The Times on C1 writes about Franklin Bank, a small thrift whose chairman spent the last several years warning of the impending housing bust, is being taken under by the housing bust—along with some “accounting errors” in how it values its mortgage portfolio. Its CEO resigned and the SEC is on the trail.

Franklin’s woes are the latest sign of trouble for small banks.

Real estate and construction loan losses have started ballooning. Federal banking regulators are bracing for several dozen bank failures after only a handful during the last few years. And as consumer loan losses rise, balance sheets are being squeezed.

Something’s rotten in public pension funds

On the same page, the Times looks at another accounting scandal, this one in public pension funds, which it says “are promising benefits to public workers on the basis of numbers that make little economic sense.”

The numbers are off-base for a variety of reasons. Sometimes there is a glaring conflict of interest, as there was in Albany, where the consultant was being paid by the workers seeking richer benefits. More often, there is subtle pressure on the actuary to come up with projections that make the pension fund look good.

Most of all, public pension actuaries use old methods that have fallen far out of sync with the economic mainstream. That does not necessarily mean their figures are wrong, but it does make them vulnerable to distortion, misunderstanding and abuse.

Market tanks

In economic news, stocks fell nearly 200 points after the producer-price index renewed fears about inflation and oil hit yet another record. Producer prices are often passed on to consumers later.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.