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The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History
In 2006, an oddball group of bankers, traders and brokers from some of the largest financial institutions made a startling realization: Libor—the London interbank offered rate, which determines the interest rates on trillions in loans worldwide—was set daily by a small group of easily manipulated administrators, and that they could reap huge profits by nudging it fractions of a percent to suit their trading portfolios. Tom Hayes, a brilliant but troubled mathematician, became the lynchpin of a wild alliance that included a prickly French trader nicknamed “Gollum”; the broker “Abbo,” who liked to publicly strip naked when drinking; a nervous Kazakh chicken farmer known as “Derka Derka”; a broker known as “Village” (short for “Village Idiot”) who racked up huge expense account bills; an executive called “Clumpy” because of his patchwork hair loss; and a broker uncreatively nicknamed “Big Nose” who had once been a semi-professional boxer. This group generated incredible riches —until it all unraveled in spectacularly vicious, backstabbing fashion.
With exclusive access to key characters and evidence, The Spider Network is not only a rollicking account of the scam, but also a provocative examination of a financial system that was crooked throughout.
With exclusive access to key characters and evidence, The Spider Network is not only a rollicking account of the scam, but also a provocative examination of a financial system that was crooked throughout.
528 pages, Hardcover
First published March 21, 2017
1562 people are currently reading
12140 people want to read
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March 19, 2019
A very cool research on a very space cadet issue that our modern world, no matter how sophisticated we think it be, was prone to at up until a very recent point. (And probably still is, I don't see this process becoming separate from judgement!)
Q: Spread out across time zones and continents, a group of bankers, brokers, and traders had tried to skew interest rates that served not only as the foundation of trillions of dollars of loans, but also as an essential vertebra of the financial system itself. It all boiled down to something called Libor: an acronym for the London interbank offered rate, it’s often known as the world’s most important number. Financial instruments all over the globe—a volume so awesome, well into the tens of trillions of dollars, that it is hard to accurately quantify—hinge on tiny movements in Libor. In the United States, the interest rates on most variable-rate mortgages are based on Libor. So are many auto loans, student loans, credit card loans, and on and on—almost anything that doesn’t have a fixed interest rate. The amounts that big companies pay on multibillion-dollar loans are often determined by Libor. Trillions of dollars of exotic-sounding instruments called derivatives are linked to the ubiquitous rate, and they have the ability to touch virtually everyone: Pension funds, university endowments, cities and towns, small businesses and giant companies all use them to speculate on or protect themselves against swings in interest rates. If you bought this book with a credit card, you quite possibly brought Libor into it. So, too, if you drove to the bookstore in a car not yet paid off—or if you’re carrying a mortgage or student loans, or if your town borrowed money to pave its roads, or if you work for a company that issues debt. So if something was wrong with Libor, the pool of potential victims would be vast. As it turned out, something wasn’t wrong with Libor, everything was. (c)
Q: … this was a misadventure like none other. (с)
Q: Of course, traders being traders, Davies teased Hayes about the fact that his mother still cut his hair and that he was still sleeping under a duvet cover decorated with superheroes. He suggested that his mentee read The Curious Incident of the Dog in the Night-Time, a novel whose autistic main character reminded Davies of Hayes. (Behind his back, Davies nicknamed him “Kid Asperger.” Other colleagues christened him “Rain Man.”) (c)
Q:
Derivatives really exploded in popularity in the 1970s, in large part due to unprecedented volatility that hit financial markets. Oil prices ricocheted up and down. Governments delinked their currencies from the gold standard, causing exchange rates to swing wildly. Rapid inflation spurred central banks to jack up interest rates. Companies and individuals needed ways to protect their fortunes from these new risks—and banks and brokerages were there to help, peddling a growing array of derivatives. A company that offered hot-air-balloon rides might purchase derivatives whose value rose the more rainy days there were in a season, thereby shielding the company from the adverse effects of bad weather. The banks or other companies that sold those instruments would charge a fee and then would try to balance out their positions by offering the opposite positions—say, a derivative whose value climbed based on the number of sunny days—to other customers, such as umbrella manufacturers. Boiled down to their essence, derivatives were designed to help people or institutions protect themselves from future circumstances. And no matter the sunshine or the clouds, one party in the transaction always came out ahead—that was the bank that, for a fee, engineered the derivative.
