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Edelman has just released it's annual survey and to prove it seems to be measuring the right things, the data it uncovered on banks is astonishing- their trust rating has plummeted like a stone- from the 3rd ranked sector in the US to the 9th and a rating drop in excess of 30 points.

Looking at this data, it provides some insight as to why the President acted as he did.



However, there's more to this story than meets the eye and more questions to ask.

- What type of banks don't people trust?
- What is it about banks that they don't trust?

I am sure Edelman have this data and it would be great to see it if they do.

Banks clearly have a huge issue that is in crisis proportions and something they need to devote a lot of energy towards. Simply ignoring the issue and hoping it will go away, isn't going help. These institutions need a whole way of thinking about how they need to relate to and communicate with their customers and beyond this need ideas that prove they are to be trusted. 


Posted by Ed Cotton Everyone knows that many banks are still in trouble and most people have a clear idea where the blame lies, with the banks themselves. Quite simply, there's no love lost between bank customers and the executives who are seen as part of a financial establishment that's taken advantage of exploitable opportunities, often at the expense of the customer and taxpayer.

A bank should only go begging to its customers for understanding if there was a well of support and a high degree of respect for the brand and the category. Anything short of a stellar reputation and it's going to end badly. Now is not the time for such a plea.

However, Westpac in Australia seem oblivious to current sentiment.  The bank sent out an email film to its customers explaining in the most patronizing way how the financial system worked and why bank rates where heading higher.

Given what people have been through with banks and the endless press on bonuses and the stratospheric pay packages of banking's top level, it's impossible to understand how Westpac's customer base could be sympathetic to the plight of a bank who now faces higher costs for borrowing money.



One can just imagine how this film came to be, harried marketing executives believing that if only the ignorant public could understand the reasons why money now cost more, things could be better, taking this thought to their ad agency and getting them to make an "educational film". The problem here is that the voice is all wrong, there's no empathy, understanding or even a recognition of some intelligence on the part of their customers. The fact this made it though the system shows an institution with a very low EQ and one that fill find its little exercise in education ends up losing it a ton of valuable customers.

Banking still has a lot to learn from how to respond to the current crisis. It does not seem like any of them get it, most don't want to acknowledge the realities of a changed context and a changed relationship. Most of the recent marketing efforts fall short, they show a lack of an insight and an inherent desire to turn the clock back to the days of old.

Recent research data from Bloomberg shows that Americans are pretty angry with bankers.

"Two-thirds of Americans say they have an unfavorable view of financial executives. More than half say big financial companies, which are expected to pay record yearend bonuses, are out only to enrich themselves and also should not have received government aid. "

The incumbents failure to get it right, could leave the door open to a smart opportunist who gets exactly what the consumer is looking for now, doesn't show the same patronizing attitude of old and finds a way to provide superior services at a much lower cost. 

Posted by Ed Cotton While a surging Dow gives us the impression that all is well and things are slowly returning to normality, but a more sober reality lurks under the surface.

"A decade ago, during Japan’s banking crisis, officials eventually managed to halt their woes by summoning senior bankers into a single (smoke-filled) room and imposing a common system to measure the rot.

It took them several attempts before they arrived at a credible number (and it was dramatically bigger than the first guess). But once they finally came up with a big sum, they recapitalised the banks – and rebuilt investor faith.

However, the problem that now haunts western leaders is that it looks extremely hard to replicate the same smoke-filled room trick. After all, this is a global crisis involving banks in numerous different legal and accounting regimes that answer to different bosses.

Moreover, the bad loan total is a moving target: as confidence crumbles in the banks, the economy is weakening – creating more bad loans. Even if global leaders could organise a single “count”, in other words, it would almost
certainly be out of date by the time it was completed."

Gillian Tett- Financial Times- April 1st, 2009

It appears the administration has started to win the communication war and achieved the goal of improving confidence. However, dealing with the reality of toxic assets might turn out to be tougher than anyone imagined. 



Posted by Ed Cotton A statistician has proclaimed that last week's crash was indeed a Black Swan. An event so rare, it can be compared to winning the lottery twice in a week.




Posted by Ed Cotton Here's a great visual from The Deal that explains the packaging and re-marketing of credit. Sort of explains how the badness was turned into goodness and everyone slept soundly at night until the day they realized the badness was real bad. It's also the system that propped up the consumer economy. An economy driven by cheap and easy credit isn't sustainable. For years, the US economy has been running on cheap credit. What happens when it goes away remains to be seen, but companies are need to get amazingly creative if they want to continue to sell in these tough times.



From Paul Kedrosky


Posted by Ed Cotton We might be in real trouble, but our experts are confused and uncertain.

"Is the global financial system headed for a meltdown? From Nobel Prize-winning economists to captains of industry, the world’s top experts are united by a common answer: We don’t know."

From Foreign Policy


Posted by Ed Cotton