The following is from the Aug. 27, 2007, edition of The Dallas Morning News. It includes an interview with SMU Professor Scott MacDonald, director of the Southwestern Graduate School of Banking.

Banks don't want you worrying about security

Pamela Yip
Business Columnist
The Dallas Morning News

Safety and security that sticker in your bank's window that says its deposits are insured by the Federal Deposit Insurance Corp.

It's a simple message, but it means the world to jittery consumers in today's credit markets.

The credit crisis sparked by the imploding subprime mortgage market has caused financial institutions and mortgage lenders affiliated with banks or thrifts to play up the fact that they're in a different world than others who don't have that backup. . .

So should you buy the companies' safe-and-secure assurances?

"There is some truth to it," said Scott MacDonald, director of the Southwestern Graduate School of Banking at Southern Methodist University.

If a bank's mortgage division is a small part of its business, "they can finance it themselves," he said.

"They have access to Federal Home Loan Bank loans, they have a multitude of sources of funding available to them [including] the core mom-and-pop deposits that aren't going anywhere," Mr. MacDonald said.

But a pure mortgage company has to depend on "other parties, be it investors or banks or whomever, and some of that funding is drying up," he said.

Of course, every situation is different.

For example, Mr. MacDonald noted that "Countrywide had a much higher portion of their business in mortgages," which has advantages and disadvantages.

"The good thing is that you get to do something really well," he said.

"The bad thing about being specialized is if a bad thing really hits your market, it's more vulnerable to the issues than others."

Read the full story.

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