A really fine piece Robert. A couple of reactions:

-I agree with you that p2p lending is an innovative concept. I do fear that your excellent indictment of proper.com's specific implementation will be read as reason to dismiss other more viable p2p models.

-As of today, Prosper.com's performance as per the link you provided is notably worse than when you wrote the piece. As unemployment continues to rise and middle- and working-class citizens keep struggling, I expect this trend to continue.

-At the same time, the "spread" between what banks pay savers and what they charge typical borrowers has never been greater. Small business loan and credit card rates keep soaring, when they're still available at all...yet the deposits used to help fund these loans costs banks less than one percent in interest. These provides a greater than usual opportunity for those who would act as intermediaries between borrowers and savers without needing such a massive spread to stay afloat. I'm thinking of models like the Grameen Foundation at http://www.grameenfoundation.org/ , or community based credit unions that focus on local "meat and potatoes" lending, complete with careful underwriting. If models like these received even a fraction of the government support currently given to the largest banks, they could do a great deal to revive the economy on a much more sustainable basis than would programs like cash for clunkers, homebuyers tax credits, and bailouts for megabanks.

In any case, thanks for giving FiLife readers good reason to pause and think before giving their hard-earned money to flawed models like prosper.com's .