Regulators Shut Online Bank NetBank

[Zenlitened]

Source: Associated Press

WASHINGTON (AP) -- An online bank with $2.5 billion in assets was shut down by the government on Friday because of an unsustainable level of mortgage defaults.

Federal regulators appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta, Ga.-based NetBank Inc., the largest thrift to fail since the tail end of the savings and loan crisis nearly 15 years ago.

While dozens of mortgage companies have closed due to soaring defaults of home loans made to borrowers with weak credit, those problems previously had occurred among non-bank lenders such as New Century Financial Corp. NetBank is federally regulated.

The FDIC said Friday that $1.5 billion of NetBank's insured deposits will be assumed by ING Bank, part of Dutch financial giant ING Groep NV.

Read more: http://www.nytimes.com/aponline/technology/AP-NetBank-Closure.html

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[TexasLawyer]

1. US Federal Regulators Close NetBank (largest US bank to fail since early 1990s)

Source: Dow Jones

US Federal Regulators Close NetBank

September 28, 2007: 04:58 PM EST

By Damian Paletta

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- 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.



Read more: http://money.cnn.com/news/newsfeeds/articles/djf500/200709281658DOWJONESDJONLINE000790_FORTUNE5.htm

[superconnected]

2. I can see this extending to US local banks for the same reason.

And it's scaring me.

[dickbearton]

3. Yes, this is not only the result of low interest rates...

but also a result of the Corrupt Republican's deregulation of
the economy. Throw in the new bankruptcy law ( What, no
debtor's prison! ) and you begin to get an idea of what a
group of slime balls these guys are. Leave it to the Criminal
Republicans to tilt the playing field for the Corporate
Kleptocracy. Republicans deregulate, why not decriminalize, so
the thieves can run wild.  

[fasttense]

4. The timing on this is very interesting.

Notice they filed it at 6:25 p.m. ET on a Friday. They are trying to make sure people don't pay attention to it. Made it a part of the Friday news dump.

I saw it last night on the AOL news site and now it is gone from the site. I couldn't even find it on the Finance page. Thank good for DU. I knew someone here would catch it.

This is very serious. Of course the corporate media is not going to pay attention, but we need to. There is a reason why they are hiding this.

I think they are releasing the bad news after the market closed to keep the market from dropping and to keep people from running on the Savings and Loans. But I also think something else is going on. I smell fish.

I'm going off into my corner to think this out. There is more to this story than corporate media wants you to know.

[nyublue]

5. actually, no. This is how banks are shut down

They close them on Friday and then work all weekend restructuring them and finding buyers for the assets. If all goes well, all of the accounts will be moved to new banks by Monday and the accountholders won't lose any $$$ if their accounts are under $100k.

[fasttense]

7. Is this a new development?

I did some research and found several banks that were not closed on a Friday.

Connecticut Bank of Commerce, Stamford, Closed by the DOB and the FDIC named as receiver. Insured deposits and certain assets assumed by Hudson United Bank, Mahwah, New Jersey. It closed on June 26, 2002 which was a Wednesday. http://www.ct.gov/dob/cwp/view.asp?a=2228&q=296974

There are others listed at the above link that did not close on a Friday but they go back to 1989.

So I'm assuming this closing of banks on Friday afternoon is a new method started after 2002?

So convenient to wait until Friday. Not only does it allow the bank to restructure on the weekend, but it keeps it out of the regular news cycle, very Roverian.

Of course the 1,500 deposit accounts that exceeded the FDIC limit will have a tough time getting their money back but there are very few regular people who have that much in savings or deposit. But everything is just fine here. Nothing to see, move along.

[Celebration]

9. exactly my thoughts

I think it is to affect the financial markets the least amount. Having the weekend acts as a shock absorber.

Our money and financial system is based on magic--face it, what in the heck is a Federal Reserve Note? Why do you think there is all that symbolism on the paper money?

You can basically count on people in charge to gloss over any problems, not wanting to destroy "confidence" in the financial system.

[Jonathan Pollard]

6. Britain had a bank failure recently too

Britain had a bank go belly up too recently, I remember seeing photos of people on the street in line to get their money out.

[FreeStateDemocrat]

8. Last major failure cost the FDIC's insurance fund an estimated $273 million.

The last major thrift to be closed by regulators was Superior Bank of Hinsdale, Ill. It had assets of $1.9 billion and was shut down in July 2001. Its failure has so far cost the FDIC's insurance fund an estimated $273 million.