Articles by deBanked Staff
Want to Avoid Another Crisis? Break Up The Banks, Fed Official Says
February 16, 2016
How to avoid another financial catastrophe?
Breaking up the big banks is one solution, according to the newly-appointed Minneapolis Fed chief, Neel Kashkari.
Pushing for a radical shakeout in corporate banking, Kashkari on Tuesday urged Congress to ensure that banks hold enough capital to not fail. The former investment banker with Goldman Sachs said the post-crisis regulation, Dodd-Frank is limited and does not go far enough in safeguarding against the ‘Too Big To Fail’ (TBTF) risk.
“Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all,” he said.
As a part of this bold transformation, Kashkari proposed options such as breaking up the big banks into “smaller, less connected, less important entities,” taxing leverage to reduce systemic risks and turning banks into public entities by forcing them to hold large amounts of capital.
Kashkari joined the Treasury in 2006 and headed the Troubled Asset Relief Program and managed banking and auto bailouts during the crisis. He also ran for Governor of California in 2014 as the Republican candidate but lost to the incumbent Jerry Brown.
He took over at the Minneapolis Fed in November last year and plans to develop an actionable plan to end TBTF to be delivered by the end of this year.
“Doing everything we can to address the systemic risks posed by large banks will be an important step to fulfilling that mission,” Kashkari added. “Seven years after the crisis, I believe it is now time to move forward and end TBTF.”
SoFi Dating App Will Take On “Loanly-ness” (Here’s How That Might Look)
February 16, 2016SoFi is apparently serious about creating a dating app for their members. That might seem a little weird considering they’re a company known for refinancing student loans. But according to Inc, Claire Arthurs, SoFi’s Director of Community and Member Success, is planning events in the nation’s big cities to bring singles together. And it’s all because their borrowers are demanding it. Eighty-six percent of attendees at an initial small event said they wanted to meet someone from the event again, Arthurs said to Inc.
Meanwhile, most listeners to SoFi’s CEO Mike Cagney on the re/code decode podcast undoubtedly assumed he was joking about a dating app. But now, rumor has it that they may actually release such an app later this year.
Naturally, deBanked saw this as an opportunity to offer our thoughts on how the SoFi dating experience might play out:
When literally nothing else has worked for your love life
For late night liaisons
If you’re old fashioned
When it’s more than just looks
When you’re trying to be romantic
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We hope you enjoyed them.
After CEO Exit, California State Probes Zenefits
February 12, 2016
The California Department of Insurance will investigate the San Francisco-based human resources software startup Zenefits after the exit of its head Parker Conrad earlier this week, amidst a regulatory compliance scandal.
Zenefits sells cloud-based human resource software for payroll, talent management and health insurance. The startup, founded in 2013, was touted to be one of the fastest growing companies in Silicon Valley with marquee investors like Andreessen Horowitz, Institutional Venture Partners and Fidelity Management.
The company, valued at $4.5 billion, let health insurance reps fake the mandatory 52-hour training course that is legally required to sell insurance. “After they faked the training course, sales reps were directed to sign a certification, under penalty of perjury, that they had spent the required 52 hours doing the work,” according to Buzzfeed News.
California Insurance Commissioner Dave Jones, in a statement, revealed that the department started probing Zenefits last year. “The recent resignation of Zenefits’ CEO Parker Conrad is an important development, but it does not resolve our ongoing investigation of Zenefits’ business practices and their compliance with California law and regulations,” said Jones.
The company’s COO David Sacks (pictured at right) has replaced Conrad as the CEO.
The Zenefits scandal brings to light Silicon Valley upstarts’ tendency to play fast and loose with regulation and compliance.
Transaction Successful: Visa Buys 10% Stake in Square
February 12, 2016
Visa just bought a 10 percent stake Jack Dorsey’s payment company, Square.
The payments network revealed an SEC filing announcing its 9.99 percent stake in the company and Square’s stock jumped 11 percent at market opening. Visa seemingly upped its stake, from the previously undisclosed investment it made in the company in 2011, according to CNNMoney. The deal makes Visa the fourth-largest investor in Square following Jack Dorsey himself, venture capital firm Khosla Ventures and major mutual fund, Capital Research and Management.
Square was started in 2009 as a point of sale solution for merchants. It turned heads with $10 million in Series A funding from Khosla Ventures and Marissa Meyer at a $40 million valuation. Since then the company has diversified into p2p payments with Square Cash and Square Capital, offering merchant cash advances to small business merchants.
