The Silo Effect

by Gillian Tett

  36. Stephanie Baker-Said and Elena Logutenkova, “UBS $100 Billion Wager Prompted $24 Billion Loss in Nine Months,” Bloomberg News, May 18, 2008.

  37. Straumann, “The UBS Crisis in Historical Perspective,” p. 17.

  38. UBS Shareholder Report, 2008, p. 18.

  39. Nelzon Schwartz, “The Mortgage Bust Goes Global,” New York Times, April 6, 2008.

  40. Baker-Said and Logutenkova, “UBS $100 Billion Wager Prompted $24 Billion Loss in Nine Months.”

  41. Karen Ho, Liquidated: An Ethnography of Wall Street (Durham, NC: Duke University Press, 2009).

  42. FINMA report, p. 25.

  43. Greg Ip, Susan Pullam, Scott Thurm, and Ruth Simon, “How the Internet Bubble Broke Records, Rules, and Bank Accounts,” Wall Street Journal, July 14, 2000.

  44. UBS Transparency Report to Shareholders, 2010, p. 18.

  45. Ibid., p. 27.

  46. UBS Shareholder Report, 2008, p. 9.

  47. Ibid., p. 15.

  48. Ibid., p. 16.

  49. Chris Hughes, Haig Simonian, and Peter Thal Larsen, “Corroded to the Core: How a Staid Swiss Bank Let Ambitions Lead It into Folly,” Financial Times, April 21, 2008.

  50. UBS Shareholder Report, 2008, p. 4.

  51. “Brady W. Dougan,” Official Bio Credit Suisse Group AG website, https://www.credit-suisse.com/governance/en/pop_s_cv_dougan.jsp.

  52. Haig Simonian and Peter Thal Larsen, “UBS Reveals Top Level Shake-up,” Financial Times, July 1, 2005.

  53. FINMA report, p. 28.

  54. UBS Transparency Report, 2010, p. 21.

  55. Sinclair, p. 109.

  56. FINMA report, p. 27.

  57. Ibid., p. 22.

  58. Ibid.

  59. UBS Transparency Report, 2010, p. 35.

  60. Ibid., p. 5. On August 8 the chairman’s office and the Group Executive Board were informed as to the extent of the problems.

  61. Straumann, “The UBS Crisis in Historical Perspective,” p. 9.

  62. Hughes, Simonian, and Larsen, “Corroded to the Core How a Staid Swiss Bank Let Ambitions Lead it into Folly.”

  63. Gillian Tett, “Silos and Silences,” Banque de France Financial Stability Review, July 2010, p. 126.

  64. FINMA report, p. 26.

  65. “Executive Profile: Joseph Scoby,” http:.//www.bloomberg.com/research/stocks.

  66. UBS Shareholder Report, 2008, p. 6.

  67. Megan Murphy and Haig Simonian, “Banking: Lightning Strikes Twice,” Financial Times, October 3, 2011.

  68. Straumann, “The UBS Crisis in Historical Perspective,” p. 8.

  69. Ibid., pp. 4–5.

  70. Haig Simonian, “UBS Board Makes Formal Appointment,” Financial Times, December 8, 2009.

  71. UBS Transparency Report, 2010, p. 7.

  72. Lofts was appointed chief risk officer in 2008. He then left but was subsequently reappointed in 2011.

  73. “Christian Wiesendanger Executive Profile,” Bloomberg, www.bloomberg.net.

  74. Megan Murphy, Kate Burgess, Sam Jones, and Haig Simonian, “UBS Trader Adoboli Held over $2bn Loss,” Financial Times, September 15, 2011.

  75. Tony Shearer, “The Banks Are Simply Too Big to Be Managed,” letter to the head of business, Daily Telegraph, September, 19 2011.

  4: RUSSIAN DOLLS

  1. This account is based on an interview with Luis Garicano. See also Andrew Pierce, “The Queen Asks Why No One Saw the Credit Crunch Coming,” Daily Telegraph, November 5, 2008; Chris Giles, “The Economic Forecasters’ Failing Vision,” Financial Times, November 25, 2008.

