Who knew what at Lending Club?

People are usually told that knowledge equals power, but in business, knowledge — and a failure to disclose that knowledge — can be a dangerous thing that leaves you unemployed.

That seems to be the story of what went wrong for Renaud Laplanche, the former chief executive of Lending Club, America’s largest online lender. He was reportedly not as forthcoming as the board would have liked on what he knew about the missold loans to Jefferies. Combined with his failure to properly disclose an interest in a fund which the company decided to invest in, it made his position untenable.

Lending Club’s 10-Q filing on Monday now blames the “tone at the top” for the missold loans, which is also what Valeant’s board said after Mike Pearson was ousted. It also says that the board “did not have the information required to review and approve or disapprove investments” made by Laplanche and a board member — John Mack — in Cirrix Capital, a holding company for funds that invest in Lending Club loans. Read more

Markets Live: Tuesday, 17th May, 2016

Live markets commentary from FT.com 

More decentralised autonomous organisation (DAO) mysticism

We’ve flagged cryptocurrency enthusiasts’ distinctly mystic beliefs in spontaneously emergent headless organisms before.

Now something called the “Decentralised Autonomous Organisation” — The DAO, not to be mistaken with Tao — project has begun to attract actual column inches in mainstream publications, albeit in keeping with the new style of journalism… i.e. devoid of critical evaluation and taking all claims at face value.

The DAO is currently raising Ether tokens (the pre-mined currency of the Ethereum blockchain, itself funded via a bitcoin capital raising) — $110m at mark-to-market rates today — in exchange for DAO, a token which “grants its holder voting and ownership rights.” As Techcrunch put it, holders of DAO “can use their tokens to vote on big governance issues (akin to traditional shareholders) but also on minute details of how The DAO spends its resources. In this way, token holders have total control over The DAO’s assets and its actions.” Read more

FT Opening Quote

LandSec is cautious ahead of the Brexit vote, Vodafone expects earnings to blossom from Project Spring, Premier Foods is back in the black. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Tuesday

- Do interest rates matter to bank profitability?

- If you’re a startup, profitable can mean whatever you want it to mean.

- Homer Jones shared his first financial report 55 years ago.

- Trump’s profit-motivated supporters cash in on his political success.

- North Korea’s one-percenters savor life in cosmopolitan ‘Pyonghattan’Read more

FirstFT – Buffett takes a bite out of Apple, the battle to beat the bugs and the allure of the strongman leader

The renowned value investor has taken a $1bn-plus stake in the technology company Read more

Smartphone gluts and inadvertently hoarded iPhones

Anxieties over a “Peak Apple” moment in markets eased temporarily on Monday when it was revealed Warren Buffett’s Berkshire Hathaway had taken a stake in the Cupertino company valued at more than $1bn.

Nevertheless, concerns about Apple’s capacity to keep the world hooked on its products have not been entirely eliminated. Some in the market are still digesting news that chipmaker TSMC cut production targets because of weaker demand expectations in the second quarter. Others, meanwhile, fret over whether the iWatch and other new products will ever achieve the mass appeal of the iPhone.

If that’s the case we could soon see Apple stock being valued less as a flashy growth-focused tech stock (where the attention is on product launches) and more as a boring old non-cyclical (where the attention is on product lifespans and upgrade cycles). Read more

“Welding student Oliver Smith had one of the mega boxes and said it was a benefit to the area”

Endless pixels are spilt discussing the digital evolution/revolution/degradation of media. Here’s a fresh example of the New Journalism. Courtesy of Katie Martin, a live blog covering the opening of a KFC chicken shop in Nottingham…

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The online lending hangover, part three

Last year, online lenders were generally spending their time raising eye-watering sums of money and talking about how great the champagne tastes.

This year, they’re busy firing employees, getting in trouble with Wall Street and getting used to the taste of water. Read more

Markets Live: Monday, 16th May, 2016

Live markets commentary from FT.com 

FT Opening Quote

ICAP is renaming itself NEX, British Land profits are up 16 per cent, the CBI has cut its UK growth forecasts. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Monday

- Nassim Taleb’s Black Swan theory pulled apart, again. Read more

FirstFT – Nato’s vulnerable spearhead, a scare at Old Trafford and the spy who vanished

Alliance’s new ‘spearhead’ rapid reaction force could not be deployed in eastern Europe if there was a war with Russia Read more

What if Greece got massive debt relief but no one admitted it? (Part 1)

Time is a flat circle, which is why the Greek government is set to run out of money before debt payments are due to the European Central Bank in July — just like last year, and despite last summer’s supposed deal between the Greek government and its various “official sector” creditors.

As before, the immediate cause of this latest crisis is the persistence of disagreements about the size of the budget surpluses (excluding interest) the Greek government is expected to generate, the specific “reforms” the government needs to implement, and the need for debt relief. The fundamental cause, however, is that the Greek government can’t raise money from the private sector at reasonable rates.

