By June, Advanta came up with a Hail Mary scheme to retain cash. It shut off credit to around one million customers so it could stop paying out money, and jacked up interest rates on outstanding balances, in some cases from 7 percent to more than 30 percent. Regulators' phones rang off the hook with calls from small-business cardholders.

To their credit, officials at the Federal Deposit Insurance Corporation moved swiftly, and forced Advanta to pay back $35 million to cardholders. The agency also told Advanta to create a plan to operate its bank without FDIC deposit insurance — meaning the company would surely lose hundreds of millions of dollars in deposits.

By July, Advanta seemed on pace to run out of money within a year. Its solution, apparently, has been the "investment notes" offer. So far it has sold $183 million worth of these notes. By Newsom's calculations, the company's only chance at paying back this money would be to borrow more money. In his mind, the only people likely to give Advanta money in its current state are gullible investors.

Ponzi scheme "is a title that applies here," said William K. Black, associate professor of economics and law at the University of Missouri and author of the book The Best Way to Rob a Bank Is to Own One. He came to this conclusion after comparing the Chronicle ad with the details of Advanta's offer.

"The only way you can do this is like a Ponzi, and grow extremely rapidly," he said. "Even using these kinds of ads, and seeking out people who they perceive as the ultimate suckers in the marketplace, you're not going to be able to grow rapidly enough to stay alive all that long."

Why did FDIC officials act quickly in ordering Advanta to stop cheating its credit card customers, yet overlook the far larger investment note scheme?

The FDIC does not directly regulate sales of corporate debt — that's the job of the Securities Exchange Commission. But if, in the process of reviewing Advanta's activities, an FDIC bank examiner came to believe that the company's "investment notes" prospectus was intended to mislead investors, she merely would have needed to call the SEC.

Kenneth E. Scott, an emeritus Stanford law professor who specializes in corporate finance reform, had not been familiar with the specific Advanta case. But he said it's commonplace for bank examiners who detect signs of trouble to make referrals to other agencies, such as the SEC or the Department of Justice.

"If they [Advanta] got a prospectus approved six months ago, and there were all kinds of developments that made the continuing use of that prospectus materially misleading, that's an enforcement action the SEC could bring," he said. "Could the bank's supervisor call it to their attention? Certainly. Would the bank's supervisor know about it? I can't see how they couldn't."

To Newsom's mind, the delayed action by federal regulators may end up devastating unsophisticated investors who responded to Advanta's pitch. "You ask yourself, how would you feel if your mother had bought some of these notes off that prospectus on Friday, and then Monday afternoon the company owns up to its desperate condition?" he said. "This happened literally under the noses of the FDIC."

Despite the postcollapse talk of the government protecting consumers, caveat emptor still applies — even to newspaper readers looking for a safe place for savings.

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