2009-12-23 16:57:57 (1 days ago)
*Interview With UK Banker Steven Green: The New World Order 'Is Already
In a Spiegel interview, London banker and lay preacher Stephen Green,
group chairman of HSBC, discusses the divide between his Christian faith
and the pursuit of profit, the morality of being involved in the
subprime mortgage business and whether he and his fellow bankers have
learned anything from the financial crisis.
SPIEGEL: Mr. Green, when was the last time you were ashamed to be a banker?
Green: I haven't felt ashamed when it comes to my own work. However,
over the past few years there has been a portion of the global business
that was simply unacceptable. Some financial products were much too
complicated and not transparent enough. Moreover, they were sold to
people who often had no idea what they were buying. This sort of
business was very successful for a few years, but it resulted in
catastrophe. In this respect, it was disgraceful for all of us.
SPIEGEL: You are not just the group chairman of Britain's HSBC, the
world's largest private bank. In your free time, you also serve as a lay
preacher in the Anglican Church. Have you ever prayed: "Please God,
Green: Well, I was certainly never at a point at which I felt that it
was so diabolical that it ought to be abolished. All economic systems
have their faults and capitalism is the best of a bad bunch - that is
even though, only a year ago…
SPIEGEL: ... shortly after the Lehman bankruptcy...
Green: ...it was truly on the brink.
SPIEGEL: When did you last give a sermon?
Green: Last Sunday. My sermon was about the gospel and the financial crisis.
SPIEGEL: Do you sometimes hear personal reproaches from the members of
Green: Rarely, because people are thoughtful, and they know that the
problems were - and still are - complex. Of course, many people feel
that they lost their jobs because of the irresponsibility of some
financial managers. I can understand this anger.
SPIEGEL: Are these two things even compatible: being religious and being
Green: It's a conflict that we must all confront. However, it isn't just
possible, but necessary, to resolve the contradictions.
SPIEGEL: Do you truly believe that Christian faith and the
uncompromising pursuit of profit can be reconciled?
Green: The pursuit of profit must be guided by morals, because not
everything the market considers legal is also legitimate. If we accept
capitalism, we must also accept this challenge. That's where religion,
among other things, plays a role.
SPIEGEL: Your fellow banker Lloyd Blankfein, CEO of the U.S. investment
bank Goldman Sachs, recently said that he was doing God's work. How did
you feel about that?
Green: I prefer not to comment on Blankfein.
SPIEGEL: How often do you experience naked greed in your industry?
Green: Very often. But the overwhelming majority of people want to be
convinced that their work makes sense and has a purpose. Profits alone
are pointless. This also applies to bank employees. In this sense, all
cultures and religions are very similar. However, working for the common
good, coming up with an effective social welfare system - all of this
also needs functioning banks too.
SPIEGEL: Nevertheless, the crisis has led to surprisingly few changes so
far. There are hardly any new laws and bankers are once again giving
themselves breathtaking bonuses. And the financial products that
triggered the crisis in the first place are already being traded again.
Green: There is more happening than you think. Everyone is learning in,
and from, this crisis. However, this process has just begun.
SPIEGEL: Are you asking for patience?
Green: The reform of the capitalist system, which is necessary, is far
too important for us to be acting precipitously. Caution is important.
We could make mistakes if we act too quickly.
SPIEGEL: But acting too slowly is an even greater risk. First in with a
suggestion for change, first served. And that could lead to nothing
changing at all.
Green: I consider that risk to be low. I'm more optimistic than you are
in this regard. And too much protection and regulation could stifle
trade, which in turn would first affect the poorest countries. That is
precisely what we should be trying to avoid.
SPIEGEL: If there is too little regulation, there is the risk of the
next bubble bursting.
Green: Of course, which is precisely why I believe that we should
examine very carefully the issue of where and how we can begin with any
SPIEGEL: Is Prime Minister Gordon Brown doing the right thing by
drastically taxing the bonuses of British bankers?
Green: That's a political question…
SPIEGEL: …to which you, as chairman of the British Bankers' Association,
ought to have an answer, particularly as the association has already
criticized the new law.