The company went public in November 2015 and debuted on NYSE with a 30 percent discount, pricing its share at $9.
As it tries to gain a foothold in the competitive payments space, this fresh infusion of capital comes as good news for the stock which has generated close to 27 percent losses since its IPO.
Real Estate Lender Patch of Land Sells $250 Million in Loans
February 11, 2016
Real estate lending platform Patch of Land announced that it signed a $250 million agreement with an east coast based credit fund to purchase its loans in a forward flow arrangement.
The reluctance to name the city or state of the fund suggests that in doing so would too easily reveal who it is.
Patch, an LA-based lender which uses a data-driven underwriting model, promises investors a risk adjusted return with extensive available data to support the underlying credit decision on each loan.
The company founded in 2013 had raised a million in seed funding and $125,000 in debt in 2014, followed by $23 million in Series A funding last year. And it has funded more than 200 projects, with an average blended rate of return to investors of 12 percent
This is continued evidence of institutional interest in loans generated by marketplace lenders. JP Morgan Chase bought loans worth a billion dollars from Santander Consumer USA Holdings Inc earlier this month. The bank also partnered with OnDeck in December of last year to facilitate the underwriting of the bank’s small dollar small business loan program.
In an interview with Bloomberg, Funding Circle’s CEO Sam Hodges said that it’s the first of many such partnerships to come where big banks will realize the potential of fast-growing fintech startups.
Lending Club nets $4.3 million in Q4 profits
February 11, 2016Wants to buyback shares for $150 million.
Online lending marketplace Lending Club earned $4.3 million in profits in Q4 last year and facilitated loans worth $8.4 billion to small businesses and consumers in 2015.
The San Francisco-based P2P lender’s revenue grew in Q4 grew by 93 percent to $134.5 million compared to $69.6 million in the comparable period a year ago. Loan originations also grew to $2.58 billion from $1.41 billion in 2014.
The company, which was the first P2P lender to register its offerings as securities with the SEC is gung ho about its growth prospects. “We have earned the trust of 1.4 million customers,” said founder and CEO Renaud Laplanche. “We have considerable room to grow our existing products, and intend to continue to expand both our product line and addressable population going forward.”
The company which announced that it will also buyback shares worth $150 million through open market operations or in private transactions in compliance with Securities and Exchange Act Rule 10b-18.
This comes amidst doubts raised about the company’s algorithm-based lending model. A Bloomberg report last week questioned Lending Club models with data to show that its actual defaults (7 to 8 percent) were higher than forecasts (4 to 6 percent). The company responded to the report explaining the data and reassuring investors that the loan performance is within expectations.
Bizfi Welcomes Record Quarter, Raises Equity
February 10, 2016
Bizfi, the marketplace lender for small businesses, originated a record $142 million in business financing in the last quarter of 2015.
Formerly known as Merchant Cash and Capital, they have financed over 27,000 small businesses through their proprietary marketplace with over $1.4 billion since 2005. They rebranded to Bizfi in 2015 and raised $65 million from Metropolitan Equity Partners for adding products and speeding up funding.
When company founder Stephen Sheinbaum was asked by deBanked about the possibility of exploring personal loans, they said they would only do that through their partnerships with companies like OnDeck, Funding Circle and Kabbage. Sheinbaum also said that they were considering referrals and marketing tie-ups with some of these companies.
Bizfi’s lending platform provides a host of funding options like short-term financing, medical financing and lines of credit. The company plans to add more partners enriching their product offerings, among other plans. Alluding to immediate growth plans, Sheinbaum said that the firm will raise institutional equity this year along with augmenting the underwriting process to attract more customers as well as forging new partnerships.
American Express wants to lend more to small businesses
February 10, 2016American Express hopes to tide over the bitter credit-card deal with Costco by lending to small businesses.
The two companies ended their 16-year partnership when Costco joined hands with Citi in March 2015. This June, customers will receive their Costco-brand Visa credit cards.
AmEx wants to turn its focus on what it is already familiar with — small business loans. In 2014, AmeEx cards for small businesses funded $190 billion in purchases, up from $122 billion in 2010, with enough reason to believe that there is room to grow the business.
AmEx hopes for the small-business loans to make up for the lost revenue from the Costco deal which accounts 20 percent of the company’s outstanding loans, according to a Reuters report.
