
English: 
Ten years ago, the world was
rocked by a financial crash
and I was reporting
from the FT newsroom.
We are in a very
dangerous moment
right now for the
financial markets.
In the last decade,
there has been
extensive debate about how
and why the crisis happened.
But this film looks at a crucial
issue which is often ignored
- culture.
Culture is the single most
important thing in any
organisation.
The human flaw that took
central bankers by surprise.
One of the most extraordinarily
important issues
in the marketplace is
how powerful fear is.
They wanted that pay so
much that they don't care
about how they're regarded.
It's really about how
people behave particularly
when they're not being watched.
We're seeing today
what is perhaps
one of the most dramatic days -
Well, effectively,
what we're seeing
is a massive explosion
of risk aversion.
99% of the time, they
did the wrong thing

English: 
Ten years ago, the world was
rocked by a financial crash
and I was reporting
from the FT newsroom.
We are in a very
dangerous moment
right now for the
financial markets.
In the last decade,
there has been
extensive debate about how
and why the crisis happened.
But this film looks at a crucial
issue which is often ignored
- culture.
Culture is the single most
important thing in any
organisation.
The human flaw that took
central bankers by surprise.
One of the most extraordinarily
important issues
in the marketplace is
how powerful fear is.
They wanted that pay so
much that they don't care
about how they're regarded.
It's really about how
people behave particularly
when they're not being watched.
We're seeing today
what is perhaps
one of the most dramatic days -
Well, effectively,
what we're seeing
is a massive explosion
of risk aversion.
99% of the time, they
did the wrong thing

English: 
- giving loans to
people who they know
will not be able
to pay them back.
You're asking me
about the culture.
It wasn't really a culture.
It was more like a cult.
Personally, I've always
been fascinated by culture
since I trained as
an anthropologist
before I became a journalist.
But before 2008,
I'd sometimes feel
embarrassed to tell
bankers or regulators
about this background
since it seemed
that the only
thing that mattered
was maths or economics
or astrophysics.
But these days, that's
changed because if there's
one thing we learned in 2008
in the great credit crisis,
it's that there's a reason why
the roots of the word credit
comes from the Latin
credere, meaning to believe.
It's a social
construct, not just
about numbers or
algorithms or computers.
And to understand
finance you have
to look at what creates trust,
what binds people together,

English: 
- giving loans to
people who they know
will not be able
to pay them back.
You're asking me
about the culture.
It wasn't really a culture.
It was more like a cult.
Personally, I've always
been fascinated by culture
since I trained as
an anthropologist
before I became a journalist.
But before 2008,
I'd sometimes feel
embarrassed to tell
bankers or regulators
about this background
since it seemed
that the only
thing that mattered
was maths or economics
or astrophysics.
But these days, that's
changed because if there's
one thing we learned in 2008
in the great credit crisis,
it's that there's a reason why
the roots of the word credit
comes from the Latin
credere, meaning to believe.
It's a social
construct, not just
about numbers or
algorithms or computers.
And to understand
finance you have
to look at what creates trust,
what binds people together,

English: 
what shapes how they behave - in
the wider world, inside banks,
central banks, and markets.
Now there's a
growing recognition
that we need to look at
culture, not just at computers.
I'm going to interview
Alan Greenspan
because he was a central
banker amongst central banks.
He was called the
maestro because he
was seen as being all
powerful and having
a really good sense
of how the economy
and the financial
system was working.
He was also someone
who championed
the idea of using models, this
idea that free markets were
self-healing and that they
would always allocate resources
to where they needed to go.
And in fact, Alan
Greenspan himself
came out and told
Congress subsequently
that there had been a
flaw in his thinking.
Yes, I found a flaw.
I don't know how significant
or permanent it is,
but I've been very
distressed by that fact.
You found a flaw
in the reality -
A flaw in the model
that I perceived

English: 
what shapes how they behave - in
the wider world, inside banks,
central banks, and markets.
Now there's a
growing recognition
that we need to look at
culture, not just at computers.
I'm going to interview
Alan Greenspan
because he was a central
banker amongst central banks.
He was called the
maestro because he
was seen as being all
powerful and having
a really good sense
of how the economy
and the financial
system was working.
He was also someone
who championed
the idea of using models, this
idea that free markets were
self-healing and that they
would always allocate resources
to where they needed to go.
And in fact, Alan
Greenspan himself
came out and told
Congress subsequently
that there had been a
flaw in his thinking.
Yes, I found a flaw.
I don't know how significant
or permanent it is,
but I've been very
distressed by that fact.
You found a flaw
in the reality -
A flaw in the model
that I perceived

