Every once in a while, I am reminded why it is good to be American. We still do some things right in this country.
This particular thought occurred to me as I was reading the FDIC notice regarding the shutdown today of NetBank. Unlike the British regulators who at first lied and then had to cave in to what the market already knew, the FDIC seems to have spotted this problem before it became widely known. And when they spotted the problem they did not mess around. They just shut the whole operation down.
This is part of their press release……
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved the assumption of the insured deposits of NetBank, Alpharetta, Georgia, by ING Bank, fsb, Wilmington, Delaware.
NetBank, with $2.5 billion in total assets and $2.3 billion in total deposits as of June 30, was closed today by the Office of Thrift Supervision, and the FDIC was named receiver.
The failed bank was an Internet bank and did not have any physical branches. Depositors of NetBank will automatically become depositors of ING Bank.
Over the weekend, customers can access their money by writing checks, or by using their debit or ATM cards. Checks drawn on the bank that did not clear before today will be honored up to the insured limit. Starting on the morning of Monday, October 1, customers will have full access to their insured deposits via the Internet and for the foreseeable future should continue to utilize NetBank’s current Website to transact banking business.
ING Bank has agreed to assume $1.5 billion of the failed bank’s insured non-brokered deposits for a one percent premium and will purchase $724 million of assets. NetBank had approximately $109 million in 1,500 deposit accounts that exceeded the federal deposit insurance limit. While these customers will have access to their insured deposits, they will become creditors of the receivership for the amount of their uninsured funds.
This is the right way to shut down a bank. By shutting down the weak institutions and giving their money to the strong institutions, you can keep the problem from spreading.
As a side note, I found the fact that the FDIC was sending NetBank’s deposits over to ING interesting. On one hand, the FDIC had no choice but to send NetBank’s money to another internet bank so it would make sense to chose ING. On the other hand, there are a lot other internet banks out there beside ING.
But I have long thought that ING was the only internet bank that was worth anything. I wonder if the FDIC agrees with me.