Some recent diaries on daily kos P2P: Prosper.com Lending Shut Down By SEC , We Need a DK Bank and Need Cash? Shoot the guy who owes you money! got me to thinking. Even though I continue to invest in the stock market on a regular basis using dollar cost averaging, when the market started to tank I looked for other alternatives. I joined Prosper and started loaning small ammounts of money to everyday people. When the SEC shut Prosper down I went looking to Zopa, the original person to person lending orginization based in the U.K. It was then that I ran into this tidbit that set me off on this rant.
Zopa launched in the US in partnership with six Credit Unions on December 4, 2007 but it closed to new business due to the US Government bailout of financial institutions on October 8, 2008. Wikipedia
WTF
OK Uncle Pauly, we're in a credit crisis, right? So how does shutting down these person to person lending websites help ease the credit crunch? I may not be a financial wizard like you, I'm just a janitor, but it sure seems to me that ordinary people borrowing from and lending to each other might actually help the situation. But what the hell do I know. I run a crew of janitors, but you used to run Goldman-Sachs. You're smart.
Well, there's one person to person lending site left that's still in business Lending Club. let's try that one.
Individuals who want to invest in Notes through www.lendingclub.com must meet the following State and Financial Suitability conditions.
At the moment, individual lenders can invest in Notes if they are a resident of one of the following States: California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Minnesota, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming. Lending Club has filed for registration with the appropriate State securities authorities in all other States and expects to be adding more states over time.
In addition, individual lenders who are residents of states other than California must (a) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000. Individual lenders who are California residents must (a) have an annual gross income of at least $100,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $100,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000.
In addition, individual lenders must agree not to purchase notes in an amount in excess of 10% of their net worth, determined exclusive of home, home furnishings and automobile.
You know something? It just warms my heart to know that they are so concerned about my financial well being that they even go so far as to protect me from myself. What a pal. It's kind of funny though. You see, when I was on the other side of the equation, when every day there were 6 or 8 pre-approved credit card offers in my mailbox, I can't recall anyone asking how much I made, or even if I had a job for that matter. No job, no assets, no problem. Just sign on the dotted line. It sort of makes me wonder who they are really protecting.
Being the poor dumb janitor that I am, I'm obviously not qualitied to loan money. Only Masters of the Universe can do that. You have to do complicated things, like risk assessment. I was reading an article the other day about CitiGroup wanting a piece of the bailout pie. It seems that they're in trouble because of defaults on their subprime mortgages. CitiGroup's risk assessment division estimated that the chance of default on their subprime mortgages was close to zero, .001 as a matter of fact. I had to stop and stare at that number to make sure I wasn't seeing things. .001? One in a thousand? Now when I was loaning money on Prosper I had to do some risk assessment my own self. On a person with a subprime credit rating, a FICA credit score of below 660, my estimate of the chance of default would be the same number, minus the zeros. But what do I know. The head of CitiGroup's risk assessment divisiion claimed that no one thought housing prices would drop. Really.
Remember when we were children and we would try to see who could blow the biggest bubble with our bubble gum? When it finally blew up in our faces, does anyone ever remember thinking, "Damn, I never thought THAT would happen." Any bubble, whether it's Dutch tulip bulbs, Nasdaq tech stocks, real estate, or bubble gum, will blow up in your face sooner or later if you continue to inflate it, just ask any 6 year old. But hey, no one could have forseen that the levies would breech.
I'm willing to compare my record as a janitor/banker to CitiGroup or any other of the Masters. Defaults-0. Late payments-0. Money lost-0. Of course that doesn't mean anything because I'm poor. And I'm not allowed to loan money to other poor people unable to get a loan from the banks or just want a lower interest rate than the banks would give them because...well.. that just wouldn't be right. Poor people loaning money to other poor people, why thats...SOCIALISM.
