FDIC Vote of Confidence in E*Trade Bank???
February 13, 2008 – 12:33 amOn October 26, 2007, the FDIC terminated the insured status of Volkswagen Bank USA. The FDIC notification became public on January 30, 2008, in conjunction with the order, E*Trade Bank assumed the deposits as of September 28, 2007.
In these “assumption of insurance transactions,” the acquiring company typically pays a small premium to assume those deposit accounts. After the NetBank failure, ING purchased NetBank’s $1.5 Billion of insured deposits for $14 Million. (ING Press Release, FDIC Press Release) ING paid a 1% premium to assume these insured deposits.
According to the FDIC’s Statistics on Depository Institutions, as of June 30, 2007, Volkswagen Bank USA (FDIC Certificate #57225) had $239,816,000.00 in insured deposit accounts (6,852 deposit accounts). No other future dates have Volkswagen Bank listed in the active or deactivated searches, so I will assume this was the amount assumed by E*Trade Bank as of September 28, 2007.
The termination of insurance was likely the result of possible changes of ownership in Volkswagen Bank USA due to the moratorium on industrial bank change of control notices if Porsche was determined to be in control of Volkswagen due to a change in the Volkswagen Act.
Although the amount of deposits was small in comparison to E*Trade Bank’s total deposits, the vote of confidence in E*Trade Bank’s sustainability is a positive. Is this why the directors increased their ETFC holdings? The public release from the FDIC is a day away from their acquisitions…Lucky timing.
Although the news is positive, depositors are still weary, especially after NetBank’s failure. Will this positive news increase deposits? Increase demand for ETFC shares?
Considering the timing of this transaction in late September 2007, when all the doom and gloom news was the beating heart of Bloomberg TV, I see it as positive and will purchase shares in ETFC. Hopefully E*Trade Bank will acquire more of these insured deposits in the future.
One Response to “FDIC Vote of Confidence in E*Trade Bank???”
The FDIC is just postponing their expenditure on cleaning up E-Trade. They have more messy mortgages than they let on.
By Ed Nace on Feb 15, 2008