Lending Club Blog

Banks Still Not Lending to Sound Borrowers

This morning most news media outlets reported their reactions to remarks made earlier by Federal Reserve Chairman Ben Bernanke at a bankers conference in Chicago.  Although reporters do not seem to agree on what it all means, two clear statements about bank lending came out of it:

  1. Credit remains tight and banks are still not lending to sound borrowers.
  2. Bank lending continues to shrink despite massive government efforts.

Perhaps Bernanke does not know yet about Lending Club, but the exact opposite is happening here: first, Lending Club rates are designed to reward creditworthy borrowers with better rates on personal loans; and second, our volume continues to grow at a 5-10% rate every single month to date: in April alone, Lending Club issued more than $9.5 mm in loans.

Here is a round-up of media coverage of Bernanke’s remarks so you can make your own assessment:

Associated Press: “Banks should make loans to sound borrowers” by Jeannine Aversa
The Wall Street Journal: “Bernanke warns of small-bank risks” by Luca Di Leo
Market Watch: “Bernanke optimistic about bank lending outlook” by Greg Robb
The Economic Times: “US bank lending still shrinking: Bernanke
Reuters: “Bernanke sees more conservative securitization mkt” by Kristine Cooke
CNN Money: “Bernanke: Fed’s not waiting for Congress on reform” by Ben Rooney Bloomberg
BusinessWeek: “Bernanke sees ‘reasons for optimism’ on bank credit” by Scott Lanman and Vivien Lou Chen

What do you think it all means?  Leave us a comment below.

Follow    me

Thursday, May 6th, 2010 at 2:10 pm

Comments (9)

  1. I think the implications are clear, financial institutions are not
    sound yet. Housing bubble was large and it takes time to deflate.
    This means golden opportunity for alternative financial services,
    like you guys. Paying off credit card debt and social lending are
    ideas, that definitely should gain more attention.

    May 7th, 2010 at 12:50 pm

  2. Stan:

    This makes me so MAD, I think they need to audit the fed and start
    kicking these bankers butts!

    May 7th, 2010 at 3:23 pm

  3. Danielle:

    The Fed is working with other government regulators and investors
    to strengthen the infrastructure of key financial markets, he said.
    Among them are the market for securities repurchase agreements, or
    “repos,” and over-the-counter derivatives.

    May 8th, 2010 at 10:55 am

  4. Why would they lend? They got that money for pretty much nothing.
    Why take the risk if you get a profit for nothing.

    May 10th, 2010 at 4:51 pm

  5. thongsai:

    they are making money without lending risks.. so why change.

    May 11th, 2010 at 12:24 pm

  6. Tony:

    If a bank holds the public interest at heart, they should lend. How
    else can they survive without borrowers. Yes, they could keep
    getting money from bailouts, but their image will be ruined (as
    sachs is finding out) and new banks will emerge take their place.
    No one will trust the old banks. Without the public trust, they
    have no business calling themselves banks. This is why Lending
    Club, though not without risk, has a strong appeal to many levels
    of investors.

    May 12th, 2010 at 4:02 pm

  7. Well, here in Canada the government has pretty tightened mortgage
    rules (all borrowers must qualify for a five-year fixed-rate
    mortgage, even if they choose a variable mortgage with a lower rate
    or a shorter term), so we have experienced surge of buyers, but it
    will be increasingly difficult to borrow, especially for young
    people, no matter how willing our banks will be.

    May 17th, 2010 at 11:32 am

  8. In Canada, there is a large number of Canada Government Grants
    available for a multiple industries and types of businesses. In the
    US, I’m not sure.

    August 11th, 2010 at 7:50 am

  9. Jay Buckhanan:

    Outstanding observation! This is what we are all experiencing, but
    very few newspapers call it what it is.

    September 29th, 2010 at 4:43 pm


5 Ways to Get Your Finances Ready for the Holidays

How to Build a Budget: Part 1

The State of Debt: 2016

Types of Loans 101

See more
Lending Club Awards
  • Archives z

Recent Posts

5 Ways to Get Your Finances Ready for the Holidays

Read More »
December 1, 2016

How to Build a Budget: Part 1

Living on a budget. It can sound scary, right?… Read More »
November 21, 2016

Five Signs Your Business Needs Capital

Knowing when your business needs working capital— and promptly… Read More »
November 10, 2016

How does a car refinance loan work?

Whether your goal is to lower your monthly car… Read More »
November 2, 2016

Are you paying too much for your auto loan?

How refinancing your auto loan with a better rate… Read More »
October 25, 2016

The State of Debt: 2016

Politics can be a divisive topic, where issues and… Read More »
October 24, 2016

Lending Club Teams Up with United MileagePlus® to Offer Customers More

  When it comes to… Read More »
October 21, 2016

Patrick Dunne: A Message to Investors

I wanted to take a moment to introduce myself… Read More »
September 29, 2016

Line of Credit vs. Loan

Lines of credit (LOCs) and small business term loans… Read More »
September 28, 2016

Types of Loans 101

There are many types of loans out there and… Read More »
September 16, 2016


We went public today!

Ringing the bell this morning at the New York… Read More »
December 11, 2014

New and Improved Statistics Page

We recently redesigned our Loan Statistics page to make… Read More »
November 13, 2014

Lending Club Honored with Economist Innovation Award

This month I was honored… Read More »
October 15, 2014

Welcome Vermont Investors!

Today, we’re thrilled to welcome residents of the state… Read More »
September 4, 2014

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014
View All w