Saturday, September 29, 2007

Bank Failure

Is this just a blip on the radar or a sign of worse things to come?

ING Direct, a subsidiary of the Dutch financial group, is to take over the customers and insured deposits of NetBank, an online lender with $2.5bn (£1.2bn) in assets that was shut down on Friday by the US government following losses on subprime mortgages and other loans.

The closure marks the largest US bank failure since the end of the savings and loan crisis in the early 1990s.

It also underscores the ongoing impact of the US mortgage crisis, which has destabilised banks around the world, including Northern Rock in the UK.

ING said it would take on about $1.5bn in deposits insured by the Federal Deposit Insurance Corporation. It said it had paid about $15m to acquire the deposits. ING will also acquire $724m in assets from NetBank, which filed for bankruptcy protection.

Arkadi Kuhlmann, ING Direct chief executive, said in an interview that ING stepped in partly to insure continued consumer confidence in companies such as his and NetBank that conduct all their banking business online and do not operate branches.

“This is all about confidence in the market,” he said. “Since we are the largest direct bank we were very pleased to assist and help out and hopefully take on these customers who will continue to do business on the Internet.”

First the run on Countrywide Bank, then the Northern Rock run, now the failure of Netbank.

The shills want you to think the credit crisis and subprime mortgage mess fall-out is over and you should go on with business as usual.

But I get the feeling that there will be more bank failures before this whole thing is over.

Too much money was lent out to people with no jobs, no income and no assets (NINJA's!!!) or to people in over there heads for this to be over already.

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