3c hapter - Index of

Pennies from Many 135
there’s a greater need than ever for these types of companies.
This tidal wave of social networking just hit the world in the last
couple of years, fundamentally changing all things having to do
with communication, entertainment, and interaction. It could
easily spill into equity, credit and fi nance, but it’s not being
allowed to. There is a fi rewall that’s being built for no good
reason. No one has thought it through. If that wall was lifted,
you’d have a tidal wave of Kickstarters that would be spreading
into the raising of credit and equity that I think would fundamentally
rewire Wall Street and the big banks in a very positive,
low cost, and open way. The whole thing with P2P was that any
American could be a granter of credit, so you’d have millions of
competitors providing credit rather than a handful of Too Big to
Fail folks.”
Larsen pauses and adds dryly: “Not that I’m bitter or anything.”
You could understand if he is. The SEC’s cease- and- desist letter
to Prosper came less than two weeks before Bernie Madoff
confessed to his sons that his multi- billion- dollar money management
operation was nothing more than a Ponzi scheme—the biggest
Ponzi scheme the world had ever seen. Although red fl ags
had been raised with regulators for years, the SEC was caught
completely off guard. Madoff’s clients were largely wiped out.
P2P Goes Global
For all the uncertainty and early missteps, P2P lending shows no
signs of slowing. Analysts at the Gartner Group project that P2P
lending will expand 66 percent by 2013, to $5 billion in loans
worldwide. The brisk growth, says Gartner, will be driven by “investors
seeking higher returns and borrowers shunning (or being
shunned by) banks.”
There are dozens of P2P funding sites around the world, and
new ones seem to pop up every day. And, with 2 billion Internet
users and growing around the globe, the crowd of potential
investors is vast. Often, the sites play on consumer and business
disenchantment with big banks. “Where everyone wins, except
the fat cats,” crows the website of Zopa, a British P2P lending