Hey... PA Securities Commission, You Suck!

If there is anyone who's been reading regularly, sorry for my lack of posts over the past week.

October marked the beginning of a new fiscal year for my employer and I had some remaining stuff for the last month of FY'07 to finish up.

That said, I began the work week figuring I better focus on my actual job so that I don't lose that along with my freedom to invest my hard earned dollars on Prosper.

-Plus we got a new family dog last Saturday which resulted in a pretty lively week at home.

We had to drive to Columbus, Ohio on Saturday to pick her up. Man is she a cutie! If you've never heard of OHIO before, you may recognize it as one of the six states that border Pennsylvania.

Still ringing no bells? Let me try again, it is one of six states, along with New York, West Virginia, Maryland, Delaware, and New Jersey, all bordering Pennsylvania and all from which you CAN LEND ON PROSPER.

The whole Prosper thing was lingering in the back of my mind all week, ebbing and flowing in waves of bitterness. Every so often I logged into my Prosper account, observing growth, observing earnings, and shaking my head in disgust.

I had four late loans at the beginning of the week. I logged in this morning and it was down to two. That rocks. These borrowers rock. I believe in these people. I believe in people. I'm glad I was able to help these couple of people while I had the chance. They're definitely helping me. I wish I could do more. They're helping me, I mean my employers stock has lost 40% since January! I'm cool though... my 401K has been in cash equivalencies for quite some time. Gawd forbid I have an opportunity to earn anything though.

Thanks again for your "protection" PA Securities Commission. Your notion that you're protecting us is insulting!

So yeah, thanks again.

Government, you're not always the solution... too often you're the problem

In last night's Vice Presidential debate, Governor Sarah Palin said something when commenting on Senator Biden's idea of Patriotism as it relates to taxes.

I love what she said! -I think it's true. I also think it could definitely apply to government regulators prohibiting citizens from an opportunity to earn worthwhile returns, as we are seeing here in Pennsylvania.

(Never mind the fact that our earnings on Prosper investments are taxable as regular income! -but that's a tale for another time.)

"Patriotic is saying, government, you know, you're not always the solution. In fact, too often you're the problem so, government, lessen the tax burden and on our families and get out of the way and let the private sector and our families grow and thrive and prosper."

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Just to Be Clearer-er: Seriously, It's Security Regulations

I've seen, heard, and received a couple of inquiries questioning and/or tying the prohibition of Pennsylvanians from Lending on Prosper to the Pennsylvania Department of Banking and the 6% rate cap.

The rock you want to look under though, is security regulations, and the Pennsylvania Security Commission's interpretation of said regulations.

(You might want to look at past posts here, here, and here.)

It seems that the biggest culprits in the dissemination of this information are the responses folks are receiving from their Elected Pennsylvania Officials.

My take is that for the most part, our State Representatives and Senators don't really know what is going on with Prosper, and probably aren't even in tune with the presence of, or the growing demand for p2p lending. Something that by the way, is not a big secret. -It's only a Google search away!

Instead, it probably goes something like this:

An Email from a frustrated Pennsylvanian hits their inbox.

They give the email a quick once-over.

A sip of coffee and a crumbling bite of danish later, it dawns on them that as an elected official, they should probably take a closer look.

Leaning towards their monitor, they zero in on the word "Lending".

The wheels start turning. Stroking their chin, they think, "Lending? ... Money? ... Hmm ... ... Hey! Banks lend money!"

They reach across their desk, crumbs spilling into their keyboard, and hit the intercom, "Hey, I need someone to call the Department of Banking to see what this 'Prosper Internet to Peer Lending' thing is all about."

The result is an email response from a staffer pointing out that 'Pennsylvania discourages Pay-Day-Loans of any type!' -and maybe a link, but at least mention of the Loan Interest and Protection Law (Act 6 of 1974), and the Consumer Discount Company Act (Act 66 of 1937).