  2. Etymological origins of “Economy”: The American Heritage Dictionary of the English Language, 4th ed. (New York: Houghton Mifflin, 2009).

  3. Chris Hann and Keith Hart, Economic Anthropology (Boston: Polity, 2011), p. 34.

  4. “News release: Paul Tucker to Leave the Bank of England,” Bank of England website, June 14, 2013, www.bankofengland.co.uk.

  5. Bill Janeway, Doing Capitalism In the Innovation Economy: Markets, Speculation and the State (Cambridge:Cambridge University Press, 2012), p. 163.

  6. Axel Leijonhufvud, “Life Among the Econ,” Western Economic Journal, 11:3 (September 1973), p. 327.

  7. Ibid., p. 328.

  8. “Alan Greenspan,” Biography, A&E, 2014.

  9. Gillian Tett. “An Interview with Alan Greenspan,” Financial Times, October 25, 2013.

  10. “1997: Brown Sets Bank of England Free,” On This Day in History, www.bbc.co.uk.

  11. Chris Giles, “The Court of King Mervyn,” Financial Times Magazine, May 5, 2012.

  12. For a discussion of how silos impacted the media and the public debate about the financial risks before the financial crisis, see: Gillian Tett, “Silos and Silences: Why So Few People Spotted the Problems in Complex Credit and What That Implies for the Future,” Banque de France Financial Stability Review no. 14, July 2010. See also Gillian Tett, “Silos and Silences: the Problem of Fractured Thought in Finance,” Speech to the American Anthropological Association, New Orleans, 2010.

  13. Tyler Cowen, “Bailout of Long-Term Capital: A Bad Precedent?,” New York Times, December 26, 2008.

  14. “Speech: Macro, Asset Price and Financial System Uncertainties,” Roy Bridge Memorial Lecture given by Paul Tucker, Executive Director for Markets and Monetary Policy Committee Member, Bank of England, December 11, 2006, www.bankofengland.co.uk.

  15. Ibid., p. 123.

  16. Ibid., p. 127.

  17. Ibid., p. 128.

  18. Ibid.

  19. Ibid., p. 127.

  20. “A perspective on Recent Monetary and Financial System Developments,” by Paul Tucker, Executive Director for Markets and Monetary Policy Committee Member, delivered April 26, 2007, www.bankofengland.co.uk.

  21. Ibid., p. 6.

  22. Ibid.

  23. For a discussion of this, see Tett, “Silos and Silences.”

  24. “About the Jackson Hole Economic Policy Symposium,” Publications Page, http://www.kc.frb.org/.

  25. “Housing, Housing Finance, and Monetary Policy,” speech by Chairman Ben S. Bernanke delivered August 31, 2007, at the Federal Reserve Bank of Kansas City’s Economic Symposium, Jackson Hole, Wyoming, www.federalreserve.gov, 2007 speeches.

  26. “The Shadow Banking System and Hyman Minsky’s Economic Journey,” PIMCO Global Central Bank Focus, newsletter, May 2009.

  27. “PIMCO Expert Bios: Paul A. McCulley,” PIMCO website.

  28. Krishna Guha, “Credit Turmoil Has Hallmarks of Bank Run,” Financial Times, September 2, 2007. See also Kansas Federal Federal Reserve minutes at http://www.kc.frb.org/Publicat/Sympos/2007/PDF/GeneralDiscussion60415.pdf.

  29. Taken from the minutes of the Jackson Hole symposium, August 2007, http://www.kc.frb.org/Publicat/Sympos/2007/PDF/GeneralDiscussion60415.pdf.

  30. See Robert J Shiller, “Bubble Trouble,” Project Syndicate. September 17, 2007, www.project-syndicate.org.commentary/bubble-trouble.

  31. The specific problem with the entities such as SIVs and conduits was something known as a maturity mismatch. These vehicles had funded themselves by selling very short term notes (or bonds) in a market called the asset backed commercial paper market, and they had used that money to buy long-term assets such as mortgage bonds. The short-term bonds needed to be constantly rolled over, but the long-term assets could not be sold easily when the markets froze up. So when investors panicked and stopped giving funding to the conduits and SIVs, these faced a liquidity crunch. Since banks had extended off-balance-sheet guarantees to some of these vehicles, when the conduits and SIVs started to collapse this hit banks’ balance sheets—and prompted a general sense of panic.

