In my last column I offered a snapshot of research depicting the sorry state of consumer trust in Wall Street and Washington. As Wall Street banks announce their 2009 bonus plans, estimated by to be $145 billion, what better time is there to discuss whether Wall Street firms can win back the trust of investors?
Can Wall Street win back investors? Some industry veterans are skeptical. Citigroup's former chief, John S. Reed, was quoted in The New York Times on January 10, saying: "There is nothing I have seen that gives me the slightest feeling that these people have learned anything from the crisis…they just don't get it. They are off in a different world." To put a finer point on it, Independent Community Bankers of America President and CEO, Camden Fine, told Politico, "It's greed, not humility, that drives Wall Street… Memories are short so they move on quickly from a crisis."
What does trust mean to Main Street? The CBS News icon, Walter Cronkite, had it. He was "the most trusted man in America," during turbulent years which included the assassination of President Kennedy, Vietnam and Watergate. His fidelity to the "facts" and "objectivity" was his trademark. Where do consumers place their trust, today, beyond family and friends? As an institution, the military ranks at the top, while Consumer Reports has been viewed as the most trusted organization in Washington D.C., and nurses are believed to be the most honest and ethical among professionals.
And what does a lack of trust mean? It comes down to having little or no confidence in, or not be willing to rely on, an individual, organization or institution. Researchers Paola Sapienza and Luigi Zingales, keepers of the Chicago Booth/Kellogg School Financial Trust Index, affirm how key trust is to investor behavior. Their work is intriguing. Early last year, in reviewing their initial survey, the researchers noted, in particular, why a 'trust gap' should concern us: "Differing levels of trust in brokers and the market influenced plans to increase or decrease investment over the next few months."
Health Care–Did the president tell the truth ? Washington scrapes are not known to inspire trust, but often the president stays above the fray. Not so with his health care legislation. Last November, one of Washington's insider 'elders,' Washington Post columnist David Broder, wrote an Op-Ed piece, "A budget-buster in the making," ostensibly about President Obama's health care reform legislation and fiscal responsibility.
In fact, Broder really wrote about trust, and how to lose it. He pointed out the credibility challenge the administration faced, because: 1) the president repeatedly promised his health care legislation will not add to the federal deficit, and 2) no one, it seemed, believed he was telling the truth.
Broder said, "every expert" he spoke to agrees the legislation is a "budget buster." He also cited a Quinnipiac poll that found only 19% of respondents believed the president "will be able to keep his word," on health care reform and the budget deficit. Further, 51% of respondents opposed the health care legislation, with only 35% supporting it.
Broder did not explicitly say 'the president lied,' about a core element of the legislation. But in illuminating the discrepancy between what the president said was true and what independent experts that Broder trusted attested to–and the public believed to be true–Broder implicitly said so. In effect, he has established the "Broder Standard" and made clear that the president came up short.
