I didn't understand his starting comments on how economic theory about incentives can't explain the situation, but a gang-ethos explanation can.

He seems to suggest that bankers 'keep dancing to the music' while they know this will make the eventual downfall both to society and to themselves harder, and he explains this by talking about group-think etcetera.

I have no trouble believing the group-think story. But isn't the main problem that going along with the group-think was indeed very profitable to these people, even when they would have been aware of a coming crisis? I would say he IS describing a typical story about skewed incentives, where expecting a crisis would mean losing ones job, while the worst the crisis could do was the same job loss, but a few well-paid years later.

I really think this is an important distinction. If unrational group-think has caused the crisis, and this cult effect is in the long run against the 'cultists' own interest, then we have at least hope that less gang-like banks come out on top and will be the examples for the future.  But if group-think didn't really hurt the long term profits of those involved, there is no reason to assume it will go away.