The most riveting drama in Washington this week 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. Rather, it was the spectacle of eight bank CEOs filing into a House committee room on Wednesday to describe precisely what taxpayers are getting for the hundreds of billions of dollars they've pumped into the financial system.
The stage was set for a made-for-YouTube six-hour tongue-lashing. Public anger at financiers is as high as it has been since Moscow circa 1917. "You come to us today on your bicycle, after buying Girl Scout cookies, and helping out mother Teresa, telling us 'we're sorry. We won't do it again,' " Rep. Michael Capuano, D.-Mass., ranted at the stone-faced octet. "Well, I have some people in my constituency that actually robbed some of your banks, and they say the same thing."
It was astonishing how little the CEOs were able to do to help their cause. They not only flunked Risk Management 101, they also flunked Public Relations 101. Rep. Gary Ackerman, D-N.Y., noting that the government had injected $165 billion into the eight banks represented at the hearing, asked how much each CEO had invested in his company in the past six months. "And zero is a number," he said. For five, zero was the number. JPMorgan Chase CEO James Dimon and Citi CEO Vikram Pandit noted that they had put $12 million and $8.4 million into their respective companies. Ken Lewis, CEO of Bank of America, recalled that he bought 400,000 shares but couldn't remember the dollar value of the purchase.
"There were some basic questions the CEOs couldn't even answer, like, 'What happened to the money?' " said 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—such as making coherent, 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 $20 Chinatown bus.)
The PR failure is partly understandable. These CEOs still believe they're running the turbocharged investment banks that ruled the roost in 2005 and 2006 rather than the government-supported utilities they have become. People who have done well in finance tend to think they're really good at dealing with pretty much anything. (A common taunt on Wall Street goes: "If you're so smart, how come you're not rich?") And so they tend to eschew the advice of their modestly compensated PR advisers. In these men's professional lives, from 1981 to the present, Wall Street has been accustomed to getting what it wanted 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.")
Unfortunately for the public, we can't simply write off the bankers and deal with someone else. As Barney Frank said, 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 to improve their image? John D. Rockefeller had a habit of dispensing nickels and dimes to children as a way of softening his image and assuaging anger at his massive wealth. When Japanese industry heads screw up and get hauled before government leaders, they often bow deeply: a gesture meant to convey respect and humility.
But bankers have go to 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 like their board of directors. "They have to recognize they have to respond to stakeholders rather than just to shareholders," he said. "In addition to being a capitalist today, you have to be diplomat."
Michael Gordon, CEO of Group Gordon, a New York-based crisis and corporate communications firm, urges banks to "go beyond what's being called for." Buy stock and have all top executives buy stock. Cut your own salary and that of other top executives. I tuned in to the hearings precisely because I figured a combination of self-preservation and competition would spur one of the executives to 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 Capuano put it, "If they can keep people in their homes, then fine, go get a private jet."
None of the CEOs risked that kind of move in the hearing. Two days later, however, JPMorgan Chase and Citi made an uncharacteristically smart PR move. They announced they would agree to a moratorium on foreclosures as the Obama administration works on its new financial stability plan. A few more stunts like that and bankers could soon be more popular than lawyers.
Newsweek's Nick Summers and Daniel Stone contributed to this story. A version of it also appears in this week's issue ofNewsweek.