FDIC Closes Netbank, One of the First Online Banks 174
An anonymous reader writes "NetBank, one of the first internet banks in the country was closed by the FDIC on Friday. Being a loyal customer for 8 years, I am saddened that an institution that provided me with so much great service and a cool, hi tech way to conduct my financial transactions is shutting down. Seems that mortgage defaults are to blame: 'NetBank's closure marks the first bank to close since the recent U.S. housing boom deflated. Critics have said that weak underwriting standards have led to record number of homeowners entering the foreclosure process. But NetBank's rare Internet-based business strategy made it a unique financial institution and its problems aren't expected to mirror issues facing other mortgage lenders, analysts say.'"
OTS not FDIC (Score:5, Informative)
ING acquires deposits (Score:5, Informative)
Re:Fridays are going to become interesting (Score:4, Informative)
You shouldve kept it under the mattress.
Now, if I had instead invested my money and bought shares of the bank, then I'd be up shit creek without a paddle. But that's why stocks pay more -- because they're riskier, and so they have to or no one would buy them.
Re:FDIC insurance (Score:3, Informative)
(Note that credit unions are insured separately by a different organization, so money market accounts there may be covered.)
Re:Good. (Score:3, Informative)
Netbank grew so big by being one of the few banks that DIDN'T charge fees for anything and everything. Generally the only thing they charged fees for was stuff that you'd expect - frequent withdrawls on a money market account, overdrafts, etc. This stuff incurs cost and isn't normal business and have been subject to fees by just about every bank since the dawn of time.
NetBank did not have the best interest rates. (Score:3, Informative)
GMAC Bank [gmacbank.com] and HSBC Direct [hsbcdirect.com] had higher rates than NetBank.
BankRate.com [bankrate.com] is the site I used to find those two. BankRate.com is a poor quality resource for finding banks, in my opinion, but it is better than nothing. Does anyone know of a better site for shopping banks?
Re:Lucky me (Score:2, Informative)
Even if they weren't moving them, saving and checking accounts are insured up to $100,000 in the US.
Although treat that as per-bank, not per-account.
Re:NetBank did not have the best interest rates. (Score:3, Informative)
Their target market, at the time (2005), was for people with good credit, say FICO 760 and better (don't remember the exact numbers). I seem to recall their interest rates were fairly low, at least compared to the other companies we serviced loans for.
Re:Bank Run in England (Score:4, Informative)
Re:Bank Run in England (Score:2, Informative)
I'm pleased that NR has suffered for its poor business practices, and I'm pleased that by-and-large its customers will not.
Rgds
Damon
Re:That's irrelevant. (Score:4, Informative)
What exactly did the Bush administration do wrong, as far as economic management goes? No matter who was in power, after 9/11 any politician would have drastically increased homeland security and military spending. The Bush Tax cuts were very popular, and would have been implemented anyway, whether or not Bush was in power. Not only that, but while corruption is very photogenic, it's effects have been economically negligible. Our deficit is mostly the result of highly enlarged entitlement spending, which I just can't see tied to George Bush.
You seem to think that presidents are relevant to macroeconomic trends. This is a common political delusion, but in the absence of massively stupid legislation(On the level of what has been seen in Latin America), the Federal Reserve bank is the only office with any real power.
"This housing boom, OTOH, everyone did have to play. Even renters pay more when houses prices are up, although at least they won't have to watch the value of their house plummet. And it's left us with no tangible benefits at all except millions of shoddy McMansions."
Of course, all that we are left with are millions of homes. What use could they serve?
"We could have put that same amount of effort and money in alternate energy, and be in the middle of a nice stock correction now, where alternate energy company stocks are dropping through the floor and being picked up by a few big players which are merging with the big energy suppliers who are just now realizing they need to change their business plan. Which wouldn't hurt John Q. Public at all. John Q. Public, in fact, came out ahead because he got 'sponsored' for solar panels and that company, with a crappy business plan, went out of business, like during the tech crash."
Really? How exactly could we have done that?
My Wife Was an Analyst for Netbank (Score:5, Informative)
After her previous company downsized, she talked to Netbank about a job; her first in-person interview was scheduled for September 11, 2001. Oooops. We saw the second tower hit live on the Today show right before she left; once she got there, the nation's entire financial industry went into lockdown, and she spent the whole day sitting in the lobby of their offices. Heh. Was that some kind of omen?
Anyway, she got the job, and went to work doing business analysis -- which promotions actually drew in new customers, what percentage of new customers retained their accounts, et cetera; she also maintained the list of ATMs that were in service and in their network; and was responsible for generating the customer lists for both the various e-mail contacts and the annual privacy policy mailings ( <geek_meat> SAS and SQL, mostly </geek_meat> ).
She really liked her job, and she liked her co-workers.
The turning point for Netbank, IMHO, came after the retirement of one of its founders and a merger with another online bank called RBMG which was located in Columbia, SC (which is, ironically, where we lived before we moved to Atlanta years ago). There were the usual issues of corporate culture which arise during mergers; there were issues regarding differing customer expectations (she ran studies on customer surveys which showed dramatically different attitudes, expectations, and opinions between customers from RBMG and customers from Netbank); there were issues arising from the fact that, although the company retained its Netbank name and identity (and the deal was structured as a Netbank acquisition of RBMG), the center of gravity for the new company was in Columbia, with the former RBMG; and, frankly (again, IMHO), there were issues with RBMG's upper management and corporate strategy.
