Confidence Ebbs for Bank Sector and Stocks Fall

In today's NYTimes;

Even as the Bush administration moved to rescue the nation’s two largest mortgage finance companies, confidence in the banking sector spiraled downward Monday.
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In Southern California, lines snaked around branches of IndyMac Bancorp, the large lender that was seized by federal regulators on Friday, as customers hurried to withdraw their money. As the anxiety spread through the financial markets, two other big banks, one in Ohio and another in Washington State, were compelled to assert that they were sound.

Even as federal regulators issued assurances that depositors’ savings were safe, Wall Street analysts circulated lists of lenders that might be vulnerable. Shares of regional banks plunged in one of the sharpest declines since the 1980s.

Many investors fear that the government’s resolve to help Fannie Mae and Freddie Mac, the giant companies at the center of the nation’s mortgage market, will not hold back the rising tide of bad loans unleashed by the weakening housing market and faltering economy.

Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, said the F.D.I.C. expected a small number of the nation’s banks to run into trouble over the next year. But she asserted that the worries driving down banking shares, fed by rumors in the marketplace, did not presage widespread failures.

“People should not assume that just because the stock price has been going down, that we’re going to close their bank,” Ms. Bair said. “In addition to our credit problems, I don’t want to have to start worrying about bank runs.”