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The first symptom?

So a friend of mine called me up this morning to state that his bank went under. Seems that Office of Thrift Supervision yesterday closed NetBank, the first Internet only bank. The FDIC was named the receiver, and the remaining deposits are being moved to ING Direct. "They had significant problems with respect to loan underwriting, poor documentation, and a high amount of early payment defaults," OTS spokesman Kevin Petrasic said. That's a polite way of saying that they had, amongst other issues, problems with subprime mortgages.

Now I hadn't heard of a bank failure occurring since the Great Depression, but having looked at the FDIC's Bank Failues and Assistance, there have been several, including one as recent as February 2, 2007. NetBank, however, is the largest of recent times.

Is this the first symptom of what is to come due to the subprime mortgage debacle?


( 2 comments — Leave a comment )
Sep. 29th, 2007 11:19 pm (UTC)
Sadly, I agree.

The problem is that the insatiable desire for growth, growth, GROWTH! caused businesses to make irresponsible decisions. I feel that this is the first domino...and businesses and investors are going to have to realize that stability is more important than exponential growth.
Oct. 5th, 2007 01:43 am (UTC)
Is this the first symptom of what is to come due to the subprime mortgage debacle?
By no means the first. There have been some large failures of hedge funds, huge writedowns taken by banks and other institutions . . . and there is much more to come. As more and more bagholders have to fess up to how little their subprime-related assets are worth, the worse it will become. Remember, the vast majority of those loans are sliced and diced and transmogrified into collateralized debt obligations with inflated ratings of safety. Those poisonous securities have metastacized.
( 2 comments — Leave a comment )