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FDIC Closes Netbank, One of the First Online Banks
Posted by
Zonk
on Sat Sep 29, 2007 07:06 AM
from the thanks-loan-guys dept.
from the thanks-loan-guys dept.
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.'"
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Firehose:FDIC closes Netbank, Inc. by Anonymous Coward
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OTS not FDIC (Score:5, Informative)
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: (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: (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)
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?
Parent
Re: (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
Re: (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,
Re: (Score:3, Interesting)
Inflation has been roaring during the past decade, but masked by cheap imports and temporary absorption of the money used to pay for those cheap goods.
True unemployment is sky high, around 50% by historical metrics. The government unemployment numbers were redefined to ignore people are barred by law from employment and people who are unable to find employment. The government has also ratcheted up efforts to legally ban more people from employ
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!
Wait, what? (Score:2, Funny)
Nice work on decimating your economy!
In for a Penny... (Score:2)
I've never understood the wildly inflated home prices in some areas. Assuming that these are "market prices" and not crazy owners' wished-for buyouts, at some point no one will be able to afford to own a home.
What happens then? A house market crash?
The only people that win from high real estate prices are those that cash-in and move somewhere cheaper, the lenders (usually) and the agents.
Re: (Score:2)
If you just bought a house, your pretty much screwed, unless you plan to stay where you are for the next 20-30 years. Prices will likely drop over the next 2 years or so depending on your market. If you have to sell, you will have a mortgage larger th
Re: (Score:3, Insightful)
ING acquires deposits (Score:5, Informative)
It would seem so (Score:5, Interesting)
Parent
Re: (Score:3, Interesting)
ING only bought the deposit accounts. Most of NetBank's mortgages are going to Everbank, apparently with the bad one staying with FDIC until they can find a sucker^wbuyer. In any event, deposits at NetBank are insured, so few account holders will lose money (the exceptions being about 1500 people who had more than $100,000 on deposit.
The FDIC has a whole list of failed banks [fdic.gov]. Apparently, it happen
Net 2.0 meets Reality 0.0 (Score:2)
Mortgage defaults (Score:3, Insightful)
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: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.
Parent
Re: (Score:3, Informative)
(Note that credit unions are insured separately by a different organization, so money market accounts there may be covered.)
Re:FDIC insurance (Score:5, Interesting)
Netbank had a "money market" account which was FDIC insured - at least as far as I'm aware (and I did take the time to find out).
I'm guessing it comes down to whether the bank wanted to follow FDIC rules regarding investments/limits/reserves/etc. Most money market mutual funds don't - but they're still very safe due to their investment profile. Also - most non-FDIC-insured money market funds tend to be privately insured against anything but investment risk.
Bottom line is - anybody with any kind of account no matter what it is called or where it is held should be aware of its FDIC-insurance status. Many banks have both insured and non-insured investment products.
Parent
Re: (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 i
I went with USAA. (Score:3, Interesting)
Re:Bank Run in England (Score:4, Informative)
Parent