Bad publicity new 'risk' factor on Wall St.

Rose Gordon
March 05 2010

In recent months, the financial services industry – banks in particular –
has stepped up its PR and marketing activities, looking to rebuild trust
with a recession-worn public skeptical of its motives. Citibank, for
example, opened a new blog in February, posting video of its executives
explaining how they've changed since the financial meltdown.

On Wall Street, where your brand is one of those intangible assets that
investors consider right along with the P&L statement, banks are
recognizing that their brands need a repositioning in order to not only
ward off regulator scrutiny, but also return to or maintain profitability.

But it was Goldman Sachs that put those concerns into writing last week
when it filed its 2009 10K. The Wall Street Journal noted the curious new
risk of “adverse publicity” in the investment banking firm's February 26
filing. Goldman wrote:

The financial crisis and the current political and public sentiment
regarding financial institutions has resulted in a significant amount
of adverse press coverage, as well as adverse statements or charges
by regulators or elected officials.

Dealing with that attention “is time consuming and expensive,” and can
“have a negative impact on our reputation and on the morale and performance
of our employees, which could adversely affect our businesses and results
of operations,” the bank noted.

To elevate “bad press” to the status of a potential risk to its business
along with market fluctuations and natural disasters, demonstrates how
serious Goldman sees the threat of government and market reaction to public
sentiment.

“This is really a hedge to protect them in case something goes really
wrong,” notes Michael Porter, president and cofounder of New York IR firm
Porter LeVay & Rose.

Goldman Sachs VP of media relations Ed Canaday confirms this is the first
time the firm has added this particular risk, but declines further comment.

Those working in financial and corporate PR likely see their day's work
validated by this admission from the global firm that yes, corporate
reputation management impacts the bottom line.

“I think it is an ‘A-Ha' moment,” says Ryan Barr, SVP and director of
financial relations at Hill & Knowlton in New York. He calls the example a
representation of the continued convergence of corporate and financial
communications work and the need for a fully integrated communications
approach.

“At the same time, I don't think there's a CEO out there that would say
their reputation doesn't affect multiple aspects of their business,” he
adds.
But on Wall Street, reputation can be a defining factor.

“Wall Street is very emotional,” points out Porter. “This is Goldman…
There's no one in the financial industry that wouldn't do business with
them. That being said, people do get worried because everyone's out there
taking shots at them. It's got to rattle their customers at some point.”

Goldman isn't alone in its concerns. Beth Haiken, SVP in Ogilvy PR's
corporate practice in San Francisco, notes that another image-challenged
company, AIG, posted a similar missive in its 2009 10K.

“Adverse publicity and public reaction to events concerning AIG has had and
may continue to have a material adverse effect on AIG,” it wrote.

Analysts will often dive into the risks contained in an annual 10K to find
the meat of what's going on at a company, points out Haiken, who led global
PR at The PMI Group, a Bay Area mortgage-insurance and credit-enhancement
company, prior to joining Ogilvy.

“It used to be risk factors were pretty straightforward, mostly external,
concrete risks,” she says. “My guess is what you'd see is they are just
getting longer and longer… [It's] where a company can try to head off a
lawsuit. There's a prevention factor here.”

Haiken suggests companies will need to more carefully consider the writing
of their 10Ks in the future as public scrutiny of corporations – and the
risk that comes with it – remains high.

“I think what we may see a bit more of is companies really taking a
reputation risk-management approach, identifying ahead of time what risks
the brand faces,” adds Barr.

Goldman, along with its lawyers, clearly marked its precedent here, but it
is just the start of 10K season and many more companies and their
communications teams have yet to file.

“It'll be interesting to see if this is an isolated incident or the
beginning of a trend,” says Haiken.