  32. Jason Douglas and Geoffrey T. Smith, “FSB’s Carney Seeks Help to End Too-Big-to-Fail,” Wall Street Journal, April 11, 2014.

  33. Heather Stewart, “This Is How We Let the Credit Crunch Happen Ma’am,” The Observer, July 29, 2009.

  34. Gillian Tett. “An Interview with Alan Greenspan by Gillian Tett,” Fin
ancial Times, October 25, 2013.

  35. “Memorandum of Understanding Between the Financial Conduct Authority and the Bank of England, including the Prudential Regulation Authority,” Bank of England website, www.bankofengland.com.

  36. “One Mission. One Bank. Promoting the Good of the People of the United Kingdom,” speech given by Mark Carney, Governor of the Bank of England, March 18, 2014, Mais Lecture at Cass Business School, City University, London.

  37. Emma Charlton, “Bank of England Creates New Unit to Crunch Economic Data,” Bloomberg news, July 1, 2014.

  38. “Financial Stability Oversight Council Created Under the Dodd-Frank Wall Street Reform and Consumer Protection Act,” October 2010, Treasury.gov.

  39. Ian Katz, “Richard Berner to Help Treasure Build Financial Research Office,” Bloomberg News, April 25, 2011.

  40. Jennifer Ryan and Simon Kennedy, “Carney Gets Chance to Reshape BOE as Tucker Plans Departure,” Bloomberg News, June 14, 2013.

  5: GUN-TOTING GEEKS

  1. Speech by Steve Jobs to Stanford University students, 2005, http://news.stanford.edu/news/2005/june15/jobs-061505.html.

  2. For press reports on highly educated professionals volunteering for the police, see “First NYPD Recruits Since 9/11,” Police: The Law Enforcement Magazine, July 9, 2002.

  3. http://news.yahoo.com/chicago-murder-capital-of-america-fbi-142122290.html; http://www.foxnews.com/us/2013/09/19/fbi-chicago-officially-america-murder-capital/; http://www.huffingtonpost.com/2012/06/16/chicago-homicide-rate-wor_n_1602692.html.

  4. For background on the culture of the Chicago police, see: Star #14931, Chicago Cop: Tales From the Street (CreateSpace Independent Publishing Platform, 2011); Martin Preib, Crooked City (CreateSpace Independent Publishing Platform, 2014); Daniel P Smith. On the Job: Behind the Stars of the Chicago Police Department (Chicago: Lake Claremont Press, 2008); Jim Padar and Jay Padar, On Being a Cop: Father and Son Tales from the Streets of Chicago (Self Published, 2013).

  5. Kari Lydersen, “In Chicago, Choice to Head Police Dept. a Controversial One,” Washington Post, December 2, 2007; Gary Washburn and Todd Lighty, “New Top Cop Seeks to Fix Broken Trust: FBI Agent Aims to Soothe Police, Gain Confidence of Detractors,” Chicago Tribune, November 30, 2007; Fran Spielman, “$310,000 for Top Cop? ‘Yes, It’s Worth It’: Daley; Weis Will Earn $93,000 More Than Mayor,” Chicago Sun-Times, December 5, 2007.

  6. Locke Bowman, “Will Mayor Rahm Emanuel Commit to Reforming the Chicago Police?,” Huffington Post, March 7 2011. www.huffingtonpost.com.

  7. For an account of the way that stove-piping has hampered the operations of intelligence and security forces in the last decade, see U.S. commission’s report on 9/11: http://www.fas.org/irp/offdocs/911comm-sec13.pdf. See also the state department’s report on the events in Benghazi, Libya, which echo a similar theme. http://www.state.gov/documents/organization/202446.pdf.

  8. http://web.archive.org/web/20131203194757/http://www.suntimes.com/news/metro/23189930-418/grateful-for-cops-commitment.html.

