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.'"
S&L crisis + DOT COM = housing bubble (Score:4, Insightful)
"It's a great time to buy a house."
"You'll never lose money in real estate".
"Real Estate is a great investment".
"Sone else is bidding on the property".
Bottom line is with stagnant median income, people just can't afford a house. The real estate sector, after an unprecidented run up, is undergoing correction and it will be long and will take some people under. If you're renting or can afford your mortgage, you'll do okay. Every else might as well mail in the keys. If the debt is to netbank, send the jingle mail to ING direct instead. This is the downside of mass immigration and easy money, people. Time to buck up!
Mortgage defaults (Score:3, Insightful)
Re:Misleading Summary (Score:1, Insightful)
Interest-only and Option ARMs are a completely different beast -- those are the exotic products with lousy underwriting standards that got so many people into so much trouble. They are useful financial products for certain people in certain situations but they should never have been offered to so many people nor should anyone with half a brain and any sense of responsibility have ever rated widespread debt based on such things as anything other than "extremely risky -- run away, run away". The twits that thought otherwise were in love with their own bullshit.
Re:That's irrelevant. (Score:2, Insightful)
It's not really the poor economy, it's the fact Bush has used a bubble [firedoglake.com] instead of actual growth.
We should have had a minor recession in 2001 or 2002, but then it would have been really hard to convince people they needed to funnel huge amounts of money into defense contractors pockets.
Money quote:
The liberal solution would have been to try and find a new tech boom, which in the case of the Gore administration would almost certainly have either been a micro and alternative energy boom or a telecom boom.
The Bush solution was different. The decision was made to base the economy on the real estate market. Record low interest rates flooded money into the mortgage market and the housing market boomed.
A boom sucks, at the end, No matter what you do, people will come in and lose their shirts. But some booms, in the long run, have much better results. The internet boom of the 90s changed the face of the planet. And even if some people lost their shirts in the stock market, well, no one made them invest.
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.
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.
Re:That's irrelevant. (Score:2, Insightful)
One that curses big government when it's a democrat doing it, and praises it when an order of magnitude more is spent to blow up some brown people. One that blames Clinton for all things evil, but claims Bush is powerless to stop anything bad at all.
Don't bother reasoning with him. DavidShor is a far-gone, fact-free, idiotic, right-wing loser. He will only agree with you if the GOP tells him to do so. His only purpose in life is to remind others of how gullible and stupid people can be. He is incapable of intelligent debate, because he is incapable of recognizing truth.
Re:In for a Penny... (Score:3, Insightful)
Re:That's irrelevant. (Score:3, Insightful)
Actually, Bush has raised entitlement spending more than any president since Johnson. The biggest offender is the prescription drug plan, but that is just one part of his "Compassionate Conservatism".
"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."
I didn't say we needed to, I said that after 9/11, the public wanted to spend more on the military.
"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 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."
Which explains why real estate prices spiked in a bunch of other countries too?
All the article says the treasury department did was eliminate the 30-year treasury note, claiming that this made long-term investment impossible without real-estate. This is absurd, anyone investing in real-estate is expecting far larger returns than a 30 year would give. Not only that, but CD's and Municipality bonds are close substitutes for the 30 year note.
The 30 year note was taken down in anticipation that we would enjoy a permanent surplus, shame that didn't work out. But don't apply any conspiracy theories.
"And, of course, Republicans automatically structure things where investments get less taxes than income."
We have to, to keep all of Wall Street from moving to London. They also have a giant financial industry, and a capital gains tax of 10%. Is this distorting? Of course, but we generate more tax revenue than if we equalized rates(And no, I don't support Laffer curve bullshit, so don't set up a straw man).
The best solution is to move to a consumption tax. Instead of taxing income that people make, you tax what people spend. The effects are a bit regressive, but you can overcome that with a tax rebate.
"Erm...tax breaks? Research grants? Higher taxes on non-alternative energy? There's a dozen way to do it."
So far, government attempts to do all of that have been subverted into bipartisan pork competitions. I don't really believe that our government is capable of doing such a complicated and nuanced thing, at least not with our current constitutional system.
Re:That's irrelevant. (Score:3, Insightful)
Yes, it was a rather disgusting corporate welfare program. Regardless, senior citizens received drugs they would have had to pay for, so I count it as an entitlement. Semantics aside, the deficit is due mostly to growth in these programs.
"Yes, they spiked and went down in some places, and went up in some places, went down in some places. Pretending the housing bubble is a global problem is idiotic. Nowhere else on the planet saw home prices double in the last eight years."
Really?
http://en.wikipedia.org/wiki/Russian_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Romanian_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Indian_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Chinese_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Spanish_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Spanish_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Irish_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/British_property_bubble [wikipedia.org] http://en.wikipedia.org/wiki/Danish_property_bubble [wikipedia.org]
Those are just the ones with Wikipedia articles. In each of those countries, median home prices have doubled in the last 8 years, in most of them, the increase was far larger. Real estate prices have spiked by enormous amounts in nearly every country in the world (Japan is a notable exception; prices are still level from their boom in the 90's).
"The government influences the market in many ways. One of those ways was to remove certain bonds for investment purposes."
You vastly over-estimate the effect of the removal of the 30-year note. As I said earlier, the 30-year note had many close substitutes with essentially identical risk and return (FDIC insured CD's and state bonds for example).
Even without substitutes, the 30-year note was for very conservative investors. The idea that by removing one ultra-safe investment option, investors will suddenly pour funds into risky real estate is absurd.
"And I notice you didn't respond to my 'Ownership Society' mention. Bush went up there in 2004, boasting how home ownership was high and talking about the 'ownership society', etc, etc, at a time that anyone with the slightest bit of knowledge could see we were in a bubble and encouraging people to buy a house at that moment was stupid. He did that because his economy was based on housing prices."
The "Ownership Society" was a political buzzword used by George Bush to capitalize on a trend. You have failed to provide convincing evidence that this was anything more than an empty slogan. Anyone with enough cash or credit to buy a home should know better than taking financial advice from a politician.
"The best solution for what? What fictional problem are you looking at? How on earth could taking consumption help the housing market? (Unless you're including taxing houses, which are not normally included in 'sales tax' proposals.)"
The best solution for attracting foreign investment without distorting the economy. I would support taxing houses though, along with all other economic transactions. As for its effect on the housing market? I do not think it would have one, I was responding to your complaint that dividends are taxed differently than incom