Mine eyes have seen the glory of the coming of the Lord
If you're in trouble or hurt or need—go to poor people. They're the only ones that'll help—the only ones. Ma Joad
The bank is something more than men, I tell you. It's the monster. Men made it, but they can't control it. They breathe profits; they eat the interest on money. If they don't get it, they die the way you die without air, without side-meat. Casey
He is trampling out the vintage where the Grapes of Wrath are stored
Now it seems to me the underlying cause of this financial firestorm that is approaching us is too much debt. The government, corporations, the American people, we're all in debt up to our eyeballs. Uncle Pauly's solution seems to be to get the credit markets rolling again. So we can borrow more money, and go deeper in debt than we already are. The solution to debt, is more debt. Put things back the way they were, keep the Great Ponzi Scheme going. And to allow the Masters to rake in the cash. This is nothing new, the shackles that Masters use to enslave the peasants is debt. As long as we owe them money, they own us. They loan us money to buy "things" to make us feel that we are wealthy, like them. But it is an illusion. Because we don't actually own these things, they do. And by owning our things they own us. But the party is over. We see through their deception. We have reversed course. Instead of borrowing to buy more things, we are saving and investing our money. It's all about the money, it always has been, it always will be. It's what makes the world go round. Whoever controls the money controls society. But money is only a symbol of wealth. And wealth is created not from the top down, but from the bottom up. From us. And it flows from us, to them. As long as we keep spending it, giving it to them. That is why we are told that the way to fight the terrorists is to go shopping. That the solution to our economic troubles is to spend more money. And if we don't have any money, borrow it. Spend, spend, borrow, spend. It's our patriotic duty. The American way. The solution to all our problems.
He hath loosed the fateful lightning of His terrible swift sword
Men who have created new fruits in the world cannot create a system whereby their fruits may be eaten. And the failure hangs over the State like a great sorrow. ...and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage. Steinbeck
And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed. The great owners ignored the three cries of history. The land fell into fewer hands, the number of dispossessed increased, and every effort of the great owners was directed at repression. Steinbeck
His truth is marching on
Now the Masters of the Universe will tell us that we must borrow and spend in order to keep the economy going. Saving instead of spending will cost jobs. True enough. The economic firestorm about to engulf us will cost many of us our jobs. But it is inevitable. Nothing can change that. But there is an infinite ammount of work to do in the world. We must create new jobs, different kinds of jobs. Not jobs making things we don't need just so we can buy them and make money for the Masters. The Second Depression is coming. There's no stopping it. But if we listen to the masters, we may just slip back into the Dark Ages. And the biggest financial decisions we will have to make is deciding if a dozen eggs is a fair trade for a loaf of bread. The sky is falling they say. Yes, it is is. But their sky is not ours. They live in a world of collateralized debt obligations and credit default swaps. We live in a world of paying the rent and putting food on the table. As the firestorm approaches they say that we must save their mansions and palaces and let our huts and hovels burn. Trillions for them, but for our sick children whose parents are too poor to afford health care, nothing.
Glory! Glory! Hallelujah!
Before I knowed it, I was sayin' out loud, 'The hell with it! There ain't no sin and there ain't no virtue. There's just stuff people do. It's all part of the same thing.'... I says, 'What's this call, this sperit?' An' I says, 'It's love. I love people so much I'm fit to bust, sometimes.'... I figgered, 'Why do we got to hang it on God or Jesus? Maybe,' I figgered, 'maybe it's all men an' all women we love; maybe that's the Holy Sperit-the human sperit-the whole shebang. Maybe all men got one big soul ever'body's a part of.' Now I sat there thinkin' it, an' all of a suddent-I knew it. I knew it so deep down that it was true, and I still know it. Casey
This is the beginning—from "I" to "we". If you who own the things people must have could understand this, you might preserve yourself. If you could separate causes from results, if you could know that Paine, Marx, Jefferson, Lenin were results, not causes, you might survive. But that you cannot know. For the quality of owning freezes you forever into "I", and cuts you off forever from the "we". Steinbeck
Glory! Glory! Hallelujah!
