Thursday, March 26, 2009

Peer-to-Peer Lending: an awesome idea being strangled by federal overreach

Yesterday I revisited one of my favorite examples of internet technology tackling important social issues:, who brings lenders and borrowers together. It's exciting because this is my favorite application of the internet; it brings people face-to-face with one another, and shares personal successes and failures. And besides the rewards of helping one another individually, it is a remarkable social invention that will allow for more and more transparency as we work with one another.

Unfortunately, I was surprised to find the following notice:

"We are not accepting new lender registrations or new commitments from existing lenders at this time."

Sure enough, securities regulators have found that their business must be registered and monitored. I'm extremely sad. Jim Bruene from has already explained why this type of thing is bad, including more examples of how this really puts a damper on innovation. I, for one, hunger for the opportunity to work with individuals rather than institutions, and I'm willing to accept the risk (and rewards) involved. How did my national government get the power to forbid this kind of trade? Actually, Jim says that our federal legislators didn't directly cause this problem, but rather the SEC decided to classify these loans such that they're in trouble. This is typical; if Congress can delegate the power

I'm not good at tirades, so I'll end here. I'm just very, very sad that this is going on, and getting worse.