for Uber is on the order of the wait time for a taxi. The difference between needing to call or book ahead to avoid a 30 minute wait vs. a 15 minute wait is utterly irrelevant.
The real reason why Uber succeeds in these markets is that they currently subsidize the rate paid to the drivers and thus compete on price. They also have way better marketing and do a good job of making people think the market for Uber rides is more liquid than the market for taxi rides (though in truth it's not more liquid except in dense areas).
Uber is not profitable in these areas, and is just hoping it can subsidize the losses on most decentralized transit regions long enough to defeat regulatory issues, outlast competitors, and put pressure on taxi services. It's still quite a significant gamble.
I just logged in specifically to tell you that as a SLC resident without a car, I use lyft extensively. Similarly all my friends do as well, for the almost perfect example people use of preventing drunk driving.
I'm already pretty strapped for cash, hence why I don't have a car but I utilize Uber & Lyft when I'm unable to get to my destination in a timely manner.
I would not however get a taxi simply because I don't know the number to call, I don't know when they'll arrive at my house, and simply the entire taxi experience is just horrible.
When I used to use Taxi's in SLC (I am still a resident), I had to call two companies at a time, then wait 20 minutes for one to show up. The taxi cab drivers aren't FT like larger cities (according to a long-time dispatcher of Yellow Cab), so have (or had, this was a few years back) had preference of fares or shifts, skirting regulation.
I now use Lyft (for pricing and the drivers), then Uber (if Lyft is unavailable).
This just makes your comment lose all credibility to me, I'm afraid:
> I would not however get a taxi simply because I don't know the number to call, I don't know when they'll arrive at my house, and simply the entire taxi experience is just horrible.
You don't know the number? Really? If you have a mobile device from which to use Lyft, then getting the number is completely and entirely trivial.
While there is some variability in taxi arrival time (just as there is with Lyft or Uber arrival time), taxis typically are no later or more difficult to estimate. You just tell them when the taxi should arrive and that's when it will be there. There are even many apps for tracking taxis on a map interface. Those apps mostly only work in large cities, but it's easy to see they will expand to many other cities, certainly a city of the size of SLC.
You say "the entire taxi experience is just horrible" but your two biggest complaints are that you don't know the number (and apparently can't be bothered to look it up one time and add it to your contacts) and you don't know when they'll arrive (even though you tell them when to arrive, that's when they arrive, and their variability is not significantly different than Uber or Lyft variability).
I'm not able to make any sense of this if it's intended to be a criticism of the taxi experience in SLC.
I remember trying to find a cab in suburban Silicon Valley on my first visit in the days before Uber. Then as now, if you Google for "taxi Mountain View" or similar, you get 2.5 million results. Should I call Yellow Cab or Yellow Taxi Cab or Bay Area Yellow Cab or Sky Cab? Which one is going to show up in a reasonable amount of time and not gouge me? Who the fuck knows! Not even my local coworkers did, because they all drive and never take taxis. I ended up asking reception, who sorted me out, but odds are she books with the company that gives her the biggest kickbacks...
These days, when I visit SV (or almost any other city), this problem is solved. Uber, bam, done.
It's almost like there should be websites that give reviews and ratings for local businesses and services.
As it happens, the first hit for that search is Yelp. Do you find this helpful?
https://www.yelp.com.au/search?cflt=taxis&find_loc=Mountain+...
Yes? The second entry clearly looks like a highly-rated general taxi service with a phone number. I might skip the top entry since it could be more related to airport rides.
I don't see what you're getting at. This looks like exactly what I'd use to quickly find a cab company and their contact info.
Meanwhile, in drops in credibility, you say this:
> While there is some variability in taxi arrival time (just as there is with Lyft or Uber arrival time), taxis typically are no later or more difficult to estimate. You just tell them when the taxi should arrive and that's when it will be there.
A charitable interpretation of this is that you must live a charmed life. The only people I know who say things like this are people who have cars and don't tend to use much else or live in and exclusively travel in very large cities.
I have literally waited two hours for a taxi, on a normal friday night. Multiple times. My average wait for a taxi in the city I live in has usually been on the order of 30+ minutes, peak hours or off. Other cities have not been much better, unless they were cities like New York where normal hailing actually works.
Also, smaller cities don't get these wonderful taxi apps you're talking about until Uber comes into town and forces them to compete. Hell, in many cities reliably being able to pay with a credit card only becomes possible when a rideshare company comes to town, before that "the machine is broken!"
