Bank runs, like the ones in California at branches of IndyMac, are bad news. But is the Times overselling the sector's financial woes?
The NYT seems determined to push the panic buttons. "It's about to start getting real bad," one analyst said. "We are closer to the Depression scenario than not," alleged the managing director of an investment fund.
Indeed, from the outset the article by Louise Story and Eric Dash, "Confidence Ebbs For Bank Sector And Stocks Fall," puts matters in a very dim light:
Even as the Bush administration moved to rescue the nation's two largest mortgage finance companies, confidence in the banking sector spiraled downward Monday.
In Southern California, lines snaked around branches of IndyMac Bancorp, the large lender that was seized by federal regulators on Friday, as customers hurried to withdraw their money. As the anxiety spread through the financial markets, two other big banks, one in Ohio and another in Washington State, were compelled to assert that they were sound.
Even as federal regulators issued assurances that depositors' savings were safe, Wall Street analysts circulated lists of lenders that might be vulnerable. Shares of regional banks plunged in one of the sharpest declines since the 1980s.
Many investors fear that the government's resolve to help Fannie Mae and Freddie Mac, the giant companies at the center of the nation's mortgage market, will not hold back the rising tide of bad loans unleashed by the weakening housing market and faltering economy.
The worries about the financial industry that gripped Wall Street whenBear Stearnsimploded in March spilled over to Fannie Mae and Freddie Mac last week. They are now buffeting small and midsize banks, many of which are heavily exposed to weakening local property markets and loans to home builders. Some investors fret small institutions will not receive the kind of federal support that rescued Bear Stearns and the two mortgage giants.
Speaking of Fannie Mae and Freddie Mac, the quasi-public entities that hold many of the nation's mortgages, National Review Online's Jonah Goldberg pondered the media's double standard on financial scandals:
I am still at a loss as to why Bush should have been criticized much at all for Enron's collapse, and yet that media firestorm consumed months of chatter in Washington. Meanwhile Fannie Mae really does have deep and abiding ties to Democrats, particularly the Clintonites (though there are Republicans in the mix as well). And Fannie Mae is just a much, much bigger deal than Enron ever was. But somehow nothing like the outrage over influence peddling has been in evidence.
The Times has yet to link Fannie Mae and Freddie Mac to the Clintonites the way the paper has used Enron as shorthand for Republican perfidy. The paper's Bush-loathing columnist Paul Krugman even defends Fannie Mae and Freddie Mac, to the amusement of journalist Mickey Kaus at Slate.