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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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