Wow

My bank went bankrupt.

I can't exactly claim I didn't see the writing on the wall, but still. It's a bit of a shock to go to your bank's website to check your account and instead find a shut-down notice from the FDIC.

This appears to be one of the largest bank failures (but not the very largest) in modern times. I'm digging around for references. This encyclopedia.com article has data charts suggesting that since 1980, only three banks with assets of over $1 billion have failed, none since 1992. Netbank had $2.3 billion on deposit.

What happened? The best I can suss out without prolonged digging is that Netbank made big bets on the mortgage business and suffered for it when the housing market began collapsing. Netbank's regulator, the Office of Thrift Supervision, put out a press release Friday attributing Netbank's heavy losses to "early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies." Ouch.

I mused a few weeks ago that Netbank's announced purchase by EverBank didn't seem to be happening very quickly. I was a few days early -- three days after I posted that, Everbank cancelled the deal, saying Netbank was too distressed to meet closing conditions. Had I been paying attention to Netbank news, I might have noticed the Atlanta Journal-Constitution piece saying the next likely step would be an FDIC intervention.

Personally, I won't lose anything in this mess. The FDIC insures accounts up to $100,000, and I had far, far (far) less in my Netbank account even at peak usage. As mentioned here previously, I was in the process of moving to WaMu, since I didn't want to migrate to EverBank. Talk about lucky timing: I cancelled my direct deposit two weeks ago. It isn't yet active at WaMu, but the paycheck I got today (a live check) was the first in years not to go straight into my Netbank account.

I'm left with about $240 tied up in my Netbank account. ING is acquiring Netbank's insured deposits (for, literally, a penny on the dollar). I'm waiting to find out how that will work, but it may actually be remarkably painless. I'd initially assumed I'd have to wait for my account to transfer to ING's system and the reissuance of an ATM card, checking account number, etc etc, but the FDIC FAQ claims my debit card and checks will continue working without interruption. If that's so, then it seems ING is physically gaining access to Netbank's systems. In that case, I think I can write a check to myself for everything left in my Netbank account (once the website resurrects and I can find out how much that is), deposit it at WaMu, and be done with it.

Not everyone will be so lucky. Of Netbank's 104,000 customers, 1,500 had accounts exceeding insurance limits, totaling $109 million. The limits -- $100,000 per person -- sound hefty, but not when you look at them in terms of a life savings. The Pittsburg Post-Gazette had a scary, sad story about a retired local citizen who saw his $521,000 nest egg vanish in this year's other bank bankruptcy, the fall of Pittsburgh's Metropolitan Savings Bank.

RIP Netbank. I was a customer for eight years; this isn't how I thought our business relationship would end.