Obama's Discarded Wisdom

Breitbart.tv has a terrific two-minute video featuring clips of Barack Obama commenting on the need to build consensus before attempting to enact major social legislation. (If the above link doesn't work, try this one.) As a public service, we've transcribed the Obama comments:

• "My understanding of the Senate is, is that you need 60 votes to get something significant to happen, which means that Democrats and Republicans have to ask the question: Do we have the will to move an American agenda forward, not a Democratic or Republican agenda forward?"--CBS-TV election night interview, Nov. 2, 2004

• "The bottom line is that our health-care plans are similar. The question, once again, is: Who can get it done? Who can build a movement for change? This is an area where we're going to have to have a 60% majority in the Senate and the House in order to actually get a bill to my desk. We're going to have to have a majority, to get the bill to my desk, that is not just a 50-plus-1 majority."--Change to Win convention, Sept. 25, 2007

• "You've got to break out of what I call the sort of 50-plus-1 pattern of presidential politics. Maybe you eke out a victory of 50 plus 1, but you can't govern. You know, you get Air Force One--I mean, there are a lot of nice perks, but you can't deliver on health care. We're not going to pass universal health care with a 50-plus-1 strategy."--interview with the Concord (N.H.) Monitor, Oct. 9, 2007

• "You know, one of the arguments that sometimes I get with my fellow progressives--and some of these have flashed up in the blog communities on occasion--is this notion that we should function sort of like Karl Rove, where we identify our core base, we throw them red meat, we get a 50-plus-1 victory. But see, Karl Rove doesn't need a broad consensus, because he doesn't believe in government. If we want to transform the country, though, that requires a sizable majority."--Center for American Progress, July 12, 2006

Who Are The Al Qaeda Seven?

He's No FDR

President Obama spent seven hours last week acting like a committee chairman, not a president. Rather than preside over the nationally televised health care “summit” of Democratic and Republican members of Congress, Obama was a participant. He big-footed Democrats and responded to Republican statements himself. He talked and talked and talked, considerably more than anyone else and for a total of two hours. When Obama delivered a concluding monologue, the TV cameras panned to a drowsy and bored group of senators and House members, the Republicans especially.

Did Obama lower the presidency to the level of mere legislator? Perhaps. But I think Obama’s behavior at the summit answers a separate question, one that’s lingered since he was elected more than 15 months ago. Is Obama the new FDR? The answer is no.

If Franklin Delano Roosevelt were president today, the summit never would have happened. As the top priority on his agenda, liberal health care reform would have been enacted already. For Obama, the summit was a last-gasp attempt to revive his moribund legislation. More than likely, it will fail.

The reason is tied to what is probably the greatest difference between FDR and Obama. Roosevelt took command of Washington. Obama hasn’t. “FDR became the father of the modern presidency by moving the Chief Executive to the center of the American political universe,” John Yoo writes in his new book on presidential power, Crisis and Command. “Roosevelt’s revolution radically shifted the balance of power among the three branches of government.”

Obama has weakened the presidency and strengthened the power of Congress—a shift in the other direction. FDR seized legislative authority. The bills that Congress passed in his first 100 days and beyond were produced by the Roosevelt administration and ratified reflexively by Congress. There’s a reason you probably don’t know who Henry Rainey and Joe Robinson were. They were rubber stamps, Rainey as House speaker, Robinson as Senate majority leader.

But in Obama’s Washington, Speaker Nancy Pelosi and Majority Leader Harry Reid are powerhouses. The job of actually writing bills—the economic stimulus, health care, cap and trade, the omnibus appropriation—was turned over to them and their colleagues. To put it more bluntly, Obama has abdicated where FDR ruled like a king (at least in his first year in the White House).

Roosevelt’s strategy worked. Obama’s hasn’t. The FDR agenda passed, though the Supreme Court later struck down important parts of it. Except for the stimulus, Obama’s top priorities haven’t passed. FDR moved on, in 1935 and 1936, to getting the so-called Second New Deal (Social Security, the National Labor Relations Act) enacted. Obama’s future looks less rosy.

It’s clear that Roosevelt had an ambitious vision and a far more expansive idea of the presidency than Obama has. When I first heard the tale that Obama had told congressional Democrats to write the bills and he’d sell them, I thought it was apocryphal. Now I’m not so sure. Obama seems to see presidential power as purely rhetorical.

Two appealing aspects of Roosevelt’s public style have not been duplicated by Obama. He hasn’t come close. “In contrast to presidents who inundate the nation with words, Roosevelt rationed his broadcasts,” writes presidential historian Fred Greenstein in The Presidential Difference. He gave four fireside chats his first year, then fewer. In a letter cited by Greenstein, FDR said “the public psychology cannot be attuned for long periods of time to a constant repetition of the highest note in the scale.”

