The Bailout Blow-Up One Year Later: Has Washington Learned?

This week marks the one-year anniversary of the Capitol Hill blow-up of the financial bailout bill, one biggest political debacles in recent memory.

I know, I know. We'd all just as soon forget that imbroglio. But as we head into the thick of the increasingly ugly fights over health reform, Afghanistan troop levels and financial services regulation, there is much Washington can learn from that disastrous week of September 29 - October 3, 2008.

On Monday September 29th of last year, the bill pushed by former Treasury Secretary Hank Paulson, Fed Chairman Ben Bernanke and congressional leaders from both parties went down in flames in the House of Representatives. The stunning rebuke of the Washington Establishment shocked the world and sent the Dow Jones Industrial Average plummeting 778 points, nearly 7 percent.

By week's end, as it became clear that the world's economy was on the verge of collapse, the terrified leaders cobbled together an amended bill with enough goodies to pass both Houses by a wide margin, and total chaos had been narrowly avoided.

The failure to pass the legislation that fateful first day was due in large measure to a massive mismanagement of communications. Had the proponents of the policy simply done more thinking about how to craft, target and deliver their message and how to counter the inevitable opposing messages, much of this disaster might have been avoided.

For leaders who understand the value of well-executed strategic communications efforts, there are at least five key lessons to be learned:

Communications Lesson #1 -- To control the story, you've got to have a story. One of the biggest bungles of the bailout bill's proponents was the failure to tell a simple, compelling story of why their proposed action was necessary. While the bill's supporters fumbled around trying to explain LIBOR standards, collateralized debt obligations and mark-to-market accounting, the opponents repeated a simple mantra: No taxpayer-financed bailouts for the Wall Street fat cats who caused the crisis in the first place.

Communications Lesson #2 -- He who names the issue frames the issue. From the beginning, the proponents of the policy did themselves a huge disservice by allowing it to be universally tagged as a "bailout." Sure opponents were going to call it that, but there was an opportunity at the outset to cast the bill not as a bailout of Wall Street, but a rescue of Main Street.

Communications Lesson #3 -- The bully pulpit can only take so much bull. Given Secretary Paulson's impeccable Wall Street pedigree, the Administration concluded that the former Goldman Sachs honcho was the most credible person to lead this fight. But after so many successive weekend "emergency" actions wherein the Treasury and the Fed bailed out one institution after another, even Paulson's "trust me or all is lost" rhetoric wore thin. Even the most flush credibility account eventually becomes overdrawn from repeated withdrawals with no deposits.

Communications Lesson #4 -- When the guy holding the choke collar around your neck asks you to slow down, do it. Capitol Hill leaders from both parties were determined to ram through the legislation, but they failed a fundamental test of effective persuasion: anticipate, address and alleviate your audience's objections as early as possible.

Communications Lesson #5 -- When you get knocked down, get up immediately. By dwelling on the initial failure, the bill's supporters missed an important opportunity to position themselves for subsequent success. The vote failed on the morning of Friday Sept. 29. It would not have been easy, but there was enough time for lawmakers to put together a compromise to win the scant 12 additional votes needed to pass the bill that same day, saving themselves, the country and the global economy untold levels of strife.

To do so, however, proponents needed to immediately mount a communications campaign designed to show contrition for failing to build more support while simultaneously reinforcing the message that to fail to pass a compromise right away would be disastrous not just for Wall Street but for Main Street. Instead, the debate degenerated into the predictable spate of finger pointing and name-calling.

To be sure, tackling issues as complex, controversial and costly as health care, financial services and energy policy are tremendously difficult under the best of circumstances, let alone an economic and political environment like this one.

But these things need to get done for the good of our nation. And they won't get done if our leaders haven't learned these basic communications lessons.

Eddie Reeves is principal of the Reeves Strategy Group, a Dallas-based strategic communications consultancy that helps corporations, nonprofits and political campaigns win in the marketplace of ideas and persuasion.

