With credit markets freezing up, I thought it might be a good time to put some money into Prosper.com–a site that lets you loan money to individuals. It seemed reasonable that if people couldn’t get loans elsewhere you might be able to make a reasonable return filling the role that banks have filled in the past. Unfortunately they aren’t allowing you to lend money to people. The best I can tell the SEC has decided that they need to be more tightly regulated and wants them to apply for some type of license or certification.
I’m concerned that in trying to fix things the government is going to put too many regulations in place to try to protect people from themselves and in the end make things even worse.
So – let me get this straight – a private group figured out a way to help people in need, and a government agency is blocking them from doing it because they want in on the action?
Brilliant.
I’m not sure if the government wants in on the action. I think they want to protect people from getting into loans with high interest rates etc. It is kind of like the government outlawing cooking stoves because some people will get burned.
I did some snooping on wikipedia, and it appears that Prosper is applying with the SEC to allow a secondary market in their loans, that is to say, to allow lenders to sell their loans to other people. Anyway, it looks to me like the move was initiated by Prosper and nothing untoward is happening.
@Ian – Looks like I may have been mistaken. Some of the information I saw early on said that this was prompted by the SEC, but as you said it now looks like it is part of setting things up so Prosper can resell loans (or something like that). Thanks for pointing this out. Maybe the government isn’t as bad as I feared. :)
@Mark – Oh, I think they are probably just as bad as you feared. Just not on this particular issue! Thanks for keeping your eyes open.
@Ian – Well that isn’t particularly comforting. :)