US throws social lenders out of its temple of economic doom

Fresh from putting the financial markets to the flame, a heroic regulator goes in search of innovation that needs snuffing out
Fresh from putting the financial markets to the flame, a heroic regulator goes in search of innovation that needs snuffing out

A critic might be tempted to observe that while the SEC was utterly ineffective in preventing the excesses that brought about the current financial crisis it is only too effective at stamping out viable alternatives to the status quo, such as social lending. 

*Ahem* I almost feel like apologising for that headline: blame the cold medicine. 

But the more urgent apology should come from US regulators the SEC to the credit crunch-afflicted poplace of the United States for blocking out the ray of light that was social lending. 

Last month they issued a cease and desist order to Prosper, one of the largest social lending enterprises in the US, forcing it to stop issuing loans. Techcrunch explains the significance of this move

And it is not just Prosper, but all P2P lenders, that are on notice. Loanio, a new entrant into the P2P lending arena that just launched last month, has suspended new loans until it registers with the SEC as well (see notice below). And last April, competitor Lending Club was the first P2P lender to temporarily cease operations (the SEC approved its registration, and its members are now lending again in about half the states, including California which gave it the go-ahead last week).

This is a stupid error for the US financial services market on two counts: 

  1. Some alternatives to the, er, discredited credit markets for individuals is now gone.
  2. For a nation that prides itself on innovation the US is putting a truly promising set of ideas around social media and finance in jeopardy. On the upside, an opportunity for the UK to perfect the models and wait for the regulators to see sense?

A critic might be tempted to observe that while the SEC was utterly ineffective in preventing the excesses that brought about the current financial crisis it is only too effective at stamping out viable alternatives to the status quo. 

Zopa, the most credible of the social lenders to my mind, was trying a slightly different model to the other social lenders has also had to pull out – its founders explain their thinking on The Tricky World of US Regulation heir blog. Its thriving UK operation, and Zopas in Italy and Japan remain very much alive. 

: : I seem to recall that Virgin Money US was operating a social lending system also. Haven’t seen anything about that being shut down….

: : : I guess that Gartner may want to revise its forecast of 10% of retail loans being made by social lending by 2010 in light of this.

Geeks you can see from space (well, Google Maps)

Maybe I should reserve judgement until the project is concluded, but I think that Moblog impresario Alfie Dennen may have surpassed himself with the Britglyph project.

The plan seems to be use a combination of GPS and digital photography to map out a geoglyph, a large drawing on the ground, using geeks around the UK to make up the points in a kind of join-the-dots exercise on a massive scale. 

The image that people will create, basically by dropping stones on the ground and pins in a Google Map with images attached, is of John Harrison‘s Chronometer H5, the 18th century technological marvel that gave us an accurate way to measure Longitude.

 

An excerpt from the lost graphic novel: Chronometer to Crack Up: The Fall of John Harrison

The project seems to be in part to promote Shozu, a mobile software application which, as Lloyd Davies pointed out in a comment yesterday, can be set to automatically attach a geotag (location reference) to photos that you upload to Flickr, and possibly elsewhere. 

I grew up partly in the Vale of the White Horse, the white horse being one of the oldest geoglyphs in the UK. I recall that people said it used to be a serpent until King Alfred‘s soldiers carved legs on it to celebrate a major battle – but I can’t find any trace of that story on Wikipedia or other websites.