Obama, in contrast, talks incessantly on practically any subject. He was interviewed at halftime of the recent Duke-Georgetown basketball game on—you guessed it—basketball. He has debased the value of the “exclusive” interview with the president by granting so many. Obama is ubiquitous, and always talking. He’s lost his connection with millions of Americans, who’ve tuned him out. He’s sparked a political backlash. FDR didn’t until his second term.

Then there’s the mystery of FDR the man. “The man behind the style was an enigma,” Greenstein writes. This created a mystique and enhanced his influence. Obama is relatively transparent and has less clout. When he tries to promote a deal in public or intimidate an opponent—he tried both at last week’s summit—he comes across as a bossy senator or chief of staff.

To Obama’s credit, he hasn’t claimed to be the reincarnation of FDR. At a fundraiser last year, he said he’d put his “first four months (in office) up against any prior administration since FDR.” The “since” gets Obama off the hook. The FDR issue has been raised mostly by friendly liberals in the media.

It’s an unfair comparison. Roosevelt’s reputation for imposing a liberal makeover on America is impossible to match. But Obama has tried. And in one significant way he’s been successful. Like FDR, he’s broadened the size and scope of the federal government. Should his health care and cap and trade bills pass, along with the authority to seize any financial institution whose collapse would be “a systemic risk” to the economy, Obama would put himself in FDR’s class as a supersizer of Washington’s power. He’s not there yet.

By following another Roosevelt example, Obama has bought trouble. FDR thought government spending would spur economic recovery. It didn’t. And his surge in regulation and tax increases actually impeded economic growth and job creation.

So, too, with Obama. Same policies, same result. Yet he appears puzzled why there were 4 million fewer jobs in the country after a year of his presidency. Liberal critics such as economist Paul Krugman insist FDR’s stimulus wasn’t large enough and neither is Obama’s. Conservatives believe Obama’s policies are wrong, and what works are across-the-board individual and corporate tax cuts. Either way, Obama comes up short.

For Obama, the most brutal disparity between him and FDR is likely to come in November. After the Democratic landslide of 1932, Democrats won still more seats in Congress in 1934. In this year’s midterm congressional elections, that’s an outcome Obama can only dream about.

Fred Barnes is executive editor of The Weekly Standard.

Our own Greek tragedy

While President Obama was making his latest pitch for a brand new, even more unsustainable entitlement at the health care "summit," thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split screen - because they're part of the same story. It's just that Greece is a little further along in the plot: They're at the point where the canoe is about to plunge over the falls. America is further upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter 20 (total societal collapse): The Greeks are at Chapter 17 or 18.

What's happening in the developed world today isn't so very hard to understand: The 20th century Bismarckian welfare state has run out of people to stick it to. In America, the feckless insatiable boobs in Washington, Sacramento, Albany and elsewhere are screwing over our kids and grandkids. In Europe, they've reached the next stage in social democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1, or just over two kids per couple. Greece has a fertility rate of about 1.3: 10 grandparents have six kids have four grandkids - i.e., the family tree is upside down. Demographers call 1.3 "lowest-low" fertility - the point from which no society has ever recovered. And compared to Spain and Italy, Greece has the least worst fertility rate in Mediterranean Europe.

So you can't borrow against the future because, in the most basic sense, you don't have one. Greeks in the public sector retire at 58, which sounds great. But, when 10 grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don't have to go to Greece to experience Greek-style retirement: The Athenian "public service" of California has been metaphorically face-down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book "America Alone," I put the Social Security debate in a bit of perspective: On 2005 figures, projected public pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent. In other words, head for the hills, Armageddon, outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn't going to have a 2040 - not without a massive shot of Reality Juice.

Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: "A government big enough to give you everything you want is big enough to take away everything you have." Which is true enough. But there's an intermediate stage: A government big enough to give you everything you want isn't big enough to get you to give any of it back. That's the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people's response is: Nuts to that. Public sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months' work - for many of them the workday ends at 2:30 p.m. When they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

We hard-hearted, small-government guys are often damned as selfish types who care nothing for the general welfare. But, as the Greek protests make plain, nothing makes an individual more selfish than the socially equitable communitarianism of big government. Once a chap's enjoying the fruits of government health care, government-paid vacation, government-funded early retirement, and all the rest, he couldn't give a hoot about the general societal interest. He's got his, and to hell with everyone else. People's sense of entitlement endures long after the entitlement has ceased to make sense.

