2011 has been a bad year for the banking industry. In addition to mixed (at best) financial results and layoffs, banking's reputation sank to new lows this year, and the public view of banks is, for the most part, lousy. According to the new conventional wisdom, bankers are greedy, corrupt, wasteful, uncaring, incompetent and just plain evil. Amid the colorful rhetoric coming out of this fall's Occupy Wall Street protests, one chant that summed up the mind-set relatively politely was, "Greedy banks, rich and rude, we don't like your attitude." (Ironically, when I Googled "banks are evil," a sponsored link from Bank of America appeared at the bottom of the first results page. ... But that's a story for another day.)
Of course, banks and their supporters can dish out the hatred, too. Explaining his party's opposition to Richard Cordray, whom President Obama nominated to head the Consumer Financial Protection Bureau, South Carolina Republican Sen. Lindsey Graham said, "This consumer bureau that they want to pass is ... something out of the Stalinist era."
Please. This kind of flame-throwing rhetoric gets us nowhere and leaves banks in a terrible position to address the very real economic and competitive challenges (and opportunities) that lie ahead. It's easy -- and not entirely incorrect -- to say that protesters are ignorant; that the mass media doesn't understand the intricacies of the business; that politicians are looking for an easy target. There's a lot of truth in those observations. But there's also a fair amount of unfortunate truth in the current stereotypes about banks, as well. And to dismiss these criticisms and resist any kind of regulatory change is wrong, unrealistic and bad for business.
A study released this fall by Northwestern University's Kellogg School of Management and the University of Chicago Booth School of Business (neither of which could be considered anti-capitalism) illustrates the bleak situation. The Chicago Booth/Kellogg School Financial Trust Index found that only 23 percent of Americans surveyed said they trusted the country's financial systems, and close to 60 percent of respondents said they are angry or very angry about the current economic situation. Trust in banks has fallen to 33 percent overall, the researchers found.
Regaining that trust requires banks to change -- not just replacing core systems or using social media, but rethinking basic business precepts and redefining their role in our society. Only the future of our industry is at stake.