Derivatives were uniquely suited for speculation, because traders could dabble without actually having to own a product. Someone who bought or sold pork belly futures, for example, was unlikely to actually own, now or ever, any actual pig parts. But future swings in the price of pork bellies might be a good gauge of expectations about the weather or a harvest or a disease’s severity or just basic macroeconomic trends. And so investors might buy or sell pork belly futures to get a piece of that action. (c)
Q:
And in 1998, the chaotic collapse of the giant, derivatives-investing hedge fund Long-Term Capital Management, run by mathematicians and Nobel Prize–winning economists, further underscored the instruments’ risks (c)
Q:
In 1981, IBM turned to Salomon Brothers for help. The Wall Street firm approached the World Bank—one of the leading issuers of debt anywhere, and an entity with a tolerance for bonds denominated in a variety of currencies—and convinced it to sell a slug of bonds that were identical to the IBM debt except for one crucial difference: They were in dollars. Then IBM and the World Bank simply swapped responsibility for making interest payments and eventually repaying the principal on their respective bonds. It was the birth of a new financial derivative: the swap. (c)
Q:
From the start, though, Libor was prone to problems. Chief among those was the potential for banks to manipulate it for their own benefit. Doing that was alarmingly easy. In the 1990s, junior bank employees would simply pick up the phone and call in their submissions to financial data company Thomson Reuters every morning around eleven o’clock. A low-level Reuters employee punched all the banks’ data into a computer and calculated the averages. Nobody of any seniority monitored the process. Virtually all it took for a bank to skew Libor was for it to skew its own submission. As long as the bank’s figures weren’t the very highest or the very lowest of all that day’s submissions, a change in its data would ripple through the average.
In 1991, a young Morgan Stanley trader in London named Douglas Keenan was placing bets on interest-rate futures. Their value was calculated based on where Libor moved. After the market moved against him one day, Keenan came to suspect that someone—he wasn’t sure who—was somehow manipulating the instruments to suit his or her own trading positions. He shared his suspicions with his colleagues. They laughed at his naïveté. It was common knowledge that banks tweaked Libor to benefit their own trading positions. It seemed that everyone other than Keenan already knew it was happening.
Banks had multiple incentives to push or pull Libor. One was that, because each bank’s submission was made public, investors scoured the data for indicators about the bank’s financial health. A bank that reported a spike in its borrowing costs might be in trouble—after all, why else would rival institutions suddenly be charging it more to borrow row money? That gave banks a reason to keep their submissions low, especially during periods of market unease. Another enticement for banks to tinker with Libor was to increase the value of the vast portfolios of derivatives that the banks’ traders were sitting on at any given time. Those positions could incentivize a bank to move Libor higher or lower—or both, in the frequent event that different traders at the same bank had amassed different positions. It all depended on what their traders had recently bought or sold. (c)
Q:
When the CFTC invited the public to comment on the Merc’s proposal, Marcy Engel jumped at the opportunity. Engel was a lawyer for Salomon Brothers, then firmly established as one of Wall Street’s most aggressive bond-trading houses (it soon would become part of Citigroup). She worried that linking Libor to the Eurodollar futures would provide banks, which had huge businesses trading those contracts, “an opportunity for manipulation . . . to benefit its own positions.” Richard Robb, at the time a thirty-six-year-old trader at a small Japanese financial company, DKB Financial Products Inc., also wrote to the commission to caution that Libor was vulnerable to manipulation and therefore shouldn’t be embedded in the contracts. “If two banks worked together, they could raise the average” substantially, he warned.