But we have something the Masters don't have. We have each other. We have things like the new kossacknetworking website. Hard times are upon us. We must cut expenses, pay off debt, save money, hunker down. And invest in each other. And this brings me full circle to the beginning of my rant. Why is the SEC shutting down the online person to person lending websites? I smell a rat. These sites were catching on with the people. Ordinary people were paying off their high interest credit card debt with low interest loans from other ordinary people. And the Masters saw the threat that the peasants posed to them. Because if the peasants were allowed to lend to and borrow from each other, they would discover the GREAT TRUTH. The Masters need us, but we do not need them. If the peasants were allowed to control their own money, we would break the chains that bind us to them. Money is power. If the wealth were allowed to remain in the hands of the people who produce it, we would regain control of our lives. And our country. And they cannot allow that to happen.
Then I'll be all around in the dark - I'll be ever'where—wherever you look. Wherever they's a fight so hungry people can eat, I'll be there. Wherever they's a cop beatin' up a guy, I'll be there... I'll be in the way guys yell when they're mad an'—I'll be in the way kids laugh when they're hungry and they know supper's ready. An' when our folk eat the stuff they raise an' live in the houses they build—why, I'll be there. Tom Joad
Glory! Glory! Hallelujah!
They's a time of change, an' when that comes, dyin' is a piece of all dyin', and bearin' is a piece of all bearin', an' bearin' an' dyin' is two pieces of the same thing. An' then things ain't so lonely anymore. An' then a hurt don't hurt so bad. Tom Joad
The firestorm grows in intensity daily. It will soon be upon us. And it is terrifying. But generations that came before us have faced down their own demons. And we're still here. I'm afraid. We all are. But if we stick together, we'll get through it. Can we do it? Yes, we can. For the sake of the children. We have to.
How can you frighten a man whose hunger is not only in his own cramped stomach but in the wretched bellies of his children? You can't scare him--he has known a fear beyond every other. Steinbeck
Why, Tom - us people will go on livin' when all them people is gone. Why, Tom, we're the people that live. They ain't gonna wipe us out. Why, we're the people - we go on. Ma Joad
His truth is marching on
I know this... a man got to do what he got to do. Tom Joad
Well now, even though I don't have have the assets to qualify to lend money on Lending Club I've signed up anyway. You see, even though I'm not a Master of the Universe myself, I've been studying up on these sumbitches. And I've learned a couple of things about how they operate. One of the things I've learned is that lack of assets is not really a problem because you can create them out of thin air. Here is a little accounting trick I learned from the Masters using credit default swaps. You take all your debt, combine it with debt from other investment banks and create something called a synthetic credit default swap. This has the effect of taking the debt off your books. Now, and this is the beautiful part, you bring those swaps back on your books as assets. Pretty slick, huh. Take your liabilities, presto chango, turn them into assets. Mmmmm. Let me see if I can do some fancy accounting to come up with $250k worth of assets. Let's see now. I have 20 American silver eagles. The spot price of silver is currently $9.81/oz. Silver eagles are going for $13.55. 13.55 x 20 = 271. So all I need to turn $271 of silver assets into $271,000 of silver assets is for the spot price of silver to rise 1000 times to $9,810/oz. Will that happen? I believe it will. Maybe not anytime soon, but sometime in the future, maybe the far, far future I'll grant you, but sometime in the future silver will be worth $9,000/oz. And I didn't see anything in their regulations that said assets had to be valued at current market prices. I think I found me a loophole. If Goldman Sachs and Merrill Lynch are allowed to pull bullshit like they do, it's only fair to allow me to cook my books a wee bit too. Right? Of course if the SEC catches on my ass may be off to Gitmo, but this ol' peasant has had about enough of the Master's bullshit and is in a state of rebellion. I've been looking over the loan applications on Lending Club, small business looking to expand, students wanting loans for college, a mother wants to buy her daughter a used car for her 16th birthday. People need help. And I've got a few bucks to invest that doesn't involve putting it in the Master's bank. To help some people out and make a few bucks for myself. So Uncle Pauly, Mr. Goldman Sachs of Shit, KISS MY ROSY RED ASS. See ya down at Gitmo.