Friday, September 28, 2007

We have a winner. Net Bank FAILS, FDIC steps in.

From CBSMarketwatch.com:

The Office of Thrift Supervision closed down NetBank Inc. a thrift with $2.5 billion in assets, and appointed the Federal Deposit Insurance Corp. as receiver.

The OTS said the bank experienced significant losses beginning in 2006 due to defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls and failed business strategies.

It was only the second bank failure in the past three years.

The FDIC said ING Bank has agreed to assume $1.5 billion of the failed bank's insured deposits.


Now for the really bad news; from the same article:
"NetBank had about $109 million in 1,500 deposit accounts that exceeded the Federal deposit insurance limit of $100,000. Those customers will become creditors of NetBank's receivership, the FDIC said."

8 comments:

Tyrone said...

Sobering news. For those in Credit Unions, here's some useful information. An individual account owner can increase coverage by naming beneficiaries in a Pay-on-Death type of account. I have over $200K in an account (starone.org, earning 5%) with 3 beneficiaries--$100K per named beneficiary, so I'm fully insured.

NCUA Publication on Insured Funds:
http://tinyurl.com/3xecpb

NCUA also has some online estimators to do what-ifs on coverage.

beta said...

and what happens if you don't die?

Tyrone said...

Each named beneficiary provides you insurance coverage on your deposits. So if a credit union fails, each beneficiary provides $100K coverage and it is additive to protect the account owner.

Funny Circus Bears said...

Tyone is correct about Payable On Death (POD) accounts. From the FDIC website, here's how a married couple with three kids can deposit $800k of FDIC insured funds:

Example: Bill has a $100,000 POD account with his wife Sue as beneficiary. Sue has a $100,000 POD account with Bill as beneficiary. In addition, Bill and Sue jointly have a $600,000 POD account with their three children as equal beneficiaries.

These three accounts totaling $800,000 are fully insured because each owner is entitled to $100,000 of coverage for the interests of each qualifying beneficiary in the accounts. Bill has $400,000 of insurance coverage ($100,000 for the interests of each qualifying beneficiary – his wife in the first account and his three children in the third account). Sue also has $400,000 of insurance coverage ($100,000 for the interests of each qualifying beneficiary – her husband in the second account and her three children in the third account).

Mr.Mortgage said...

CNBC's Maria Bartiromo/Bill Maher Housing Bubble Video

Here is a clip from Real Time with Bill Maher which aired Friday September 28th. I have never heard the housing slump sound or look this good.

http://thegreatloanblog.blogspot.com

AnalysisGuy said...

5:00pm KGET news ran a good follow-up piece. Credit goes to Kiyoshi for asking some of our questions and actually getting an answer. I was particularly surprised he got someone on camera to admit we're no where near bottom.

Guess it's not a "buyer's market"

dicktracy said...

BB-Are you out of town? Kind of quite after KGET's real estate forum?

Bakersfield Bubble said...

dicktracy-

Just a little busy.

Thanks for asking.