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Poetic Justice in NetBank Implosion
It hasn't got a lot of headlines, but the US has now officially suffered its
biggest bank
failure since 1993. NetBank had $2.5 billion in assets, and somehow contrived
to lose more than $200 million in 2006. Deposits were insured up to the FDIC
ceiling of $100,000, and ING Direct is buying $1.5 billion in deposits for $14
million, which works out at about $1,000 $135 per new customer.
Of course, there's always going to be someone with more than $100,000 in deposits. But in this case it's hard to feel a huge amount of sympathy:
Applied Cognetics, a software development and online marketing firm based in Brooklyn, N.Y., has about $1 million in deposits in NetBank...
NetBank customers with accounts exceeding the FDIC limit will become creditors in NetBank's receivership, the FDIC said Friday...
Applied Cognetics bills itself as a one-stop shop for online lead generation and Internet development.
Colthrust and his team - who formed the company after a subprime mortgage lender where they worked was sold - have built the 10-employee company's sales to more than $10 million since it was founded in 2000. Ironically, given that lenders' catering to subprime borrowers have led to a spike in home loan defaults, subprime lead generation software is among the services Applied Cognetics sells.
So Colthrust started a subprime lender, sold it, and then used the proceeds to start a company finding leads for other subprime lenders. He also put all his money in NetBank, which promptly went belly-up in the subprime meltdown. There's some kind of poetic justice there, I think.
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