Peer-to-peer lending sites: MSE guide discussion

masonic

itwasntme001 said:

No P2P platform should ever get any sort of bailout.  First there will be absolutely no upside for the taxpayer.  Secondly it creates an even bigger moral hazard then there already is following the GFC.

I would be saying the same even if I had money in P2P (although of course i would still want a bailout if it helped me financially).

I still have some money trapped in P2P, and I don't think the taxpayer should be on the hook for any of my capital.

itwasntme001

The ones that may fail are the ones who's operating expenses can only be covered by borrowers continuing to pay on the loans and/or fees made on originating new loans.  I think that means pretty much all platforms?

The longer the current downturn, the more chance these platforms will go belly up.

itwasntme001

It was a flawed business model from the beginning.

KeepOnKnitting

masonic said:

itwasntme001 said:

No P2P platform should ever get any sort of bailout.  First there will be absolutely no upside for the taxpayer.  Secondly it creates an even bigger moral hazard then there already is following the GFC.

I would be saying the same even if I had money in P2P (although of course i would still want a bailout if it helped me financially).

I still have some money trapped in P2P, and I don't think the taxpayer should be on the hook for any of my capital.

Seconded. I knew there was a risk. I might have lost out. Serves me right.

jennyjj

Ehube said:
RateSetter .... are telling people it will be "at least 6 months" and "probably longer" before money requested released 

...
Effectively, as RateSetter freely admit, money in this market you would like to release and withdraw will still likely be being lent to new borrowers in 6 months and there's nothing you can do about it! Least of all get your money back.

Can I ask where you get that '6 month' quote from? From what I've seen, they seem to be implying a couple of months tops.

I've partly disinvested and continue to try to do so, but I'm not hopeful. I'm particularly p1553d that they will re-contract to lend out my capital out even if I try to ramp up my required interest rate and there seems little I can do about it. I seem to recall that it used to be possible to have all repaid interest and capital go straight to holding, but that's no longer possible.

itm2

Does anyone have any insight into how long withdrawals from Ratesetter Access accounts are currently taking? I requested a drawdown from my Access ISA account on March 20th.

Malthusian

Sailtheworld said:

I really do hope they don't get funding. It's about time those of us who know that higher returns are associated with higher risk aren't asked to bailout those with spare cash who don't.

That ship sails on a regular basis. If enough people believe that an investment is risk-free, the government has to spend everyone else's money to make it so. Barlow Clowes, defined benefit pensions, Equitable Life, IceSave, etc etc. To that list we may be adding LCF and P2P, who knows.

I believe Lendy investors have already been trying to get a public bailout for some time, by arguing that Lendy missold the loans and is therefore liable to them (that liability would then inevitably fall on the FSCS, i.e. the general public).

Why the regulator sat back and allowed this crap to be promoted ad nauseam to ordinary retail investors is beyond me.

itwasntme001

Well the bankers were bailed out in 2008 so why stop there right?  Lets just continue to ignore moral hazard and incentivize reckless behavior in all manner of ways and please lets make sure those who are responsible get away with it along with the money they milked from it.

itwasntme001

Boy am I glad I sold out of P2P a few years back.  I always knew it would be a terrible idea in a downturn and now you have the mother of all downturns!

Malthusian

itwasntme001 said:

Well the bankers were bailed out in 2008 so why stop there right?  Lets just continue to ignore moral hazard and incentivize reckless behavior in all manner of ways and please lets make sure those who are responsible get away with it along with the money they milked from it.

To be fair the logic behind the bank bailouts is slightly different. The logic was that if the banks were not bailed out, everyone would have queued round the block outside every bank to withdraw their money and stuff it under the mattress, and the economy would have collapsed. Furthermore, when the taxpayer bailed out the banks we took shares in the banks in exchange. At one point the taxpayer was making a profit on that deal (although last time I looked a sale of RBS shares at a loss had put us underwater again).

So it was different to bailing out P2P (or Equitable Life or whoever) for two reasons:

1) The bank bailouts were to benefit a wider range of people than those who had their savings in insolvent banks; by contrast only P2P bagholders would benefit from bailing out P2P.

2) The taxpayer could have made a profit by taking shares in the bailed-out banks, and if we didn't we at least mitigated the cost. Most of them had the money, it just wasn't liquid enough to pay everyone if they started queuing round the block, and the credit crunch meant they couldn't borrow liquid funds. A collapsed P2P scheme by contast is virtually worthless (other than a few dribs and drabs from sub-prime borrowers) and there is no prospect of the taxpayer getting any real money back.

Personally I was against the bank bailouts, but I'm just illustrating the logic.

Most people do not put their money in the banks expecting high returns, they have their money in the bank because getting paid in cash and keeping it under the floorboards is not how most people live nowadays. It is socially undesirable to encourage people to put money in risky investment schemes expecting a bailout if it goes wrong, but it is also socially undesirable to encourage people to live cash-in-hand because if you put your money in the bank it might disappear. Moral hazard works both ways.