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Wall Street's Image Problem

Wall Street has contributed to its own vilification by remaining aloof and it needs to step up efforts to communicate better with Main Street.



) -- When asked what he thought about an underling's e-mail message describing a deal as "sh*tty," the response of

Goldman Sachs

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CFO David Viniar was honest, but probably gave his public-relations team a collective aneurysm.

"I think that's very unfortunate to have on e-mail," Viniar said in response to a question from Senator Carl Levin (D., Mich.) on Tuesday, barely disguising a smirk.

Goldman Sachs CFO David Viniar

On one hand, the remark was a refreshing burst of candor in a tense, day-long hearing full of

grandstanding and evasion. But it was also representative of the larger problem with Wall Street: They just don't get it, and sometimes don't even bother to pretend.

There have been precious few signs that the financial industry acknowledges the havoc it has wreaked in average consumers' lives. That's partially because the industry feels -- rightly so -- that it isn't entirely to blame. But it's also because the Wall Street titans that President Obama described as "fat cats" a couple months ago are so far removed from the situation, that they've turned a blind eye to its severity.

"I think the banks thought the bailouts were the end, whereas it was just the beginning," says Doug Landy, a onetime Federal Reserve lawyer, who now heads Allen & Overy's bank regulatory group.

Indeed, in the court of public opinion, Big Banks are the villains. Without the tremendous amount of taxpayer support that has been extended, banks may have succumbed to the crisis. And now, they have recovered miraculously while the real economy continues to bumble along.

"We have 18%

real unemployment and 15% of mortgages either 60 days late or in foreclosure," says Jack Reutemann, head of Research Financial Strategies. "If you're in one of those groups and look at what Goldman Sachs did or Bear Stearns did, or some hedge fund that stole $100 million, you become extremely angry. They all get painted with the same brush."

Banks have only recently attempted to make amends and repair their tarnished images, a year and a half after receiving multi-billion-dollar bailouts. Meanwhile, public anger becomes ever more distilled, and banks appear more evil with each passing day.

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The time lag, combined with the economic downturn, and the fact that banks represent one of

the most hated industries even before the crisis, means the industry may not have been able to repair its long-tattered image, anyway. But a little damage control might've gone a long way.

For instance, Goldman CEO Lloyd Blankfein acknowledged on Tuesday that "until recently, most Americans had never heard of Goldman Sachs or weren't sure what it did." But whose fault is that?

Blankfein explained that while Goldman doesn't have bank branches on every corner, its capital-raising for governments and companies, and its management of endowments and retirement funds, help to serve the greater good -- albeit indirectly.

But his explanation appeared to be too little, too late. Taxpayers are steaming mad, and have aimed that anger directly at Goldman Sachs. And Goldman's cavalier attitude up til now has only weakened the firm's position; it's much more difficult to illustrate one's importance to a new flame than an angry, jilted lover.

"The company has steadfastly refused to work effectively to ... blunt the negative publicity that has made it the poster child of what is wrong in the current financial crisis," asserts Rochdale Securities analyst Richard Bove.

Goldman isn't alone in this battle of cluelessness. Another example is

Bank of America

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, which adopted friendlier fee policies only after receiving a $45 billion bailout, facing changes to federal law and fielding untold hours of customer-service calls. Similarly, the Treasury Department had to shame the bank into ramping up its mortgage-modification performance, several months after the government rolled out a program to help struggling homeowners.

To its credit, Bank of America's CEO Brian Moynihan has acknowledged flawed practices and unveiled a new strategy aimed at improving customers' experience. By contrast,

JPMorgan Chase

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has been strong-armed into changing its fee and rate policies, with CEO Jamie Dimon grumbling along the way.


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has reacted to new laws by attempting to quietly stick old fees into new places.

"Banks were kind of like the airlines in the past couple of years," explains Landy, the Allen & Overy partner. "They got drunk on charging consumer fees to everyone for everything."‬‪‪

On the whole - whether the response has been indifferent, inadequate or unappreciative - the industry isn't putting salve on its black eyes, it's letting them get beaten bloody. For all the dozens of communications professionals working at any given firm, and for all the obvious signs that Wall Street's messages and actions must change, progress has been slow at best.

Reutemann notes that community banks aren't as vilified as the big Wall Street players, and that some, like

Capital One

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U.S. Bancorp

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have worked to soften their image through humorous commercials and advertising campaigns. If Reutemann were a banker of any sort, he'd be "working with my PR firm to differentiate me from what those other organizations are."

Ron Geffner, a lawyer with Sadis & Goldberg, which represents hedge funds and private equity firms, says Goldman's image problem is especially severe. (He referred to the firm as both "the Lindbergh case of my lifetime" and "the investment bankers' OJ Simpson.") Geffner suggests Goldman hold "fireside chats" in the community, or install a program to help five unemployed people find a job each month, and publicize it effectively. Goldman has tried to do this with a small-business lending program, but it hasn't gotten much traction.

"The banking industry as a whole has done a poor job from a marketing perspective or a public-relations perspective of better communicating the difficulties they've endured, and the steps they're taking to develop financial health and stability," he says. "And their short-term and long-term plans to reestablish themselves within the communities fall flat."

After Viniar's remark on Tuesday about profane email messages being "unfortunate," the audience began quivering with laughter. But his interrogator, Sen. Levin, seemed less amused than the

protestors dressed in faux prison garb.

Levin demanded to know why Viniar found the email unfortunate, but not the underlying notion that it was okay for Goldman to sell assets to clients that one trader described as "sh*tty" and another referred to as "crap pools."

"On an e-mail?" Levin bellowed, incredulously. "What about to believe?"

Viniar's tone of regret inched forward ever so slightly: "I think that's a very unfortunate thing for anyone to say in any room."

"What about believe?" Levin quickly countered.

"Yes, it's a very unfortunate thing to believe," Viniar said, working to mask exasperation.

"That's what you should have started with," Levin said, grasping for satisfaction.

"You are correct," said Viniar. "It is."

(Uh huh.)

Any observer could tell that Viniar's admissions became less genuine with each repartee. Believing that the "crap pools" of assets were "sh*tty" wasn't the unfortunate part, from his point of view -- nor was selling them to a sophisticated buyer who was crowing for crap. The unfortunate part was shepherding Goldman through an unprecedented market rout, only to be humiliated by a profane e-mails he didn't write, but were accurate nonetheless.

"They're talking to each other but they're not communicating," says Sadis & Goldberg's Geffner. "If they're telling an objective story, then the facts speak for themselves."

-- Written by Lauren Tara LaCapra in New York