 

Comments

[josephtibman]

Congress does not understand finance or financial markets. Congress does not unerstand the economy. Congresspeople and senators are generally not qualified to legislate on anything involving finance or the economy. Washington has learned little. What we generally see on C-Span is grandstanding. When congress debates economic or financial issues it is farce. Without an economist or financial know-it-all whispering in their ears they are not able to conduct cogent discussions on these matters.

This is a big problem.

Joseph Tibman
Author, The Murder of Lehman Brothers, An Insider's Look at the global meltdown
lehmanbook­.blogspot.­com
twitter.co­m/josephti­bman

[Rule Of Law]

Once more without the fun words--

Forget for a moment the warning bells sounding in DC since Brooksley Born tried to control Derivatives and Clintons gang of four--Rubin, Greenspan, Summers and Geithner shot her down.

Put aside the economists with towering credentials going back to 2002-3 both in and out of the admin. warning us of abubble based on subprime mortgages--though they rarely mentioned the Derivatives that were leveraged 30 to 40 times that would really be the problem.

You, and other historical revisionists want us to believe that this happened so suddenly and all those expert Wall Street Billionaires so completely surprised, that there was no recourse but to bend to Paulson threat of martial law and pass a bailout without any real debate.

Does the rush to war with Iraq ring any bells?

This was not, to quote Cool Hand Luke, failure to communicate, but a poorly hidden strong arm attempt to dump more debt onto the people rather than hold the Wall Street banks accountable. And to the contrary, they controlled the message admirably, producing the sheep scaring tactics they knew would allow them to win.

No economic crisis creeps up on any sophisticated financial system like ours unless it has a lot of help along the way. This orchestrated and bogus crisis is nothing more than the greatest transference of wealth from the people to the corporations in the history of the world.

[HamletsMill]

You cannot really communicate with psychopaths in the long run.

What has happened in the United States is NOT an ECONOMIC ISSUE at all. It is a MENTAL HEALTH issue. This was the deranged fall out of the rabid dogma of Reaganomics. It is a virus of the soul.

http://www.youtube.com/watch?v=wx3KMX6T8bo

The eight year Neocon tyranny was the political manifestation. The large corporations that control our financial markets are run by legions of psychopaths plain and simple. Deregulation was the high octane crack that led to serious addiction. Our wild west financial markets attract these kinds of warped mentally ill people in droves. These morally bankrupt people have gained total control of our government over the last 30 years. They are the Economic Fundamentalist American Taliban and they must be stopped at some point by prudent regulation. Psychopaths must be prevented from running corporations.

Communicate THAT!

http://www.fastcompany.com/magazine/96/open_boss.html

http://www.hare.org/links/saturday.html

http://www.management-issues.com/2006/8/24/research/beware-the-corporate-psycho.asp

http://edition.cnn.com/2004/BUSINESS/08/26/corporate.psychopaths/

[Rule Of Law]

Heartily seconded!

[AnotherMcIntosh]

Has Washington learned?

If we have politicians on the take, yes they learned.

Unfortunately, they and their bonus-receiving friends are going to be back for more.

[maxfolger]

Great post on strategy/c­ommunicati­ons, and it's funny remembering how much anger was directed toward the bailout during that time. Here's a short satire piece that was made around that time, poking fun at the fear that surround the issue:

http://bit.ly/2Dyruz

(satire)

[sonofsamphm1c]

We were shrinking at a 6% per year rate and exceedingly unstable, which, if continued, would have forced huge job losses and accelerated shrinkage. At the one year out, we are on the cusp of growth. What's to know?

[stuporman]

washington has learned only one lesson: ginormous campaign contributions come from wall street.

[FearlessFreep]

I for one am not interested in "communication lessons." What interests me is how well the bailout's working.

[Rule Of Law]

Well the author suggested that the message be spun as "look at how we're taking care of Main Street" to have made it more easily sell-able. In other words, if they'd only tweaked it a little more, then the dupes would have bought it the first time round.

But based on what I've seen of where the money's gone, dammm little has made it to main street, and it was never intended to. I too am more interested in results and facts and care less about window dressing and public relations poop.