Why aren't Americans buying the bailout?

This is a great article that is definitely worth reading. The author's premise is that the administration's lackluster communications strategies and tactics are the critical factors why Americans haven't bought into the bailout plan.

She points out a number of critical strategies that good advertising execs stick to when creating really effective TV spots. And, of course, these are just as important in the world of public relations – Make the subject easy to understand, frequently repeat your core message, personalize that story so your audience really feels it, ensure that it’s accurate and my favorite... be specific. We often refer to this last point as specifically “identifying the pain.” Specific to this bailout, it means if your audience fails to act by not supporting this bill, what real, acute pain will they feel?

It's safe to say that Paulson and his boss Bush failed on every one of these strategies. Paulson didn’t make anything easy to comprehend. In fact, no one really understood what this crisis was technically about until the media figured out how to dumb it down. Neither Paulson, nor his people, brought us any clarity on what these securitized bonds really mean to Main Street. As smart as Paulson certainly is, I thought he was a very poor spokesperson. He rarely reinforced anything that made sense and the few phrases that were uttered consistently were so broad ("we have a very good plan"), that they didn't mean anything. Come to think of it, I now question whether he was ever really speaking to the American public. Unlike almost every politician, he never brought up any specific, very personal and heart wrenching stories about “a family in Wisconsin that wouldn’t be able to send Johnny to college because those student loans wouldn’t exist.” Or, “the farmer in Iowa who would certainly lose his third generation farm because the bank would take away his line of credit which supports his harvest.”   

Ok. I know. I should cut the treasury secretary a little slack. After all, he only had a few days and was trying to save the world. Then again, I could choose to view this through a different lens. Paulson was not only the chief architect, but also the lead salesman for this monumentally important bill. Perhaps he (and his advisors) could (or should) have taken a wee bit more time to think about the stimulus they planned to communicate to the American people, so that the desired response (and outcome of the bill) would have been entirely different.

Then again, the real question here is which came first… the chicken or the egg? I tend to believe that all those politicians (the eggs) who voted down the bill were way ahead of their skeptical American constituents (uh…the chickens). They had plenty of time to calculate, craft and then communicate a very savvy platform known as “Wall Street versus Main Street.” And, because this message was so simple, easy to understand and personalized, it clearly resonated with both the media and those key publics in a way that the bailout bill never could. It made many angry and it brought out the worst type of hate and ugliness (“get those investor crooks”) based on nothing but a great slogan standing in front of a smoke and mirrors reality. And look at the outcome: A bill that never saw the light of day and an economy that is teetering on the edge. Talk about the power of effective communications…

Comments

[John]

Maybe the reason Americans aren't buying the bailout is because our "leaders" have lied to us so many times in the past that we just naturally discount what they say.

You've heard it many times. How can you tell if a politician is lying? His lips are moving.

[Steve Zweig]

I think there's actually good reason to suppose the bailout's a *bad* idea. Leaving aside any moral issues of bailing out the banking industry--including moral hazard for the moment--

1) Why should we think that the banking industry will responsibly use the liquidity the bailout would provide? They're the ones who profoundly misvalued assets and risk in the first place; who overlevereged themselves with complex securities they did not even understand; wbo made bad lending decisions; and who failed to maintain adequate liquidity reserves. Given this track record, why should we trust them with a sudden infusion of this much taxpayer money?

2) The underlying root of the crises is bad valuation of assets and risk. Fundamentally, the crises will only be over--the "frozen" assets will only thaw and be readily tradeable--when valuation is corrected to a supportable level. The government buying those assets for more than their fair, reasonable, or market value will temporarily prop up the market, but it will not correct the underlying problems. There is reason to think it will put off the day of reckoning for a time, but *not* actually prevent it; and is $700 billion to simply delay the market adjustment a worthy investment? Some people may say "yes," but I'm not so sure.

(By definition, even given the "auction" of toxic investments contemplated by the bailout, the government will be buying them for a premium. If they were priced correctly, they would be moving in the market already--that's the defintion of the securities market.)

3) If the "main street" impact of the crises is a lack of lending, so that people can't get mortages, auto loans, college loans, etc., and small business can't get the credit it needs to grow, then wouldn't it be more efficient for government to simply put in place a mechanism to lend directly to people and businesses that are good credit risks? That way, we wouldn't have to hope that banks would take the money and start lending--it would cut out a link in the chain, and put the money directly in the hands of those who need it most.

It may be argued that the government lending directly to consumers and small business is "socialistic," but so what? Is it any more of a government intrusion into the financial markets than the government providing massive bailouts to banks?

Wall Street was not the only thing that got us into this mess--certainly the irresponsibility of homeowners and property investors who took out mortgages they could not afford was a major part of it--but clearly, Wall Street *is* culpable in the crises. If Wall Street messed up and helped create this problem, why should we assume that only throwing money at Wall Street will get us out of it?

[ed]

Technically, it's the government that will be in charge of making sure the banking industry is reducing its exposure. The banking industry really isn't in charge of much right now. But, I get your point.

As the bill was passed today, I think the short term alternative was just to scary for the majority to deal with.

I, for one, am glad it was passed. From what I hear, it certainly isn't a remedy and maybe it will actually hurt us later on. But, I really didn't want to test the great depression waters like we did almost 80 years ago.