During Bill Clinton’s presidency, the CFTC had earned a reputation as a hands-off, probusiness regulator. In December 1996, staffers wrote a memo to the agency’s leaders saying that Libor “does not appear to be readily susceptible to manipulation.” The commission approved the Merc’s application. The next month, Libor officially became an integral component of the fast-growing derivatives market. (c)
Q:
One way for the BBA to wring more revenue out of Libor was to create new versions of the benchmark. The most prominent versions of Libor were the British pound and the U.S. dollar varieties, but by 2005 Libor came in ten flavors: The pound and dollar were joined by the Australian dollar, the Canadian dollar, the Swiss franc, the Danish krone, the euro, the Japanese yen, the New Zealand dollar, and the Swedish krona. And within each of those, there were fifteen subcategories, broken down by time periods. For example, a three-month U.S. dollar Libor was supposed to measure how much it would cost a bank to borrow dollars in London for a three-month period. Other time periods included one month, six months, one year, and so on. (c)
Q:
Smith had basically no clue what he was doing. He didn’t know how to go about figuring out the bank’s borrowing costs, which were supposed to be the entire basis of the bank’s Libor data. He didn’t even know whom to talk to internally. … So Smith, lacking much other relevant information, would make up his submission based in part on what the brokers were predicting. …
Brokers weren’t Smith’s only sources. One of the investment bank’s priorities at the time was to improve collaboration between different parts of the company. The idea was to transform UBS into a more efficient, collaborative beast, with everyone aware of what his colleagues were up to and pulling in the same direction. The directive was communicated down the chain of command by a senior manager named Holger Seger, a veteran trader who’d worked at UBS and before that Swiss Bank Corp. since 1990. It might have sounded like a vacuous corporate platitude, but UBS employees, at least some of them, took it seriously. Smith was supposed to coordinate with UBS’s traders who specialized in buying and selling interest-rate swaps, instruments whose values rose and fell based on movements in Libor. Sometimes the swaps traders would lob a request in his direction about where they wanted him to submit the bank’s Libor data that day. Even as a rookie on the desk, he understood what was going on. The traders had big positions whose values hinged in large part on Libor—precisely what Marcy Engel and Richard Ross had warned the CFTC would happen. A lot of money was on the line. So Smith generally followed their requests when it came to what he entered into his spreadsheet. He didn’t see any reason not to. (c)
Q:
Around 7 a.m., he sent out an e-mail called a “run-through” to a slew of bank traders. The dispatch contained a simple spreadsheet—basically just a box of numbers—pasted into the body of the message. It listed where every tenor—the technical term for time period*—of yen Libor had stood the past day or two and where Goodman expected it to end up that day. He called that last figure “Suggested Libors.” Each morning, he prefaced the data with the same simple note: “GOOD MORNING YEN RUN THRU.”
The run-throughs had been an ICAP fixture since the late 1990s. Before long, ICAP’s marketing team had sensed their commercial potential. Every so often, an executive traipsed around to a bunch of banks and touted the run-throughs as a valuable service ICAP provided important clients. And so the number of recipients on Goodman’s run-through list grew. Libor submitters received it. Derivatives traders received it. Even Bank of England officials received it.
Read and Goodman had realized something interesting about the mundane run-throughs. Employees at some banks—including Citigroup, J.P. Morgan, Royal Bank of Scotland, WestLB, and Lloyds in Great Britain—who were in charge of submitting Libor data sometimes appeared to simply copy ICAP’s data rather than go through the onerous process of coming up with their own hypothetical estimates of what it would cost to borrow across different currencies and time periods.
… Once, when Goodman’s run-through contained a typo, suggesting six-month Libor at 1.10 instead of 1.01, Read noticed that Citigroup and WestLB copied it, even though it represented a huge leap from the previous day’s level. When Goodman corrected it the next day, the banks again followed suit. (c)
Q:
Nobody ever told him it was inappropriate—legally, ethically, or otherwise—to lobby outsiders for help on Libor. What kept him up at night wasn’t that what he was doing was wrong. It was that he wasn’t doing it well enough.
