Illustration: Sarah Grillo/Axios

Lending Club was founded on the idea of bringing individual borrowers and lenders together. Those days are now officially over.

Why it matters: The peer-to-peer dream was that Americans could deal directly with each other, rather than having to go through hated banks.

  • Lending Club was the foremost avatar of that dream. But the company soon realized that it was a lot easier to borrow money from hedge funds, or the market, than it was to provide the ability for people to make tiny loans to hundreds of different borrowers.
  • Individual lenders wanted higher returns, too. If Lending Club wanted the lowest borrowing costs for its borrowers, it had to move to wholesale funding.

Eventually, Lending Club decided it should just become a bank — so it announced the acquisition of Radius Bank in February.

  • Banks intermediate between borrowers and lenders. If you lend to an FDIC-insured bank like Radius, you take no credit risk, and let the bank worry about what happens if borrowers default. (Lending to a bank and keeping money on deposit at a bank are ultimately the same thing.)
  • It's the exact opposite of the peer-to-peer model, which was built on the idea that individuals are more likely to repay other individuals than they are to repay a faceless financial institution. If that was ever true, it isn't any longer.

The bottom line: Peer-to-peer lending failed. When Lending Club went public in 2014, it was worth more than $9 billion. Today, it's worth just $350 million.

Go deeper

Dion Rabouin, author of Markets
Oct 14, 2020 - Economy & Business

China's digital currency aims to leave the rest of the world in the dust

Illustration: Sarah Grillo/Axios

China is already test-driving the future of finance while the rest of the world is stuck trying to get its learner's permit.

What's happening: Over the past two weeks Chinese authorities in cities like Shenzhen and Chengdu have given out the country's brand new digital renminbi currency and are urging even faster rollout of the token nationwide.

Pence to continue traveling despite aides testing positive for COVID-19

Marc Short with Pence in March. Photo: Drew Angerer/Getty Images

Marc Short, Vice President Mike Pence’s chief of staff, tested positive for the coronavirus Saturday and is quarantining, according to a White House statement.

Why it matters: Short is Pence's closest aide, and was one of the most powerful forces on the White House coronavirus task force. Pence and second lady Karen Pence tested negative for the virus on Sunday morning, according to the vice president's office.

AOC: "Extremely important" that Biden offer Bernie Sanders a Cabinet position

Rep. Alexandria Ocasio-Cortez (D-N.Y.) said on CNN's "State of the Union" Sunday that she believes it's "extremely important" that Joe Biden offer Sen. Bernie Sanders and other progressive leaders Cabinet positions if he's elected president.

The big picture: Ocasio-Cortez was pressed repeatedly on policy differences between her and the more moderate Biden, including her opposition to fracking and support for Medicare for All. She responded that it would be a "privilege" and a "luxury" to be able to lobby a Biden administration on progressive issues, insisting that the focus right now should be on winning the White House.

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