NetBank
One of the great misconceptions people seem to have about banks is that the money you deposit is still “your” money. No, that money is now the bank’s asset, and the account holders are essentially creditors </hand-waving>. That provides flexibility, but it can also lead to massive problems when things go bad.
In the largest US bank failure in 14 years, internet banking pioneer NetBank filed for bankruptcy protection last Friday. As a result, the Office of Thrift Supervision and the FDIC closed NetBank, and ING acquired NetBank’s deposit accounts.
I am (or at least was) a NetBank account holder, but I had less than $100,000 deposited, so my full account value was insured. Others won’t be so lucky. The 1,500 people with more than $100,000 in their accounts will become creditors to the bank’s receivership.
I have known about NetBank’s souring finances for a while, yet I kept my NetBank account loaded with a non-trivial (for me) amount of cash. Why? Did I feel invulnerable? Was it supreme faith in the FDIC? Maybe a little of both.
The actual failure has snapped me back to my senses, and even though I didn’t get burned this time, you can be sure that I will be more proactive the next time around.
*enhance*
ha! the first number is a 4!
*enhance*
HAHA!! I now have your whole credit card number!!!
— god, I love Hollywood movies…although i know it is possible to find the number [or extract extra details in images/films] if you get multiple images of the same item. Superresolution is what they call the technique…and I’m actually learning about it in grad school right now…
There are even explicit instructions about how to recover data from blurred images, which is why I played with the order of the numbers before blurring them 🙂
Buy physical gold/silver.
Pedantically and seemingly paradoxically, money on deposit with a bank are the bank’s liabilities, and the loans held are the bank’s assets. Good article, though. I worked for a fellow who’d been in banking for his entire life and one of his favorite sayings was ‘A Federal banking charter is a license to steal.’