The perfect spokesman for the entitlement mentality is the deputy prime minister of Greece. The European Union has concluded that the Greek government's austerity measures are insufficient and, as a condition of bailout, has demanded something more robust. Greece is no longer a sovereign state: It's General Motors, and the EU is Washington, and the Greek electorate is happy to play the part of the United Auto Workers - everything's on the table except anything that would actually make a difference. In practice, because Spain, Portugal, Italy and Ireland are also on the brink of the abyss, a "European" bailout will be paid for by Germany. So the aforementioned Greek deputy prime minister, Theodoros Pangalos, has denounced the conditions of the EU deal on the grounds that the Germans stole all the bullion from the Bank of Greece during the Second World War. Welfare always breeds contempt, in nations as much as inner-city housing projects. How dare you tell us how to live! Just give us your money and push off.

Unfortunately, Germany is no longer an economic powerhouse. As Angela Merkel pointed out a year ago, for Germany, an Obama-sized stimulus was out of the question simply because its foreign creditors know there are not enough young Germans around ever to repay it. Over 30 percent of German women are childless; among German university graduates, it's over 40 percent. And for the ever dwindling band of young Germans who make it out of the maternity ward, there's precious little reason to stick around. Why be the last handsome blond lederhosen-clad Aryan lad working the late shift at the beer garden in order to prop up singlehandedly entire retirement homes? And that's before the EU decides to add the Greeks to your burdens. Germans, who retire at 67, are now expected to sustain the unsustainable 14 monthly payments per year for Greeks who retire at 58.

Think of Greece as California: Every year an irresponsible and corrupt bureaucracy awards itself higher pay and better benefits paid for by an ever-shrinking wealth-generating class. And think of Germany as one of the less profligate, still just about functioning corners of America such as my own state of New Hampshire: Responsibility doesn't pay. You'll wind up bailing out anyway. The problem is there are never enough of "the rich" to fund the entitlement state, because in the end, it disincentivizes everything from wealth creation to self-reliance to the basic survival instinct, as represented by the fertility rate. In Greece, they've run out Greeks, so they'll stick it to the Germans, like French farmers do. In Germany, the Germans have only been able to afford to subsidize French farming because they stick their defense tab to the Americans. And in America President Obama, Nancy Pelosi and Harry Reid are saying we need to paddle faster to catch up with the Greeks and Germans. What could go wrong?

Mark Steyn is the author of the New York Times best-seller "America Alone" (Regnery, 2006).

U2 Lists: Top 10 Types of Sustenance in U2's Lyrics

I'd break bread and wine, but far less often than honey

[Ed. note: This is the 17th in a "U2 Lists" series, where @U2 staffers pick a topic and share their personal rankings on something U2-related.]

Any way you slice it, U2's music feeds the soul in more ways than you'd realize. When you think of U2's lyrics, typically people think of the holy trinity of political, spiritual and emotional to describe what their music is all about. If you dig deeper, you'll find an overlooked theme in their music that Bono alludes to in their unreleased song, Mercy: "If you hunger, baby, let me feed it." Nourishment comes in many forms, and I would like to propose a list of the top 10 types of sustenance inspired in U2’s music.

1) Honey

This sweet regurgitation from honey bees is the leading food item Bono takes inspiration from. It is referenced in at least 10 U2 songs, with Wild Honey being the most obvious tribute to this yummy delight. Bono explains how honey is made in the outtake Levitate: "To be the bee / To be the bee and the flower / Before the sweetness / Before the sweetness turns to sour." He tightened up the lyric when Levitate became Always: "To be a bee and the flower / Before the sweetness turns to sour." Even Better Than the Real Thing brings us "You're honey, child, to a swarm of bees." A Man and a Woman tells us "But you're like honey on my tongue," which is the same reference Bono gives in both Hawkmoon 269 and Summer Rain. The Rattle and Hum b-side A Room at the Heartbreak Hotel gives us "You let them suck your life out like honey." Passengers' Elvis Ate America mentions "honey, potato chips and cheese." Not to mention, I Still Haven't Found What I'm Looking For states "I have kissed honey lips."

