Lessons Learned From the Frontlines of the Last Financial Crisis


By Abbie McDonough, Vice President

September 2008: It was 10:00 p.m. and my boss had just come back from a somber meeting in the U.S. Capitol with seven other members of Congress, Federal Reserve Chairman, and Treasury Secretary. He chaired the Capital Markets Subcommittee in the House of Representatives and Lehman Brothers had just crashed. They were urgently discussing the need to pass a life support package to prop up our financial system — now notoriously known as the Wall Street bailout. When he came back to the office, I told him I needed to know if our economy was going to survive.

Today’s circumstances are no less dire. As Congress just reached a $2 trillion deal to boost struggling industries and workers, the financial crisis of 2008 provides important lessons for companies navigating the challenges ahead, especially for those that may accept federal support.

Communication is critical – and every company needs to think about it as part of the recovery process from day one. Most Americans remember that big banks got a federal bailout and workers didn’t. Because the public didn’t understand the need for the bailouts in 2008, how inaction would have hurt them in the long run, or that the money was actually paid back with interest, it led to mass distrust and deep anger at corporations broadly. Many companies, in turn, took serious reputational hits in Washington and around the country and have not entirely recovered.

Right now, we are at another crossroads – a much bigger one than in 2008. The COVID-19 crisis is impacting every piece of our health care system and economy. Business leaders are grappling immediately with the following questions:

  1. How do we stem the tide and stay afloat?
  2. How do we keep operating while working with lawmakers in Washington, DC to get support?
  3. How do we leverage and accept financial support from the government without incurring the wrath of the public?

Lawmakers also come to this new crisis armed with the lessons they learned from dealing with the last one. They are calling for strings-attached relief, including executive pay and stock buyback restrictions, enhanced worker protections, and stronger oversight. Far-reaching changes in regulation and the way businesses operate are virtually inevitable. But these industries can take some steps now to preserve their legitimacy and hopefully set themselves in the right direction going forward.

As an aide to a member of Congress who helped lead the federal response in 2008, I know there are some things we did right and some things we did not when it comes to communicating with the public during a crisis. Here are some of the most important lessons that I would urge today’s business leaders to consider:

  • Near term pain must be shared. No memory of the financial crisis was more indelible than the day America learned that financial institutions had given themselves nearly $20 billion in bonuses in the same year they had been bailed out. My boss at the time held the first congressional hearing on AIG a week after the company decided to move ahead with $165 million in executive bonuses though it received a $170 million federal bailout. The scene at that hearing was unforgettable – protestors interrupting, packed overflow rooms, and TV cameras everywhere trying to get footage.
  • That cannot happen again. No Member of Congress in their right mind will allow it. Industries that may need government support in our present crisis shouldn’t wait for Congress to impose heavy-handed restrictions. Offer them up proactively. Some airline CEOs as well as the CEOs of Marriot and GE have already reduced their own pay. Others should follow, and any industry requiring public support should come forward with clear plans for how executives and shareholders will take haircuts at least until the public has been made whole once the economy normalizes.
  • Be prepared to change core aspects of the business model. In the financial crisis, the institutions were bailed out. But customers were given little relief from the fees and inconveniences they had always endured. This won’t likely be tolerated this time. So it would be better for industry to get ahead of the curve and start proposing ways to change the business model to make it as customer friendly as it can be, consistent with profitability. For airlines specifically, that probably starts with rethinking the most unpopular features of the current offering like baggage and change fees.
  • Treat the public like shareholders. Business leaders routinely communicate challenging information to shareholders, trusting that investors have the sophistication to understand why certain decisions must be made in the long-term interests of the firm. In the financial crisis, bailed out companies never really tried to explain their actions to the generally public, even though they took taxpayer money. They didn’t try to educate them about the realities of their businesses – or to the impacts of inaction on families across the country. Perhaps they felt that nobody would give them a fair hearing. But they owed the public the effort.
  • Today, industries seeking bailouts should step forward and start talking to the public — right now — about what they intend to do to keep themselves operational, why those steps are necessary, and how they will support their workers. They should also explain why these actions are necessary not just for the business, but for the economy and public writ-large. This is particularly important for decisions that are likely to be unpopular. It won’t do to try to simply force those through or to try to hide them away. If airlines feel they need to reduce capacity, renegotiate union contracts, or take other steps that people might hate because doing so is essential to economic sustainability – then make that case clearly and substantively.
  • Explain how employees are getting support. A lasting wound from the financial crisis is the feeling that there were winners and losers – the big banks were winners while the public were hung out to dry. Businesses seeking federal money should already be talking about how critical their employees are to them, how difficult any layoffs are, and what they are doing for employees even if they have to let them go. If companies have to make tough decisions, showing empathy and that they understand employees have bills to pay and families to support will go a long way.
  • Don’t forget to say thank you. If one word summarized how Americans saw Wall Street leaders during the financial crisis, it was “arrogant.” The public never saw those executives show humility or gratitude. Americans were left to conclude that somehow they felt entitled to taxpayer funds. Businesses today must not make that same mistake. Many companies will live to fight another day because the taxpayers stepped up. That doesn’t make these companies state enterprises. They will still be free to run their businesses – albeit with some restrictions. But it isn’t asking too much that if and when the bailouts come, they look the public in the eye and say, “thank you.” Look at it from their perspective — many of them are getting laid off and don’t know how they will afford to feed their families or pay their electricity bills.
  • Contribute and give back. Unlike in 2008, we are facing a serious and likely long-lasting public health scare. People across the country are stuck in quarantine in their homes. There’s fear about not having enough hospital beds or ventilators. Schools and childcare are closed. And several cities are on lock-down. We’re seeing people and businesses rise to the occasion. Many breweries and distilleries across the country have shut down their operations and are instead using their facilities to make hand sanitizer. Large companies are devoting stockpiles of respirators to state and local authorities and hospitals.  Manufacturing industries are retooling factories to produce personal protective equipment for health care workers on the frontline of this crisis. Businesses – whether they get federal support or not – should look for ways to contribute. Not only is it the right thing to do, but it will boost their reputations at a critical time and help them weather this storm after it subsides.

Back in 2008, our economy did survive and it recovered – but not without a great deal of pain for many across the country. COVID-19 is an exceptional event, one that will likely have a lasting impact for the next decade or more. It’s imperative that companies accept the realities of this new environment and heed the lessons from the last crisis. They will be better for it, and so will our country.