Bankers seek to counteract bad news, tarnished image

October 03, 1990|By Robert Trigaux | Robert Trigaux,American Banker

WASHINGTON -- What's the difference between banks and S&Ls? Two years.

That joke is working its way around Washington these days, but bankers aren't laughing. An unprecedented torrent of bad news is battering their industry's image and many feel powerless to counteract it.

Some bankers think all they can do is ride it out. Others say a grass-roots solution is best, where bankers can talk one-on-one to their customers, their stockholders, and local media.

But most agree that the convergence of bad publicity -- ranging from the weakness of the bank insurance fund to massive layoffs to prophecies of an industry collapse -- is tarnishing banking's reputation.

Of 40 top bank executives queried in the last two weeks, two-thirds said that public confidence in banks had eroded "somewhat" or "significantly" in September after extensive media reports about the weakening condition of the Federal Deposit Insurance Corp.

When asked what, if anything, banks should do to improve public confidence, surveyed bankers recommended: raising the industry image in local speeches; pushing industry trade groups to better publicize the difference between banks and S&Ls and urging the federal regulators to be less loose-lipped with bad news.

One banker's solution: "Praying."

Two-thirds of the 40 bankers, who were questioned by Trans Data Corp., a market research affiliate of American Banker, said their trade groups should be doing more to counteract the barrage of bad news.

Bankers are aiming their frustration at two sources: politicians and the press. Both were late to realize the extent of the thrift crisis -- and are now overreacting by exaggerating banking's problems, they contend.

"The public, based on what they have seen on TV and read, has painted a picture in their minds of something far blacker than it is," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America.

"I suspect generally the public tends to view this through the glass darkly because the S&L news over the past three years has been steadily worse. It does not follow that the banking news will be worse -- unless there is a recession," he said.

With few regional exceptions, the United States is suffering a severe real estate slump that is threatening the health of dozens of banks, if not more. Institutions touted a year ago for high-quality loans and sharp management are facing serious real estate loan write-offs, severe squeezes on capital, and forced turnover of top officials.

Industry officials also fear banks' difficulties have become the fixation among lawmakers in the nation's capital, who, with only a few weeks before Election Day for many of them, are eager to show voters they are not going to allow the banks to go the way of S&Ls.

"There's a simple way to describe Washington's current response to the financial weakness in the banking industry: panic," wrote Peter Wallison, former White House and Treasury general counsel, in a comment in last Friday's Wall Street Journal.

In reaction, top banking officials are nervously huddling, trying to devise strategies to halt, if not reverse, the onslaught of bad news and the consequent pounding many institutions are facing in the stock markets.

Last month, in the same week that two government reports cited gross weaknesses in the FDIC, 400 bankers were meeting in VTC Washington as part of the American Bankers Association's banking leadership council, a policy-making group.

Reports about the FDIC, the sharp rise in bank premiums, and other events that week were clearly on the bankers' minds at the ABA meeting, said trade group spokeswoman Virginia Dean. "There was concern about how the industry is perceived. A sense of panic seemed to be rising in the city as each testimony unfolded. The bankers' interest was that it not be taken out of context.

"Obviously, the banking industry's condition will be a topic at its annual convention" later this month in Orlando, she said.

The ABA, so far, has opted for a low-key, grass-roots solution. It has assembled and distributed to its member banks a binder of information about how to publicly present -- in speeches, for the media, and for the bank customer -- the most positive spin on current banking conditions.

Some marketing experts are wary of individual bank advertising that calls attention to the safety and soundness issue. "It could create a consumer backlash," said James Grant, senior vice president of First National Bank of Chicago.

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