The megabanks' mega-image crisis might have been averted had financial firms paid closer attention to a key fundamental of banking: spurring the development and growth of enterprise, the goods and services produced by people in business and all walks of life. Or, the Gross People Product (GPP), to coin a new economic term.
Human enterprise is powered by financial resources and expertise, the high-octane fuel that helps people achieve their goals. Financing combined with the expertise of skillful, knowledgeable bankers has often been a key factor in the growth of business, industries and individuals. As maudlin as this may sound, banks truly can help people in all walks of life accomplish what they set out to do. Such amazing power in the domain of bankers and their balance sheets!
When the business of banking helps create, generate and sustain enterprise, how good is that? It's good business and good PR. As I said in American Banker several years ago, before the financial services business became more complicated than it should be, banks were doing quite well by focusing on the fundamentals of their business. Various banks that are among the largest financial institutions, today, achieved success by supporting enterprise. These banks grew their business the old-fashioned way, before the age of mortgage-backed securities, collateralized debt obligations and other fancy investment vehicles.
While fancy banking generates substantial revenue for financial firms, the level of risk involved is often substantial as well, when, for example, a firm reports billions in trading losses. Without question, risk is unavoidable in banking. But it isn't nearly as extreme and devastating when banking is done the traditional, old-fashioned way, as current events and flagging opinion of banks would suggest.
Let's say you're a megabank CEO going over your daily news briefing. You're likely to stumble across some variation of the following:
This lead paragraph in The Nation: "In the olden days, it used to be that the bad guys robbed the banks. Now it seems the bad guys are running the banks, at least the big ones, and robbing the rest of us."
Or, this in the Huffington Post: "What on earth is a synthetic CDO, you likely ask? It is a side bet on a bunch of side bets on somebody else's debt ... These have absolutely no economic value, aside from enriching the bankers..."
Or this column in American Banker: "Simply put, bankers' reputations ranks just above the tobacco industry's these days..."
This Washington Post headline: "Big banks engaging in payday lending, report says"…Or "Why People Hate the Banks," the headline for a column in the New York Times?
As a megabank CEO, would you prefer to be reading this news, or stories about banks building enterprise and strengthening the economy?
Getting back to fundamentals – the real business of banking – can change our industry's PR paradigm.
Harvey Radin, an independent public relations consultant, was a senior vice president at Bank of America. He also served as head of western region corporate communications and media relations at Bank of America and was a PR consultant for Greater Bay Bancorp and Wachovia Corp.
1. Relearn how to turn young first-time buyers into homeowners instead of putting them through an out of body experience that has nothng to do with complying with lending standards.
2, Take the initiative. Learn how to solve busineses'real problems by learning what they. Stop being order takers and become the solution.
3, All the billions banks spend on marketing are wasted unless brand promises are kept. Dont promise relationships and deliver only monthly statements. Accounts are families and businesses consist of workers,investors and their customers. Banks succeed who help them reach their goals.
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I think the larger questions should be, do we really want these markets to rule? Just how much of a contribution do they make? What are their costs? Most importantly, Can more than a fraction of the capital in secondary markets ever be realized? (No, btw. Once that capital is absorbed by a secondary market it cannot come out. Maybe 10% at most can be returned to the real economy. The other 90% of it can only be lost.)
Anyone who feels firms playing in these markets will not willingly relinquish their cash cows is dreaming, which is why finance should be forced to revert to the public utility model which served the US very well up until 1976. A modest profit should be guaranteed. Banks should be protected both from competition as well as themselves. The banking model should be defined by statute - in detail - and rigorously enforced. Separate banking business models should never be allowed to consolidate (yes, Glass-Steagall all over again.) In case of another banking crisis, the Fed should begin lending directly to real economy businesses relying on rollover debt while the TBTF bank is unwound.
You get the idea. From 1929 to 1982 the US had exactly zero banking crises. In my lifetime, I've seen two. Both the result of deregulation. When are we going to learn?