FDIC Can’t Ignore Blogosphere

When the Federal Deposit Insurance Corp. (FDIC) seized the IndyMac Bank on July 11, the blogosphere responded. The response however, was not what the FDIC wanted to hear.

The IndyMac Bank was one of the largest bank failures since the 1980's. The blogosphere began to speculate other bank failures from some of California's largest banks.

"The blogs were a bit out of control," said Sheila Bair, chairman of the FDIC, told the San Francisco Business Times after a speech in San Francisco this week.

"We're very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors' fears."

Bair did not disclose which financial institutions were on the agency's troubled bank list. She said most of the institutions would survive and others could possibly team up with healthier institutions.

Past statistics show that only 13 percent of banks on the troubled bank list actually fail. If the listed banks were revealed, then most likely all the banks would fail since customers would pull all their deposits out.

"These are challenging times for a number of institutions large and small," Bair said. "We've worked with them as their primary regulator. They've raised a lot capital, they're getting their loan loss reserves up. They're doing everything they can and should do."

"The capital is there to absorb the losses," she added. "Some will have some bad quarters, but still overall they're quite solvent, healthy institutions, and they'll get through this."

The FDIC plans to keep a closer eye on the blogosphere in the future.

Popularity: 14% [?]

Links you may find interesting -