2. LendingClub, one of the largest fintech firms, attempts to match lenders and borrowers. Unlike some other fintech firms, LendingClub securitizes some of the loans it makes and sells them to investors. According to an article in the Wall Street Journal, it began to do that to "expand the pool of investors" in its loans. In 2016, its CEO was fired after LendingClub's board of directors learned that the dates on loans in some securities had been falsified. (a) What moral hazard problem do you face when investing funds on a site like LendingClub? (b) Is this problem increased or decreased if the site securitizes some of the loans it makes? Briefly explain.

2. LendingClub, one of the largest fintech firms, attempts to match lenders and borrowers. Unlike some other fintech firms, LendingClub securitizes some of the loans it makes and sells them to investors. According to an article in the Wall Street Journal, it began to do that to "expand the pool of investors" in its loans. In 2016, its CEO was fired after LendingClub's board of directors learned that the dates on loans in some securities had been falsified. (a) What moral hazard problem do you face when investing funds on a site like LendingClub? (b) Is this problem increased or decreased if the site securitizes some of the loans it makes? Briefly explain.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section: Chapter Questions

Problem 5TY

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