  9. See Chicago Police Memorial Foundation Website, Officer Of The Month—Brett Goldstein. May 2014 www.cpdmemorial.org/officer-of-the-month-brett-goldstein/.

  10. Adam Lisberg, “Chicago Buried in Murders; 2nd City Passes New York in Killing,” New York Daily News, November 2, 2008; Angela Rozas, “Chicago Murder Rate Is Up 9 Percent So Far This Year,” Chicago Tribune, May 17, 2008.

  11. David Heinzmann, “After Scandal, a New Cop Unit: This Special Outfit Won’t Be Called SOS,” Chicago Tribune, October 7, 2008.

  12. “Crime Is Down, but It’s Still a Huge Problem,” Editorial, Chicago Sun-Times, August 5, 2010.

  13. “Two Lawmakers Propose National Guard Should Deal with Gun Violence and Murder in Chicago,” NBC Nightly News, April 26, 2010; Hal Dardick and Monique Garcia, “Daley: Guard Isn’t the Answer; Mayor, Governor, Police Union Not Fans of Proposal to Deploy Troops,” Chicago Tribune, April 27, 2010.

  14. Lauren Etter and Douglas Belkin, “Rash of Shootings in Chicago Leaves 8 Dead, 16 Wounded,” Wall Street Journal, April 17, 2010.

  15. Terry Wilson, “Top Cop Pushes Accountability as He Makes Changes in the Ranks,” Chicago Tribune, February 2, 2000.

  16. See The Gang Book by the Chicago Crime Commission 2012 for estimates of the size and scope of the Chicago gangs: http://www.chicagocrimecommission.com. See also Peter Slevin, “Jennifer Hudson’s Nephew Found Dead,” Washington Post, October 28, 2008; Fran Spielman, “A Different Beat for Weis,” Chicago Sun-Times, October 25, 2008.

  17. Gary Slutkin and Tio Hardiman, “The Homicide That Didn’t Happen,” Chicago Tribune, February 9, 2011.

  18. For statistics on Chicago murders, see portal.chicagopolice.org. For press reports on this decline, see William Lee, “Decreases in Major Crime Categories, Chicago Police Say,” Chicago Tribune, September 8, 2010.

  19. Frank Spielman and Frank Main, “Police Supt. Weis Bails Out,” Chicago Sun-Times, March 2, 2011.

  20. “Weis Critical of Decision Allowing Burge To Keep Pension” CBS Chicago, January 28, 2011.

  21. http://harris.uchicago.edu/directory/faculty/brett_goldstein.

  6: (RE)WRITING SOCIAL CODE

  1. Julia Bort, “Facebook Engineer Jocelyn Goldfein to Women: Stop Being Scared of Computer Science,” Business Insider, October 2, 2012.

  2. Nicholas Carlson, “At Last—The Full Story of How Facebook Was Founded,” Business Insider, March 5, 2010.

  3. Jessica Gurnn, “The Grunts Are Geeks at Facebook Bootcamp,” Los Angeles Times, August 1, 2010.

  4. Brier Dudley, “Facebook Message: Girls, Too, Can Do Computers,” Seattle Times, March 11, 2012.

  5. “Audio Podcast: Deep Inside Facebook with Director of Engineering Jocelyn Goldfein,” Taken from the Entrepreneurial Thought Leaders Lecture Series, Ecorner: organized by Stanford University’s Entrepeneurship Corner, May 22 2013.

  6. Dudley, “Facebook Message: Girls, Too, Can Do Computers.”

  7. “Audio Podcast: Deep Inside Facebook with Director of Engineering Jocelyn Goldfein.”

  8. Nick Bilton, “Facebook Graffiti Artist Could Be Worth $500 Million,” New York Times, “Bits” blog, February 7, 2012.

  9. Sarah Phillips, “A Brief History of Facebook,” The Guardian, July 24, 2007.

  10. Ibid.

  11. “Timeline: Key Dates in Facebook’s Ten Year History,” Associated Press, February 4, 2014.

