When it comes to social media, financial marketers are often caught between “content” and “compliance.” For instance, how do you promote a financial product or service within the constraints of a 140-character tweet while still adhering to regulatory requirements?

In July, the U.S. Food & Drug Administration cracked down on pharma giant Novartis for using online tools like Facebook Share and the popular social media widget ShareThis. The FDA said Novartis failed to meet regulatory and compliance standards when the company asked consumers to tell their friends and family about Tasigna, a cancer drug.

Facebook Share is a way for people to share articles, web pages and other content with their Facebook friends. With two clicks, someone can send a link along with a thumbnail image and a brief description to potentially hundreds — even thousands — of other Facebook users. Similarly, ShareThis allows people to quickly and easily share web content with users of popular social media services like Twitter and Digg.

Omission of Risk

The FDA is taking a tough stance, calling the drug manufacturer’s marketing incomplete and misleading. The agency, concerned people might tweet something like, “This drug saved my mom’s life with no side effects,” fired off a stern letter to Novartis.

“Shared content is misleading because it…fails to communicate any risk information associated with the use of [Tasigna],” the letter stated.

“Widgets that allow users to share content via other social media applications offered via the ‘Share This’ tool…raise similar issues,” argued the FDA in its letter.

How will the FDIC and NCUA respond?

The repercussions of the FDA’s crackdown on Novartis could ripple throughout regulated industries, impacting everyone from banks and credit unions to insurance companies and investment firms — maybe even manufacturers of packaged foods. While regulatory agencies often seem to be lagging as much as a decade behind the markets they oversee, they eventually catch up. Even though this is likely the first time the FDA has issued a warning to a pharmaceutical company over its use of Facebook, don’t be surprised when someday soon, you see the FDIC and NCUA launching their ‘Social Media Taskforces’ or ‘Online Compliance Divisions.’

Considering how many financial institutions run video contests and “tweet this” sweepstakes, it’s inevitable that a bank or credit union somewhere will encourage consumers to extol the virtues of a specific product…while somehow failing to meet compliance regulations.

Key Takeaway: Even though social media tools provide limited space for communicating with consumers, financial marketers are responsible for making sure all necessary disclosures are properly integrated into their social media marketing initiatives.

When a bank fails, it seems the other remaining financial institutions in the community are reluctant to aggressively market themselves to the failed bank’s customers. They don’t want to seem insensitive to the hardship placed on the community, nor come across as if they were dancing on the grave of their fallen peer. The psychology is understandable, but the strategy is a huge mistake and a massive missed opportunity.

Many financial industry experts agree that 2010 is on track to see as many bank failures as there were in 2009 — around 150, or between 2-4 each week. If a bank was seized in one of your communities this upcoming Friday, how would you respond?

Get your battle plan together now — before then next bank fails — so you can be ready.

Barnes Bank failure presents Goldenwest opportunity

At 4:50 pm Friday January 15, the Barnes Bank was closed by the FDIC and Utah Department of Financial Institutions. Within hours, Goldenwest Federal Credit Union had mobilized its resources, launching a coordinated, all-out response. Goldenwest wanted to make they sure picked up more than just a fair share of new business. Among Goldenwest’s tactics:

• Staff went door-to-door, handing out flyers and informing people about the benefits of banking at Goldenwest. The credit union had 16 residential and 6 commercial groups canvassing the area. By the end of the first week, the credit union has reached some 4,000 homes and businesses.
• Handed out flyers in the local Barnes Bank parking lot.
• Kept their doors open on a traditional bank holiday — Martin Luther King Day — to accommodate Barnes Bank customers. (The bank was seized Friday, January 15. MLK Day was Monday, January 18.)
• Found an office space right across the street from Barnes Bank headquarters location on Saturday, signed the lease on Monday, and opened a new temporary branch 10 hours later. By Tuesday at 9 a.m., Goldenwest was up and running.
• Instituted specials for Barnes Bank customers, including $75 for all new personal checking accounts, $100 for all new business accounts, a five year in-house mortgage special rate of 4.99%, and a seven year in-house mortgage loan rate of 5.74%. Auto loans were offered at 4.75%, and home equity loans were as low as 3.75% with no closing costs. There was also a special bump rate CD.
• Goldenwest’s chief Twitter representative reached out to anyone tweeting about Barnes Bank’s failure.
• Staff posted information and status updates on their Facebook pages.
• The credit union personally called all new members from Barnes to thank them.

