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.

After delivering bad new, I usually grin. Unless I feel personally affected by the events.
This week in the daily meeting, M.B. the production manager gave us the sketchy details of the recent visit by the Scary One (the member of senior management most prone to asking for what we are not ready to deliver). The Click Here to continue reading.

According to witness, this rant at Long or Short Captial made our publisher laugh so hard that he almost busted a gut. He disputes the fact that he laughed that hard, but he will testify to the fact that it was very funny.

This from Spiegel…

Deutsche Bank’s announcement that it is short €29 billion has Germans fretting. If the country’s biggest bank is in trouble, what does that mean for the others? Commentators think it could be bad news.

This from the New York Times….

The dollar remained at a low ebb today against major world currencies.

One euro traded at $1.4090 this afternoon, up from $1.4065 yesterday, the first time in the common European currency’s nine-year history that it has crossed the $1.40 mark. The British pound also rose, trading at $2.0202, after closing at about $2 yesterday.

And the American dollar remained at virtual parity with the Canadian dollar, the first time that the two currencies have traded that closely since late 1976. It was trading today at 1.0007.

This from the New York Times via Calculated Risk….

It is a measure of the continued confidence in the power and wisdom of central bankers that markets around the world rallied. Both moves showed that the bankers had grown more fearful of credit market contractions damaging economies, but investors initially chose to focus on the action rather than the fears.

By yesterday, however, the markets were moving in ways that cannot have made the Fed happy. The dollar fell — an expected result from cutting short-term interest rates — but long-term rates rose, and so did mortgage rates.

“Alan Greenspan’s conundrum is becoming Ben Bernanke’s calamity,” said Robert Barbera, the chief economist of ITG, recalling that when the Fed raised short-term rates under Mr. Greenspan, long-term rates did not follow. Now the opposite is happening, a fact that will make it that much harder to stimulate the economy.

Those wanting to understand the Fed’s reversal can profit from reading two papers by Fed officials, released this summer as the credit squeeze was worsening.

In total, they constitute an admission that the Fed was surprised by the housing and borrowing boom on the upside, and now fears it will be surprised on the downside.

This from Marco Man…

Macro Man has long been more favourably disposed to the buck than many. His disavowal of the “dollar must go down forever” thesis is one of the reasons that he (unfortunately) didn’t delta hedge his powerball strip. However, even his patience has its limits. A few weeks ago, he noted that any aggressive gesture from the Fed to bail out turd-holders and reflate asset markets would force him to turn structurally bearish.

That has now come to pass, and in what Dennis Gartman might refer to as a “Watershed” moment, Macro Man has lost faith in George Washington. Simply put, if the Fed doesn’t give a crap about protecting the purchasing power of the dollar, why should anyone hold it?

Meanwhile, Jeff Matthews mocks the Fed. And Saudi Arabia declines to follow the Fed off the cliff.

This from Bloomberg….

Crude oil climbed above $82 a barrel to a record in New York after the Federal Reserve reduced U.S. interest rates more than economists expected.

Sometimes the world is just so sick that even I can’t laugh at it. Though perhaps I am overly sensitive due to the fact that food is near and dear to my heart.

What ever the reason, I can find no humor in the fact that this country subsidizes the burning of food for fuel while at the same time slapping such heavy environmental regulations on fuel that farmers are facing shortages. This from Fox News…

NEW YORK — Fuel shortages in the U.S. Midwest are raising concerns corn farmers may have trouble harvesting their bumper crop this autumn.

Farmers planted the largest corn crop since 1944 last spring after prices hit a 10-year high of $4.37 a bushel in early 2007. The U.S. Department of Agriculture has estimated a record crop of more than 13 billion bushels.

But farmers said supplies of the ultra low sulfur diesel needed for harvesting equipment are running low, particularly in the corn-growing regions of Minnesota, Nebraska, and Iowa.

In Iowa, fuel shortages are anticipated as retailers report having only about 80 percent of their normal supply, said John Scott, a corn and soy farmer in west central Iowa.

“Worse case scenario is our crop stands in the field until we have fuel to harvest it,” said Scott, who has stored about one week’s supply of fuel in anticipation of shortages, but not enough to tide him over for the six-week harvest season.

Curt Watson, the President of the Minnesota Corn Growers Association, said the fuel terminal that usually supplies his area is dry. His supplier has to drive to another area, where long lines with a wait of four hours are not uncommon.

So according to this article, the checks that America Home Mortgage Investment Corp sends out to pay the property taxes are bouncing. That means that the people in those houses need to pay their bill themselves if they don’t want to lose their houses. So what has that to do with shooting government officials? Well read this….

Baltimore City received bad checks for 53 properties – a total of about $63,500. Baltimore County said American Home Mortgage checks bounced for 21 properties, totaling $41,000. Taxes are due at the end of the month.

Finance officials in the rest of the region – Anne Arundel, Carroll, Harford and Howard counties – reported no similar problems.

“This is just another chapter in what is a very difficult time for the mortgage industry,” said Donald I. Mohler III, a spokesman for Baltimore County, which no longer accepts checks from American Home Mortgage.

“It’s an unfortunate situation and we certainly hope these individuals will be able to work out some kind of agreement with their mortgage company,” Mohler said.

Anthony McCarthy, a spokesman for Mayor Sheila Dixon, said the city does not plan to notify the affected homeowners. They will get a notice in November along with all other delinquent taxpayers if the problem isn’t resolved by then.

Baltimore County said it has sent bills directly to the property owners to alert them.

Now Baltimore County is doing things right. I don’t feel any particular need to see them shot. But what excuse is there for the city of Baltimore? If the City alerted people like the county did, then people could avoid penalties.

I thought that government guaranteed deposits were supposed to stop bank runs. But apparently it does not work all that well. This from the Telegraph…..

About £1 billion was withdrawn by panicking Northern Rock customers on Friday, as fears for the bank’s future sent shock waves through the City and caused its shares to crash.

The company’s phone lines were jammed for most of the day, its website crashed and the 72 branches were besieged by thousands of worried customers after it admitted having to ask the Bank of England for emergency funding.

I have yet to read a good explanation for what Northern Rock’s problem is. But it is not going to be an independent company for long at any rate.