15 years later: reflecting on the Lehman Brothers crash of 2008

As the 15th anniversary of the Lehman Brothers crash approaches on Sept. 15, I am brought back to the early years of my career. I not only now possess the perspective of a seasoned Wall Street expert, but also approach this milestone as an Arizonan who is haunted by the memories of what the crash did to our state and country. It’s a moment that calls for acknowledgment of the profound and lasting impact of this pivotal event and the mistakes that led to it, while illuminating the pervasive influence of special interest groups in our political landscape across industries — not just Wall Street, which has become an easy foil. Most importantly, it prompts us to consider the future.

I started my career on Wall Street less than three years before the crash began. I had a ringside seat to one of the biggest boom and bust cycles in history and saw what happens when incentives are not aligned and unchecked euphoria reigns. In my view, as a global industry employing hundreds of thousands, Wall Street bears a duty to fortify the American economy and uplift the middle class. I’ve witnessed the positive contributions our industry can make to the American economy and how we can help boost the middle class. But I’m acutely aware of the industry’s shortcomings. Like any institution, Wall Street is not a perfect one.

My personal connection to this story is tangible, as my wife, like many thousands of Americans, fell victim to economic shortsightedness during the crash when she lost her job at Credit Suisse, the firm where we first met.

Moreover, we cannot ignore the alarming prevalence of special interests and their far-reaching impact on policymaking. To restore political integrity and ensure a fair and equitable society, we must take decisive action. This includes banning individual stock trading in Congress (three in four voters support this), curbing the excessive influence of lobbyists on federal lawmakers, and fortifying essential institutions such as the SEC and CFPB. As I embark on my journey to Congress, I pledge to tirelessly champion these reforms because I know they can work. In fact, Wall Street firms place strict restrictions on employee stock trading and it’s high time that Congress followed suit for its own members.

The 2008 financial crisis, hastened by the downfall of Lehman Brothers, reverberated across the global financial landscape, ultimately leading to the Great Recession. However, it transcends mere financial statistics; it embodies human stories, shattered lives and deferred dreams. It is not just a matter of remembrance, but also a moral obligation to proactively safeguard against future financial catastrophes.

Looking back, in December 2007, Arizona’s unemployment rate was 4.4%, gradually rising from a low of 3.7% as our once-thriving housing industry lost steam. By late 2009, it had peaked at a staggering 11.2% during a six-month period with persistently high joblessness rates exceeding 11%. This led to 297,000 workers becoming unemployed, second only to Nevada in per capita loss during this challenging period. Life savings were wiped out. Homes were seized. Dreams were shattered.

Key reforms like the Dodd-Frank Wall Street Reform and Consumer Protection Act, The Emergency Economic Stabilization Act (EESA), and the Troubled Asset Relief Program (TARP) played a pivotal role in setting the stage for our economic recovery – despite years-long obstruction from our current U.S. Rep. David Schweikert. It’s essential to recognize that the benefits of this recovery didn’t begin to be felt in Arizona until 2016 when Arizona formally matched its pre-recession employment levels, just a few short years before the onset of the Covid pandemic and the economic downturn that occurred during that crisis.

As we move forward, it’s imperative for leaders in Congress to remain committed to crafting responsible legislation. Such legislation should not stifle the financial sector but should ensure it operates with responsibility and integrity. Our primary goal should be to create safeguards that protect the American economy from future economic catastrophe. The federal government plays several pivotal roles; it is the Fed’s duty to keep market euphoria in check and Congress must pass common-sense policies that help new markets grow and thrive, but in a responsible and consumer-friendly way.

Furthermore, it is essential to cast a spotlight on the prevalence of special interest groups and their extensive influence within our congressional decision-making process. The influence of special interest groups helped lead to the crash and their continued influence leaves the door open for yet another emergency. One particularly troubling facet of this issue is the intricate web of the revolving door between Congress and lobby groups. This phenomenon is especially evident in the domain of so-called “non-profit” think tanks and “consumer groups,” which in reality receive substantial funding from industry organizations with a vested interest in advancing positions that align with their agendas at the federal level.

This symbiotic relationship often leads these think tanks to produce research that conveniently supports the lobby group’s perspective. As a result, the lobby group cites the think-tank’s findings as impartial and objective, creating a facade of transparency and accountability in our political discourse. When we examine this practice in conjunction with critical economic policy areas such as loan origination, the carried interest loophole (which needs to be eliminated), and tax policy, we begin to see how funding from the fringes of political groups can surreptitiously shape policies that run counter to the preferences of the majority of Americans.

Historically, this practice has not been confined to any particular political ideology, as it has been employed to advance both ultra-conservative and very progressive positions across various industries. But if our ever-intensifying extreme factions continue to inform the policies that are lobbied by special interests, then I fear the ramifications. It is incumbent upon us to take decisive action and rein in this pervasive influence to ensure a more equitable and transparent political system that truly represents the will and interests of the majority.

This anniversary shouldn’t just be a moment of reflection; it’s an opportunity for a thoughtful and sober conversation about the profound impact of financial crises, the imperative of addressing the influence of special interest groups, and the pressing need to craft sound economic policy at the federal level. Together, we can create a fairer and more equitable society for all.

Conor O’Callaghan is a Wall Street professional and a Democratic congressional candidate in Congressional District 1.