Ben Joe Markland, Sales & Training Manager at Goldenwest FCU, told The Financial Brand how the whole thing got started. “Essentially, our boss called us that Friday night (the day the bank announced it was closing) and asked us to come in on Saturday at 9 a.m.,” Markland explained. “By 10 a.m., we were going door to door and tweeting.”

The payoff seems to be worth all the extra hours and effort. In the first four days, Goldenwest brought in over 400 accounts and $3 million in deposits.

“We have since tripled our numbers of January, and doubled for February,” Markland said.

Goldenwest is in the process of building a permanent 4,300 square-foot branch to replace the temporary location across from Barnes’ HQ. It is expected to be open by June.

Some other things you can do:

• Make sure your 100% of your staff knows what’s going on. Give them all the facts about the failed institution and equip them with talking points. Make sure they know how to answer questions about your organization’s safety and stability.
• Update your website homepage with a message that specifically addresses the situation with the failed bank. You could have something as simple as “We welcome Acme Bank customers!”
• Contact the local media. Tell them what you’re doing, and explain how you are a safe, stable financial institution. If you’re doing this many things, they’ll run a story for sure. Make sure your CEO is available for interviews.

Here are recent stories and other items of interest from around the web.
Click on the hotlinked headlines to read more.

Bookmark This: FDIC provides deposit data for any bank branch in the U.S.

Business is Booming: FDIC to add new office to handle bank closings

Be First to Know: FDIC updates list of failed banks almost in real time

Sound Familiar? 5 things mystery shops at banks reveal

Meat & Potatoes Marketing: 6 things you really should be doing more of

Facebook + Banks: Not quite really “friends”

Birds of a Feather: Financial institutions flocking to Twitter

Not So Fast: Spontaneity of Twitter presents regulatory problems

Getting Creative: 4 different stories about how bank marketing materials get made

Earth Day: Only one bank celebrates with a promo — Wells Fargo

Kasasa: Bancvue’s new flavor of Rewards Checking is all goodness

Bribes: one way to buy deposits

National Bank of Kansas City is offering a free $50 Lowe’s Gift Card for opening a personal checking account. TCF Bank just announced their $50 Free Cash Checking Campaign. Neighborhood Credit Union is offering a free $100 bonus. HomeStreet bank is offering up to $215 free. At least Key Bank is giving away something a little different: a free Garmin nüvi GPS for banking with Key.

Umpqua adds ‘green’ to its org chart

Umpqua Bank has created a new eco-banking division and given employee Dan Weldon the title of Eco-Banking Manager. As the bank’s new eco-chief, Weldon will lead the development, delivery and tracking of green programs, including the GreenStreet lending program which offers financing options designed to help small businesses. Weldon is a LEED Accredited Professional (which means he knows how to design green buildings), so he will oversee lending for Umpqua’s business customers seeking funds for green construction projects.

Take it back. No, you keep it.

Lately, banks have been lining up to give back TARP money. TCF Bank was one of the first, but the Treasury said no. TCF says it was asked to participate in TARP even though it didn’t need the money. TCF is understandably frustrated.

On the other hand, Shore Bank must be thrilled. The Treasury said yes to their request to return TARP money. Shore felt persecuted by Congress, and didn’t like the public perception that they needed a bailout.

Shore cut the Treasury a $25 million check the same day they were approved for repayment. Lucky for them. So far, they’re the only ones allowed to back the Treasury back.

Can you believe that banks have to ask to pay the Treasury back? What kind of lender doesn’t want his money back? Is there some sort of pre-payment penalty? (See also, Catch 22.)

Noteworthy articles and other items of interest

• Twitter Stats: Pew research shows who is, isn’t using Twitter
• Show Me You’re Nuts! Financial marketer dares credit unions to go crazy
• Green Sprout: Startup e3bank to specialize in green loans
• 6 Key Words for Banks: Stability, Customer, Savings, Value, Brand, Metrics
• Failure Friday: Three banks seized by FDIC on Friday May 1 (2009 total: 32)
• California Crush: CA credit unions threatened by collapse of corporates
• Doom or Gloom? Nobel Prize-winning economist: bank rescue doomed to fail
• Similar Name, Different Bank: One of two ‘Frontier’ banks in CO seized

The WaMu Story

A computer expert with no obvious connection to WaMu has created a website, wamustory.com, where he shares his complex views on the seizure of WaMu. It’s detailed, lengthy, and has an occasional hint of conspiracy.