I live in a rural area of northern Indiana that is about 1 hour outside of a medium-sized city (around 250,000). I don't own a car. I rely on rides from family, and unusual combinations of taxis and buses when in town.
I've experienced none of the problems you describe, and I've used taxis in small (less than 30,000 people), medium (100,000 - 300,000 people) and large (Boston (where I lived for a long time), Chicago (nearest large city to me now), New York (visited friends there many times), Austin (work travel), Paris (worked there in 2010), and various other places I traveled) cities and towns.
If you call with a bit of advanced notice, it's rarely an issue. If you call at the last minute, of course there's a problem. But the exact same problems happen with Uber/Lyft.
Well, no. Apparently if you call with a bit of advance notice it's rarely an issue.
If I do it, who the hell knows. I've called the night before and still waited almost an hour for a taxi beyond when it was supposed to come. The difference between taxi and uber/lyft variance is night and day, in my experience.
Your experience seems to be exceptional to me.
Meanwhile, your experience seems exceptional to me.
> even though you tell them when to arrive, that's when they arrive
Having used taxis in multiple countries for most of my life until Uber/Lyft...
... HAH!
If this was the case then there wouldn't be so much of a problem. The number of cab companies that say they'll show up and don't (or show up late as hell) is massive.
Uber at least lets you know if it's running late (ie - an ETA). Taxi companies should have been on this way before they were.
I have also used taxis in many countries. They arrive mostly on time, and when they are not on time, the variability is not significantly different than the variability also experienced with Uber/Lyft.
> Further, in all of the non-mega [...] cities I've been in, apart from one single city (San Francisco), the wait time for Uber is on the order of the wait time for a taxi.
As a data point to the contrary, in Chicago we stopped calling taxi dispatchers to our apartment because they would arrive up to 30 minutes late. Even if we scheduled ahead of time, it didn't seem to matter; as if the dispatchers were holding our request until the last minute and then dispatching into the general queue (so why call ahead?)
With the Uber app, whenever we call a car (even a taxi) we get an ETA based on GPS coordinates of the driver, which is both accurate and updates live. There's a level of accountability that was never available with the existing taxi dispatch.
I live in northern Indiana and have visited Chicago many times in my life, downtown, near UChicago, and both airports. I've never experienced late taxis beyond a very normal 5min sort of thing.
My late taxi experiences were always in more residential neighborhoods (Ukranian Village, Wicker Park, Lincoln Park, Roscoe Village). It isn't the land of taxi stands, but there are definitely cars in those areas, on major streets. The heart of the city is crawling with taxis at all hours, so I would not expect to see any delays there.
No, you are wrong. Uber is profitable in hundreds of cities.
http://www.businessinsider.com/uber-profitable-in-hundreds-o...
I do not believe the quotations about profitability in hundreds of cities from the article. When the books are opened and it can be verified, then I'll believe it. Until then, I choose to chalk it up to duplicitous accounting.
I openly acknowledge I could be wrong. But vague quotes like this effectively do not mean anything, one way or the other, to me. Companies say this kind of thing all the time when it's not actually true by accepted accounting standards.
on demand car hailing = taxis?
For me still this equation holds true. Taxes are abundant and cheap in Singapore. Riding in someone's car makes me uncomfortable. (But that is just me, I suppose)
The success of Uber in a city is directly proportional to how much taxis suck in that city.
So Singapore is one of a few cities where that's the case (NYC also -- Uber doesn't really work there. I was there for 8 days and requesting an Uber as a 10-15 minute wait. You can get into one of a million cabs that go by in that time. I gave up).
Same in Bangkok. Taxis are plentiful and cheap. But like elsewhere if you flag one down they often refuse you if you want to go somewhere inconvenient for them. That's where a taxi hailing app like GrabTaxi is useful. It works like Uber except it's a taxi that picks you up. Uber exists here but hasn't got much traction (as far as I know).
I have good friends at Grab and use it frequently in Singapore. Mainly because of the auto-pay functionality. I.e. pay with credit card.
NYC is actually one of Uber's most important cities. Don't forget that NYC is more than just Manhattan below 125th street. Getting a taxi in the outer boroughs was miserable. The green ones help but were a little too late. The black car services are entirely unpredictable and unreliable, doubly so if you are not of the ethnicity of the dispatcher/drivers they employ.
And let's not even talk about the number of times a cab driver straight up refused to take me to Brooklyn, both during the day and late at night. Totally illegal, but it happens all the time.
