NextBank, NA - Phoenix, Arizona Bank Gagal - Episode 325

**Freesia Brindski** (0:01)
Good morning, good morning. Thank you so much for joining me. This is the podcast, The Endurance of Labor Laws. I'm your lovely host, Freesia Brindisi. Today is episode 325, and we're going to take a look at another failed bank. The one that we're going to take a look at is called NextBankNA, which is probably abbreviated for National Association. But before we dive in, let me give a big shout out to my listeners, because as usual, you guys are awesome. I love to see you here. So a big shout out to Virginia, California, Oklahoma, New York, Texas, Pennsylvania, British Columbia, sorry, British Columbia, Illinois, Florida, Oregon, Georgia, New Jersey, West Virginia, Quebec, Indiana, Arizona, Colorado, Maryland, Massachusetts, Ohio, Michigan, Washington, Minnesota. The District of Columbia, also known as DC, aka The Swamp and Trump will drain it, thank goodness.
See a big shout out to Alabama, Nebraska, Iowa, New Hampshire, Utah, Ontario, Tennessee, North Carolina, Mississippi, Rhode Island, Alberta, New Brunswick, Connecticut, Manitoba, Newfoundland and Labrador, which is in Canada, Wyoming, Missouri and Nova Scotia. In terms of country, Niger, Spain, South Africa, Germany, the Netherlands, India, Australia, Bangladesh, the United Kingdom, the Russian Federation, Brazil, Canada, China, Sweden, Singapore and the United States. Okay, so again, today we're going to take a look at another failed bank, which is not good that these failed, but there's a reason why they failed. And this one's very interesting because a financial institution did not acquire them. Very interesting there, so either A, that means their books were so bad, no one wanted to touch it, or B, the FDIC could not find anyone. So it wasn't profitable to help them. And so sometimes these things happen. And it also has to deal with their portfolio and how management mismanaged the portfolio of that financial institution, because this is a bank. This is a bank that failed. So this one was located in Phoenix, Arizona. Again, no financial institution took them over. This one failed back in February. This would have been February 7th of 2002
So in terms of the background of it, it says, this is the FDIC's General Council's statement on NextBank. And this was released on February 14th, 2002 It says, the FDIC as a receiver for NextBank National Association NA has advised the Bank of New York as trustee of the NextCard credit card, sorry, the NextCard credit card master trust that an automatic event default acceleration or early amortization based solely on insolvency or appointment of the FDIC as receiver is not enforceable against the FDIC. The FDIC has not indicated any question or doubt to the trustee or otherwise regarding the validity or effect of any other trigger events for an early amortization of any NextBank credit card trust obligations, including any other trigger events based on collateral performance. The FDIC re-confirms under established FDIC policy as codified by express rule at 12 CFR 360.6 that it will not disaffirm or repudiate the completed transfer of financial assets by NextBank NA in securitizations in accord with the FDIC rule. So this one is very interesting. We've never seen one like this where there was not someone that came in and acquired them and the FDIC is buckling down. They're hunkering down on their rules and regulations and for good reason. Because this means this means this bank was really bad. They did something really bad and probably for a long period of time and I'm guessing they probably failed a whole bunch of audits if I had to guess. It's like what we've talked about in times past with labor unions. It's very important to do an internal and an external audit because if you do not do those audits every year, you will not know everything that is going on within your organization, regardless of whether you are in the public sector or the private sector, or if you are a labor union or a bank. So it needs to say the people that ran this bank literally ran it into the ground. I have no doubt that even though this was 22 years ago, I bet those people are still around and they're probably still causing problems at other banks. Because no one has the nerve or the courage, no one has the courage to slap their hand and say, we're not hiring you. You may have worked for another bank, you may have an MBA, or you may have a master's in something else to do with financial transactions, but you clearly do not know what you are doing. And this one was so bad that it's interesting that it not only affected the bank, but also affected their credit card, master trust. Basically, like whenever you go to a bank and you open an account, you have the choice of basically it being free banking or a type of fee based banking, and you typically can get a debit card. Debit cards are typically issued for free checking, and then you can also do a credit card associated with that bank. And for the most part, it goes through Visa, because Visa is typically the processor. I'm not a fan of MasterCard or Discover, but Visa tends to be pretty good. This bank's failure was so bad that it not only affected the actual bank, the NextBank National Association, NA, it also affected the Bank of New York, because they were the trustee of the NextCard Credit Card Master Trust. So this one was really bad. So just FYI, be aware that if you have a credit card and it goes through your bank, it typically is not managed or processed by your bank. So if your bank screws up, it affects the entity that is managing them in a private trust. That's how it is. So anyway, moving on, it says the introduction to this FDIC article. It says, on February 7th, 2002, NextBank NA National Association was closed by the Office of the Comptroller of the Currency, also known as OCC, and the Federal Deposit Insurance Corporation, also known as FDIC, and the FDIC was named receiver. As receiver, the FDIC is charged with winding up the business affairs of the failed financial institution, typical jargon for this. It says this includes the disposition of assets and liabilities of the failed financial institution and payment of dividends to approved creditors in order of priority. So again, if you're not an approved creditor, you're screwed. That's just how it is because you're not considered a priority. Goes on to say the FDIC as receiver has taken all necessary actions to conclude the affairs of the failed financial institution, made all dividend distributions as required by the law, and the receivership is deemed terminated. So basically, this one's really strange in that basically you have a bank that failed, the FDIC came in, took it over, but that side of it is going to be terminated. So there's the bank part that's terminated, but then it's also with the FDIC. So again, that part of the FDIC in regards to this financial transaction will be terminated because the FDIC cannot run banks. That's not their job. We do not have a federal bank. We do not have state banks like Oklahoma, like the state of Oklahoma, which is where I'm from originally. The state of Oklahoma does not own its own bank. Neither does any state in the entire United States, nor do any of its territories that I'm aware of, because that would not technically be lawful because the government cannot control money like that. The federal government already prints and produces currency via the US. Mint, but it's not appropriate for the government to be in charge of your bank. That's communism, and that's what happened in the Soviet Union, the USSR. That's what happened in pre-Nazi Germany, and then that's definitely what happened in Nazi Germany. That is what has been happening in China for a long time because it's communist. So a lot of these communist countries, they claim to provide all this freedom or whatever for their citizens, but when it comes down to it, they want the money, they want the financial assets, and they don't want their people to be successful, and they don't want their people to be successful because they want the money, and they don't want their people to know what's really going on. That's very true of every communist country, especially USSR because once communism took over the USSR, basically the Russian Empire fell and became a communist country, you had what were called the KGB, and that's basically the organization that Putin was a part of when he was a young man, so it was basically public policing, but under the government branch. He was a government agent and he policed people, and so basically under the Soviet Union and their regime, it became a closed society, so people could hardly ever go visit, but people could not get out. Also, there was massive inflation, there was massive starvation, there was massive deportation, there was massive executions, it was horrible over there during that time. And what a lot of people did not know, the citizens, they were just relying on their government, whether they liked them or not, and a lot of people were communists, they were willingly practicing communism, but they had no clue what was really going on. And the entire world did not really know what was going on in the USSR until the wall fell. And people, the citizens of Russia, basically ambushed the KGB's office and found just, I don't know, file after file and room after room of all these documents and all this public policing that the KGB had done, and they were watching all the citizens and documenting everything they did. So basically, if you went to the store and bought a banana, and instead of buying four bananas, you only bought two, they made a note of that. It was really creepy. It was very disturbing, but what's interesting is that there were still some people that did not want to believe that their government was bad.