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FDIC closes Net Bank
Old 09-28-2007, 07:30 PM   #1
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FDIC closes Net Bank

FDIC closed NET Bank today. It was closed because of loses in it's mortgage loan portfolio. Net Bank had about 2 billion dollars in deposits all but 106 million were covered by FDIC. The people with the 106 million in deposits over the FDIC limit will become normal creditors of the bank. Good luck!

Why would these people deposit more than what FDIC would cover? Were they chasing rates?
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Old 09-28-2007, 08:20 PM   #2
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Bloody hell. Net Bank had a promotion for United Miles along with a good CD rate 5.3%, so I signed my mom up for it. Luckily ING is aquiring Net Banks customers but this may not be fun getting the money out.
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Old 09-28-2007, 08:33 PM   #3
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My prior experience with FDIC takeovers is that the institution that takes over the insured deposits will have those deposits available to depositors immediately and the CD will continue on the same terms.

Our course, things may be different this time.
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Old 09-28-2007, 09:44 PM   #4
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I found out about this by reading this thread. (I'm kind of annoyed about that. They could've sent me an e-mail.) But I have used my ATM card today, and all the blurb claims my direct deposit etc will keep working.

Tim
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Old 09-28-2007, 09:46 PM   #5
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My understanding is that insured deposits will be immediately available the next business day at ING, the acquiring bank. The interest rates on your insured deposits, including the CDs, won't necessarily be the same as they were at NetBank, as the terms and conditions of the insured deposit became interrupted/repudiated by the intervention of the FDIC, as receiver, which transferred the "account" to ING.

If you have uninsured deposits, you can become a general creditor against the "receivership estate" and obtain a receiver's certificate. Uninsured depositors have a priority in the claims process, but this might take some time, although the FDIC might make advance payments to uninsured depositors within several weeks of its intervention.

There's helpful information at the FDIC website.
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Old 09-28-2007, 10:11 PM   #6
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Quote:
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My prior experience with FDIC takeovers is that the institution that takes over the insured deposits will have those deposits available to depositors immediately and the CD will continue on the same terms.

Our course, things may be different this time.
I don't like the sound of this, "the accounts may require review by an FDIC Claim Agent", in reference to depositors who use FDIC-approved techniques to have more than one account and still remain insured.
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Old 09-28-2007, 10:23 PM   #7
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Having worked at a bank that was taken over by the FDIC, this is a non event for most people...

The FDIC always close on a Friday so they have the weekend to 'count' everything...

They review your account to make sure you did it right... because if you have more than the legal amount because you did not do it right then you become a general creditor... if you styled your accounts correctly, no problems.

Also, unless the rates were way out of line, most acquiring banks keep the CDs at the same rate.. they want to try and keep your money..
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Old 09-28-2007, 10:49 PM   #8
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As a former FDIC claims agent, I can tell you that uninsured accounts are typically business accounts. Many businesses have payroll and other operation accounts that will exceed the insured limit.

Texas Proud is correct that individuals often exceed the insured limits because they don't understand how deposit insurance works and fail to style the accounts correctly. Unfortunately, many financial institutions make mistakes, so it's critical that the customer correct the problem at the time the account is opened.
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Old 09-28-2007, 11:54 PM   #9
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Cocobird, now I REALLY don't like the sound of this situation.
FDIC publishes a booklet called Your Insured Deposits which details, with examples, ways of opening a number of less-than'$100,000 accounts at the same bank, such as joint accts, or trust accts, thus allowing one depositor to have protection of >$100K.

If some youthful bank employee were to somehow screw up the creation process by not crossing every "t" or dotting every "i", how would the customer know?

(I have no funds in Net Bank and had never heard of them before they turned turtle).
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Old 09-29-2007, 12:03 AM   #10
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Years ago I bought their stock when it was on the rise, but lost it back and then some before I bailed.
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Old 09-29-2007, 12:17 AM   #11
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I have some accounts at NetBank and I just made an ATM withdrawl about 10 minutes ago. No problem, the Thai baht poped out as usual

(Thank god!)
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Old 09-29-2007, 01:24 AM   #12
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Just imagine back in the day... before the FDIC! All those high interest loans (on shakey credit). Loan defaults brought netbank down.

