So, Why Are Banks Failing? Business Papers Disagree

So, Why Are Banks Failing? Business Papers Disagree - 8/24/2009

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So, Why Are Banks Failing? Business Papers Disagree
Kevin LaCroix

The D & O Diary. August 24, 2009
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EXCERPT: It might well be asked why anyone should bother reading both the Wall Street Journal and the New York Times business pages. After all, both usually cover the same stories. Indeed, on Friday, both ran stories discussing the fact that year-to-date bank failures are at the highest level since 1992. However these same-day articles about the number of bank failures in fact were a great illustration of the value of reading both publications, because the two newspapers presented very different explanations for the run of failed banks, particularly with respect to the latest round of bank closures. Each article has its points, though, and both raise interesting questions. […] The addition of two more failed banks in Georgia among this Friday’s round of bank closures brings that state’s nation-leading year to date total number of failed banks to 18. Friday’s closures also included Austin, Texas-based Guaranty Bank, the tenth largest bank failure in U.S. history […]. Though this year’s round of bank failures includes behemoths like Guaranty, and Colonial Bank of Birmingham, Alabama which closed last Friday, the bank failures generally involve much smaller banks, many of them so-called community banks having assets of less than $1 billion. Of the 81 year-to-date bank failures, 68 of them have involved community banks. Now – why are the banks failing? The Journal and the Times disagree on that point, particularly with respect to the most recent closures. In an August 21, 2009 article written by Floyd Norris, the Times reported that "banks are now losing money and going broke the old-fashioned way: They made loans that will never be repaid."

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