The SLABS Rabbit Hole - Part 4: Return of the SLAB. Peer to Peer lending, SoFi, The DeVos Connection, and Big Banks.

Wow. First of all I would just like to thank all of you for the immense support on all these posts. I was never expecting this type of reception, and I'm very grateful.

Less than 15 hours ago I concluded my trilogy of DDs on SLABS. Yet here I am, 15 hours later, writing another one. I guess I'm just addicted to writing about this shit. Or maybe I just realized how much deeper the rabbit hole goes. Anyways, thanks for bearing with me guys. If the topic is feeling oversaturated please let me know and I'll try to space these DDs out a bit more. But I'll make these as long as relevant new information comes up. Hopefully this will help you all grow some more wrinkles.

You can find the other DDs here: Summary DD (Basically a TLDR), Part 1, Part 2, and Part 3. Part 5 HERE (https://www.reddit.com/r/Superstonk/comments/rq6vmi/down_the_slabbit_hole_part_5_the_federal_reserve/). I would highly recommend reading those before tackling this one.

This part will focus on Peer to Peer lending (aka P2P), SoFi and other big modern day private loan players, Betsy DeVos' impact on all this shit, and how some familiar big banks are wrapped up in all this. Let's go.

First, I would like to explain what peer-to-peer lending is and its significance with SLABS. P2P lending is what corporations like SoFi, LendingClub, and CommonBond engage in (however, I will be discussing SoFi seperately, because unlike LendingClub and CommonBond, they allegedly take credit into account). P2P lending essentially cuts out the middle man: instead of a financial institution mediating a loan, loans are done privately from individual to individual. What is the significance of this? Well, it allows borrowers to take out credit without the need for official banks to do the financing. Holy shit. This sounds really risky. And it is. You see, the entire purpose of P2P lending is to help people that can't get credit elsewhere. But the very fact that they can't get credit elsewhere should be a huge red flag. Well, what's in it for these companies to adopt all these risky buyers? Higher interest rates. Which again would lead to increased defaults, thus devaluing the SLABS that are created from private loans under these P2P protocols. These are seriously dogshit. But miraculously, these companies still pull AAA ratings. (Link). Guess who? Yup, the same ratings people I mentioned in Part 2: Moody's. Conflict of interest much? And JUST LOOK at all of the other names mentioned in this report. "The transaction was CommonBond’s tenth and brings the company’s total securitized loan amount to over $2 billion. Goldman Sachs served as structuring agent, co-lead manager, book-runner, and co-sponsor for this securitization. Barclays, Citi, BMO and Guggenheim Securities also served as co-lead managers and book-runners on the transaction." Ummmmm... Goldman? Citi? Barclays? Jesus Christ. This shit goes so much deeper than I thought it did. One important thing to note though is that student loans are only a portion of these companies' loans. Still, total private loans make up hundreds of billions of dollars. I don't have a way to figure out what percent of private loans are under P2P institutions.

Now, onto SoFi. SoFi, like I mentioned, is a P2P lending institution. Yet, unlike the previous ones I mentioned, they claim to take credit into account. Sounds great, right? Nope. First of all, SoFi doesn't even disclose their requirements for credit scores. These dudes could theoretically be loaning out money to people with credit scores absolutely in the shitter. Now, third party sources have stated that the minimum to qualify hovers around 680. This is lower than the national average, and in some places won't even qualify you for a home or apartment loan. But yeah, taking out a hundred grand to pay for college is no problem. And you'll never guess what these are rated. Yup, they're rated AAA. By Moody's (Link). JUST. WOW. And guess what? "In October of 2017, SoFi announced a $777 million SLABS deal, in partnership with Deutsche Bank, Bank of America Merrill Lynch, Goldman Sachs, and Morgan Stanley (Link)." This honestly just speaks for itself. Just LOOK at these quotes. "SoFi CEO Mike Cagney says that every time he’s placed a SLABS offering, Morgan Stanley was involved... CommonBond just did its first SLABS offering. Unsurprisingly, Morgan Stanley was the lead underwriter and sold manager on the deal." (Link). My god. And this was all the way back in 2015. Just imagine the SLABS market since then.

Now, let's get into DeVos. If you are unaware, she served as the Secretary of Education from 2017-2021. And as it turns out, she was pretty fucking corrupt. That's what happens when your family is worth $5.4 billion. Anyways, she did some shitty things that helped jack tuition prices (which benefit SLABS), and appointed many officials who were high up at for-profit universities that were even being investigated for fraud. Here's the quote from this link: "Rather than curtailing the subpriming of student debt by eliminating student income loans and seeking to reduce the student debt bubble, Trump’s secretary of education, Betsy Devos, has aggressively sought to deregulate student lending for the benefit of banks and for-profit universities. Once in office, Devos appointed leaders from the for-profit higher education sector whose schools were being investigated for fraud. For-profit colleges and universities have engaged in widespread lying to prospective students about the value of a degree and the nature of a program to capture vast sums through tuition financed through student loan debt. Devos and these officials proceeded to dismantle the special team responsible for fraud investigations, and they also moved to protect colleges and universities that made fraudulent claims to students by gutting the 'borrower’s defense' act." I'm honestly astounded at what such a high level this corruption has spread. Then again, it is Wall Street, so maybe I shouldn't be surprised. Still, these blatant conflicts of interest, of which has clearly benefited predatory SLABS companies, is just appalling.

That's about all I've got for Part 4. Given that each DD has been getting shorter and shorter, I do expect this one to be the last one at least for a little bit (edit: it wasnt. Part 5 out now lol.) But honestly who even knows, that's what I said yesterday and here I am. Thanks again for all your continued support. As always, I believe that GME is the best hedge against a market crash (not financial advice though). Buy, Hold, DRS. Thanks.