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FDIC Closes Netbank, One of the First Online Banks

Posted by Zonk on from the thanks-loan-guys dept.

An anonymous reader writes "NetBank, one of the first internet banks in the country was closed by the FDIC on Friday. Being a loyal customer for 8 years, I am saddened that an institution that provided me with so much great service and a cool, hi tech way to conduct my financial transactions is shutting down. Seems that mortgage defaults are to blame: 'NetBank's closure marks the first bank to close since the recent U.S. housing boom deflated. Critics have said that weak underwriting standards have led to record number of homeowners entering the foreclosure process. But NetBank's rare Internet-based business strategy made it a unique financial institution and its problems aren't expected to mirror issues facing other mortgage lenders, analysts say.'"

2 of 174 comments (clear)

  1. It would seem so by Sycraft-fu · · Score: 4, Interesting

    ING Group is pretty major, I don't think they are going under any time soon (ING Direct is one of their divisions). However if it does, you needn't worry as mentioned this is what FIDC insurance is for. Up to $100,000 of your deposit is covered by the FDIC. So unless you've got more than that in there, you are fine. If you do have more, may I suggest you seek the services of a financial consultant, as that is too much money to just leave sit in a bank account, even one with a reasonable interest rate.

  2. Re:FDIC insurance by Rich0 · · Score: 4, Interesting

    It largely depends. Many banks have "money market" accounts that are classified as savings accounts as far as the FDIC is concerned and are insured. Many money market accounts are in fact uninsured as well.

    Netbank had a "money market" account which was FDIC insured - at least as far as I'm aware (and I did take the time to find out).

    I'm guessing it comes down to whether the bank wanted to follow FDIC rules regarding investments/limits/reserves/etc. Most money market mutual funds don't - but they're still very safe due to their investment profile. Also - most non-FDIC-insured money market funds tend to be privately insured against anything but investment risk.

    Bottom line is - anybody with any kind of account no matter what it is called or where it is held should be aware of its FDIC-insurance status. Many banks have both insured and non-insured investment products.