Hayes was so open about, and preoccupied with, his strategy that he would change the status on his Facebook page to reflect his daily desires for Libor to move up or down, a self-deprecating poke at his nerdy fixation. (c)
Q:
In December 2007, UBS’s CEO, Marcel Rohner, gave a presentation to investors in London. Projected on a screen in front of the audience, the presentation cited “structured Libor” as one of the bank’s “core strengths” and as a “high growth/high margin business.” (c)
Q: Spread out across time zones and continents, a group of bankers, brokers, and traders had tried to skew interest rates that served not only as the foundation of trillions of dollars of loans, but also as an essential vertebra of the financial system itself. It all boiled down to something called Libor: an acronym for the London interbank offered rate, it’s often known as the world’s most important number. Financial instruments all over the globe—a volume so awesome, well into the tens of trillions of dollars, that it is hard to accurately quantify—hinge on tiny movements in Libor. In the United States, the interest rates on most variable-rate mortgages are based on Libor. So are many auto loans, student loans, credit card loans, and on and on—almost anything that doesn’t have a fixed interest rate. The amounts that big companies pay on multibillion-dollar loans are often determined by Libor. Trillions of dollars of exotic-sounding instruments called derivatives are linked to the ubiquitous rate, and they have the ability to touch virtually everyone: Pension funds, university endowments, cities and towns, small businesses and giant companies all use them to speculate on or protect themselves against swings in interest rates. If you bought this book with a credit card, you quite possibly brought Libor into it. So, too, if you drove to the bookstore in a car not yet paid off—or if you’re carrying a mortgage or student loans, or if your town borrowed money to pave its roads, or if you work for a company that issues debt. So if something was wrong with Libor, the pool of potential victims would be vast. As it turned out, something wasn’t wrong with Libor, everything was. (c)
Q: … this was a misadventure like none other. (с)
Q: Of course, traders being traders, Davies teased Hayes about the fact that his mother still cut his hair and that he was still sleeping under a duvet cover decorated with superheroes. He suggested that his mentee read The Curious Incident of the Dog in the Night-Time, a novel whose autistic main character reminded Davies of Hayes. (Behind his back, Davies nicknamed him “Kid Asperger.” Other colleagues christened him “Rain Man.”) (c)
Q:
Derivatives really exploded in popularity in the 1970s, in large part due to unprecedented volatility that hit financial markets. Oil prices ricocheted up and down. Governments delinked their currencies from the gold standard, causing exchange rates to swing wildly. Rapid inflation spurred central banks to jack up interest rates. Companies and individuals needed ways to protect their fortunes from these new risks—and banks and brokerages were there to help, peddling a growing array of derivatives. A company that offered hot-air-balloon rides might purchase derivatives whose value rose the more rainy days there were in a season, thereby shielding the company from the adverse effects of bad weather. The banks or other companies that sold those instruments would charge a fee and then would try to balance out their positions by offering the opposite positions—say, a derivative whose value climbed based on the number of sunny days—to other customers, such as umbrella manufacturers. Boiled down to their essence, derivatives were designed to help people or institutions protect themselves from future circumstances. And no matter the sunshine or the clouds, one party in the transaction always came out ahead—that was the bank that, for a fee, engineered the derivative.
Derivatives were uniquely suited for speculation, because traders could dabble without actually having to own a product. Someone who bought or sold pork belly futures, for example, was unlikely to actually own, now or ever, any actual pig parts. But future swings in the price of pork bellies might be a good gauge of expectations about the weather or a harvest or a disease’s severity or just basic macroeconomic trends. And so investors might buy or sell pork belly futures to get a piece of that action. (c)
Q:
And in 1998, the chaotic collapse of the giant, derivatives-investing hedge fund Long-Term Capital Management, run by mathematicians and Nobel Prize–winning economists, further underscored the instruments’ risks (c)
Q:
In 1981, IBM turned to Salomon Brothers for help. The Wall Street firm approached the World Bank—one of the leading issuers of debt anywhere, and an entity with a tolerance for bonds denominated in a variety of currencies—and convinced it to sell a slug of bonds that were identical to the IBM debt except for one crucial difference: They were in dollars. Then IBM and the World Bank simply swapped responsibility for making interest payments and eventually repaying the principal on their respective bonds. It was the birth of a new financial derivative: the swap. (c)
Q:
From the start, though, Libor was prone to problems. Chief among those was the potential for banks to manipulate it for their own benefit. Doing that was alarmingly easy. In the 1990s, junior bank employees would simply pick up the phone and call in their submissions to financial data company Thomson Reuters every morning around eleven o’clock. A low-level Reuters employee punched all the banks’ data into a computer and calculated the averages. Nobody of any seniority monitored the process. Virtually all it took for a bank to skew Libor was for it to skew its own submission. As long as the bank’s figures weren’t the very highest or the very lowest of all that day’s submissions, a change in its data would ripple through the average.