Green: All I can say is this: The system has to think and act for the
long term, so as to prevent instability. The taxation of bonuses is
merely a short-term measure.
SPIEGEL: This sort of thing can sometimes be helpful, if only to allay
public outrage over the conduct of bankers.
Green: Certainly. But it doesn't guarantee the system's long-term survival.
SPIEGEL: It sounds as if you considered Brown's venture to be populist.
Green: That's what you say.
SPIEGEL: We also say that we expect to see huge excesses in terms of
bonuses in the coming weeks and months…
Bankers Big Bonuses 'Not Particularly Important'
Green: …which are sometimes worth criticizing. But they are not
particularly important when it comes to the system's fundamental flaws.
SPIEGEL: Why? They fueled the orientation toward short-term profit that
many of your fellow bankers had up until recently.
Green: Of course. But just look at the amounts in question and compare
them with the overall cost of damages inflicted during the crisis. This
is marginal. And besides, we can't turn back the clocks to
SPIEGEL: Is the crisis already over?
Green: In the financial sector the worst is behind us. But the real
economy will feel the effects for a long time to come.
SPIEGEL: In other words, people and governments are now paying the price
for the damage the bankers have done.
Green: And they will be paying off these mountains of debt for a few
years to come. Unemployment will continue to rise in many countries.
SPIEGEL: Many countries are deeply in debt. Even Dubai can hardly pay
its bills anymore. How bad is this situation for the HSBC and other banks?
Green: We have been in Dubai since 1946. In fact, we were the first bank
to do business there. The country will retain its status as a regional
financial center. Dubai is not Lehman (Brothers, the financial services
firm that filed for the largest bankruptcy in U.S. history in September
2008, sparking a financial crisis). The country has far too many assets
in the form of natural resources. It has accumulated a lot of debt but
it is manageable.
SPIEGEL: Are you at all concerned about bankrupt states in Greece or
Green: I do not wish to, and I cannot, rule out such shocks in the
future. But I don't expect them. However the issue of exit strategies is
SPIEGEL: By that, you mean how do the central banks of various countries
plan to stop pumping money into the global economy? After all, higher
interest rates will just making servicing debts more costly.
Green: It's a complex issue and every country has to develop its own
approach. Australia has already begun to raise interest rates, even
though the country was not hard-hit by the financial crisis.
SPIEGEL: In your new book "Good Value: Reflections on Money, Morality
and an Uncertain World", you write that you expect a "new world order"
to begin taking shape. What will it look like? And what should it look like?
Green: I see the G-20 group as an indication that this new order is
already underway. In the past developing countries were not represented
in such groups. But now they are growing in self-confidence and stepping
onto the world stage.
SPIEGEL: It can't be a coincidence that your CEO is moving his office in
the New Year from London to Hong Kong.
Green: That's where our bank was first established. In other words, we
are returning to our roots. Asia's global economic dominance will
continue to grow, while the dominance of the West slowly declines. I'm
convinced of that.
SPIEGEL: Throughout the entire crisis, HSBC never required a government
bailout. But your company is also accused of perhaps being too big to
fail in a crisis.
Green: There are many banks, even supposedly small banks like Northern
Rock that cannot simply be allowed to fail. They have to be liquidated
in an orderly manner.
SPIEGEL: But they could also be broken up first.
Green: HSBC has a relatively simple structure. Under the umbrella of the
holding company, there are independent institutions in all of the
countries in which we are active, companies that could survive on their
own. Of course, we do come to the assistance of subsidiaries if they get
SPIEGEL: Your U.S. subsidiary was one of the largest providers of
so-called subprime mortgages. That was certainly an expensive rescue
Green: Certainly, it cost us billions. But we did step up to the plate,
we did not just leave our colleagues to their fate. From today's
standpoint those efforts are regretful. But in 2003, it made sense.
SPIEGEL: You approved mortgage loans to people who couldn't afford them.
For a moralist like you, this must have been a huge contradiction.