Agreed, when I was living in the Valley in 2003/4 public transportation was terrible and taxis nowhere to be found. But then I was driving a shitty Ford ....
Except when it's 4 pm and you want to go to the airport from Manhattan, at which point none of the million cabs are interested in picking you up.
Or in the other four boroughs of NYC, or Manhattan above ~125th St.
edit: which is exactly why the city rolled out the green cab system, which has inverted limitations on where they can accept street hails
I found that using Blacklane in that case was cheaper and more predictable than Uber.
Same with Hong Kong, Uber have started up there but I think they will struggle.
That's not my experience in Singapore. The one time I was there I had to wait 15 minutes to get a taxi and then had to argue with them to get them to take me where I wanted.
In contrast, Uber took less time and required no negotiation.
Taxis are abundant and cheap in Shanghai... unless it's raining (very common). Then they won't pick you up at all. They're still driving around, but you can't actually get one.
It also depends on where you are and the time of day. Even without rain it's not always easy to hail a taxi in Shanghai.
Yes actually? "Hail a cab."
> People have dreamt about on-demand car hailing for a long time
Taxis.
Dismissing Uber & AirBnB as primarily/solely successful from exploiting legal loopholes is insulting and uninformed.
...ok, how? I understand it's "all about execution" but were there not explicit laws governing taxis and related services, as well as running a hotel out of your home? Did we as a society not choose to put those in place?
Vacation rentals have been around as long as, well, homes. We as a society absolutely did not choose to forbid Uber. In fact we love it.
You can apply your logic to basically any entity in history to belittle them. Everything can be positioned as a "massive case of blah" if that is your goal.
No you can't. Was there ever a law explicitly saying coding an OS was illegal? Versus operating a cab company without registering with the government to prove compliance with laws already in place to deal with those? Or similarly running an illegal hotel out of your house?
Disagree. Transistor, car, heck even the iPhone (and I say this as a massive hater against apple) are not describable by this. Neither is anything which 1) actually solves a problem 2) in a legal way (Airbnb is pushing legislation, Uber is breaking it, and it appears lending club simply commited fraud)
"Tesla is just growing off of government subsidies!"
etc.
No, making cars was never outright illegal. Operating a cap company, (or rather an illegal one), without proper licensing was. Operating a hotel out of your house was. Nice strawman.
Uhhh it was basically illegal to make cars in the US from ~1903 to 1911 due to restrictive licensing policies aimed at excluding competitors from the market: https://en.wikipedia.org/wiki/Association_of_Licensed_Automo...
Ford Motor Co produced cars without such a license and eventually a case went to court. Ford initially lost but then the ruling was overturned.
But hasn't professional licensing and regulation gone a bit too far when driving someone in your car for money is supposedly illegal? What's the crime in that?
For what it's worth, this economist agrees: https://mobile.twitter.com/Noahpinion/status/746483638158561...
>"the idea being that safer, higher-yielding loans would be more attractive to investors"
Who would have thought that the basic laws of lending apply to fintech startups?
I highlighted several months that their behavior strongly signaled cooked books but I didn't think it would reveal this fast! https://news.ycombinator.com/item?id=11660112
Other than investing in their stock, there's an argument to be made that it might actually be a relatively safe time to invest in their loans.
Nothing they have disclosed has caused me to stop investing in their loans. In fact you can get some nice high grade loans on their secondary market from people trying to unload their portfolio at a 3-5% discount to face value.
As long as they don't have any debt on the books you are pretty safe. If they did have debt there might be some question about order of payment to creditors.
Default rates have just hit their lowest point in eight years:
https://www.federalreserve.gov/releases/chargeoff/delallsa.h...
From this halcyon point, there's more downside risk than upside going forward. Unless the cyclical nature of debt defaults suddenly stopped after centuries.
The increased scrutiny could reveal much worse, who knows?
That's my logic, I bought stock, and continue to put money into the loans.
(I have zero affiliation with Lending Club, just like the returns.)
Stock's up 7% as I write this. I'm assuming nothing has been revealed that isn't already at least suspected, and layoffs are generally good for a stock's price. I've already made money on one dip-and-bounce, but currently in at 4.88, so here's hoping it will claw it's way back a little bit. I'm in no way qualified to declare a bottom, but I'm guessing all of the bad news is out of the way. This in no way constitutes investment advice; in fact, I'd steer clear of LC if I were you. But I'm not you, I'm me, and sometimes I invest poorly.