Trouble for some, opportunity for others

Market Insights offers some thought-provoking advice about how financial institutions shouldn’t just hunker down, they should embrace the opportunity to:

• Reconnect with your customers.
• Deepen customer relationships.
• Reestablish your competitive position.
• Take advantage of customer churn.
• Expand your BRANCH NETWORK.

Read the whole article here at their blog.

“Capitalism without failure
is like religion without sin.”

– Economist Allan Meltzer

“Most financial history is useless at this point.
Even well-known economists grasp for examples of periods that are comparable to current conditions.”

– Douglas McIntyre in Time Magazine

“Close them down, get them out of business.
If they’re dead, they ought to be buried.
We bury the small banks. We’ve got to bury
some big ones and send a strong message
to the market.”

– Senator Richard Shelby, ranking Republican on the Banking Committee

“I cannot stress enough that right now, if you are not looking to your brand to guide you through this difficult time and use that brand to demonstrate its value in real and tangible ways, you will be sorry.”

– Paul Stull, SVP/Arizona State Credit Union

“If you want banks to be the workhorses
here, you can’t keep beating the horse.”

– Wayne Abernathy, Executive Director/ABA

“If an institution has become so large that there
is no alternative except for the taxpayers to
provide support, should we allow so many
institutions to exceed that kind of threshold?”

– Sheila Bair, FDIC Chairman

“If my check is returned marked ‘insufficient funds’
does it refer to me or to my bank?”

– The “Bob And Sheri” morning show

“Financial policy makers have enacted numerous programs and committed trillions of dollars of public funds to address the crisis. And still the problems remain. We have yet to restore confidence and transparency to the financial markets, leaving lenders and investors wary.”

– Thomas Hoenig, President/Federal Reserve of Kansas City

Last week, The Financial Brand wrote about how the FDIC and the NCUA are cracking down on financial institutions that attack the safety or soundness of any financial institution (or category of financial institutions). Their fear is that such ads might trigger an unwarranted run on deposits.

So how will federal regulators feel about these clever and attractive ads from Barron & Company for North Coast Credit Union?

These ads clearly ride the line of what federal regulators are labeling “acceptable.” There could be trouble, specifically with copy suggesting that North Coast is “safe” while “your bank is giving you that sinking feeling.” Or that any bank might be taking a “nose dive.”

Key Question: If the NCUA censors these ads, do you think they’ve gone too far?

Bottom Line: North Coast Credit Union is going to get mileage out of these ads one way or another. These days, you almost hope that the FDIC or NCUA tells you to pull your ads because you can milk it for a mountain of PR. Local news outlets will be happy to report about a financial institution that’s “so safe and sound, the Feds are telling them to be careful with their marketing.” And the best part is that neither the NCUA nor FDIC can tell a publication (including this one) that it can’t reprint the ads as part of the story.

NCUA quashing any form of finger pointing

Last month, a credit union lodged a complaint with the NCUA about a rival credit union’s website. The credit union wasn’t happy that Glendale Area Schools FCU had publicized an unflattering rating from Bauer Financial.

The NCUA promptly fired off a letter to Stuart Perlitsh, CEO/Glendale Area Schools FCU. In the letter, the NCUA requested that Perlitsh remove the ad from their website as soon as possible.

Initially, Perlitsh ignored the request, citing free speech. But after a follow-up call from the NCUA, he finally decided to give in, saying he had “other battles to fight.”

“We’re operating in a low-testosterone environment.”

Perlitsh isn’t happy about it. He feels strongly that he did nothing wrong, And his board fully supports him. When Perlitsh showed the board the NCUA’s request, he said they were incredulous. They firmly believe it’s within their rights to exploit competitive weaknesses, certainly when drawing off public data.

“All I did was republish information that’s already out there. Yet the NCUA came down on us like we did something sacrilegious.”
– Stuart Perltish, CEO
Glendale Area Schools FCU

“I didn’t say ‘close your accounts,’” he told The Financial Brand. “All I did was republish information that’s already out there. Yet the NCUA came down on us like we did something sacrilegious.”

