NetBank Fails, Assets Disgorged To FDIC, ING

NetBank is the first federally regulated bank to fail thanks to the ongoing subprime meltdown. The failure spotlights the importance of FDIC insurance, which guarantees deposits of up to $100,000. Customers who abided by the FDIC limits and deposited less than $100,000 with the internet bank will become ING customers, and will have immediate access to their funds. The 1,500 customers who collectively deposited $109 million above the FDIC limits stand to lose half of their funds.

NetBank was one of several financial partners of the US Airways. The Tempe-based airline offered promotions such as 4,000 miles to open a NetBank checking account, 4,000 miles for a money-market account and 5,000 miles to deposit at least $15,000 into a NetBank certificate of deposit.

The announcement annoyed at least some customers in U.S. Airways’ Dividend Miles frequent flier program.

“I’m flabbergasted to think a company they’re involved with would go out of business,” said Scottsdale resident Frank Simons, a US Airways frequent flyer who said he deposited money with NetBank. “I feel there’s a level of culpability, since they solicited me through the Dividend Miles program.”

More information on the bank’s closing is available on the FDIC’s website.

Regulators Shut Online Bank NetBank [AP]
Failed Bank Information [FDIC]
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(AP Photo/Mary Ann Chastain)