Covering lenders in crisis

Clark Hoyt, the public editor of the New York Times, takes a look Sunday at the paper’s coverage of struggling lenders Fannie Mae and Freddie Mac, as well as the government takeover of another lender, IndyMac.

Hoyt believes that the paper was too restrained in its coverage of IndyMac’s problems.

Hoyt writes, “The Times buried the news deep inside the business section. ‘If I had to do it again, I probably would have given it bigger play,’ said David Gillen, an assistant business editor who handled the IndyMac story. But, he said, ‘we were trying to give a fairly measured and cool response.’ He said the number of banks in trouble, perhaps 50 to 150 of 7,500 in the nation, had not changed in three months, and The Times did not want to give an impression otherwise.

“The front of last Monday’s business section carried an article saying that regulators expected dozens of banks to fail over the next year, and that Wall Street analysts were wondering how many and, more urgently, which one could be next. The analysts, including Bove, were drawing up lists, the article said.

“The Times had Bove’s list, but did not say which banks were on it. Gillen said editors ‘thought it would be the equivalent of publishing a death watch, and that would be really inflammatory.’ I understand the thinking. Banking is different from any other business. If you print that General Motors might be in danger of bankruptcy, it can hurt the company by scaring some car buyers away. If you say a bank is in danger of bankruptcy, you can put it out of business. Banks lend and invest depositors’ money and keep perhaps eight cents on the dollar for anticipated withdrawals. If all depositors get scared and want their money at once, the bank is gone.”

Read more here.