Netbank "Classic" had been focussed on, and content with, being, well, a bank. Checking and savings, CDs and Money Markets; you know the drill. RBMG, though, had aspirations both grander and farther afield, starting with mortgages (in fact, the "MG" in "RBMG" stood for "Mortgage Group").
That didn't work out too terribly well.
By last year, there were some signs of strain. While the overwhelming majority of folks working in Atlanta and Columbia (and Jacksonville) were really great, and on the ball, there was a bit of a corporate malaise; RBMG ran what seemed to me to be a less employee-friendly operation (one of the first things they did, for instance, was move Netbank's Atlanta HQ from its basic "A" or "B" office space into a semi-crappy converted former retail space which was, at best, a high "C" quality office space). The bad vibe was subtle at first, but it was certainly there; and as the mortgage business began sucking more and more, money got tighter and tighter, and things got less and less functional.
Finally, as last year began to wind down, more and more employees started to jump ship from my wife's group. Eventually, it got to the point where she was more or less forced to jump ship, simply because everyone else already had, and she would be left in department that couldn't possibly do all of the things it was expected to.
By the time she left, right at the end of the year, there was a really grim air about the place; and we got to look on in horror this year as her company stock shares rapidly declined in value to the point where it wasn't even worth bothering to sell them.
We still have a Netbank account with a small amount of money in it, and a lingering bittersweet fondness for the brand and the people who worked for it; but we're certainly not regretting her decision to leave, that's for sure.
Re:That's irrelevant. (Score:2, Informative)
Then you're a moron. Clinton left Bush with a balanced budget. Bush has not increased entitlements. Ergo, our deficit cannot be caused by entitlements.
However, that's completely irrelevant to what I was talking about. No one here is talking about the financial shape of the government. We're talking about the financial shape of the country.
And we didn't need to vastly increase military spending after 9/11. We could have beaten Afghanistan with one hand tied behind our back.
You seem to think that presidents are relevant to macroeconomic trends. This is a common political delusion, but in the absence of massively stupid legislation(On the level of what has been seen in Latin America), the Federal Reserve bank is the only office with any real power.
Did you read the article I linked to? The Treasury Department, which I assure you the president does control, almost single-handed caused the housing boom because of how they structured their bonds, causing anyone who wanted to invest long term have to do so in real estate. (And, of course, Republicans automatically structure things where investments get less taxes than income.)
And does the phrase 'Ownership Society' not ring a bell anymore? Maybe you should check out who coined that expression and used it repeatedly. The Treasury Department's behavior was not an accident.
Of course, all that we are left with are millions of homes. What use could they serve?
Are you being sarcastic? We've got more homes than people, we've got more going up all the time because of the lag in the market, and quite a bit of them are much too large to operate at a reasonable cost and shoddily enough constructed that the upkeep will be a bitch. Because people stopped judging houses as 'Is this a good fit for me?' and instead asked 'What's the most expensive house I can afford right now as an 'investment'?'.
Yes, in the long run, the houses aren't going to vanish and will eventually get used. OTOH, the excess houses are going to depression the construction market for some time, so look for higher prices there.
Random fads are not a useful way to build material wealth in this country. People suspend their judgment, companies slap together shoddy products that people would not normally want, and then it crashes down and products sit on shelves and houses stand abandoned for years. If people want X amount of something a year, and then suddenly want X3 for a year and then 1/2X for two years, the industry is in a lot worse shape than if they had just kept wanting X a year...half the companies have probably gone bankrupt and a lot of waste occured.
Random fads, OTOH, are a good way to get a lot of research done. Or, for example, convert a lot of homes to be more energy efficent. Or, as the last fad demonstrated, get everyone on the internet.
Really? How exactly could we have done that? Erm...tax breaks? Research grants? Higher taxes on non-alternative energy?
There's a dozen way to do it.
Re:NetBank did not have the best interest rates. (Score:3, Informative)
475 bottom of the barrel. If you want a loan, you're going to get eaten alive. (30% interest rates, etc.)
525 - 475 your credit really sucks. Like above, though you risk is considered somewhat less. 20-25% interest rates.
600 - 525 Credit isn't in good shape, but you can qualify. Interest rates will be high, (20% on average).
700 - 600 Average credit for a consumer. You qualify for most things, but your rates will still be ugly (15% - 20%).
800 - 700 Good credit. Good rates. People who pay their bills on time and don't have any unpaid debt (collections) fall into this range.
800 + These are the people that qualify for 0% interest for the life of the loan, etc.
FICO is just a small part of the underwriting process and there are many other factors that are taken into consideration by lenders. Mostly these include:
PTI (payment to income ratio)
DTI (debt to income ratio)
High Credit
Deliquincies (number of, severity).
Most lending institutions have their own criteria for lending (called lending guidelines) and they vary widely.
Generally the underwriting process looks something like this:
Get your FICO. If it doesn't immediately disqualify you, then look at the other factors (DTI, PTI, etc.).
If your profile passes those, they'll give you money, otherwise they don't.
Where you fall within those limits will effect the interest rate that the lender will apply to you.
Other factors to consider:
Time of year. --> Generally buying happens seasonally and you can get better deals during the down periods (August, February)
Time of month. --> Lending institutions have monthly lending goals. Underwriters will pass you through the system if you're border line to meet their quotas.
Sorry about the adhoc tutorial on credit.