US regulator mulls crowdfunding as a way to jumpstart economy.

FT: “….The best deal – at a rate of 10 per cent – came not from a bank, but from Zopa, the UK’s first peer-to-peer lender. “Anything I can do to make a stand and move my money away from my bank is a good thing,” says Ms Robinson. “I can’t understand why bankers haven’t received prison sentences for what they did in the financial crisis.”
“The global credit meltdown may have shattered public faith in mainstream financial institutions by those like her in need of funding, yet it could not have come at a better time for the fledgling and fast-growing P2P loan industry.
In less than a decade a handful of crowdfunding websites around the world have provided billions of dollars’ worth of small loans to individuals and businesses by matching investors with needy borrowers and offering better rates than banks.
Yet as the sector grows, it is attracting the interest of the mainstream financial industry that it professes to undermine. First in the US and now in Europe, P2P is being co-opted by professional investors and even banks themselves.
….Global regulators are also beginning to scrutinise P2P lending as they explore its potential. Last week, for instance, the Federal Reserve Bank of New York hosted a meeting to discuss the role crowdfunding can play in jump-starting the US economy.
But other organisations are questioning whether the phenomenon is the next evolution of responsible banking or a financial wild west in need of tougher oversight.

The use of technology also nets lower rates for borrowers and higher returns for lenders. At a time when average personal loan rates in the UK are hovering at about 6.3 per cent, Zopa advertises a borrowing rate of 4.9 per cent.
….The appeal has not been lost on Silicon Valley. This month venture capitalists, bankers, traders and investors flocked to San Francisco to mingle with the global P2P industry in the second annual LendIt conference.
“Every banker and most venture capitalists were there – from Goldman Sachs, Credit Suisse to JPMorgan, Barclays, Bank of Montreal and more,” says Ron Suber, president of Prosper, the second-biggest P2P platform.
….Investors have also applied one of Wall Street’s most infamous techniques to the sector. Last October a New York-based hedge fund “securitised” about $53m worth of P2P loans from Lending Club, repackaging them into bonds that could be sold to a wider array of investors.
….In China, where nearly 1,000 P2P companies operate, dozens have collapsed in recent months as borrowers struggle with debts in the midst of an economic slowdown, according to research by Celent consultancy.
….More than 60 per cent of the loans facilitated by Prosper and Lending Club are now thought to be funded by big institutional investors such as hedge funds and wealth management firms.
Even in the UK, where the crowdfunded lending landscape remains dominated by retail investors, the British arm of Santander is in talks with Funding Circle.
The industry’s partnership with bankers is viewed with suspicion by many. There is disbelief that an industry that once claimed to want to avoid large financial institutions is now teaming up with them. Some have suggested that investment through P2P lending might be a way for institutions such as banks to circumvent regulatory requirements.
….There was little actual reference to P2P lending in San Francisco this month. Executives are moving away from the term in favour of “direct consumer lending”. Now, as the sector booms, it is time for another rebranding: “marketplace lending”.”