It’s the principle, really

Timing and people’s money matter, too

A newspaper could warn depositors that city government is losing confidence in a bank. What’s the point in holding the story?

By Lane Kelley

Lane Kelley is a business reporter for the Fort Lauderdale (FL) News/Sun-Sentinel.

Author bio information is from the time of article submission and may not be current.

Source: FineLine: The Newsletter On Journalism Ethics, vol. 1, no. 10 (January 1990), p. 4.

This case was produced for FineLine, a publication of Billy Goat Strut Publishing, 600 East Main Street, Louisville, Kentucky 40202. Reprinted with the permission of Billy Goat Strut Publishing. This case may be reproduced for classroom and research purposes. Publication of this case in electronic or printed form requires written permission from the publisher and Indiana University. An exception is granted for use in readers designed for specific academic courses.

 

A city official tells a newspaper reporter that the city is pulling $3 million out of a bank because of the bank’s shaky financial condition.

The reporter knows that the story could cause a run on the bank. So does the bank’s chairman, who for that reason asks the reporter not to print the story.

I was the reporter, covering banks for the Tulsa World in 1986. Tulsa’s city treasurer told me one afternoon that the city was withdrawing half its total deposit from the Bank of Commerce because of the bank’s “capital problems.”

I thought we should run the story on the front page the next day, which was Tuesday. I thought the bank’s depositors might want to know that city officials considered the bank a risky place to leave money.

My editors thought otherwise. They held the story a few days, tinkered with a few key paragraphs — i.e., all of them — and ran it on Saturday, when the bank was closed. I took my name off the story.

To be fair, maybe someone at the World was afraid of breaking the law. No one at the paper ever told me about it, but Oklahoma has a law that makes it unlawful “to publish, utter or circulate false, malicious or unprivileged statement or representation for the purpose of injuring any banking institution.”

But breaking that law is about like committing libel. A newspaper has to print a story that not only is false but malicious in its intent. I wrote a few other stories at the World that caused runs on banks, and no one ever mentioned this law to me.

Concerning the Bank of Commerce, maybe I was just insensitive to the issues. I thought the chairman of the Bank of Commerce probably was right, that my story might very well cause a run on his bank. And the executive editor of the World, Bob Haring, agreed with me; he also advocated holding the story.

But this didn’t strike me as a hard case in journalism. You contact all the parties involved, put in all the boilerplate paragraphs about how deposits are insured up to $100,000 and the numbers showing how broke the bank is, and be done with it. So maybe nervous depositors do storm the bank the next day and withdraw millions in deposits. It’s nice to know people read your paper.

Think of a similar situation involving just about any other business — say, a restaurant. City inspectors say this restaurant has run afoul of the health code. Does the newspaper print that story? Word travels fast when you raise the specter of ptomaine poisoning. No way the restaurant is going to see a sudden surge in business after that story appears.

So what about an unhealthy bank? Is it wrong for a newspaper to print a story about a city government pulling its money out of a troubled bank?

Here was an institution that was virtually broke, that had lost $15 million the year before and was being kept open only by the patience of the regulators. Did it deserve special treatment from a newspaper?

The World obviously thought so. Here’s the first paragraph of the story I took my name off of:

“The City of Tulsa will be taking new bids soon for a bank to handle the city’s accounts, according to City Treasurer and Budget Director Ed Koepsel.”

In the fourth paragraph it said the city had pulled $3 million out, but not why. That came in the sixth paragraph, where there was an oblique phrase about how city officials thought withdrawing the money was the “prudent” thing to do.

They buried the lede, after holding the story for almost a week. I took my name off because it would have made me look stupid.

That story ran on Saturday. My competitor at The Tulsa Tribune, Mark Davis, followed up on Monday. Davis didn’t tiptoe around the subject.

He put the punch in the lede, saying in the first paragraph that the city was pulling its money because of the bank’s “capital problems.” He added the crucial $3 million figure in the second paragraph, saying the city had shifted the money to another bank because of the Bank of Commerce’s “capitalization difficulties.”

About two months later, on May 8, the Bank of Commerce was declared insolvent by the state banking commissioner. He said the bank was $17 million short of the capital required by regulators, the shortfall due to “enormously bad judgment” by the bank’s management in making loans. The loans were in energy and real estate, of course.

The commissioner also revealed that he had closed the bank a day earlier than he’d planned, because of an “uncontrollable run” precipitated by the Tulsa news media. No doubt he was referring to a story that appeared in a Tulsa paper the day before, on May 7, that said the bank was about to be closed.

My name wasn’t on that story, either. Nor did it run in the Tulsa World.