Forbes – Caveat Emptor Banking: Peer-To-Peer Lending Challenges Too-Big-To-Fail Status Quo

Imagine a financial institution that the government cannot deem too big to fail, requires no deposit insurance, can never be subject to a run, needs no lender-of-last-resort support by a central bank, cannot become overleveraged, suffers no maturity mismatches between assets and liabilities, is immune to interest rate manipulation, can never subject the rest of us to systemic risk, offers quick approval of unsecured personal and business loans at market rates, and provides yield-hungry investors with a way to build individualized debt portfolios based on risk models of their own choosing.

It’s called peer-to-peer lending, the latest innovation shaking up the financial industry. It will be interesting to see how long it lasts before Washington’s out-of-control regulatory regime attempts to crush it—and what happens afterward if they do.

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