LendingClub IPO mixes disruption with confusion

September 4, 2014

The peer-to-peer lender is growing fast, with fans ranging from John Mack to Larry Summers to Google. But it’s struggling to turn a profit, lacks some advantages of traditional banks and has yet to be tested by an economic slump. Investors need to know whether it’s fish or fowl.

Loan hangover will cast pall over European buyouts

December 2, 2011

Banks have been caught out again. As in 2008, loans for European private equity deals have proved hard to resell or refinance in the bond market. Today’s backlog is smaller and the financial hit is modest. But new buyouts can expect less debt, higher rates and tougher terms.

US housing recovery shows subsidies need trimming

May 17, 2012

Recent strong data, including property prices, suggest the market is bottoming. It’s cheap to borrow, too. Mortgage interest tax deductions and above all loan guarantees look ripe for cutting. The cash saved could then be put to more productive uses.

China’s U.S. home loan risks being a subprime idea

June 27, 2012

China Development Bank may lend Lennar $1.7 bln to build two housing projects - one on a polluted man-made island in an earthquake zone. It has all the hallmarks of globally distorted economic incentives forcing yield-starved investors to take risky bets they don’t understand.

U.S. student loan fix robs the old to pay the young

July 16, 2012

To keep borrowing rates low for education, Congress is using some devilish hocus-pocus. An accounting change will allow employers to kick in less to a pension guarantee fund. That could leave Uncle Sam owing more to retirees while also increasing taxpayer risk on student debts.

CDB highlights China’s dysfunctional finance

January 8, 2013

China Development Bank raised $193 billion in 2012 to fuel an unusual mix of vendor financing, M&A lending and infrastructure loans. While it has a legitimate part to play in China’s growth, the policy bank’s habit of undercutting rival lenders smacks of capital misuse.

Lending squeeze tests faith in China’s authorities

June 20, 2013

A spike in interbank rates has raised fears of a 2008-style meltdown. China’s closed and state-controlled financial system has a better chance of averting a crisis. But policymakers can make mistakes. The lack of transparency means even a small slip could undermine confidence.

China’s PBOC serves reformists an amuse-bouche

July 22, 2013

The central bank has allowed banks to lend as cheaply as they like. That smells like liberalisation, but it’s no more than a tasty morsel. Banks could even end up weaker, if rates fall for well-connected borrowers. The real meat, relaxing deposit rates, is still off the menu.

Imagine a world without debt

August 7, 2013

Banks need to raise equity to bear possible loan losses. Why not replace loans with securities that take losses naturally? Wait, these exist today, with gainsharing and inflation protection. Shares, or something similar – call it flexi-debt – are the key to crisis-free finance.

GM readies its bailout defense

November 16, 2009

There's little downside to accelerating the repayment of the loans. The much feared implosion of the auto industry following the bankruptcies of GM and Chrysler failed to materialize, leaving GM in a better position than it had estimated. And repaying the loans earlier certainly helps GM. The interest rate on government debt is an expensive 7 percent a year, executives noted on a conference call.