  12. Tomio Geron, “The Untold Story of Two Early Facebook Investors,” Forbes, February 2, 2012.

  13. Ashlee Vance, “Facebook: The Making of 1 Billion Users,” Bloomberg Businessweek, October 4, 2012.

  14. Robin Dunbar, Grooming, Gossip and the Evolution of Human Language (Cambridge: Harvard University Press, 1998). See also Robin Dunbar, How Many Friends Does One Person Need? (Cambridge: Harvard University Press, 2010); “Neocortex Size as a Constraint on Group Size in Primates,” Journal of Human Evolution 22, no. 6 (June 1992).

  15. Drake Bennett, “The Dunbar Number, from the Guru of Social Networks,” Bloomberg Businessweek, Technology. January 10, 2013.

  16. R. I. M. Dunbar, “Coevolution of Neocortical Size, Group Size and Language in Humans,” Behavioral and Brain Sciences 16, no. 4 (1993): 681–735.

  17. Jessica Guynn, “The Grunts Are Geeks at Facebook Bootcamp,” Los Angeles Times, August 1, 2010.

  18. See the post by Andrew Bosworth on Facebook on November 19, 2009, entitled “Facebook Engineering Bootcamp.” https://www.facebook.com/notes/facebook...bootcamp/177577963919.

  19. Mike Swift, “A Look Inside Facebook’s ‘Bootcamp’ for New Employees,” San Jose Mercury News, April 18, 2012.

  20. Samantha Murphy Kelly, “The Evolution of Facebook News Feed,” Mashable, March 12, 2013.

  21. Diberendu Ganguly, “How Facebook’s Jocelyn Goldfein Brought Magic to the Most Popular Product ‘Newsfeed,’ ” The Economic Times, January 25, 2013.

  22. Ibid.

  23. Ibid.

  24. Ibid.


  25. Ibid.

  26. Ibid.

  27. Ibid.

  28. Sam Laird, “Facebook Completes Move into New Menlo Park Headquarters,” Mashable.com, December 19, 2011.

  29. Emil Protalinski, “Facebook Wants Two Menlo Park Campuses for 9,400 Employees,” ZDnew. www.zdnet.com/article/facebook-wants-two-menlo-park-campuses-for-9400-employees August 24, 2011.

  30. Megan Rose Dickey, “Some of Facebook’s Best Features Were Once Hackathon Projects,” Business Insider, January 9, 2013.

  31. Jocelyn Goldfein, Facebook post, March 10, 2011, and March 17, 2011, www.facebook.com.

  32. Ibid., September 15, 2011.

  33. Ibid., April 23, 2012.

  34. Ibid., January 24, 2012.

  35. Ibid., June 24, 2012.

  36. Ibid., April 25, 2012.

  37. Mark Zuckerberg, Facebook post, June 28, 2013, www.facebook.com.

  38. Ibid., August 19, 2012.

  39. Mike Schoepfer, Facebook post, August, 14 2012. www.facebook.com.

  40. Ryan Patterson, Facebook post, May 20, 2013, www.facebook.com.

  41. Devindra Hardawar, “Facebook Home Isn’t Dead Yet and More Surprises from Engineering Director Jocelyn Goldfein,” Venturebeat, February 17, 2014, http://venturebeat.com/2014/02/17/facebook-home-isnt-dead-yet-more-surprises-from-mobile-engineering-director-jocelyn-goldfein.

  42. Evelyn Rusli, “Facebook Buys Instagram for $1 Billion,” New York Times, “DealBook,” April 9, 2012.

  43. “Facebook Reports Fourth Quarter and Full Year 2014 Results,” January 28, 2015. www.investor.fb.com.

  7: FLIPPING THE LENS

  1. Financial Aid Cost Summary, Harvard Business School website.

  2. Toby Cosgrove, MD, The Cleveland Clinic Way: Lessons in Excellence from One of the World’s Leading Healthcare Organizations (New York: McGraw-Hill, 2014).

  3. Diane Solov, “From C’s and D’s to Clinic’s Helm: At the Age of 63, Delos ‘Toby’ Cosgrove, Surgeon, Inventor, Go-to Guy (and Dyslexic), Finds the Job and Opportunity He’s Been Looking For,” Cleveland Plain Dealer, June 9, 2004.