Friday, September 28, 2007


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 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.

Monday, September 24, 2007

Kicking's tires

For any who haven't heard of it yet, is a site that aggregates all your financial accounts in one centralize portal.

I first came across a few months ago, and had a lingering beta code I hadn't yet gotten around to using. I see they went public with a splash last week, winning the TechCrunch conference demothingie, and the resulting flood of blog attention reminded me that I should go give Mint a try. So I signed up last week (after the website crawled back from the lag-and-crash slashdot effect winning the conference had), imported a batch o' financial data, and started poking around.

Here's the disclosure part of my Mint tire-kicking: Mint initially popped up on my radar as a direct competitor to a fledgling personal-finance start-up I've been doing some consulting work for. I got involved because I liked the idea of a website that will let you centrally manage a zillion financial accounts and optimize your money management. Some months down the road, I found out about Mint and how it's also working toward that goal. Yeep.

So, I have a direct interest in not having Mint be the ultimate perfect site for managing finances. On the other hand, I also have a direct interest in finding a site that will do that (it's a service I really want, dammit!), and as a personal-finance blogger and journalist, I want to check out anything that pops up in the field.

I think this is a fairly objective rundown of my impressions after a few days of working with Mint, but -- you've been forewarned. I may be biased. One important caveat: I haven't seen the demos and feature set yet for the Mint competitor I'm working with. My consulting is on editorial stuff only. So, where I criticize Mint features, I'm not trying to cast aspersions on a gap Rival Site fills; I honestly have no idea whatsoever whether they'll do better at the areas I see as flawed or not. My criticisms are based solely on what areas of functionality I find lacking for the ways I, personally, would like to use a site like this.

First, The Good Parts

It looks great. Full credit to their design team. Look-and-feel is no small thing; people have come up with all kinds of blather about what makes an application "Web 2.0," but to me, the biggest change I've seen in modern Web apps is a realization that design matters. Ugly, kludgy things are frustrating to use; we put up with it for years because we wanted the functionality software offered, but now that it's clear good aesthetic appeal is possible in software and Web apps, there's no excuse.

Also, good design costs money. I find that I trust sites more if they've obviously put in the resources to make themselves attractive -- and if I'm going to hand over the keys to my financial kingdom to a website, I'd better trust it. Mint's design (and, while we're at it, their URL -- I'm sure snagging that was pricey) suggests that they're a serious venture with resources.

Mint's account import features are pretty painless. Pop in logins and passwords, click buttons and poof! It took me about 10 minutes to populate Mint with two checking accounts and three credit cards. Within 10 minutes, I had a pretty robust data set for Mint to start mining.

The snazziest thing Mint does is automatically categorize your spending and offer dashboard-like graphs and analytics. For me, this is a fun toy. For someone actually trying to stick to a defined budget in various categories, it could be a very helpful tracking tool. (As I've mentioned previously, I don't budget.)

The big advantage of having all my accounts centralized in one interface, for me, is the ability to get a quick, high-level overview of what's happening. Mint seems more geared toward financial analytics than management. I don't see tools for, say, making a payment on a card directly from the Mint interface, or for aggregating due dates so I can see what I owe next. But if I want to just glance over all my accounts, and make sure there's no giant unexpected spikes (since we all know how attractive financial thieves find my accounts), this is a great timesaver.

Also, I like Mint's data-centralizing approach. Lots of people probably use Quicken to do similar things to what Mint does. But Quicken is a desktop app, which limits its accessibility to one PC, and it requires either data entry or synchronization. If that works for you, great. I'm lazy. It doesn't work for me. Mint automatically retrieves data from all the accounts you give it access to. I can neglect it, come back weeks later, and not have to fight through data catch-up.

The Less Good Parts

Mint is in beta, and I'm a big believer in incremental development, so I don't expect every possible feature to be in the application now. But I don't know what the future development plans and priorities are, and as Mint stands right now, it strikes me as a one-trick pony.

