I try to avoid quoting post in full, but this one is important, it’s been up long enough that I don’t imagine I am siphoning off any traffic, and the folks at FT Alphaville seem to be good sports. As they reported yesterday in “Truth, the flexibility of facts, and market panics“:
FT Alphaville: Hello, Murphy
Morgan Stanley PR: Hi, this is XXXXX from MS. Have you seen the information on Bloomberg? Mr Mack did NOT say these things. And I’m just calling to get your post on this taken down, so can you take it down?
FTAV: No. We’ve noted the Mack denial – published snaps from Reuters. We will link to that and make denial clear. But the post stays up.
MS felt: You can’t believe the stuff that’s going around. People are just making things up…
FT AV: So what does the NYT say?
MS felt: Oh, that’s being dealt with by our NY people. I’m just ringing round getting stuff taken down….
Who knows whether the Mack comment, published by one of the most respected media titles on the planet, is true? We don’t and we’d guess the MS felt it is not 100 per cent sure either. We are not saying he is lying. We are just saying that in these febrile times “facts” take on a malleable form.
If you are John Mack and your stock’s in freefall, and you’re weighing what you might say to save your bank and what you might have to confess at the Pearly Gates – well, the bank wins and heaven can wait.
As it happens, on this occasion, forced to guess, we’d go with Mack; these are stressful days for reporters as well as financiers.
But there’s a more enduring issue here: lying to the financial media has become routine in recent years, encouraged by the tightening noose of market regulation. In short, answering media enquiries accurately can often constitute a breach of the market abuse regime. The truth quite literally becomes a criminal matter – and the result is a growth in speculative news reports.
All of which makes the following all the more intriguing.
On Tuesday, officials from HBOS contacted this newsblog and various other news organisations to state very clearly that there was no reason for the run on HBOS stock. The bank was well capitalised and continued to enjoy access to the capital markets.
The FSA, no less, followed up with a statement of its own:
FSA statement re: HBOS
Since the beginning of the current extreme difficulties in the financial markets, the Financial Services Authority has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans. We are satisfied that HBOS is a well- capitalised bank that continues to fund its business in a satisfactory way.
But as the razor-sharp Guido Fawkes blog notes, according to the BBC the Chancellor of the Exchequer believes he and his colleagues had been on to the problems at HBOS for several weeks:
Alistair Darling added that without the deal the outlook was “very bleak indeed…We were onto their (HBOS’s) problem for several weeks. It didn’t just suddenly happen…”
If the authorities can’t follow their own rules, why should anyone else?
Now consider this in conjunction with our preceding post, on how retail customers are sufficiently worried about their banks that increasing numbers are considering moving their accounts. The risk of runs is real, we’ve seen them. Northern Rock. Bear. IndyMac. Lehman in the early stages of one (hedge fund clients were fleeing). In a hair-trigger environment, corporate communications pros become hyper vigilant.
But to what effect? Anyone with an ounce of observation powers knows that the presentation of corporate information has been raised to an art form, and has at best the same relationship to reality that Norman Rockwell paintings do. Rockwell reportedly started with images of real people and burnished them. Children became cherubic, adults were well-fed and rosy-cheeked, and middle class virtues were idealized. Needless to say, less skillful practitioners provide images that are more glaringly at odds with reality.
So the more aggressive the efforts at spin control, the more it will drive the discerning to other sources of information. And not all of them will be as reliable as Institutional Risk Analytics.