The Lighthouse | federal reserve

Selling or Liquidating your Notes on Lending Club (and some other P2P insights)

By Erik Zimerman On May 2, 2016 · Add Comment · In The Whiskey Room

Lending Club, among other players in the industry such as Prosper, is one of the great success stories in the peer-to-peer revolution, or the “share economy”. The idea is simple enough, the internet is ideal for cutting out middlemen, so why not banks? In the idealized (and fictitious) scenario, a bank is an institution that takes and safeguards deposits from people in exchange for an interest rate, say 2%, and then uses those deposits to make loans to people and businesses that need them at a higher interest, say for example 6%. The Bank is thus simply an intermediary that facilitates a market in which some people have money they wish to save, and others need loans to invest or purchase goods and services with. Lenders and borrowers. The margin between the two rates, 6 and 2 percent respectively, is the gross profit of the bank, in this case 4%. And of course, out of that 4%, the bank presumably has to pay its many expenses such as rent, insurance, marketing, staff salaries (a really high-tech secure vault like in the movies) and the like. And finally, like in any business, if there is some profit leftover after all these [...]

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