Financial Services PR FAIL

So who is advising the financial services industry on their public relations, Lord North? Marie Antoinette? Wile E Coyote? The collective reaction to the Occupy movement has been a study in thud and blunder.

First we have the spectacle of the swells sneering from the balcony at the protesters on the sidewalk. Then members of the CBOT thought this gesture would be cute.

Here in Washington, DC we have been treated to the antics of a agent provocateur so stupid that he did not know better than to write a magazine article bragging about his crime.

A CEO asks his reporter friend to check out Occupy Wall Street to see if they are dangerous. Obviously they are not dangerous. Demonstrators have been pepper sprayed, beaten with batons, assaulted by a plain clothes officer, and run over by a police motorcycle. In spite of all this their non-violent discipline has held. If they were going to be violent, that would have happened by now.

And why has Mayor Bloomberg decided to play the part of a twenty first century Bull Connor?

There have been the comparisons to the hippies of the late 1960's. Take it from someone old enough to remember, there is no resemblance. The coalition of people supporting these protests is wide and deep, witness all the pizzas that have been ordered for the demonstrators and the donations, both in kind and monetary that have been made. That never happened in the 60's. Witness of the small acts of support, such as cab drivers who turn off their meter when taking riders to the demonstration or the sanitation workers in San Francisco who returned personal items to demonstrators after the police had tossed them. Such things never happened in the 60's.

The incident at Citi Bank was the first incident I have head of where a customer was arrested for trying to close her account; but it seems there have been previous incidents of this. Why police departments go along with it I will never know.

Anyone who thinks that the Occupy movement bears any resemblance to the Tea Party is encouraged to read this post by Peter Daou.

Certainly the financial services industry has been ill served by their trade press, take this unfortunate editorial in Investment News. While it concedes the demonstrators have a point it characterizes them as misguided and attention seeking.

With over 1,549 demonstrations in this country, and hundreds more around the world, the Occupy movement is already a very serious movement. Its impact will go way beyond electoral politics.

So here is my advice for anyone in the financial industry who would be interested:

Reexamine your business model.

Do nothing inflammatory in the present environment. For example, on November 5th protesters will be closing their bank accounts. DO NOT call the police and have them arrested. DO NOT think that you can control this story. Almost every protester there will be carrying a video phone, do not give them anything to film. Have extra staff there to handle the additional traffic and close the accounts as fast an efficiently as possible. Anything else will generate a storm of bad publicity that will haunt your company for decades to come.

Listen to the protesters in their own voices. This Twitter list follows protesters from all over the world.

Read the following reality based economics blogs:
Mosler Economics
Naked Capitalism
New Economic Perspectives

Above all recognize that you are in a new environment and that the old rules do not apply.

Edit -
Slightly off topic, but I thought that Jonathan Bernstein had an interesting take on Margin Call.

There is a limit to what PR can do for you

Banks Prepare for Bigger Bonuses, and Public’s Wrath

Those worries aside, few banks are taking immediate steps to reduce bonuses substantially. Instead, Wall Street is confronting a dilemma of riches: How to wrap its eye-popping paychecks in a mantle of moderation. Because of the potential blowback, some major banks are adjusting their pay practices, paring or even eliminating some cash bonuses in favor of stock awards and reducing the portion of their revenue earmarked for pay.

Some bank executives contend that financial institutions are beginning to recognize that they must recalibrate pay for a post-bailout world.

Of course we are not really in a post bail out world, otherwise Congress would not have prepared the ground for an additional $4 trillion bail out.

Angry citizens are already moving their money. Things can only get worse if banks continue to award outrageous bonuses to management so out of control that they require multiple trillion dollar bail outs.

Soros proposes way to fund to fight global warming

Reuters

"I've found a way for someone else to pay ... to mobilize reserves that are lying idle," Soros told Reuters on the sidelines of the December 7-18 conference that will end with a summit of 110 world leaders meant to agree a new climate pact.

Hungarian-born Soros said green loans to poor nations backed by International Monetary Fund gold reserves could total $100 billion.

"This $100-billion fund I think could just turn this conference from failure to success," he said, admitting there were several legal and practical hurdles to unlocking the cash.

From Soros' email annoucement:

In September 2009, the IMF distributed to its members $283 billion worth of SDRs, or Special Drawing Rights. SDRs are an arcane financial instrument but essentially they constitute additional foreign exchange. They can be used only by converting them into one of four currencies, at which point they begin to carry interest at the combined treasury bill rate of those currencies. At present the interest rate is less than one half of one percent. Of the $283 billion, more than $150 billion went to the 15 largest developed economies. These SDRs will sit largely untouched in the reserve accounts of these countries, which don't really need any additional reserves.

