"I'll Get Back To You"
I note that the FT's estimable Alphaville blog is losing patience with financial public relations professionals. I'll give you some illustration of the fact that these poor sods are all that stand between their employers and ritual evisceration in a haze of populist anger. This morning on NY1's In the Papers, coverage of the bonuses paid to AIG dominated the first couple of minutes.
But the media relations people working for these organisations are unaware that their audience has changed. Financial PR used to be a very sweet gig, mostly because it involved trading favours and locking horns with a set of journalists with their own pretty small and focused readership. At most, when dealing with, say, the Wall Street Journal or Bloomberg, you'd have exposure to, well, most financial services professionals. But those guys don't write angry letters to congresspeople, they just write cheques, or they don't.
The thicket of securities and disclosure rules surrounding financial transactions, not to mention the prevalence of non-disclosure agreements, to which I alluded in this comment at the Atlantic Yards Report, together with financial institutions' increasing willingness and ability to enforce message discipline on their employees, has resulted in the creation of a horrible symbiotic relationship between financial journalists and the PRs that service them.
I must stress, there's plenty of information sloshing around outside the usual channels. Only it's a) rumour and b) usually being spread around for financial gain. The sort of public-spirited leaks we tend to encounter in national security and political reporting are much less common in the world of finance. Even Harry Marokopoulos the hero of the Madoff scandal, looked over Madoff because he was a competitor.
Given that the corporations tend to have access to much better legal help, though much weaker libel protections, than private citizens, these PRs tend to enjoy considerable power as gatekeepers. In fact, as far as I can tell, the London Stock Exchange seems to make employing an outside firm, or at least having a substantial PR capability, a condition of listing.
So reporters get hopelessly reliant on PRs to confirm, off or on the record, the stuff that's swilling around as market rumour, or at least to immunise themselves from charges of sloppy reporting. Kudos, then, to Alphaville, for giving us an example of the PR sausage factory in action. Their reporter, Neil Hume, got a tip that Barclays was trying to sell its asset management arm, but couldn't even get an off-the-record nod either way from Barclays' PR people. A nod, in the negative, that the PRs were happy to provide other reporters.
Turned out to be (at least partly) true, and that Barclays is trying to work out whether it needs a UK government bail-out, whether selling its asset management arm would be enough, or whether selling its asset management arm might be needed to pay for the government insurance.
As an aside, because this isn't really an Atlantic Yards post, either outcome is not very good news for the Nets arena naming rights deal. A UK government bailout would increase pressure on the bank not to be subsidising Brooklyn real estate ventures. Bt if the asset management sale goes through, there's very little need for Barclays to slap its name on a sports arena. You might sell mutual funds by beaming your logo at basketball fans, you sure as hell don't sell investment banking services. That all said, Barclays might be fine, and neither option would be necessary. But banks' records on insisting they're not in trouble are pretty rotten.
Which brings me back to Goldman Sachs, which was also making, this time very public and strenuous, denials about its benefiting from a US government bail-out of AIG. Which turned out to be not entirely operative.
Egg on the face for Goldman PR Lucas Van Praag, then. He's now locked in a deathmatch with Goldman's other principal PR, Michael Duvally, over who can come up with the most ridiculous statements to the press. Duvally is a former reporter and, like the Inspector Highland character in Patriot Games can expect NO QUARTER. Head over to Dealbreaker for one of his bundles of amusement.
But the best one by far is his insistence that it was an entirely different type of money that Goldman used to pay bonuses after receiving TARP money. This I sense is one of those moments where a financial PR tries to get a handle on how financially illiterate his new audience is.
In Goldman's retelling of the bonus story earnings, the source of the bonuses, and capital, the destination of the TARP money, are two entirely different tthings, and are not at all related. This is humorous because banks' earnings are a key way by which a troubled financial institution could rebuild its capital. By noting that Goldman bonuses were paid out of its earnings, Goldman is saying "we could have used all that money we made prop trading and skirting conflicts-of-interest issues to beef our capital base. But the US government did that for us. So we'll keep paying the bonuses. Cheers!"
I'll end this only-slightly-erudite discussion of the trials and tribulations of the financial PR business by noting that financial PRs have at least as difficult a time in their dealings with the institutions they represent. For each of the episodes I mention there's probably a tangled backstory that involves the person in question trying to get sense out of their own people. But then again, that's why they pay them the big bucks. Dealing with scumbag journalists should be comparatively plain sailing.