Green: Not in the least. There are two ways you can tell how decent a
company is. First: Does it honestly assume the responsibility - and the
costs - when something goes wrong? We lived up to our responsibility in
SPIEGEL: That's not what we were asking.
Green: Second: How dishonorable was the business? And I can tell you
right now, that the subprime loans were completely legitimate.
SPIEGEL: You had to have known that many of your borrowers would not be
able to make their mortgage payments.
Green: Eighty percent of these customers are paying their mortgages
without a hitch. And it's a rather arrogant way of looking at things,
when the affluent tell those who are not as well off that they have no
right to buy real estate.
SPIEGEL: This isn't about rights, but about risks - and, consequently,
'We Made it Possible for Poorer People to Own Homes'
Green: We made it possible for poorer people to own homes…
SPIEGEL: But you must have known that an unemployed person cannot pay
off a mortgage. One might consider that immoral.
Green: I can't accept that, because we handled subprimes carefully.
Without us, these people would have fallen into the hands of loan sharks.
SPIEGEL: With all due respect, your bank didn't get into the subprime
business because it wanted to help out poor Americans. It got into the
subprime business because it expected to make a handsome profit.
Green: Making a profit and promoting a social concept are not mutually
exclusive. In fact, it was perfect. In 2002, we could not have predicted
the problems that would occur later.
SPIEGEL: The moral problem lies elsewhere. The risks associated with
these mortgages were securitized, and therefore hidden, a thousand times
over. The responsibility was simply sold onto someone else.
Green: You're completely right. But HSBC hardly pursued this strategy.
We securitized almost nothing - precisely because we consider this to be
a questionable practice.
SPIEGEL: It's also immoral when a bank forecloses on the houses of their
insolvent customers. The Christian thing to do would be to at least
allow these people to keep a roof over their heads. As long as there are
no buyers for the houses it doesn't cost the banks anything.
Green: It wouldn't only be the moral thing to do, it would also be in
the interest of the investors. And in fact we did offer that option to
many of these homeowners.
SPIEGEL: What kind of business does an ethical banker engage in?
Green: He deals in products that are useful and socially beneficial, and
that are fairly traded. Long-term relationships with his customers and
his shareholders are important to him.
SPIEGEL: Given this self-image, could you support a weapons company, for
Green: There are activities that I, and my bank, consider to be
questionable. For this reason, we have almost no involvement in the
weapons industry. We want the things we finance to be sustainable.
SPIEGEL: Do you have lists that classify companies as "good" or "bad?"
Green: No. We tend to look at business sectors instead.
SPIEGEL: Is HSBC more ethical than others?
Green: Neither more ethical nor better. There are undoubtedly some
smaller banks that don't pay too much attention to how they make their
money. But nowadays, the big banks pay very close attention to these
issues, even if the public is under the impression that bankers are
motivated purely by greed.
SPIEGEL: A former employee of HSBC in Switzerland is believed to have
turned over data on more than 100,000 customers to French authorities.
What do you know about this?
Green: All that is clear so far is that there was criminal activity
involved, in which a former employee gained access to customer
information illegally and passed it on. However, based on what we know
at this point, this affects fewer than 10 of our customers.
SPIEGEL: Tax evasion and possibly even Mafia accounts are believed to be
involved. Now, purely as a question of morals: Would you understand if
an employee betrayed the company for purely moral reasons?
Green: If he had any suspicions, I would expect him to report them
internally first. In our bank, all laws and regulations are strictly
observed in all countries and units. We have departments that look into
everything, such as money laundering and compliance issues, as well as
an internal audit department. Tax evasion, money laundering, drug or
Mafia money are not things our bank knowingly tolerates. For this
reason, no one has to steal customer data.
SPIEGEL: So, could you understand it: Yes or no?
Green: It depends. End of story.
SPIEGEL: Mr. Green, we thank you for this interview.
Intellpuke: You can read this interview with Steven Green, conducted by
Spiegel journalists Thoma Tuma and Beat Balzli, in context here:
This article was translated from the German for Spiegel by Christopher