FDIC is definitely a Regulator we need (Gov Agency). If someone was not looking over the bank's shoulder, do you think Net Bank Execs would tell anyone?
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Old 09-29-2007, 06:41 AM   #13
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Cocobird, now I REALLY don't like the sound of this situation.
FDIC publishes a booklet called Your Insured Deposits which details, with examples, ways of opening a number of less-than'$100,000 accounts at the same bank, such as joint accts, or trust accts, thus allowing one depositor to have protection of >$100K.

If some youthful bank employee were to somehow screw up the creation process by not crossing every "t" or dotting every "i", how would the customer know?

(I have no funds in Net Bank and had never heard of them before they turned turtle).
Unfortunately, it is the customer's responsibility to 'know'... and they will be the one to pay... which is why you should not have more money in the bank unless you are sure...

BTW, it is the same as the (IIRC) 90 days to roll over a IRA. Even if YOU did everything correctly, but the new IRA trustee screwed up and left your check uncashed on their desk for over the official time period, YOU LOSE.. it was taken to court and the guy lost...
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Old 09-29-2007, 09:02 AM   #14
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The "official" notice. Note "no prior" announcement. FDIC Bank Closing Information for NetBank, Alpharetta, GA.
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Old 09-29-2007, 09:41 AM   #15
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There are so many banks and the CD rates usually aren't all that different. A 0.1% difference on a $100,000 CD is only $100 per year. Given that, why would anyone ever have over $100,000 in a single bank?

I've got CDs all over the place and consider the possibility of bank failure a non-event in my financial life. I don't even have over $50,000 in any one bank just in case it takes over another one of my other bank CDs.
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Old 09-29-2007, 09:48 AM   #16
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My understanding is that insured deposits will be immediately available the next business day at ING, the acquiring bank. The interest rates on your insured deposits, including the CDs, won't necessarily be the same as they were at NetBank, as the terms and conditions of the insured deposit became interrupted/repudiated by the intervention of the FDIC, as receiver, which transferred the "account" to ING.
If they can change the terms and the rates on the CDs, would that create a time window during which you can redeem the CD without the usual interest penalty? Seems only fair.
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Old 09-29-2007, 11:06 AM   #17
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FDIC is one of the programs put into place by the government to help prevent another Great Depression. My parents went through the GP and lost what little money they had at a bank that went under. Even up until they died in the late 1990s kept a lot of cash around the house in cans. They would never even consider getting close to the FDIC insurance limits at any bank.
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Old 09-29-2007, 11:40 AM   #18
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There are so many banks and the CD rates usually aren't all that different. A 0.1% difference on a $100,000 CD is only $100 per year. Given that, why would anyone ever have over $100,000 in a single bank?

I've got CDs all over the place and consider the possibility of bank failure a non-event in my financial life. I don't even have over $50,000 in any one bank just in case it takes over another one of my other bank CDs.
It is possible to find substantially higher rates at a particular institution many times. If you do and you have >$100K, it's quite useful to open multiple accounts at that lucrative rate. Much more convenient too.

This is particularly true when a CD comes due and it's time to roll it over.

On the other hand, orange juice futures offer a MUCH greater opportunity for profit.
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Old 09-29-2007, 01:07 PM   #19
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Cocobird, now I REALLY don't like the sound of this situation.
FDIC publishes a booklet called Your Insured Deposits which details, with examples, ways of opening a number of less-than'$100,000 accounts at the same bank, such as joint accts, or trust accts, thus allowing one depositor to have protection of >$100K.

If some youthful bank employee were to somehow screw up the creation process by not crossing every "t" or dotting every "i", how would the customer know?

(I have no funds in Net Bank and had never heard of them before they turned turtle).
The claims agent usually checks the titling on the account, which is usually listed on your statement, and the signature card. Both items are readily available to the customer at the time the account is opened. Other documents and bank records may be reviewed if these items do not clearly identify the owners of the accounts.
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Old 09-29-2007, 01:33 PM   #20
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If they can change the terms and the rates on the CDs, would that create a time window during which you can redeem the CD without the usual interest penalty? Seems only fair.
Seems like Cocobird can answer better as he was 'on the other side'... but yes, if they change the rates, you have a window to get your money out.. the previous contract was dissolved by the FDIC...

And Cocobird can answer this one even more so.... if it is a small bank, lots of time the FDIC will not allow a change.. they just bid the deposits out and take the highest bid... not worth the trouble.

When my bank (or should I say banks) failed way back when branch banking was not allowed.. so all our 'branches' were separate banks... the small ones were sold 'as is' and a few of them were sold for NEGATIVE dollars..
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