Arthur Levitt, former Chairman of the U.S. Securities and Exchange Commission
Photograph by Adrees Latif — Reuters
By Leena Rao
October 5, 2015

SoFi, a company that refinances student loans, said Wednesday that it raised $1 billion in funding. The investment, led by Japanese tech company SoftBank, is believed to be the largest-ever in the emerging financial technology industry and an example of its buzz.

Mike Cagney, a former financial trader, founded SoFi in 2011 while at Stanford’s business school. Lately, he’s been expanding the company beyond its student loan roots into personal loans and home mortgages.

Cagney’s vision is to be the modern day bank for millennials. For example, all the company’s mortgages and student loan refinancing will soon come with wealth management services, free of charge. SoFi will pre-approve mortgage borrowers via a mobile app in minutes, and only require a 10% down payment. How? Cagney claims that SoFi is aimed squarely at professionals who may otherwise be charged higher interest rates by banks and required to put more money down. “Fundamentally banking is broken and banks won’t fix banking,” he told Fortune in an interview.

SoFi has loaned $4 billion to customers so far (including some mortgages and consumer loans), and expects to hit $10 billion in loans by next year. This growth attracted the attention of Arthur Levitt, the longest-serving chairman of the U.S. Securities and Exchange Commission and current advisor to private equity giant Carlyle Group. Levitt joined SoFi as an advisor in September.

Levitt sat down with Fortune to talk about why online lending is hot right now, the tech bubble, and more. The following was edited for length and clarity.

Fortune: What makes you so excited about SoFi?

LEVITT: SoFi is by far and away a company on the highest trajectory, that has come further in a shorter period of time than any other company that I’ve seen. It is also surprisingly under the radar. I can be part of a company where I don’t necessarily have to go out and hustle for money for them, I don’t have to go all over the country speaking on radio and television on their behalf, I don’t have to worry about whether the company will be around six months from now.

This company is here to stay, and I generally like companies that are run by interesting, exciting, and sane people. And in this world where I used to work for Carlyle and Goldman Sachs, there’s a lot of insanity. And thus far, I haven’t seen much of that here.

What do you think makes SoFi different?

I think what makes them different is the establishment of a relationship between lender and borrower. The notion of trying to make that connection between a lender and borrower more personal is unheard of. It’s unthinkable.

If you came to me with that idea, I’d say there’s no way you can do that. Sure, you can showpiece a dozen or a hundred points of contact, but here it’s part of the DNA of the company. And that’s unusual.

You look at LendingTree (TREE), which I suppose is competitive to some extent. In the first place, they don’t have the capital. The second place, they have totally different kind of relationship with the people that they put together.

This relationship between borrowers and SoFi are enduring relationships. I went to a dinner that SoFi sponsors for borrowers. It’s absolutely unheard for me to see a collection of people who are willing to get together, who aren’t ashamed of the fact that they borrowed money, or embarrassed by it. They actually want to proclaim it, come meet the company, talk about the company, and use it as a social event, and that’s simply not true in situations that I’ve seen where money is borrowed.

Roughly 90 online personal loan companies have launched in the past three months. Why do you think that we’re at this point where there’s so many online lenders?

It’s the Internet world. There’s a whole new structure out there that is made possible by the way we communicate. In particular, millennials are impatient with credit cards. They’re impatient with standards and filling out forms, with going to the bank, and shaking the hands of somebody in a jacket and tie.

If they can do it online, save time, meet other people who have done it online, they’re going to do that instead of going to their friendly banker.

What does that mean for the banks?

I think the banks are pretty smart. They’re not stupid people. And not just dealing with lending but in terms of a lot of technology with respect to digital crypto-currencies, such as bitcoin. What they viewed as competitive and probably a hole-in-the-wall kind of system, they’re now joining crypto-currencies.

But I don’t think what has been done here at SoFi is yet viewed as a serious threat to the banks. But as SoFi grows, as they gain a greater imprint, the banks are going to try to improve what they do.

I’ve learned that there’s a tremendous advantage in being first. Whoever tries to copy SoFi is going to have difficulty in catching up.

Do you think that there will be regulation on online lending in the future, as it becomes so popular?

Probably. There will be more inquiries by federal regulators. I think if the market continues to grow fast, Congress will go where the action is. That’s the way they make their chops.

Is SoFi going to be a household name the way we know Wells Fargo (WFC) or Bank of America (BAC)?

There are going to be a lot of competitors.

What do you think of state of the private technology market?

Over the past several years, high tech is where all the money has poured in. All you have to do is say “I’m a business,” and you can raise dough. That’s going to change. It’s in the process of changing right now.

SoFi is in a very good position, with lots of dough and a CEO who is driving the system relentlessly. I think there are a lot of failures about to take place in the tech world and throughout the high tech world because growth has been so mindless and money has been so easy, and we’ve been riding this wild horse, really, since 2007 or 2005.

Whose fault is this?

It’s not anybody’s fault, it’s the nature of capitalism. There are peaks and valleys. It’s not going to affect this company, which has enough capital to ride out several cycles.

What advice do you have for startups that need to work with regulators?

Regulation is the good housekeeping seal of approval. If you are known early on by key players the U.S. House of Representatives, U.S. Senate and SEC, it places you ages ahead of competitors.

For more about the bubble in tech investing, watch this Fortune video with Greylock partner Reid Hoffman.

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