Mint gives you a neat set of analytics about your spending: how your current monthly spending tracks against your past spending patterns, how your cash-vs-debt ratio is doing, and so on. In addition to giving users fancy graphs and widgets, Mint uses this information to look for savings opportunities: It compares your info against some sort of data set of other available financial products, and makes suggestions.

This is both really clever and really problematic.

Mint is a free service. Mint says it plans to stay free and make its money on referral commissions from the offers shown on its "ways to save" page. This implies Mint will never show me an offer on that page from a financial services company that isn't an affiliate or advertiser of Mint. It also means those offers may or may not really fit my individual financial needs.

Mint currently has two offers showing right now for me, which it claims would save me $4,202 annually. So let's take a look at those offers.

The first offer suggests I switch my American Express card for a Discover card. Doing so gets me away from American Express's usurious 30.34% interest rate and into a 0% rate at Discover, potentially saving me $1,688 annually in forecast interest charges based on my usage pattern. Mint's calculator also adds in $515 in estimated cash-back payments from Discover.

Here's the flaws in that savings logic: The 0 percent APR is, of course, a six-month introductory one. After that, Discover's website puts the average APR at up to 18.99%. That's better than Amex's, but still a long way from 0%.

Also, if I wanted a Discover card, I would already have one. I did some pretty careful comparison shopping before picking my Amex IN NYC card as my primary plastic. Discover would be accepted at far fewer places than my Amex; I couldn't use it as a universal card as I can with the Amex for (almost) all purchases. And my Amex racks up annual rewards equivalent or better than the $500 or so in annual cash back Discover is dangling

So, Discover isn't a good fit. The second offer, swapping my Time Warner cable/Internet and Verizon phone combo for a Time Warner "All the Best" package is slightly more intriguing, but that involves swapping my landline for a digital one, and that's a complicated headache I'm going to postpone thinking about.

Overall, though, my criticism stands: I don't like the blurry line between "savings optimization service" and "advertorial engine."

If the savings offers are basically advertising window dressing underwriting Mint's core service, fine; I can live with that. But I don't know that the core service -- centralized accounts and pretty graphs -- are compelling enough to make me a regular Mint user. If identifying financial product savings opportunities are part of what Mint sees as its core service, I think the product analysis needs to be expanded beyond only those advertisers will pay to serve up.

My other big Mint criticism: As it stands now, it doesn't really track your financial life comprehensively. Part of what I would like in a financial portal is an ability to get a sense of how my longer-range financial pieces fit together. Mint is good for lining up "day to day" accounts: checking, savings and credit cards. But what do I do with my 401k? My student loans? My HSA (health savings account)? Mint's service doesn't really seem geared toward dealing with those kinds of long-term, low-daily-activity accounts.

The Uncertain

Ye gods and fishies, this is getting long. I'll just briefly touch on two other issues, and save any future observations on Mint for another post:

-Security: The immediate, kneejerk reaction many people seem to have to Mint is that aggregating all your financial logins in one place is the height of security stupidity. "One hack away from being an atom-bomb of identity theft" is how one Consumerist commenter put it.

I think that's a misguided, or at least superficial, concern. I haven't done a security dissection, but Mint doesn't seem to allow any easy reverse-engineering of stored passwords. The site doesn't display any of my logins, passwords and account numbers. To transactionally do anything with any of those accounts, I have to go offsite and log in at the provider's webpage. If someone got hold of my Mint login and password, they could see all of my transactions and get a snapshot of my financial life, but it doesn't look like they could immediately then rip off my accounts and wreak havoc with them. Sure, a sophisticated hacker could probably make all sorts of trouble if they got into Mint's infrastructure, but frankly, hackers routinely get into and make all sorts of trouble with the infrastructure of all kinds of financial services companies. I don't see Mint as any riskier than, say, having my 401k, credit card and bank accounts accessible at those institutions' Web sites.

