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Wednesday, April 26, 2017

We've been duped

Libor manipulation wasn’t illegal. It was so clearly morally wrong that it was not thought necessary to specify that.
The British broker who became the public face of the Libor scandal was Tom Hayes, a grubby man who dressed in tattered pants and sweaters with holes, and had terrible dandruff. Socially clueless, he was good at one thing: creating massively complicated computer models for derivatives, which are financial products derived from something else, e.g., gold bar futures rather than gold bars themselves.
David Enrich is the ironically named author of the latest book on the Libor scandal, The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History. (The subtitle is styled for simpletons.)
The Spider Network, about Hayes and his gang of thieves, is great stuff, although written in tight co-operation with Hayes himself, now serving an 11-year jail sentence. The only scammer jailed after Libor, he feels he is a scapegoat. He is not. He is guilty; it is irrelevant that other juries were too mystified by high finance to convict.
Hayes worked at various institutions — all these men move around a lot — including Royal Bank of Canada early on (he appalled them), the Swiss bank UBS, and Citigroup. He did his nastiest work at UBS in Tokyo, persuading co-workers to skew Libor, and then doing the same with traders at competing banks, which was very Carlos Danger, shall we say.
As a result, the Libor rate was falsified and international finance was poisoned. Pension plans overpaid, university endowments lost value, people lost homes, all because Libor birthed small corruptions for the personal profit of a few heartless brokers.
The reader becomes Nick Carraway in The Great Gatsby, meeting Meyer Wolfsheim, the man behind the fixing of the 1919 World Series. “It never occurred to me that one man could start to play with the faith of fifty million people — with the single-mindedness of a burglar blowing a safe.” But that’s what Hayes did nearly a century later, so he could have grand houses and five cars.

How the Libor scandal spat in the world’s face: Mallick

Very few people are jailed for white-collar financial crime. Perhaps this is why there is so much of it.

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