“I did the homework for people, and let them draw their own conclusions,” he added.

Perlitsh wondered why the NCUA was picking a fight with him when they could be concentrating on poorly-performing credit unions instead. He seemingly answered his own question by noting that “we’re operating in a low-testosterone environment.”

To paraphrase, he feels the NCUA is picking the fights they can win rather than winning the fights they should pick.

The safety and soundness of other financial institutions may be in question, but not Glendale Area Schools FCU. Perlitsh  — who can see branches for WaMu, Wells Fargo, Citi and BofA from his headquarters — said Glendale Area Schools FCU has a cap ratio above 12%, and paid 48% of last year’s gross income to members in the form of dividends.

“GASFCU is proud of it financial strength and will market this competitive advantage,” he said. “It is all about capitalism, free enterprise, and freedom of press.”

The NCUA isn’t afraid to flex its muscle

This isn’t the first time the NCUA has put the smackdown on one of its own.

Last fall, the NCUA and Texas Credit Union Commissioner Harold Feeney ordered Resource One Credit Union in Dallas to stop running an ad that said:

“What is safer than money in the bank? Depositing it at Resource One Credit Union. Your bank may be failing but Resources One is NOT! Don’t take chances with your money.”

And last October, TDECU elected to pull the plug on a “Safe & Sound” campaign after the NCUA sent them a similar request.

“Public confidence is the cornerstone of the financial system. Maintaining this confidence is the responsibility, and should be the utmost priority, of all financial institutions.”
– Harold Feeney,
Texas Credit Union Commissioner

In its campaign, TDECU said, “Many banks and mortgage lenders made questionable loans that have gotten them, and their customers, into trouble.” TDECU was keen to point out that they didn’t “get into this kind of trouble.”

That may be true, but TDECU landed itself in hot water with financial regulators. TDECU’s campaign rankled both the ABA and FDIC something fierce, prompting a letter of concern from the FDIC. In the letter, Kelsey asserted that TDECU was implying — not stating, merely implying — that “deposits with banks are not safe and sound.”

The letter went on to say that “by casting aspersions on the health of the banking industry and implying that bank deposits are not safe and sound, TDECU has made irresponsible and misleading statements that could generate unwarranted public anxiety. Such statements may violate both federal and state laws, including the Federal Trade Commission Act and deceptive trade practices laws.”

The NCUA responded promptly, sending a firmly worded request to TDECU to kill the campaign immediately.

Does NCUA have the regulatory authority?

It appears that the answer is no, not necessarily. In all three cases, the NCUA has only “requested” the marketing be removed. Not once have they cited a regulation or portion of code governing their actions. And nowhere in the NCUA’s compliance guidelines is there anything about “finger pointing,” “fear mongering” or “playing nice with others.”

In an interview with The Financial Brand, an NCUA spokesperson said that there were indeed no specific guidelines concerning the issue, but they did cite other laws concerning deceptive advertising and unfair trade practices.

Nevertheless, the issue has created a bizarre allegiance of interests, including the NCUA, FDIC, ABA and various leaders in the credit union industry. All seem to be in agreement that anything that could be construed as an attack on the “safety” or “soundness” of any financial institution is unacceptable without exception. They are ready to kill any threat posed — big or small, real or imagined — to the insured deposits of America’s financial institutions, no matter what.

“Credit unions don’t need to criticize another financial institution regardless of its charter.”
– Michael Fryzel/NCUA Chairman

Whatever threats — real or implicit — the NCUA may be sending, they have proven to be exceptionally effective. Each of the three of the CEOs contacted by the NCUA have quickly backed down, basically saying they had “bigger fish to fry” and thus weren’t inclined to engage in a fight that could take a lot of time and energy.

According to one source, the answer is much more simple: “No one wants to piss off any regulators. Not right now.”

Bottom Line: Financial marketers will find themselves walking a fine line when they talk about their strength and stability, especially when you start drawing distinctions. If you feel tempted to succumb to your natural marketing instincts by attacking the safety and soundness of any financial institution (or just generically “those other banks”), be prepared for the wrath of regulators — backed by the full force and fury of the U.S. Government — to come raining down on you like a ton of bricks. Sure, they may just be playing a game of legal chicken…but then again, maybe not.

