Categories: OLD Media Moves

When to report a bank is in trouble

Washington Post ombudsman Andy Alexander reports on how the newspaper decided to mention that federal regulators considered closing a Pennsylvania bank after it was accidentally disclosed in an Office of Thrift Supervision release.

Alexander writes, “Hereâ€™s how it unfolded: The e-mail sent to reporters on July 31 announced the closing of Peoples Community, an Ohio bank located in West Chester, near Cincinnati. But the e-mail said the bank in Pennsylvania â€“- it was crossed out with red lines -â€“ also had been closed. Within minutes, OTS issued a retraction on the Pennsylvania bank. But it was clear that it had been considered for closure.

“Post banking reporter Binyamin Appelbaum consulted with his editors, and they decided to write the story, but without naming the Pennsylvania bank. The story, which appeared the following day, began: ‘The Office of Thrift Supervision accidentally disclosed Friday night that it considered closing a small Pennsylvania bank — a rare breach of the rigorous silence that banking regulators maintain about the health of individual companies.’

“A few paragraphs later, after explaining the e-mail, Appelbaum wrote: ‘The Washington Post is not naming the second bank so as not to exacerbate potential harm caused by the e-mail. News that a bank might fail can become a self-fulfilling prophecy. Depositors sometimes start withdrawing money despite the federal guarantee protecting most accounts, and customers may begin to take their business to other banks.'”

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Bernie Kohn says:
August 13, 2009 at 3:59 pm
The controversy about this is all a bit misplaced because OTS has on at least a few occasions signaled a closing of a bank in advance in documents posted on its web site. One such occasion occurred in January when the OTS stated that is not only intended to seize a small Maryland bank but specified what day it would do it. The Baltimore Sun got photos and video of the federal "go" team as it assembled in the parking lot of the bank's headquarters. Certainly, it would irresponsible of the media to speculate about a pending bank closing for the very reasons Binyamin points out. But to portray this as some isolated "accident" is to ignore recent history, and if the OTS is beating the tom-toms over this as some sort of ethical issue with the Post, it might hold up a mirror.