English: 
is the critical
functioning structure
that defines how the
world works, so to speak.
In other words, you found
that your view of the world,
your ideology, was not right.
It was not what working -
It had - precisely.
After the crisis, there was
a dramatic reassessment.
Alan Greenspan presided over
this crazy large credit bubble.
And he hadn't
spotted it because he
put so much faith in his
models and his concept
of self-healing free markets.
How are you?
Great to see you.
Good to see you.
After the crisis, you
then said to Congress
that you thought there
had been a flaw in some
of your thinking.
What I hadn't been
aware of is the fact
that my own self-interest was
actually conceptually wrong.
I originally assumed that people
were acting wholly rationally
or, if not wholly rationally,
closely approximate to that.

English: 
is the critical
functioning structure
that defines how the
world works, so to speak.
In other words, you found
that your view of the world,
your ideology, was not right.
It was not what working -
It had - precisely.
After the crisis, there was
a dramatic reassessment.
Alan Greenspan presided over
this crazy large credit bubble.
And he hadn't
spotted it because he
put so much faith in his
models and his concept
of self-healing free markets.
How are you?
Great to see you.
Good to see you.
After the crisis, you
then said to Congress
that you thought there
had been a flaw in some
of your thinking.
What I hadn't been
aware of is the fact
that my own self-interest was
actually conceptually wrong.
I originally assumed that people
were acting wholly rationally
or, if not wholly rationally,
closely approximate to that.

English: 
That is factually inaccurate.
One of the most extraordinarily
important issues
that I've seen in
the marketplace
is how powerful fear is as
differentiated from euphoria.
And the data showed very clearly
that as people in the stock
market, for example, tend to
sell much more rapidly and much
more heavily and are frightened
so that they pull back.
Whereas euphoria, that is a
much slow, drawn-out process.
I thought I knew
about as much as I
could know about markets going
all the way back into - well,
into the last century.
But I was mistaken.
Do you think that the culture
of finance and markets
has changed since the crisis?
It's changed a lot
of people's views.
It's really quite
extraordinary when
you go back and look at
the Wall Street forecasting

English: 
That is factually inaccurate.
One of the most extraordinarily
important issues
that I've seen in
the marketplace
is how powerful fear is as
differentiated from euphoria.
And the data showed very clearly
that as people in the stock
market, for example, tend to
sell much more rapidly and much
more heavily and are frightened
so that they pull back.
Whereas euphoria, that is a
much slow, drawn-out process.
I thought I knew
about as much as I
could know about markets going
all the way back into - well,
into the last century.
But I was mistaken.
Do you think that the culture
of finance and markets
has changed since the crisis?
It's changed a lot
of people's views.
It's really quite
extraordinary when
you go back and look at
the Wall Street forecasting

English: 
groups, the various different
banks who are publishing
all sorts of data.
Nobody got it right.
There are lots of
people who say they did.
Thank you, no.
It was striking that the
financial crash appeared
to come as a surprise
to central bankers
on both sides of the
Atlantic and that more wasn't
done to avert the crisis.
I mean, that something as
small as the US subprime
market can bring down the
whole of global finance
is incredible.
Ex-deputy governor of Bank
of England Paul Tucker
is, like Alan Greenspan,
able to see the flaws
in the thinking of the time.
London over there,
the Bank of England
lost influence over
the banking system
because that function
was taken away.
And in the Fed in the
US, the Greenspan Fed
lost interest in it because he
personally - that wasn't where
his heart was.
That wasn't where he
went in every morning.
So are you basically arguing
the problem with finance

English: 
groups, the various different
banks who are publishing
all sorts of data.
Nobody got it right.
There are lots of
people who say they did.
Thank you, no.
It was striking that the
financial crash appeared
to come as a surprise
to central bankers
on both sides of the
Atlantic and that more wasn't
done to avert the crisis.
I mean, that something as
small as the US subprime
market can bring down the
whole of global finance
is incredible.
Ex-deputy governor of Bank
of England Paul Tucker
is, like Alan Greenspan,
able to see the flaws
in the thinking of the time.
London over there,
the Bank of England
lost influence over
the banking system
because that function
was taken away.
And in the Fed in the
US, the Greenspan Fed
lost interest in it because he
personally - that wasn't where
his heart was.
That wasn't where he
went in every morning.
So are you basically arguing
the problem with finance

