by Mike Masnick
Mon, Oct 1st 2007 12:48am
If you remember the earlier days of the web, you'll probably remember NetBank, which was one of (if not the?) first internet-only banks out there. It offered high interest rates in the early days, making it popular with online folks in the late 90s. To be honest, I hadn't heard much about it lately and wouldn't even have known if it still existed until I read that the FDIC was shutting the bank down after it had too many mortgage defaults. The FDIC, of course, insures bank accounts up to $100,000 -- and all of the insured accounts are going to be transferred to ING (another popular online bank). Unfortunately, it appears that more than a few people had more than $100,000 in their accounts, totally around $109 million in accounts that were uninsured. For the folks who had more than $100,000, they now need to get in line with various other creditors for whatever is left of NetBank -- meaning that they'll probably get pennies on the dollar. While some may paint this as a sign of problems with internet-only banks, it sounds more like the problem was in how NetBank chose to approve mortgages -- an area it was hardly alone in screwing up over the last few years.
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