In praise of peer-to-peer lending

Will bigger banks ever latch onto this trend? A whole new source of liquidity has been set loose by the Internet. Companies with dot.com-ish names likes Loanio, Propser, Lending Club are facilitating so-called peer-to-peer loans, essentially loans from people with money to loan to those who need to borrow. The rates are set by competitive bids. This is a mere drop in the bucket when you consider the massive credit crunch we're suffering through, but for many individuals this amounts to new liquidity options. 

The industry seems to be latching on, and you have to wonder if a big bank or two might see the potential. The SEC has moved in some ways to legitimize the industry. Slate notes that Lending Club in particular sought out the SEC to work out some of the regulatory issues that plagued some pioneers, notably Prosper but also Loanio. With these issues resolved, we may some see some surprising new entrants. 

For more:
- here's the Slate article

Related Articles:
The big loser in the credit crunch
The real fallout from the credit crunch
Bank lending plunges again
Not all banks are deadbeats
What should banks do with TARP funds?