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Regulator Accidentally Names Imperiled Bank
Error Could Endanger Bank Further

By Binyamin Appelbaum
Washington Post Staff Writer
Saturday, August 1, 2009

The Office of Thrift Supervision accidentally disclosed Friday night that it considered closing a small Pennsylvania bank -- a rare breach of the rigorous silence that banking regulators maintain about the health of individual companies.

The information appeared in an e-mail that the agency sent to reporters announcing the closing of an Ohio bank, Peoples Community. A section crossed out with red lines but still legible said that a second thrift also had been closed. A few minutes later, the OTS issued a retraction.

A spokesman described the incident as "an unfortunate clerical error."

The Washington Post is not naming the second bank so as not to exacerbate potential harm caused by the e-mail. News that a bank might fail can become a self-fulfilling prophecy. Depositors sometimes start withdrawing money despite the federal guarantee protecting most accounts, and customers may begin to take their business to other banks.

The accidental e-mail is a small black mark for an agency struggling with larger problems. The OTS has come under intense criticism for its failure to prevent the collapse of some of the largest banks that it supervised, including Washington Mutual. President Obama has proposed abolishing the agency as part of a restructuring of financial regulation.

Peoples Community Bank was one of five banks closed by the OTS and other regulators on Friday night. The company had assets of $706 million. Also seized were Mutual Bank of Harvey, Ill., with assets of $1.6 billion; Integrity Bank of Jupiter, Fla., with assets of $119 million; First BankAmericano of Elizabeth, N.J., with assets of $166 million; and First State Bank of Altus, Okla., with assets of $103 million.

The Federal Deposit Insurance Corp., which reimburses depositors of failed banks, said it expected to spend about $911.7 million.

The branch networks of all five banks, along with some assets and deposits, were sold to other companies.

Regulators have shuttered 69 banks so far this year.

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