Check this chart, which shows LC returns relative to SPY (S&P 500) over the past 5 days. The stock is up from the open today, but relative to the market it looks like it is tracking mostly unchanged from last week, or slightly negative. If I had to guess, I'd suppose that the negative trend is related to brexit's impact on the entire financial sector, and the sharp drawdown/recovery is related to the news: sharp drop on reaction, then partial recovery after value traders decide that the "wash" lending apparently doesn't matter much for future value.
http://www.barchart.com/chart.php?ss=1&spread=LC+%2F+SPY&p=I...
The entire market is bouncing back from brexit.
Except Google, which is down 1%... :)
LC has been bouncing up and down with 5-10% daily changes very frequently ever since the news broke about their security fraud and CEO departure. The 7% change today (given the general market rally today) likely means that the market sees this news as neutral.
Yeah, I'm not sure exactly what to make of it. Everything else I track is up 3-4% today, so that's why I view 7% as a positive outlook. But as you point out, it's a pretty volatile stock, so it may just be riding the rest of the market and got a little extra bump from volatility.
But personally, I don't try to read tea leaves. Set my stop limits so I don't have to watch it like a hawk, set an alert for the upper limit, and watch LC news strictly for entertainment value. Because thought the story is somewhat interesting, it's not anything we haven't seen before with companies like Tyco and Adelphi.
Ah yes Tyco, that was a fun one...
In just world this would result in a prison sentence, banishment from stock exchanges, and revocation of their corporate charter. The fact that there is no capital punishment for companies, especially public ones, provides a moral hazard.
I agree. Our society tolerates white collar crime far more than we should.
We've got a good handle on things like punishing criminals that rob someone at gunpoint. However, we struggle with seeing the CEO making short term loan to his company as theft from investors (the short term loan hid the fact that the company wasn't meeting its presumably publicly announced growth targets).
The issue is that white collar crime needs to show criminal intent. But, in this case the CEO didn't have criminal intent to steal, rather his intent was simply to boost his business (with the consequence of misleading investors).
I view white-collar crime as primarily an individual act. Corporate crime, such as we saw with HSBC, Dow Chemical, and even Mitchell Jessen, escapes significant punishment, only very rarely rising to criminal conduct. That the conduct is legal, or considered legal, is a policy and legislative outcome.
As for intent, the law has centuries of precedent to incorporate into criminal statutes that affect corporate activities. It's just that the standards are artificially high and don't take into account the diffuse nature of the enterprise. But we have several decades of even that which could be applied, but isn't.
> capital punishment for companies
That's the second time today I see this, is this some kind of meme?
Yes, but it's been around for years.
If corporations are persons, and they can commit felonies, why not give them punishments that are analogous to what you'd give a person who committed a felony?
> If corporations are persons, and they can commit felonies, why not give them punishments that are analogous to what you'd give a person who committed a felony?
Because corporate personhood is a legal fiction, and a corporate death penalty doesn't really hurt the people who a corporation stands in for very much, and hurts lots of other people a lot.
a corporate death penalty doesn't really hurt the people who a corporation stands in for very much
I know, that's why I included prison.
Corporate death would just be another form of bankruptcy, which hurts shareholders and employees but wouldn't harm anyone else. Actually since this would be a rare form of bankruptcy with plenty of assets, it could be set up to pay restitution to various corporate victims as well.
I wasn't aware of its prevalence, but hey. Great minds yadda yadda.
Yes, punish the hundreds who simply do their job by forcing the company to go out of business, instead of trying to steer it towards a more productive future. We've gotta justify that pitchfork investment, don't we?
You punish the family when you send a parent to prison.
I'm sure I've seen "just doing my job" invoked in a pejorative sense, in close parallel to "just following orders"? When one's job is to harm society, society might step in, even if one "didn't know".
Is your argument that P2P lending is analogous to the Holocaust?
I don't think you need to do any of this shady stuff to be a small loan marketplace for unaccredited participants. But the shady stuff kills your chances to feed the CLO pipeline and selling (large batches of) small loans to accredited buyers.
So just... why take _these_ risks? It doesn't have a realistic chance of helping any viable strategy that I can think of.
You answered your question. It is a risk... a risk that not many are prepared to take. LC seems like it serves those who are willing to take that risk in hopes of getting better returns.
It's ludicrous that someone would risk their reputation and their company's future for a mere 32 more loans on the company growth report. I can't imagine how these loans made a significant difference to these reports. These revelations could be just a scapegoat for more serious fraud.
Look at the date: they were made in 2009, when the company was barely a year old. At that time, an additional 730K in loans could have been a needle mover.