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The Financial Brand used Google Trends to see how the economic crisis was affecting people’s feelings about their finances and the general state of things.

The Google Trends tool searches Google’s records to see how often people search for certain terms. It graphs out the relative frequency with which these terms have been searched over the last five years. In each graph, the top data line represents people’s searches, while the lower data line shows references in the news. (Tip: You can use commas to compare multiple search terms.)

Using Google Trends, you can get a sense of what people’s feelings and fears are. For instance, in a classic case of “saying one thing but doing something different,” people are increasingly looking for any “silver linings,” yet — at the same time — they are buying more “ammo.”

“Silver Lining”

People started looking for “silver linings” right as the subprime mortgage mess triggered a recession.
Notice how the media is increasingly looking for “silver linings” to share with a weary public.

“Ammo”

As the stock market crashed last November, people starting looking for more and more “ammo.”

“Unemployment Benefits”

A grim indicator of the jobs market.

“Home Safe”

People want more safes for the home.

“Coupons”

People’s interest in “coupons” is growing, along with the media’s usage of the term.

People have become increasingly concerned about the insured status of their deposits.

“FDIC”

The first spike is when IndyMac failed. The second occurred when Wachovia was acquired.
This graph also suggests people might be looking to move their deposits.

“NCUA”

The biggest spike happened last fall as deposit insurance limits were increased to $250,000.

Google has already proven it can track the flu as it spreads across the country. Could Google Trends be used as a leading indicator of economic trends too? These graphs show when economic fears became part of the common zeitgeist:

“Subprime”

“Subprime” became part of our vernacular in Spring 2007.

“Crisis”

There were whiffs of “crisis” by Fall 2007, but it wasn’t clearly obvious we had a
fully-blown “crisis” on our hands until the stock market crashed a year later.
Notice media references (the bottom data line) don’t really kick in until Fall 2008.

“Bankrupt”

This graph essentially follows the same trend as “crisis.”

“Socialism”

Obama’s tax plan spiked references and searches for “socialism.”

And here are graphs for a few financial services:

“Online Banking”

Notice the phenomenal growth in searches for “online banking.”

“Refi”

After a lull in 2008, interest in refinancing is again surging.

One thing is for sure: People’s interest in Twitter is up, up, up!

“Twitter”

Can the popular social media tool keep up with demand, especially when it has $0 income?

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$500 billion FDIC bailout forebodes massive failures

Late last week, the U.S. Senate proposed to allow the FDIC to borrow as much as $500 billion from the Treasury Department. While the mainstream media obsesses over the seemingly never-ending stream of colossal bailouts pouring out of Washington, another — arguably more important angle — is going relatively unnoticed: Massive bank failures are on the way.

Bailout increases normal FDIC fund by 1000%

First, let’s put the dollar amount in perspective. Historically, the FDIC fund has maintained a reserve around one percent of all insured deposits. At the start of 2008, that was $52.4 billion. But one year and 25 bank failures later, the fund held $18.9 billion, down 64%. As of February this year, another 14 banks had failed, draining another $1.7 billion from the insurance fund. Three more banks have already failed in March, whose hits to the FDIC have not yet been calculated.

Currently, the FDIC’s deposit fund is at just 0.4% of banking industry assets. That’s barely a third of the 1.15% statutory minimum. So the FDIC desperately needs cash…and a lot more than the $15 billion in special assessments they just tagged on their insured institutions (for just this year alone).

How big is the problem?

It almost seems the FDIC’s insolvency is inevitable. At least that’s what the FDIC’s chief Sheila Bair is worried about.

Last month Bernanke sent a letter alerting Congress to the imminent dangers if the FDIC wasn’t given a “mechanism that would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system.” In case you aren’t nuanced in the language of “Fed speak,” what Bernanke is saying is, “Look out. Something’s coming. Are you hearing me??? Are you listening? Something big is going to happen.”

At the current rate, the FDIC will seize over 100 banks by the end of the year. Some prominent research firms in the financial industry predict that the banking crisis will claim 1,500 banks before it’s all over. RBC Capital Markets recently upped their expectations for bank failures earlier this month, warning that they anticipate 1.000 institutions could fail over the next three to five years, up from their earlier forecast of only 300.