English: 
is that bankers will
always be greedy and always
go mad because that's just
kind of the culture of money?
And the issue is that actually,
the central banks should
try and keep control of that?
Is that -
There's a dynamic that pushes
banking and the penumbra
of banking to excess.
It doesn't mean everyone
goes in every day
and tries to drive the coach
over the edge of the cliff.
But that's in it always.
And it isn't even to do with the
extraordinary amounts of money
they are now paid for doing
something that isn't so
terribly difficult. So
if that's the given,
the big questions are, well,
why do we allow banking at all?
Given that we do
allow it and we're
going to carry on
allowing it, then we
need independent
authorities who will ensure
that the system is resilient.
So how do you tackle
this human flaw?
Well, as it, happens the
Federal Reserve in New York
and the Banking
Standards Board in London

English: 
is that bankers will
always be greedy and always
go mad because that's just
kind of the culture of money?
And the issue is that actually,
the central banks should
try and keep control of that?
Is that -
There's a dynamic that pushes
banking and the penumbra
of banking to excess.
It doesn't mean everyone
goes in every day
and tries to drive the coach
over the edge of the cliff.
But that's in it always.
And it isn't even to do with the
extraordinary amounts of money
they are now paid for doing
something that isn't so
terribly difficult. So
if that's the given,
the big questions are, well,
why do we allow banking at all?
Given that we do
allow it and we're
going to carry on
allowing it, then we
need independent
authorities who will ensure
that the system is resilient.
So how do you tackle
this human flaw?
Well, as it, happens the
Federal Reserve in New York
and the Banking
Standards Board in London

English: 
are each trying to find ways to
observe, measure, and improve
culture.
One of the things that we
learned during the financial
crisis was that behaviour
and conduct at financial
institutions played a
critical role in outcomes.
And we can look at things
like the scandals around Libor
and foreign exchange trading and
sales practises, all of which
had a behavioural component.
And that led us to shine
a spotlight on behaviour
and conduct at firms, which is
driven at a root cause level
by the culture at the firms.
This is about how a business
runs and how the people in it
actually do things.
So it's like anthropologists
with big data trying
to use ways - or use techniques
to actually track what bankers
are doing, what they're feeling,
to work out whether they have
a good culture or not.
Speaking up seems
to be a challenge.
What's interesting for us is
there are two main causes.
One's fear.
People don't speak up
because of the fear
of negative consequences.

English: 
are each trying to find ways to
observe, measure, and improve
culture.
One of the things that we
learned during the financial
crisis was that behaviour
and conduct at financial
institutions played a
critical role in outcomes.
And we can look at things
like the scandals around Libor
and foreign exchange trading and
sales practises, all of which
had a behavioural component.
And that led us to shine
a spotlight on behaviour
and conduct at firms, which is
driven at a root cause level
by the culture at the firms.
This is about how a business
runs and how the people in it
actually do things.
So it's like anthropologists
with big data trying
to use ways - or use techniques
to actually track what bankers
are doing, what they're feeling,
to work out whether they have
a good culture or not.
Speaking up seems
to be a challenge.
What's interesting for us is
there are two main causes.
One's fear.
People don't speak up
because of the fear
of negative consequences.

English: 
But interestingly,
people in banking
also don't speak up because
they think nothing will happen.
If you were advising
the CEOs of banks today,
what would you tell them about
building a better culture
or handling the
cultural question?
I don't think they'd understand
what I was talking about.
In fact, I know that.
But is it really true that
banking CEOs were not,
and they're still aren't,
thinking about culture?
Well, in 2008, Bob Diamond
was chief executive
of Barclays Bank -
Hey, hey!
- and was portrayed as a
representative of fat cat
banking.
So I put the question to him.
What about the culture
inside finance?
Do you think that the culture
of banking has changed?
You know, culture is the single
most important thing in any
organisation, whether it's
government or private sector.
And it's no different
in financial services.

English: 
But interestingly,
people in banking
also don't speak up because
they think nothing will happen.
If you were advising
the CEOs of banks today,
what would you tell them about
building a better culture
or handling the
cultural question?
I don't think they'd understand
what I was talking about.
In fact, I know that.
But is it really true that
banking CEOs were not,
and they're still aren't,
thinking about culture?
Well, in 2008, Bob Diamond
was chief executive
of Barclays Bank -
Hey, hey!
- and was portrayed as a
representative of fat cat
banking.
So I put the question to him.
What about the culture
inside finance?
Do you think that the culture
of banking has changed?
You know, culture is the single
most important thing in any
organisation, whether it's
government or private sector.
And it's no different
in financial services.

