With the Obama administration proposing the most sweeping regulatory overhaul since the Great Depression, and the Congress likely to act quickly to pass it, financial firm public relations is about to get manifestly more complicated.
New regulatory agencies, federal watchdogs, and higher capital requirements shouldn’t be a surprise to anyone paying a bit of attention to the past two years. The predictable arguments now will break out — The Wall Street Journal runs 50-point type above the fold, with comprehensive (and as usual, well-written) coverage of the individual aspects of the planned changes — with the left saying the plan doesn’t go far enough and the right saying that it goes way too far.
Regardless of your political leanings, I believe there are good reasons to be concerned. There is no doubt that the financial industry behaved like a college junior on 21st birthday night. But now regulation will stand in opposition to much policy regarding home ownership, consumer and business spending, and other financial matters that would contribute to the financial recovery.
For financial PR people, this means further scrutiny by lawyers and compliance folks for public statements. Much of their work will be very difficult, as passing the laws is just half of what has to happen. The remainder is more important and more taxing — actually writing the regulations that will govern the procedures associated with the new laws, new agencies and new policies. Without those details, the lawyers will be flying blind — lawyers don’t like that and tend to retreat when pressed to approve something.
Additionally, the balance among the agencies will become more difficult — SEC/Federal Reserve/CFTC/Consumer advocate will have slightly different responsibilities for the same batch of financial products. New capital requirements will take funds out of the lending pool, leading to higher interest rates, higher fees and tighter credit. Sure, a contributing factor to the financial crisis was cheap money and loose requirements, but the screws are already tightening, and now the new agencies will need funding — is that the best way to make the industry healthier?
The causes of the financial crisis are many — and blame is due to a lot of people. The governmental oversight program failed miserably and deserves to be replaced.
How will PR work through these changes? Will it be through more transparency and more forthright communication, or will the generals of caution reign, retreating to less openness? I’ve spent 70% of my career in financial services. I have no idea. But I plan to continue to advocate for transparency, openness and honesty.
Great post Sean! I think the job of PR people is to lead rather than wait. Firms will take a position and live by it only if that position represents who they are, otherwise proposed internal changes will have all the teeth of a New Year’s resolution. I hope your advocacy for transparency, openness and honest prevails. It’s not only the right thing to do, but will serve as a competitive advantage in the long run.
Fire all the regulators for it was they who were paid to craft legislation that made the bank/Wall Street looting possible and for looking the other way whilst the fleecing took place.
Smithwill — point of clarification: regulators don’t craft legislation, they are responsible for taking legislation and creating the specific rules, policies, processes and procedures that enact the legislation. The Obama Administration reconstruction of the regulatory environment changes the matrix of accountability, potentially in a positive way. That remains to be seen. The roots of the financial crisis are long and complicated; I don’t see how anyone can center blame on any one factor. Greed by people who bought houses they couldn’t afford, mortgage bankers looking to write as many loans as possible, governmental oversight compromised by competing goals and policy, investment banks creating new products to mitigate risk and isolate banks from poor or at least facile decisions… There are just so many factors to consider. The point now, I believe, is to be sure that as PR people (as Leo’s comment says above) we’re leading our organizations toward a strong ethical position on how to talk about the new world. Thanks for your comment.