The warning signs were there for everyone to see at Lehman Brothers but in the midst of a bubble, high-earning employees were too scared to raise their hand.
That’s according to David DeMuro, head of compliance at Lehman Brothers during the great crash of 2008, who spoke out for the first time today to Complinet, one of the world’s leading providers of compliance and regulation information.
“The last few days at Lehman Brothers were a very surreal experience – there was disbelief – nobody anticipated the firm would collapse,” said DeMuro in a live webcast on Complinet.com. “It wasn’t until the Tuesday before the fateful weekend that we realised we might not make it.”
“The warning signs were there if people could only look and listen. But bubbles are very dangerous things. They cause you to believe the laws of gravity have been repealed,” said DeMuro.
“There was a general understanding of the risk but there was also an almost religious belief in the veracity of the business model. And when there’s still money to be made, it’s very difficult to walk away.”
DeMuro added that he wished he had been louder about his concerns, saying that in the future, employees should be rewarded for pointing out the risks and not be dismissed as malcontents.
“There wasn’t a free flow of information back then. We need to develop a protocol or council where ideas are exchanged. Risk managers need to be able to exchange what they think, what they see, otherwise they may miss the truly dramatic problems lurking just around the corner.”
Looking to the future, government regulation will be more intrusive and far more sceptical, he said. “And when people tell you things are working differently now, look for the closest exit and get out of there,” said DeMuro.
“But, if you work in these fascinating times, in thirty years you will be able to look back and tell your colleagues ‘hey this is nothing you should have been around for the great crash of 2008’.”
“All in all it’s a fantastic business to be in but I could have lived without the near-death experience.”
“David DeMuro’s telling comments show how vital it is for companies to be fully aware of their responsibilities in every area of their business,” says Chris Pilling, CEO of Complinet. “Over the coming months compliance issues will be at the forefront of business regulation.”
