A representative of the Utah Bankers Association stopped by the Standard-Examiner on Monday to lecture the editorial board on proper reporting of bank troubles. He said media coverage of the death rattles of Barnes Bank made the collapse worse than it would have been if reporters had swallowed their pens.
Howard Headlee also argued that Barnes and other community banks that have encountered trouble since the national housing market collapse got there because they had been working hard to serve a booming housing development market. He complained about lax home loan policies, nothing to do with the business loans of community banks, that fueled the boom and collapse.
OK, did I undertand this correctly? So bank failures are more the fault of nosy reporters and greedy mortgage lenders? Wait a moment. How about the bad banking? I mean, Barnes and a lot of banks smelled big profits in the housing boom and plunged most of their business into the bubble. And when it blew up in their faces, that’s someone else’s fault?
Upon questioning, Headlee acknowledged that Barnes’ ultimate fate was of its own making. Yet the bankers group feels the need to go on tour scolding news organizations for alerting the public to capitalization problems at certain community banks. The message: Trust us. We and the FDIC can systematically resolve banking boo-boos during sensitive periods; no need for depositor panics spawned by news stories.
In the case of Barnes Bank, it had been under scrutiny by FDIC for months, and in its latter days, its shareholders were arguing among themselves. In an open society, that’s information that citizens in a community ought to be alerted to, so depositors and others can go about making their own decisions, backed by knowledge not available from the self-interested banks.
The Bankers Association understandably must feel burned by the loss of the more than 100-year-old Barnes Bank. But pointing fingers in all other directions seems excessively petulant. Before he left, Headlee also complained that credit unions are not subjected to the same levels of public disclosure and scrutiny that banks must shoulder.