English: 
What I worry about is that
we get the right balance
between a safer and sounder
financial system with one
that can still promote
jobs and economic growth.
And so we need the culture
within banking of a willingness
to take risk on behalf
of clients, a willingness
to lend into the economy.
And that's how we get
stronger economies.
And that's how we
get job creation.
And so that
responsible risk taking
is - is the critical piece.
But how do you create a culture
of responsible risk- taking?
I think you never want to go
to one extreme or the other.
So are the regulators important?
Of course.
Can we count on the regulators
to be managing the banks?
No.
Leadership matters.
You said in public
a few years ago
that you thought the time
for remorse was over.
It's time to move on.
Do you think that's
still the case?
That is not what I said.
OK.
That is what you
quoted me as saying.
And I think there
were two things
at the time that were missed.
One was the context.
The context of when I said
that was in early 2011,

English: 
What I worry about is that
we get the right balance
between a safer and sounder
financial system with one
that can still promote
jobs and economic growth.
And so we need the culture
within banking of a willingness
to take risk on behalf
of clients, a willingness
to lend into the economy.
And that's how we get
stronger economies.
And that's how we
get job creation.
And so that
responsible risk taking
is - is the critical piece.
But how do you create a culture
of responsible risk- taking?
I think you never want to go
to one extreme or the other.
So are the regulators important?
Of course.
Can we count on the regulators
to be managing the banks?
No.
Leadership matters.
You said in public
a few years ago
that you thought the time
for remorse was over.
It's time to move on.
Do you think that's
still the case?
That is not what I said.
OK.
That is what you
quoted me as saying.
And I think there
were two things
at the time that were missed.
One was the context.
The context of when I said
that was in early 2011,

English: 
and it was
specifically, its time
to pass the mantle of
growth, the mantle of growth
to the private sector
from the public sector.
And do you think people
thought enough about culture
in the past, or did
they just ignore it?
You know, every bank
might have been different.
I know in our institution
it was something
that we thought about
every single day.
And I think in many institutions
that would be the case as well.
It was a risk-taking culture
within some institutions that
was blamed for creating the
bubble that would soon burst,
especially within
the lending industry
and in particular
as subprime mortgage
lenders such as Countrywide.
Every one of them was
turned down for a home loan
by three different lenders.
I'm with Countrywide, and
I got them all approved.
Michael Winston was an executive
at Countrywide Financial
in 2008 and was one
of the very few people
to blow the whistle on
the culture he found there
when he joined in 2005.
He paid a heavy price.
And I said, who do
you usually hire?

English: 
and it was
specifically, its time
to pass the mantle of
growth, the mantle of growth
to the private sector
from the public sector.
And do you think people
thought enough about culture
in the past, or did
they just ignore it?
You know, every bank
might have been different.
I know in our institution
it was something
that we thought about
every single day.
And I think in many institutions
that would be the case as well.
It was a risk-taking culture
within some institutions that
was blamed for creating the
bubble that would soon burst,
especially within
the lending industry
and in particular
as subprime mortgage
lenders such as Countrywide.
Every one of them was
turned down for a home loan
by three different lenders.
I'm with Countrywide, and
I got them all approved.
Michael Winston was an executive
at Countrywide Financial
in 2008 and was one
of the very few people
to blow the whistle on
the culture he found there
when he joined in 2005.
He paid a heavy price.
And I said, who do
you usually hire?

English: 
And he said, bottom
quartile, low level schools.
Why would you do that?
They are hungrier.
Maybe we're the only
ones who would hire them.
Yes!
Why would you want to do that?
Well, because those
people are pliable.
They'll do whatever
we tell them to do.
They say jump, you say how high.
That was the
Countrywide culture.
You know, Countrywide
had 65,000 people.
I saw people deliberately
look the other way.
Well, I was going
to look at it, and I
was going to either set it
right or contact the government
officials.
And I did.
Michael claims that there was
a culture at Countrywide where
staff were encouraged
to seek risky subprime
loans without concern for
the overheating housing
market or threat to the economy,
a culture of greed and fear.
People are afraid to sound
the alarm because of companies
like Countrywide that
retaliate instead of praise
the person's
courage and bravery.

