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US Bank failures need more attention

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A tip of the hat to the Southtown Star, an Illinois paper that ran a detailed story on Sunday about the Federal Deposit Insurance Corporation’s (FDIC) recent closure of a community bank called Palos Bank and Trust Co. in Palos Heights, IL. Palos was the 110th US bank to fail in 2010.

By “detailed,” I mean that that the reporter gets into some of the reasons why the bank failed.

Too often, it seems that reporters covering community bank closures are happy to simply re-write the news releases that the FDIC sends out to let the public know it has had to intervene in a particular bank’s affairs to protect depositors’ money.

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These FDIC news releases don’t go into many details about why, precisely, a bank is in trouble and must be closed; they are intended more to reassure depositors that their money is safe, in keeping with the FDIC’s mission.

In Palos Bank and Trust Co.’s case, like many US community banks, as the Star states, it had been hurt by “loans to real estate developers” that apparently went sour in the Great Recession. The FDIC swung into action once it became clear that the bank would not be able to shore up its strength on its own.

I hope many journalists see the Southtown Star’s coverage of Palos and use it as a model, in case they have to write about a community bank failure.

While the Southtown Star story about Palos is much better than a typical article about a bank closure, it could be even stronger, if some additional information was inserted.

For example, what real estate projects was Palos financing that got it into trouble? Were they commercial real estate projects? Residential? What is the state of those projects? Was it one big project that went belly-up and did Palos in, or was it a number of smaller projects?

In the article, the Southtown Star’s reporter includes some community reaction to Palos’ having to close its doors. In terms of capturing wider reaction to the closure, what about local business leaders? What does the bank’s closure and absorption by a stronger financial institution mean for the local economy?

And what about some reaction from elected officials? What does the local member of Congress have to say?

Politically, the issue of US community bank failures is not getting the national profile its deserves. Stronger local coverage of individual bank failures, particularly by local  newspapers, will help correct this. Even in the age of Twitter, Facebook, etc., there’s nothing like a call for comment from a widely-read hometown paper to focus a Congressman’s attention.



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