I propose that the developed countries--in addition to establishing a fast start fund of $10 billion a year--should band together and lend $100 billion dollars worth of these SDRs for 25 years to a special green fund serving the developing world. The fund would jump-start forestry, land-use, and agricultural projects. These are the areas that offer the greatest scope for reducing carbon emissions and could produce substantial returns from carbon markets. The returns such projects can generate go beyond reducing carbon; there will be non-carbon related returns from land use projects, the potential to create more sustainable rural livelihoods, enable higher and more resilient agriculture yields and create rural employment.

This is a simple and practical idea. There is a precedent for it. The United Kingdom and France each recently lent $2 billion worth of SDRs to a special fund at the IMF to support concessionary lending to the poorest countries. At that point the IMF assumed responsibility for the principal and interest on the SDRs. The same could be done in this case.

I am very curious about what it must be like to handle a major figure like Soros and one of my life's ambitions is to meet Michael Vachon.

The CIA recruting investment bankers

Spy low, sell high

George Soros on the current financial crisis

In his article in the Financial Times George Soros suggests, amongst other things, that:

Recipient countries would pay the IMF interest at a very low rate, equivalent to the composite average treasury bill rate of all convertible currencies. They would have free use of their own allocations but would be supervised in how the borrowed allocations were used to ensure they were well spent.

I am not sure that the IMF has such a good record on identifying to proper allocation of funds that they are the best judges of such a task. I would rather depend upon the country's leadership, who might or might not know what they are doing, but have a better record than the IMF.

In his article in the Wall Street Journal Soros suggests that credit default swaps are "toxic instruments whose use ought to be strictly regulated." Surely if credit default swaps are actually toxic they should be abolished, rather than merely regulated.

Soros will be speaking at tomorrow's Looking Towards the London G-20 Global Growth Summit event, so I will be interested to hear what he has to say.

Soros' book, The Age of Fallibility: The Consequences of the War on Terror, is filled with insight and highly recommended.

Great moments in media relations

Financial Times Sues Blackstone for Web “Fraud”

Earlier today I suggested that we were headed toward a two-tier information economy where wealthy people pay for good stuff and everyone else gets free crappy stuff. But I may have miscalculated–maybe even rich people won’t be willing to buy the good stuff.

That’s one lesson you might derive from this odd lawsuit: The Financial Times is suing Stephen Schwarzman’s Blackstone Group (BX), claiming that the private equity group has been defrauding it since 2002. How? By allowing multiple people to use a single account to access articles on the paper’s FT.com site.

There is no savings in the world that is worth generating that amount of ill will. But then, if there is one thing we have learned about these investment houses, they are a little weak on risk analysis.

A serious accusation requires serious evidence

U.N. crime chief says drug money flowed into banks

VIENNA: The United Nations' crime and drug watchdog has indications that money made in illicit drug trade has been used to keep banks afloat in the global financial crisis, its head was quoted as saying on Sunday.

If UNODC really has such evidence they need to come forward and put it on the record.

SEC completes taxonomies for XBRL

Investment News

The SEC is encouraging users and creators of investment company information to review the taxonomies (see the link below).

Any comments received by Nov. 24 might be included in the final taxonomies that are to be used in mutual fund filings, starting in 2009.

Visit the SEC website to read the rule proposal on mutual fund risk-return summaries. To review and comment on the taxonomies, visit XBRL US. Visit the story “Advisers may benefit from XBRL shift” for more on how the standards will ultimately help advisers.

If you have an opinion about taxonomies for XBRL, the time to express it would be before November 24.

Three cheers for Josef Ackermann

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

Well done Josef Ackerman, it is nice to know that someone in management has a sense of proportion.

e-Discovery; not just for email anymore!

The Big Picture has been following the House Committee on Government Oversight and unearths this little Instant Messaging gem from S&P analysts:

Rahul Dilip Shah: btw: that deal is ridiculous

Shannon Mooney: I know right ... model def does not capture half of the risk

Rahul Dilip Shah: we should not be rating it

Shannon Mooney: we rate every deal

Shannon Mooney: it could be structured by cows and we would rate it

Instant Messaging and social media are going to add a whole new element to records management and e-discovery.

The coming boom in criminal justice IT

Cash crunch could result in more corruption cases

“We’ve seen the high-water mark for [Foreign Corrupt Practices Act] cases,” said Steven Tyrrell, chief of the Justice Department’s fraud section, speaking at a Securities Industry and Financial Markets Association conference today. “[But] I believe we have yet to reach the crest of the wave.”

While the current credit crisis, and the lawsuits and prosecutions related to it, may produce a crop of additional FCPA cases, Mr. Tyrrell noted the recent boom of sovereign wealth funds is an area of particular interest to the Justice Department, though it has not yet garnered any definitive cases.

Desperate men will do desperate things.

Dept. of irresponsible allegations

Kurt Cagle throws around some wild accusations in his XBRL column.

