Is P2P management wiser than Wall Street management?

As I've stated earlier, I hope P2P works. With smart, risk-averse management, it can work, and work well. But before you invest, you should consider: Is P2P management capable of forgoing short-term profits for long-term strength?

If we learned nothing from the current financial crisis and the subsequent bailouts and recession, it's that bankers and financiers live to maximize profits in short term, long term wisdom be damned. Individual bankers have an strong incentive to find more ways to issue loans. AFter all, if one bank isn't lending to marginal lenders, then the competitor might---and rake in the short-term profits. The long term matters little to individual banker; he might not be around that long. The urge to compete lend to marginal lenders is strongest during during good economic times, and not times like these.

Competition is good for borrowers. But for the lender—that is, you, the Lending Club lender—competition might not be good. When there is competition, more firms compete for the same number of customers. Thankfully, with Lending Club, the credit score threshold remains 660 and above, which is relatively high. With Prosper flaming out because of nonexistent standards, and lenders fretting over the borrower standards, Lending Club has a strong incentive to keep their standards high and demonstrate their seriousness and permanence and stability.

But I worry as Lending Club becomes more established and management can take their goodwill and existence for granted, profit motive might push them to make more loans.