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September 30, 2007

Netbank Shut Down, guess who I'm banking with now!

I was surprised to learn that my online bank Netbank was shutdown by the FDIC (Online Bank Fails, and Regulators Shut It) because of bad mortgage lending. I became a Netbank customer many years ago after my old online bank Compubank, was purchased by Netbank.. Although they did away with my favored feature of ATM fee reimbursement (which I get now through Commerce Bank), they kept low minimums, prepaid bank-by-mail mailers, high interest rates and no fees.

Over the years I grew dissatisfied with Netbank. Their website was stagnant and rendered ever more frustrating with security features. Their worst sin however was that their rates were trailing the highest available by a significant margin. So recently I closed one of my two accounts with Netbank and I moved most of the money I had with them to an ING Electric Orange account. The only thing that kept me tethered to Netbank was that ING doesn't allow check writing, you have to use a bill pay system or and ATM card to get money out. So wasn't I surprised when I learned that ING was taking over all Netbank accounts. So right now I have to wait the 60 days during which ING will tell me what happens to my account. I hope they have a new offering with check writing privileges and more bank by mail service, if not I'll have to open up a special account someplace else for that purpose, and link the two. But, since I said that I'd already moved most of my money out already, this is more of a hassle than a terrifying bank run. I should be able to transfer my remaining money out
when the bank reopens on Sunday evening.

Banks still fail. Take advantage of FDIC insurance and don't keep more than $100,000 at any one bank. As bank depositors, Netbank customers are the senior-most creditors and are likely to get their money back, but the wait will be longer, and that must at least partially depend on how their mortgage portfolio behaves. So sleep easier and just use a couple banks. Of course, if you have that much cash, talk to a financial planner because you probably could be using your money more efficiently.

I didn't realize what a crazy internet bubble stock Netbank was. It was floated at $12 a share in 1997 hit a high of $249/ share in April 1999 until settling to a price of $15 a share in mid 2004. The company was delisted from the NASDAQ on August 3 this year and last traded at $0.068 on the OTC board on Friday.

I was wrong above, the The Office of Thrift Supervision (OTS) closed NetBank, not the FDIC

Slashdot has a discussion as well.

Posted by OneEyedMan at September 30, 2007 2:01 AM

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