So Just to be Clear:

This whole situation does NOT have to do with Banking Regs.

It has everything to do with Securities Regulations and the Registration of Promissory Notes as Securities.

Prosper was even kind enough to provide the following statement on The Official Prosper Blog, dated 9/22/08:

In response to inquiries regarding the origin of the decision to discontinue lending activity in Pennsylvania, we would like to clarify that this decision relates to the Pennsylvania Securities Commission’s interpretation of Pennsylvania securities regulations. Due to the confidential nature of our discussions with the Commission, we cannot disclose any further information about our discussions, other than to say we respectfully disagree with their interpretation and are attempting to work with them to address their concerns.

So if you are just picking up on pa4pl, or the situation in general, I hope this saves you some time, and provides some direction.

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Venting! - Follow Up.

First off, I hope I didn't offend anyone with my rant of a post on Friday.

I was thinking about going back in to censor it because well, I swore.

I did it. I admit it, I said a swear word. Sorry! Sorry everyone.

In case you haven't read the entry, I said "B.S."

I said it, despite an honest effort at keeping this thing rated "E" for Everyone. I am after all, a dad myself. I have two little guys at home. They're four and seven, and considering the amount of time & discipline it took me to clean up my vocabulary in the first place, I'm not about to use this forum as a gateway back to that foul habit.

Ultimately, I decided against censoring it because I figured that generally speaking, this blog is WAY to boring to hold any sort of audience under the age of 18.

Besides my abject language, I was also very sarcastic. Especially when it came to Pennsylvania's state motto. As far as my sarcasm goes, I'm usually a sarcastic jerk as it is, and I quit making apologies for that a long time ago.

For the record, I love PA. I think we have a great motto, and while I grew up here, I moved back to Western PA after 10 years by choice because I personally could think of no better place to raise my boys.

To get back on topic, and in case anyone hasn't noticed, I am swinging back and forth like a heavy brass pendulum on this whole issue.

One day I'm frustrated with the Pennsylvania Securities Commission and the next, I'm frustrated with Prosper.

I am frustrated at the PSD for acting not only in the minority and prior to any apparent definitive on the subject of registration. But I'm also frustrated with their obviously heavy-handed manner in dealing with Prosper. All of to which Prosper just said, "Forget it!".

Leaving all Pennsylvanians prohibited from lending, and for screwing existing PA lenders along the way. To be clear, I blame PA Regulators for the prohibition and I view Prosper as doing what they had to do.

Where I'm frustrated with Prosper is for not having their ducks in a row in the first place.

Now I don't know what's happening behind closed doors. Though I will say, if Prosper is not working to return things to normal for us, and by "normal" I mean allowing us to lend again, then they really need to buy our notes back from us with interest.

Because, like I mention in my post on Friday, PA Lenders are still in the Prosper marketplace, but we are not equals among our lending peers. Everyone else can expand and diversify their portfolios. Everyone else can compound their principle and earnings. We can't!

As for myself, I was going to lend to riskier borrowers (C, D, E, and even HR) until any single loan was less than 2% of my portfolio, and then I was going to shift to the better credit grades. I don't know if that's the best strategy in the world, but it's what I was doing. I never made it that far. Each loan is currently around 4.75% of my portfolio and they're all riskier.

Prosper, if you're trying to return things to normal, great! I hope you are. Get your sh!t together and let us know. (Oh, crap, I did it again!)

If you, Prosper, are not working to return things to normal, then I think it's kind of crappy that you haven't offered to buy our notes back from us. It should at least be an option.

So as for my bipolar focus and for my jumping from one to the other, all I have to say is: That's what happens when you're stuck in the middle. -And that is what we PA lenders are. We're stuck in the middle of this nonsense.

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Venting! - Oh, and have you seen the PA State Motto?

Needless to say this situation is painful and frustrating for Pennsylvanians who have already invested in Prosper.

