By Fraser P. Seitel
You want PR truth? You may not be able to handle the real "public relations truth."
President Obama – nice guy, basketball player, great father and family man – is a terrible leader.
Scared, unsteady, idea-bereft, clueless in the face of really big, mounting challenges, he increasingly looks like a "one and done" president. While a lot can happen in a year, his only hope to hang on by his fingernails is a Republican party that may be even more hopeless than he is.
The latest proof that Obama may have squandered all the goodwill he earned at the beginning of his presidency and may now be permanently damaged is the ongoing contretemps with the despicable Standard & Poor's, a disgraced "rating" agency that compounded stunning incompetence in facilitating the financial meltdown with boneheaded recklessness in downgrading the world's most trusted economy.
The PR decisions of both the president and the rating agency are classic examples of what happens when individuals and organizations fire first and think later.
A History of 'Wrong'
The economists who run S&P and its fellow rating agencies, Moody's and Fitch, have always been considered something of a "step-child" by Wall Street, more "necessary evil" than respected arbiter. S&P equity research, for example, is generally ranked at the bottom of sell side analysis.
Blessed by regulators to "rate the debt securities" of corporations primarily, the three agencies use their oligopoly to earn fees from the very companies they are obliged to rate. As a consequence, S&P and its brethren were only too happy to declare toxic mortgage debt "AAA" in return for significant fee income.
When the toxic mortgage debt proved to be, well, "toxic," the financial industry and its underpinnings flew out of control; Lehman Brothers, WAMU, Bear Stearns, Countrywide and others effectively blew up; and it was left to politicians – including President Obama – to salvage the world's financial system.
S&P and its fellow raters lost all credibility and caused the Congress to pass the Dodd-Frank financial reform bill, which, among other things, reduced the clout of the reviled rating agencies.
But in a nervous, uncertain economic climate, even a disgraced rating agency can cause a panic, which is exactly what S&P's U.S. government downgrade did.
In downgrading U.S. debt, S&P was saying, in effect, that the creditworthiness of the U.S. Treasury – which prints its own money and to which investors ironically flocked after the downgrade – was less dependable than that of Microsoft, Johnson & Johnson, ExxonMobil and ADP, all of which S&P reaffirmed as "AAA."
Ridiculous? Yes. But also, as Michael Bloomberg and Warren Buffet both noted, "extraordinarily reckless timing" in the midst of such a fragile world economy. (Curiously, after he blasted S&P, Mr. Buffet's company was also downgraded by S&P.)
S&P's defenders argued that the agency was right in calling Washington "dysfunctional" and its debt ceiling brinksmanship, "embarrassing." But that really isn't the point.
The point is that in a ham-handed attempt instantly to rescue its reputation, S&P decided to grandstand and make headlines at the very moment the world economy could least afford the gratuitous shock.
PRwise, S&P sent out to defend itself, the head and deputy of its sovereign ratings division -- an egghead duo, dressed drably, speaking in monotone, haughtily impervious to the damage they had wrought.
"Our research is out there for investors to look at and decide whether they agree with us or not," dismissively sniffed the S&P damage controllers.
And speaking of that "research," in terms of the "$2 trillion error" that the Treasury Department pointed out in S&P's math, the agency first acknowledged the mistake, then "clarified" it, and finally rejected it out of hand.
Some credited the traditionally close-mouthed agency with "going public" to defend its controversial rating. In fact, S&P had little choice but to respond. That response, however, was unconvincing at best, infuriating at worst.
In its hail Mary attempt to bolster its credibility, S&P further weakened it.
Deer in the Headlights
And then there was the president, the poor, lamentable president.
With the market in free fallout from S&P, down 400 points, the White House announced that President Obama would be out at 1 p.m. to address the nation. Why, we still don't know.
For when the president finally wandered out at 1:40 to deliver his speech, his words spoke volumes about the state of his Presidency.
"Strangely powerless and irresolute," wrote liberal Dana Milbank in the Washington Post.
"Weak, plaintive and small," intoned conservative Charles Krauthammer on Fox News.
And the markets responded by giving up another 200 points, hoping desperately that shy and retiring Professor Ben Bernanke would provide what the Standard & Poor's company and the president of the United States ultimately couldn't – responsible leadership. |