There has been a lot of heat, and very little light, about the “bailout of banks.” What is clear to me is that almost nobody understands how banking works. That’s too bad — for bankers. Less than .001 percent of people understand (1) how banks make money, (2) how federal policy regulates what banks can do to make money, and (3) what the heck a bank is and isn’t. And, whose fault is it that banks are so widely misunderstood, if not actually reviled? Here’s a clue: banks spend less than 1 percent of their assets telling customers what is good about the bank. Why is that so? Because banks don’t think their shareholders want them to waste money on frills, like PR.
There’s a maxim in the PR business: spend some time every day making sure your customers know why you are important to them. Even if your products are very similar to your competitor, never, never, never stop convincing your customer that your bank is better than any other bank because of WHO you are.
So, now that the proverbial excrement has hit the fan, banks everywhere have to endure a public scourging mostly because the public doesn’t understand anything except what they read in the paper — or see on the internet.
And, where, you ask, are the banks now? You’d expect them to be out there explaining why they aren’t part of the problem. You’d expect them to be running ads, hitting the rubber-chicken circuit, writing letters to the Editor making their case about why they are victims of the economic crisis, not the perpetrators.
The answer is, they are nowhere. Their excuse for not getting the word out is a variation on the theme. Now it is “Our shareholders don’t want us to spend money we don’t have on advertising.”
And, what is the result of all this? More people hate bankers this year than last year. More people hate banks than hated them 60 days ago. Nobody can think of one reason why their bank is one bit better than any other bank. Nobody can think of even one example where their bank has demonstrated a willingness to help be part of a solution.
Except the credit unions.
I know bankers hate credit unions. I know all those reasons. But, the simple fact is that credit unions are winning the PR war. When you read the news, you read lots of stories where customers praise their credit unions for working with them. Politicians, reporters and editors alike praise the cooperative spirit they find in the local credit union. And those same worthies seem to take delight in damning the bankers.
Here’s a recent example: Arianna Huffington, writing in the Huffington Post has fulsome praise for small banks — except she’s mostly talking about Credit Unions — read it for yourself here: http://www.huffingtonpost.com/arianna-huffington/heres-a-switch-some-good_b_186455.html.
So, whose fault is it that the press seems to love Credit Unions and hate banks? Who’s responsible for the fact that there are virtually no stories about what a bank has done to help anybody (but themselves)? Who has done virtually nothing to move public opinion the other direction? (Editor’s Note: There was, actually, a sort of positive story in the May 12, 2009 NY Times about community banks. It said they were “dull, but profitable.” Not exactly fulsome praise.)
Do I really have to answer that question?