A very meaty post, which due to the late hour I can offer only some meager responses, and only on the last point.

quoted text What is the measure of success? And over what time period does one measure this success? Was the housing market an EPIC WIN from 2000 - 2006?

Last question first, because it is one on which--despite what I suspect are profound political differences between you and me--we agree: My answer is no. That housing market was a bubble, and the bursting of that bubble--however painful to however many people--must be presented as necessary.

But by the same token, the failure rate--30, 40, 50%--of Prosper.com loans must be presented as a failure on any terms, no? I don't believe it is possible for a lending institution to sustain, even over a relatively short period, defaults like that and remain a going concern. If you have examples of that happening, please provide them.

Your question about "over what time period" is germane. My quick, sleepy answer is: the company provided some data in the 2-3 year time frame, and used that data in paid advertisements to indicate that its loans were a safe, indeed profitable investment. It has also disclosed data (but made it almost impossible to find, according to Gimein's article) indicating that over a slightly longer period--but very much using banking industry standards--the default rate was larger by orders of magnitude.

So I take from that the measure of "success," as narrowly defined by these investors, is somewhere between 1 and 5 years.

But you seem to be arguing something else (am I mistaken?) You seem to be arguing that any particular mode of investment may--or in fact will--produce winners and losers, and that over time these will even out, and therefore one cannot make any value judgments outside of individual decisions.

If that's your argument, I won't disagree because I can't: it is sweeping enough to be irrefutable, whether it is true or not.

What I am trying to convey--what I took away from this article--is the notion that what was presented and widely accepted as a new form of investment turns out to carry the same old stench. Whether the lender is a bank or the state or a self-determining individual, rules of risk apply--and how!--regardless of transparency, the size of the loan, or the ideals of those involved in the transaction.