We are essentially stuck in limbo, a BIG, FAT, STINKY limbo! -and there seems to be no one, or no organization advocating for our loss of rights.

What rights?

What rights? Well, let's see, if you are a Prosper "Lender" and you live in Ohio, Colorado, Arizona, California, Alabama, Wait a sec!

-why on Earth am I attempting to list the states where you CAN lend? It makes no sense! Silly me!

Why list the 48 states whose securities regulators seem to have no problem with respecting their adult citizen's rights and freedoms to invest their hard earned money, to assess and assume risk like the free adults they are.

It's much easier to just point out Pennsylvania, as one of only two states who do not regard their adult citizens in the above light. Who, in the name of "Protection"? -interfere in freedom and choice!

-Hey guess what? -I don't need your protection when it comes to my money! -and I assume others don't as well!

We know the risk, and those who are willing WILL, and those who aren't willing WON'T!

We're adults and we're not idiots! -and even if one or two idiots slip by, we're still adults!

I mean, I personally have a degree in economics, I've held a Series 7, and a Series 66 stock broker, and financial advisors license! I've studied risk! I'm not a "risk adverse" investor! -and I know the difference between being a risk adverse, risk neutral, or risk willing investor!

-and I know enough about it to know that people are inherently one or the other, and that people behave accordingly. That's one reason out of many reasons why we don't need your intervention, and your protection!

But never mind me!

My point is: the rights that we, as PA Lenders no longer have, the rights and abilities that we have been stripped of, that we've been deprived of, in direct relation and comparison to investors in other states, are the rights and abilities to:

• Expand our portfolios by purchasing new notes;
• Diversify our portfolios by purchasing notes of different credit ratings;
• Compound our earnings

All investors, from all other states, less one other, have these abilities!

These abilities are CORE INVESTOR ABILITIES!

A loss of ability is a handicap! A loss of ability is a disability!

So Pennsylvania lenders are now left crippled in the Prosper Marketplace!

Yet no one, and no organization is advocating for us!

(Man, if I could scream in print I would certainly have screamed, with my face red, and my veins popping those last few statements!)

The Pennsylvania Securities Commission claims to be taking their actions to protect consumers.

Well I say Bullshit -and please pardon my language, and I mean that sincerely, but I'm just calling it for what it is. It's utterly bold and transparent B.S.

Hey PSD! You're in a huge minority! and you're trampling and depriving us of rights and abilities that others in the exact same marketplace are enjoying!

-like I said above, you've crippled us, you've cut those of us who have already invested off at the knees!

You've left us suspended in limbo, gagged and bound in the same financial landscape where others are free to enjoy the full range of investor abilities.

How about protecting those of us who have already invested in Prosper!

I love Prosper, and I love the concept of Americans investing in other Americans, so I mean the next statement in a rhetorical way, but why aren't you taking some form of action against Prosper, who in your autocratic opinion was committing securities fraud!

-and PA Senators & Representatives why don't you quit reiterating the PSD's lame, and insufficient excuse of "protecting consumers". It's nonsense and you know it! All I can say is, How Freaking Typical!

Well, here's the cherry-on-top:

How about the Pennsylvania State Motto. Is anyone else aware of this?

It's three simple, yet meaningful words, -and it's hard to read them without conjuring up an image of the brightest red, white, and blue American flag you've ever seen! -swaying and rippling with symbolic freedom in the breeze of a beautiful bright blue sky. (In fact, everyone, before proceeding, please take a moment to pause, stand up, place your right hand over your heart and say the Pledge of Allegiance. ".....with liberty and justice for all.")

Okay, you may now proceed:

Virtue, Liberty and Independence

Laughing, gripping my head in the blatant hypocrisy, and turning to dictionary.com,

We see that...

-Virtue is a beneficial quality, or advantage.

-Liberty is freedom from control, interference, obligation, restriction, hampering conditions, etc.

-Independence is freedom from the control, influence, support, aid, or the like, of others.

All I can say is, WOW!


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