Why? Read more

When you take the slack out of the system bad things happen

In today’s highly fragmented, personalised and noisy news environment, you may have missed the story that on Monday, May 9, the breakdown of several old power stations led to a growing deficit in the UK wholesale electricity market leading the National Grid to issue an emergency request for more supplies.

Prices spiked to £1,250 per megawatt hour accordingly, relative to a price per MWh in summer that’s usually closer to £50.

It’s a significant phenomenon, and one worth paying attention to not least because of what it says about the efficiency of capital allocation in the UK. Read more

How to steal a cyber billion swiftly

As reported in the FT on Friday, a fresh cyber attack has been identified by Swift, the bank transaction messaging system, potentially linking the recent theft from the Bangladesh central bank to the data breach at Sony in 2014.

At the heart of the attack was a “sophisticated knowledge of specific operational controls within the targeted banks — knowledge that may have been gained from malicious insiders or cyber attacks, or a combination of both.”

But also… a bit of malware which targeted the bank’s PDF reader.

As we’ve had it explained by Swift on Friday, the malware essentially created a decoy interface which obfuscated the true state of underlying accounts, ensuring the spent transactions went unnoticed by the impacted institution for longer than would otherwise be normal. Read more

What happens if Lending Club goes out of business?

There’s a headline that would have been unthinkable just a week ago, even if it’s a question posed on Lending Club’s site.

To be fair, it’s still unthinkable — the company had $868m in cash, cash equivalents and securities as of March 31 this year — but with the shares having nearly halved in just a week, now seems as good a time as any to check the fine print.

Conceptually, the demise of Lending Club shouldn’t matter to buyers of the company’s loans. In a peer-to-peer or marketplace model, loans are passed straight through to investors, who have a direct, if fractional, claim on the principal owed by that borrower and any interest due, minus any charge owed to the platform facilitating the sale.

That’s the idea, but it’s not exactly how things work in practice. People who buy loans from Lending Club aren’t really buying “loans” from Lending Club. It’s more complicated than that. Read more

Alphachat: oil and savings; and tax havens in… South Dakota?

Alphachat is available on Acast, iTunes and Stitcher. Read more

Some Lending Club news you might have missed because you were watching its shares crash and burn

You might recall that among Lending Club’s growing pile of problems is a class action lawsuit claiming the company illegally made usurious loans.

One Ronald Bethune of New York filed suit last month alleging that the online lender’s relationship with WebBank — where Lending Club loans are originated by the Utah-based bank and then sold through Lending Club to investors — was a sham designed merely to avoid state interest rate caps. Read more

Markets Live: Friday, 13th May, 2016

Live markets commentary from FT.com 

Who would buy London property in a market like this?

A chart from Deutsche Bank to soothe the minds of London’s middle-class millennials, whose only shot at owning property in the capital is probably the popping of the housing bubble/unfair destruction of an appropriately-priced market (delete as per your preferences):

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If you’ve already purchased a ticket for our festival, this will irritate the hell out of you

There’s a discount. Just for today.

And there’s a code: Friday13th. Use it here.

The authorities here had led the Alphaville team to believe there would be no special price reductions for the FT’s Festival of Finance (née Camp Alphaville) on July 1, at the Honourable Artillery Company, London EC1. There was supposed to be just one high-value rate: £120, including VAT.

That’s turned out to be rubbish. Read more

Further reading

Elsewhere on Friday

- BREXIT the movie?

- The effects of minimum wage on employment dynamics.

- “At this major car brand I worked for, we paid $300,000 for a few photographs because the CEO’s kid liked someone.”

- #FirstWorldProblems. Millionaires humiliated by billionaires in Hualalai. Read more

FirstFT – Second bank hit by cyber heist, lunch with Sean Penn and the British spin-doctor doing Beijing’s bidding

Swift has warned of a second financial cyber attack, mirroring one of the biggest ever robberies earlier this year at the Bangladesh central bank Read more

Lending Club’s woes stem from a deeper issue with online lending

Why did Lending Club invest in a fund that bought its own loans? Well, just to spell it out, and via the Wall Street Journal: to juice demand:

LendingClub Corp. and its chief executive invested millions of dollars in an outside fund in part to boost demand for the company’s loans at a time of market stress, people familiar with the matter said. Read more

Markets Live: Thursday, 12th May, 2016

Live markets commentary from FT.com 

Further reading

Elsewhere on Thursday

- Societies “more accepting of ambiguity” prefer market financing to bank financing.

- Trump, modern monetary theorist.

- “Hermione,” Ron said quietly, “what’s a tax shelter?”

- Workers in the US poultry industry are horribly mistreated.

- “The new fight over Cabbage Patch Kids has sabotage, choke holds, and slurs.” Read more

FT Opening Quote

TalkTalk profits have been hit by its cyber attack, ITV ad revenues are suffering from Brexit jitters, Mark Carney could add to them today. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

FirstFT – PM avoids debating Johnson, London’s dirty secret and the airline cabin class war

Downing Street indicated that the prime minister would not take part in any head-to-head encounter with a Conservative colleague Read more

Google gets that old-time religion

Exodus 22:25:

If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.

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