More than 1,900 financial institutions went under during 1987-1991, peaking with the failure of 534 banks in 1989.

Institutions on the FDIC’s  “problem list” grew to 252 lenders in the quarter ended December 31. Back in Summer 2008, there were only 90 so-called troubled banks. But nowhere on the list was IndyMac, Washington Mutual, nor Wachovia.

Reality Check: The FDIC doesn’t know which banks are going to fail this quarter or the next. All they know is that massive failures are on the way.

Some people speculate that either Citi or BofA are next. If either one failed, that would slam the fund for around $500 billion according to some estimates. When IndyMac failed, it cost the fund $9 billion and the bank had $31 billion in assets.

The five biggest U.S. bank holding companies — Bank of America, Citi, JPMorgan Chase, Wells Fargo and Wachovia (now owned by Wells) — had domestic deposits ranging between $271 billion and $701 billion at the end of the second quarter of 2008.

“It’s the biggest banks that need the bailout,” says Walker Todd, a former Fed official, lawyer and economic historian. “And those hold the vast majority of the estimated $4.54 trillion in FDIC insured deposits.”

Bottom Line: Whether it’s one big bank or hundreds of smaller ones, the shockwaves hammering the financial industry are far from over. By the end of the year, there will be far fewer bank brands covered by this publication. And it could be a long time — if ever — before we ever see the 8,000+ banks that the U.S. once had.

Key Questions: If the amount of insured accounts is fixed at $250,000, what will the affect be of making FDIC premiums permanently larger? What is the right amount for the FDIC to hold in reserve? Is it more than the historical 1%±?

[ratings]

[Editor's Note: This is a guest article from William Quinn, an associate at Callahan & Associates.]

No matter how the financial rescue plan unfolds, the financial industry as a whole will not go back to the way it was. This challenging economic climate provides a historic opportunity for the credit union industry to step out from the shadow of banks and take a prominent place in Americans’ financial futures.

With this in mind, credit unions need to decide today where they want to be when it all shakes out. They must position themselves correctly to succeed. Let’s look at the three ways to reach your market:

1. Marketing to existing members
2. Marketing to potential members
3. Member-employee interaction

1. Marketing to Existing Members

There is opportunity in enhancing relationships with existing members, and current statistics certainly show room for much greater penetration:

Breaking News – Thursday, September 25, 2008

The FDIC just seized all the assets of Washington-based thrift, WaMu, making it the largest bank failure in history.

The FDIC quickly brokered a deal where WaMu’s roughly $150 billion in deposits will be sold to JP Morgan Chase. It is reported that JP Morgan will be paying the FDIC about $2 billion to acquire WaMu’s deposits. Some sources estimated the value of the deal could have been worth as much as $10 billion.

JP Morgan is not taking on any of WaMu’s so-called toxic assets, things like home equity loans, but will probably take branches as part of the deal.

What will happen with the thrift’s $227 billion in real estate loans is still a question. More than half of those loans consists of home equity, option adjustable-rate mortgages, and subprime mortgages. That’s about $125 billion in bad loans.

Key Question: What happens at 9:00 a.m. Friday when WaMu branches are supposed to open?

According to CNBC, no one at WaMu knew about this until a few hours beforehand.

Indeed, it is quite a surprise, because the FDIC usually waits until a Friday to seize a bank and its assets, presumably for the two-day weekend cushion to avoid a run on deposits.

Why the FDIC moved today is unclear. It perhaps had something to do with WaMu’s share price, which hit its lowest level since the 1980s.

Federal regulators were quick to point out that the WaMu+JPMorgan Chase deal would not have any impact on the FDIC fund.

This year, 12 other banks have been forced to close their doors. Back in July, IndyMac was the largest collapse of an FDIC-insured institution since 1984. IndyMac had assets of $32 billion and deposits of $19 billion when it failed.

CNN Money reported WaMu had had combined assets of $307 billion and total deposits of $188 billion. The Seattle-PI reported deposits of $143 billion.

Further Reading:

• FDIC to Seize WaMu and Sell Deposits to JPMorgan (CNBC)
  
• WaMu’s Shotgun Wedding (Forbes)
• JP Morgan buys WaMu (CNN Money)
• JPMorgan Chase to buy bulk of WaMu (Seattle P-I)