As American bank failures continue…What will President Obama say? 

As of this past Friday, 96 US banks have failed in 2010, according to the Federal Deposit Insurance Corporation (FDIC).

This Friday, when the latest bank failures are announced, the total number could go over one hundred for the year.

The FDIC’s semi-weekly ritual of announcing the latest banks to go under late Friday afternoon does not usually attract much attention. The FDIC posts news releases on its website that provide reassurance to any depositors or people who have borrowed money from the failed banks. The news releases describe what steps the agency has taken to protect the public in light of the bank failure. The financial wire services dutifully write up the FDIC news releases, and that’s often the end of the matter.

But this Friday could be different. This Friday, if the number of failed banks reaches 100, the financial news reporters may be tempted to do more than just write up the FDIC releases.

They may ask Treasury Secretary Tim Geithner for some reaction, for example. They may even be tempted to ask the White House for comment. And one of the TV networks may take an interest in the story, like ABC did when the FDIC announced the 100th bank closure for 2009.

Given that there are about 8,000 FDIC-insured banks in total, the number “100” doesn’t have much statistical significance – it’s not a sign of the total collapse of the US economy. But, for whatever reason – perhaps because it would put the number of bank failures for 2010 into triple digits – “100” just has more news value than, say, “57” or “39.”

So - what will the President say when the 100th bank closes? (Or, more likely, what will his press secretary say on his behalf?) While only people in the White House know for sure, the rest of us can make some guesses about two aspects of his response:

1.       He will provide a message of reassurance. “The FDIC continues to carry out its important work. I have confidence in its leaders as they safeguard the stability of the American banking system. The American people need to know that, thanks to the FDIC, they do not have to worry about their bank deposits.”

2.       He’ll talk about his financial reform package and take a dig at his opponents. “My Administration has taken steps to ensure that banks can no longer, for example, gamble on risky trades for their own profit. These trades present unnecessary and ill-advised risks to the banking system. These changes should have been made sooner, but unfortunately the previous administration did not make the changes a priority.”

But these are just basic talking points, really. If reporters want more precise answers out of the President (or his spokespeople), they need more precise questions. Here are three ideas:

-“In cities across America, local banks provide important start-up loans to new companies. What is the Obama Administration doing to reduce the number of these local bank failures, so that these important institutions continue to flourish?”

-“Are there ways that the FDIC and the Treasury Department can help otherwise healthy banks purge themselves of toxic real estate loans, which is the root cause of many bank failures, so that they can remain open?”

-“The FDIC has allowed foreign banks to buy up some failed American banks. Is it a good idea to hand over chunks of the US banking system to foreign banks, without first holding a debate on whether doing so is in the national interest?”

Remember: the FDIC typically begins announcing the latest bank failures after 5pm Eastern time on Fridays. If the 100th bank failure for 2010 is indeed announced this Friday, and if reporters pick up the scent, it could be a long night for the Obama Administration’s communications team.

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Neil Hrab

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