While there are many culprits to blame in this (and its easy to blame anyone and everyone) one group of individuals that are getting especially heavy scrutiny are the banking regulators. It is very likely that some corruption exists here - suborning the regulatory mechanism is the very first step necessary in order to make the kind of deals that ultimately led to the financial collapse possible, and there is no doubt that more than a few regulators should probably be wearing prison orange jumpsuits right now.

And the evidence for that would be? Truly, before you start throwing that sort of allegation around you need to be able to document it chapter and verse. Did the regulators fail to uphold the law? Or was the law bent by their political masters? We will need a detailed analysis of the financial follies of the last decade in order to know who needs to be held accountable.

John Stewart on the blame game.

Litigation support: growth sector of IT

Via Gabe's Guide:
Subprime mess sends number of fraud lawsuits higher

Investors sued 110 companies for alleged stock fraud in the first half of this year, up from 107 in the previous six months, according to a study released Tuesday by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research. About half of the suits included claims related to subprime and other credit losses, the authors of the study said.

Subprime fiasco keeping class action lawyers busy

SEC to Examine Subprime Accounting

Accounting software and criminal justice IT should also see substantial growth.

Sigh.

Note - Gabe's Guide and Kevin LaCroix take a similar view.

Understanding our economic situation

This is a public relations/marketing/technology blog. Rather than attempt to offer any insight I will just offer my preferred sources of economic and financial news:

The Levy Institute

The bonddad blog

The Housing Bubble

Nouriel Roubini's Global EconoMonitor

Calculated Risk

All of these sources predicted the real estate and related credit crash years before it finally happened.

Email, it always comes back to email

MORTGAGE MELTDOWN

And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.

It's a great time to be in e-discovery and litigation support.

Little considered aspect of Software as a Service

Making technology investments in tough times

Some commentators have opined that more customers will turn to SaaS-based solutions inasmuch as the cash crunch will hit buyers' capital ("CapEx") budgets first. If that's the case with you, you'll want to weigh reduced initial cash outlays against potentially higher operating costs on a long-term basis under a SaaS model. Depending on the type of service provider, you're shifting at least part of the capital burden to your SaaS vendor, so you'll want to weigh their liquidity very carefully.

More generally, it's prudent to examine the financial health of all your major technology suppliers, current and prospective. We've always counseled looking more closely at balance sheets rather than profit-and-loss statements. Many vendors still remain cash-rich, even as they become customer-poor. I'm no financial expert, but I'd value short-term assets over things like "goodwill."

Keep in mind that bigger does not always mean more solvent.

PR lessons from the bail out blunder

Misread

From a PR perspective, the question arises of how the President and Speaker could have miscounted so badly. How could they have assumed that the House would go along with a bill that enraged millions of Americans?

From the point of view of our democracy, it is a very bad sign that they would attempt to railroad through legislation that is so clearly unacceptable to the vast majority of their constituents. This is not over, there will be a re-vote this week, so they may yet succeed in subverting the public will. This is not a proud moment for our country.

Angry constituents crash the congressional server

DorobekInsider: House.gov overwhelmed

AP is reporting that the House of Representative’s Web site was brought to its knees yesterday as people flooded the site seeking information on the vote to reject the Wall Street rescue plan.

The numbers must have been astronomical, as the server is designed for waves of public pressure. The worker bees of Capitol Hill IT have been working very hard indeed.

George Soros is half right

Paulson cannot be allowed a blank cheque

By George Soros

The bill submitted to Congress even had language in it that would exempt the secretary’s decisions from review by any court or administrative agency – the ultimate fulfillment of the Bush administration’s dream of a unitary executive.

Mr Paulson’s record does not inspire the confidence necessary to give him discretion over $700bn. His actions last week brought on the crisis that makes rescue necessary. On Monday he allowed Lehman Brothers to fail and refused to make government funds available to save AIG.

In my opinion, the management of Lehman Brothers and AIG are responsible for the failure of their companies. It will be a very good thing if it is made clear that there is no such animal as too big to fail. In my never-was-humble-opinion nothing else will serve to cure the hubris that played such a large role in the present debacle.

Soros' book, The Age of Fallibility: The Consequences of the War on Terror, is filled with insight and highly recommended.

Edit -
Soros proposes an alternative plan, I am not sure I like it; but it is certainly superior to what the Senate passed last night.

Trojan Horse does the Limbo

Trojan can grab extra personal banking data

A Trojan horse program now available to a growing number of fraudsters can add data entry fields to legitimate online banking sites and entice consumers to give up sensitive information such as bank card numbers and PINs (personal identification numbers).

The Limbo malware integrates itself into a Web browser using a technique called HTML (Hypertext Markup Language) injection, said Uri Rivner, head of new technologies at RSA Consumer Solutions, a division of EMC. Because it's so closely integrated in the browser, it can operate even while the user is at the real bank site and can actually change the layout of that site, he said.

In case you weren't already paranoid.