BulletProofBlog the blog on crisis communications

If a tidal wave hits a beach and there is nobody there to drown, did it really happen? Or does it only become known when the waters wash inland?

Far fetched? Yes - but, in essence, that' s exactly what happened earlier this week.

For those who still don' t believe in the power and potency of the blogs and social media after the Domino' s Pizza incident of last week, we offer the following. On Monday, the news of Bank of America' s $4.2 billion in earnings during the first quarter of 2009 should have been music to a weary industry' s ears. But instead it was a blog post published over the weekend that drove the markets sharply lower, costing billions of dollars in shareholder value in the process.

Was this blog post an announcement by the Federal Reserve, President Obama, or a leading financial institution? No. In fact, it was much less - and it meant much more.

Last Sunday night, blogger and former conservative radio host Hal Turner wrote that he had seen (and he has yet to produce them online) detailed information about the Treasury Department' s bank stress tests - and that the results were devastating.

Tuner wrote that 16 of the 19 banks that took part in the stress tests were "technically insolvent," and if just two of those 16 failed, the FDIC' s remaining deposit insurance would be completely drained. He went on to assert that some of the biggest names in the financial industry had credit exposures that far outweighed their risk capital allotment.

A nervous market reacted instantly and the Treasury Department followed suit, smartly recognizing the need to cauterize this wound as quickly as possible. Treasury Department spokesman Andrew Williams told CNBC that there was "no basis" for the report, given that the Treasury Department itself had not yet received the tests' results.

But it was too late. The damage had already been done, thanks to the speed of social media today. A blog post that amounted to little more than unfounded gossip caused investors to guess that the nation' s banks' newly-reported profits weren' t good enough. Translation: the recovery has yet to begin and there is more bad news on the horizon.

As Domino' s and Amazon.com learned last week, the rules have changed and communications strategies must change with them. There is no going back, but there is going forward.

To that point, companies who don' t track the blogs and social media as they do The Wall Street Journal and other traditional media do so at their own peril. In this case, had the banks cited in Turner' s post seen it immediately, planned ahead with respect to their response, been agile in their response and empowered enough to make it happen, this latest firestorm could have been a tempest in a teapot, and nothing more.

And most important, when news-cycles are measured in minutes and rumor carries the weight of fact, there is no time to do anything other than execute a plan and use materials that have already been approved.

The alternative is akin to racing a Model-T against an SUV, the march of time has changed the rules permanently.