English: 
And he said, bottom
quartile, low level schools.
Why would you do that?
They are hungrier.
Maybe we're the only
ones who would hire them.
Yes!
Why would you want to do that?
Well, because those
people are pliable.
They'll do whatever
we tell them to do.
They say jump, you say how high.
That was the
Countrywide culture.
You know, Countrywide
had 65,000 people.
I saw people deliberately
look the other way.
Well, I was going
to look at it, and I
was going to either set it
right or contact the government
officials.
And I did.
Michael claims that there was
a culture at Countrywide where
staff were encouraged
to seek risky subprime
loans without concern for
the overheating housing
market or threat to the economy,
a culture of greed and fear.
People are afraid to sound
the alarm because of companies
like Countrywide that
retaliate instead of praise
the person's
courage and bravery.

English: 
Don't shoot the messenger.
This begs a crucial question.
Are we really safer now?
I think banks are
safer and sounder.
Particularly, the systemic
banks are safer and sounder.
We're nine years into
an economic recovery
from probably the deepest,
darkest recession we've ever
seen since 1929.
My worry is have we still
got the policy tools
on the monetary side
and the fiscal side
if we have a crack
in corporate credit?
We won't be able to spot where
the next crisis comes from.
The question is, is the
system resilient enough
when the shock hits?
And then if it proves
resilient, it will still be bad.
Recessions are bad.
But not all recessions end
up in a massive collapse
with social, cultural,
political, even
constitutional consequences.
I believe there will be
another financial crisis.

English: 
Don't shoot the messenger.
This begs a crucial question.
Are we really safer now?
I think banks are
safer and sounder.
Particularly, the systemic
banks are safer and sounder.
We're nine years into
an economic recovery
from probably the deepest,
darkest recession we've ever
seen since 1929.
My worry is have we still
got the policy tools
on the monetary side
and the fiscal side
if we have a crack
in corporate credit?
We won't be able to spot where
the next crisis comes from.
The question is, is the
system resilient enough
when the shock hits?
And then if it proves
resilient, it will still be bad.
Recessions are bad.
But not all recessions end
up in a massive collapse
with social, cultural,
political, even
constitutional consequences.
I believe there will be
another financial crisis.

English: 
I don't think it - I know it,
bone-deep, deep in my heart,
because the same half-truths
and empty promises and outright
lies are being told by
executives in financial
services firms.
Do you think that we are in
another bubble period which
will have another market
crash or a crisis?
We're actually in a somewhat
different type of world now.
We've basically run into
a populist environment.
Populism - I don't think
that is a rational approach
to develop economic - economies.
It's a scream of pain.
So a decade after
the financial crisis,
what did we really learn?
Well, we learned
that finance does not
function without faith
or trust or credit
in the old fashioned
Latin sense of the word.
And we learned that trust cannot
be predicted with mere models.

English: 
I don't think it - I know it,
bone-deep, deep in my heart,
because the same half-truths
and empty promises and outright
lies are being told by
executives in financial
services firms.
Do you think that we are in
another bubble period which
will have another market
crash or a crisis?
We're actually in a somewhat
different type of world now.
We've basically run into
a populist environment.
Populism - I don't think
that is a rational approach
to develop economic - economies.
It's a scream of pain.
So a decade after
the financial crisis,
what did we really learn?
Well, we learned
that finance does not
function without faith
or trust or credit
in the old fashioned
Latin sense of the word.
And we learned that trust cannot
be predicted with mere models.

English: 
So could trust crack again
in finance over there?
Well, maybe - parts of
the financial system today
are certainly a lot healthier.
Other parts are not.
However, maybe the really big
question we should also ask
is, what about trust in the
wider political economy?
Because these days, we live
in an era of growing populism
and protests and anger.
And this can't all be blamed
on the financial crisis,
but in some ways, it is the
next stage of that drama.
And that is why
leaders of all stripes
today need to relearn that
lesson - that trust is crucial.
To build it, you
have to understand
how human culture works.
And once trust or credit is
lost, it's very hard to regain.

English: 
So could trust crack again
in finance over there?
Well, maybe - parts of
the financial system today
are certainly a lot healthier.
Other parts are not.
However, maybe the really big
question we should also ask
is, what about trust in the
wider political economy?
Because these days, we live
in an era of growing populism
and protests and anger.
And this can't all be blamed
on the financial crisis,
but in some ways, it is the
next stage of that drama.
And that is why
leaders of all stripes
today need to relearn that
lesson - that trust is crucial.
To build it, you
have to understand
how human culture works.
And once trust or credit is
lost, it's very hard to regain.
