U.S. Federal Regulators Close NetBank
September 28th, 2007Watch those FDIC limits, people. (And in any real crisis, forget FDIC.) While the Federal Reserve and the U.S. Government are eroding the value of your dollars by the minute, at least they’re going to guarantee you 100,000 of the things on deposit. How many loaves of bread you’ll be able to buy with your 100 grand, well, that remains to be seen.
Via: CNN:
Federal regulators closed NetBank Inc. (NTBK), a $2.5 billion thrift based in Alpharetta, Ga., on Friday partly due to significant mortgage-related losses the company sustained in 2006 and 2007.
NetBank marked the largest bank to fail since since the early 1990s, which marked the end of the savings and loan crisis. The Office of Thrift Supervision closed NetBank at 3 p.m. EDT, the federal regulator said, and the company was immediately taken into receivership by the Federal Deposit Insurance Corp.
The OTS said weak underwriting standards, failed business strategies, and a lack of proper controls forced NetBank to suffer significant losses starting in 2006.
“They had significant problems with respect to loan underwriting, poor documentation, and a high amount of early payment defaults,” OTS spokesman Kevin Petrasic said. “All of those factors led to fairly significant losses that increased substantially in 2007.”
The OTS said NetBank’s board of directors unsuccessfully tried to orchestrate a private sale of the company.
“These efforts were unsuccessful, and the institution had no remaining prospects for raising capital and achieving profitability,” the OTS said.
NetBank doesn’t have branches, and its business model is based on interacting with customers over the Internet.
Bank failures have become very rare because of recent strong performance by the U.S. banking industry. But problems, particularly related to mortgage lending, has put pressure on many financial institutions, particularly smaller banks. For example, the FDIC said last month that loans at least 90 days past due rose in the second quarter by $11.4 billion, or 36%, compared with the second quarter of 2006.
“A couple of years ago, it was almost impossible for a bank to fail,” said Jaret Seiberg, a financial services policy analyst at the Stanford Group Co. ” Today, that’s no longer true.”
There is a US GAO report out there somewhere (though my search isn’t cooperating for a link) about the credit union being the preferred option of banking.
I’ve been trying to get out of the mega-bank syndrome – these banks, I believe are in on the game and perhaps have played a large hand in, and are also responsible for the subprime mortgage fiasco.
In my mind, selling securities, trading shares and investing dollars when you are “supposedly” the dollar holder for ordinary citizens is NOT in the interest of cash accounts. This is the type of bank I want to hold my dollars in NOW. Think Northern Rock.
When a small potatoes bank goes down, sheesh oh man. That big donut hole in the dollar just keeps getting bigger and bigger.
should read NOT THE TYPE OF BANK I want my dollars in now.
Solly.