-The future: Mint is currently running on venture-capital funding. The VC exit strategy in the Web 1.0 boom was "IPO." The VC exit strategy in the Web 2.0 boom is "get acquired."

I'm skeptical (perhaps wrongly; I dunno, I'm not a VC and haven't seen Mint's pitch presentation) that Mint's affiliate referral scheme will ever deliver booming revenue. Unless the company plans to later change its business model to introduce additional revenue streams, the likely real plan for monetizing the service is to sell it off.

It's not a bad plan. Google, Yahoo, and other Web Goliaths like to snap up sparkly startups, and Mint has a very slick interface and targets a very sought-after user demographic. I will be very unsurprised if it gets acquired within a year.

But someone, at some point, is going to have to monetize Mint, most likely through advertising. And advertising, as Mint's current offers section shows, has inherent conflicts-of-interest with optimizing your financial planning.

P.S.: I know Mint isn't the only thing out there doing what it does; other competitors include Wesabe and Cake Financial. I intend to check out Wesabe soon; Cake I'll probably avoid because it's geared toward investors, and my only investment is my 401k. Anything else I should be watching? Let me know in comments ...

Friday, September 14, 2007

The banking bake-off winner: WaMu

Sorry for the hibernation. I wrapped up my mad travel jag ... and promptly got consumed by freelance projects. Bad blogger! I promise to talk more here again.

I did finally solve my new-bank selection dilemma (detailed in part 1 and part 2 of my "eek Netbank got sold!" drama). The winner was WaMu (are they still technically Washington Mutual?), which met all my "I refuse to pay fees of pretty much any kind" criteria.

On paper, at least. WaMu's documentation is frustratingly contradictory on whether or not it charges fees for using non-WaMu ATMs; I suspect it's a holdover from their old account structure. I'm anecdotally assured that the WaMu Free Checking account is indeed fee-free.

Converting bank accounts is a sloooow process. Unsurprisingly. I signed up at WaMu's website around Aug 19. It took 15 minutes. But confirming my initial-deposit transfer from NetBank took about a week. Then it was another week for my ATM card to arrive. My PIN, sent under separate cover, was a few days more. Finally, this week, my starter checks arrived. All up, about three weeks to gather the bits and pieces needed to start my migration.

Today I went to a WaMu branch and changed my PIN from the randomly generated one to my preferred PIN, and made my first check deposit. I also used a voided starter check to fill out new direct-deposit forms. My company says it'll take 21 days to get that moved. So, it looks like another month before I can really move my financial life out of NetBank and over to WaMu.

Going with WaMu was as much an emotional decision as a straight financial one. Other banks like the Schwab Investor Checking account offer more financially advantageous things, like higher interest rates and reimbursement for outside ATM fees. But ... I've never had a local bank. Ever since college, I've used Net banks. (At the time, I couldn't find a single local bank without monthly service fees for low balances, which I am adamantly, categorically opposed to.) The idea of going to a local branch to deal with any customer-service issues, as I did this morning to change my PIN, is kind of novel. And while Internet banks have always worked out well for me financially, the one problem I keep running into is them getting sold out from beneath me. I'm not sure how much I trust banks with too-good-to-last terms like Schwab's.

So, I'm giving the WaMu thing a try. Will report back on how it works out!

Tangentially: I meant to move faster on this, since NetBank's initial Everbank announcement said it would do the conversion by "late summer," and for convenience's sake, it seems best for me to get out before that happens. But it's now September, beyond what anyone can reasonably call "late summer" ... and my NetBank account seems to be chugging on. So I checked today to see if they had an update, and found a terse little message linked in tiny print from the front page: " When we announced our agreement with EverBank in May, we expected to first complete the sale of other bank investments to have the means necessary to meet the terms of the EverBank agreement. The sale of these investments is taking longer than originally anticipated."

Uh oh. And I see NetBank is getting Nasdaq nastygrams, too. Whatever is happening under the hood over there does not seem good.