The most riveting drama in Washington wasn't Sen. Judd Gregg's sudden realization that he is, in fact, a conservative Republican and hence unsuitable to serve as President Obama's commerce secretary. No, on Wednesday, February 11, the CEOs of eight large banks filed into 2128 Rayburn to describe precisely what taxpayers are getting for the hundreds of billions of dollars they've pumped into the financial system—an inquiry that turned into a six-hour tongue-lashing. Public anger at financiers is at levels last seen in Moscow circa 1917. And bankers make fat targets: you don't get to the top of an investment bank by being cuddly, or even nice. But the group did surprisingly little to help its image during the hearing. When Rep. Gary Ackerman (Democrat of New York), noting that taxpayers had injected $165 billion into their eight firms, asked how much each CEO had put into his company in the past six months, five answered that they hadn't even bought a single share.
It's an example of how the well-heeled heels who flunked Risk Management 101 are also failing PR 101. "There were some basic questions the CEOs couldn't even answer, like 'What happened to the money?' " says Michael Kempner, CEO of MWW Group, a public-relations firm. "The lack of preparation was truly breathtaking." Crisis PR guru Robert Dilenschneider notes that instead of doing the basics, like making constructive statements before, during and after the hearings, the bankers focused on symbolic items like taking the Acela train instead of a private jet. Next time they come to D.C. begging for cash, bankers should take the $25 Chinatown bus.
The PR failure is understandable, to a degree. It's hard for CEOs who became accustomed to running turbocharged investment banks to adapt to life at the government-supported utilities they now oversee. Arrogance is also a factor: people who have done well in finance tend to think they're really good at everything. (A common taunt on Wall Street: if you're so smart, how come you're not rich?) And so they tend to eschew the advice of their PR staff. During these men's professional lives, Wall Street has become accustomed to getting what it wants from Washington. America's top bankers have an even longer history of not giving a hoot what the public thinks. Sample (possibly apocryphal) quote from the original J. P. Morgan: "I owe the public nothing."
The most frustrating aspect of this state of affairs is that we can't simply write the bankers off. "If you can't be with the one you love, love the one you're with," goes the Crosby Stills and Nash song. Barney Frank sang a slight variation on that theme while indicating his willingness to tolerate the banks. "We have no option if we are to get credit flowing in this country other than to work with the existing institutions."
What should bankers do? John D. Rockefeller had a habit of dispensing nickels and dimes to children as a way of softening his image. In Japan, when industry heads screw up and get hauled before government leaders, they often bow deeply—a gesture meant to convey respect and humility. But U.S. bankers have to go beyond gestures and stunts. They have to change their self-image. Richard Edelman, CEO of public-relations giant Edelman, says they have to start treating Congress more like a board of directors. "In addition to being a capitalist today, you have to be a diplomat," he says. Michael Gordon, CEO of Group Gordon, a New York–based crisis-communications firm, says bankers should have all top executives buy stock and cut their own salaries.
I tuned in to the hearings because I figured one of the executives would make an out-of-the-box move, like freezing foreclosures for a few weeks, or temporarily eliminating late fees on credit cards. Such a relatively inexpensive move would pay significant dividends. As Rep. Mike Capuano (Democrat of Massachusetts) puts it, "if they can keep people in their homes, then fine, go get a private jet." And in fact, the Acela ride may have had some effect. Two days after the hearing, JPMorgan Chase and Citi made an uncharacteristically smart PR move. They announced a moratorium on foreclosures as the Obama administration works on its new financial-stability plan.