Consider this. Economic pundits have declared that volatility is the New Normal. Markets are fluctuating wildly day to day. Executive officers, guiding their companies, are afloat in a sea of uncertainty. Investors generally take fewer risks during volatile times. It takes guts to invest when the downside may be greater than the upside. It also takes courage to make major business decisions.
According to Morgenson, E. Stanley O'Neal, Merrill's CEO, is described as an autocratic leader. Two of his lieutenants discouraged open communication between the risk management arm and the sales arm. One of the lieutenants was Osman Semerci. Semerci she wrote, "often played the role of tough guy . . . silencing critics who warned about the risks the firm was taking." He also "would chastise traders and other moneymakers who told risk management officials exactly what they were doing." We can only infer that important lines of communication and necessary discussions to determine true risk were cut off. Most likely, not talking about the obvious, unexpected, or anything out of the ordinary became the norm. Some employees described Semerci as intimidating. Like the frog who gets comfortable as the temperature of the lukewarm water rises, Merrill employees no doubt became used to the culture of fear and didn't speak up.