COMMENTS: Run on the Bank

The shaky state of the financial system continues to make headlines. Last week ended with worries that Fannie Mae and Freddie Mac, the mortgage guarantee firms, might go broke. Now the banking sector is Story of the Day as the bear market in residential real estate is beginning to undermine midsized commercial banks. ABC and CBS both led with the California angle of the banking crisis, as depositors stood in line to retrieve funds from the $32bn IndyMac Bank, which failed on Friday and is now run by the FDIC. NBC led with the national implications for the sector as a whole. For the second Monday in the month, ABC expanded its newshole (24 min v CBS 20, NBC 20), courtesy of Lyrica medication's lone sponsorship, to run its Small World anthropological feature.

NBC's lead was filed by Erin Burnett of CNBC, the network's sibling financial news cable channel, who ranked IndyMac as the second largest bank failure in the nation's history: "I just came from the stock exchange where the question is not whether another bank will fail--but which one and when." Burnett's best guess was Washington Mutual. CNBC's in-house economist Steve Liesman did not mince words: "Look, this is a banking crisis. This is a mortgage meltdown. There are going to be bank failures." But the 90-or-so institutions in trouble are fewer than in previous crises, Liesman pointed out, and ABC's Ryan Owens reminded us that they represent "a mere 1%" of all the banks the FDIC insures.

CNBC's Burnett handed off to her colleague Jane Wells who joined ABC's Lisa Fletcher and CBS' Bill Whitaker outside the IndyMac branch in Pasadena. The depositors who are in trouble are those with in excess of $100,000 at IndyMac, since the federal government's insurance pays only 50c on the dollar above that amount. CBS anchor Katie Couric sought advice from's analyst Greg McBride. He reminded all of us who have in excess of $100,000 on deposit at a single bank to divide it up so that it can be fully insured: "Not having that is like driving around without your seat belt on."

As for Fannie Mae and Freddie Mac, they have been extended an unlimited line of federal credit. Referring to JP Morgan's federally subsidized buyout of Bear Stearns, ABC's Betsy Stark observed that this was the second time in five months that "top government officials have been so concerned about the potential for panic in the financial markets they have taken emergency action over the weekend." NBC's Lisa Myers and CBS' Anthony Mason covered the new regulations issued by the Federal Reserve Board to forbid abusive mortgage lending to subprime borrowers. Mason called it "an about face for the Fed, which under Alan Greenspan had resisted tighter regulation." Myers noted that since the new rules are not retroactive they would be of no help to the 2.2m homeowners now delinquent on already issued loans.


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