2) Alcohol

For a band from Ireland, it's no surprise that alcohol in some form would be mentioned in song. From the band's earliest days, Cartoon World mentions "He didn't give me a lot of beer." To the best of my knowledge, that is the only reference to beer. Holy Joe gives a nod to champagne, but it's wine that seems to inspire Bono more. I suppose wine is a better sounding word in songs, especially since it can rhyme with many things. Wine has also been a bigger influence to Bono since Paul McGuinness first taught him to appreciate the beverage. Lyrics with Bible scripture references are where wine is used mostly: Until the End of the World, Mercy, and Acrobat. The Unforgettable Fire gives us "red wine that punctures the skin." And there's the outtake Xanax and Wine.

Bono's not afraid to write about hard liquors as well. He mentions "Tequila and orange, Jamaica and rum" in Summer Rain. He also alludes to hard liquor in the title Two Shots of Happy, One Shot of Sad. While it's a stretch, cocoa butter can be made from chocolate liquor, which would put the line "She's cocoa butter, baby, she's the glue" in Big Girls Are Best in this category too.

3) Fruit

From wearing Lemon, and bringing oranges from a tank in Cedars of Lebanon, fruit has been used in a few ways by Bono. The earliest reference to fruit can be found in Boy/Girl to describe complexion "her skin is coloured strawberries and cream." He also uses "cherry red" to describe lips in Walk to the Water. Edge also gets into the fruit action when he tells us to "have another grape" in Numb.

4) Non-Alcoholic Beverages

Bono must have a thirst that needs quenching while in the studio because he sings about many types of drinks other than alcoholic ones. Coffee and water are the most popular (Cedars of Lebanon, Electrical Storm, Hawkmoon 269, and Trip Through Your Wires). Bono's soft drink of choice appears to be Coca-Cola, as sung in Promenade and The Playboy Mansion. Even Better Than the Real Thing was a coy nod to Coca-Cola's slogan "The Real Thing" from around the same era. Mofo mentions lemonade, and "If O.J. is more than a drink" is cleverly used in The Playboy Mansion.

5) Fast Food

Bono has given lyrical equal time between McDonald’s and Burger King. The Playboy Mansion gives props to McDonald's with "A Big Mac bigger than we think." In Elvis Ate America, Burger King gets the spotlight with "ate a king burger and kept getting bigger."

6) People

As crazy as it sounds, if you take Bono's lyrics literally, he references cannibalism twice in U2's discography. Bono sings "Every artist is a cannibal" in The Fly. He chose to be a bit more descriptive in Crumbs From Your Table, by singing "With a mouth full of teeth, you ate all your friends."

7) Ice Cream

Sorbet and sherbet just aren't cool enough when it comes to frozen dairy products in U2 songs. Ice cream is where it's at in Elvis Ate America, Holy Joe and Get On Your Boots.

8) The Sweetest Things

"Ain't love the sweetest thing?" Not really when bubble gum and sugar are used in U2 lyrics. Bubble gum can be found in Discotheque. Bono finds "sugar" both as a term of endearment in Original of the Species, and a way to describe someone as "Some sweet delight, a sugar rush" in Love You Like Mad. Get On Your Boots refers to "candy floss," which is blown sugar. Even the outtake Flower Child refers to sugar.

9) Special Ingredients

There are several songs with a single referenced ingredient, all of which are worth noting. Beautiful Day mentions tuna being cleared out by the fleets. "I can taste the salt in the sea" is found in Kite. U2 performs the Allen Ginsberg poem, Drunk Chicken/America. There's even "butter on toast" in Winter.

10) Artificial Ingredients

It would seem that U2 inspires many comedians with food-related parodies. Two worth bringing up in this list include Chris Kattan and Ben Stiller. Chris Kattan parodied Bono during episode 2 of season 25 of Saturday Night Live. This parody pokes fun at NetAid, and the fact that no one showed up for it. Kattan sings "Salami, cheese and pickles help make starving people strong" to the tune of One. Ben Stiller also uses One to parody U2 with a commercial for "Lucky Clovers" cereal.