In 1991, a young Morgan Stanley trader in London named Douglas Keenan was placing bets on interest-rate futures. Their value was calculated based on where Libor moved. After the market moved against him one day, Keenan came to suspect that someone—he wasn’t sure who—was somehow manipulating the instruments to suit his or her own trading positions. He shared his suspicions with his colleagues. They laughed at his naïveté. It was common knowledge that banks tweaked Libor to benefit their own trading positions. It seemed that everyone other than Keenan already knew it was happening.
Banks had multiple incentives to push or pull Libor. One was that, because each bank’s submission was made public, investors scoured the data for indicators about the bank’s financial health. A bank that reported a spike in its borrowing costs might be in trouble—after all, why else would rival institutions suddenly be charging it more to borrow row money? That gave banks a reason to keep their submissions low, especially during periods of market unease. Another enticement for banks to tinker with Libor was to increase the value of the vast portfolios of derivatives that the banks’ traders were sitting on at any given time. Those positions could incentivize a bank to move Libor higher or lower—or both, in the frequent event that different traders at the same bank had amassed different positions. It all depended on what their traders had recently bought or sold. (c)
Q:
When the CFTC invited the public to comment on the Merc’s proposal, Marcy Engel jumped at the opportunity. Engel was a lawyer for Salomon Brothers, then firmly established as one of Wall Street’s most aggressive bond-trading houses (it soon would become part of Citigroup). She worried that linking Libor to the Eurodollar futures would provide banks, which had huge businesses trading those contracts, “an opportunity for manipulation . . . to benefit its own positions.” Richard Robb, at the time a thirty-six-year-old trader at a small Japanese financial company, DKB Financial Products Inc., also wrote to the commission to caution that Libor was vulnerable to manipulation and therefore shouldn’t be embedded in the contracts. “If two banks worked together, they could raise the average” substantially, he warned.
During Bill Clinton’s presidency, the CFTC had earned a reputation as a hands-off, probusiness regulator. In December 1996, staffers wrote a memo to the agency’s leaders saying that Libor “does not appear to be readily susceptible to manipulation.” The commission approved the Merc’s application. The next month, Libor officially became an integral component of the fast-growing derivatives market. (c)
Q:
One way for the BBA to wring more revenue out of Libor was to create new versions of the benchmark. The most prominent versions of Libor were the British pound and the U.S. dollar varieties, but by 2005 Libor came in ten flavors: The pound and dollar were joined by the Australian dollar, the Canadian dollar, the Swiss franc, the Danish krone, the euro, the Japanese yen, the New Zealand dollar, and the Swedish krona. And within each of those, there were fifteen subcategories, broken down by time periods. For example, a three-month U.S. dollar Libor was supposed to measure how much it would cost a bank to borrow dollars in London for a three-month period. Other time periods included one month, six months, one year, and so on. (c)
Q:
Smith had basically no clue what he was doing. He didn’t know how to go about figuring out the bank’s borrowing costs, which were supposed to be the entire basis of the bank’s Libor data. He didn’t even know whom to talk to internally. … So Smith, lacking much other relevant information, would make up his submission based in part on what the brokers were predicting. …
Brokers weren’t Smith’s only sources. One of the investment bank’s priorities at the time was to improve collaboration between different parts of the company. The idea was to transform UBS into a more efficient, collaborative beast, with everyone aware of what his colleagues were up to and pulling in the same direction. The directive was communicated down the chain of command by a senior manager named Holger Seger, a veteran trader who’d worked at UBS and before that Swiss Bank Corp. since 1990. It might have sounded like a vacuous corporate platitude, but UBS employees, at least some of them, took it seriously. Smith was supposed to coordinate with UBS’s traders who specialized in buying and selling interest-rate swaps, instruments whose values rose and fell based on movements in Libor. Sometimes the swaps traders would lob a request in his direction about where they wanted him to submit the bank’s Libor data that day. Even as a rookie on the desk, he understood what was going on. The traders had big positions whose values hinged in large part on Libor—precisely what Marcy Engel and Richard Ross had warned the CFTC would happen. A lot of money was on the line. So Smith generally followed their requests when it came to what he entered into his spreadsheet. He didn’t see any reason not to. (c)
Q:
Around 7 a.m., he sent out an e-mail called a “run-through” to a slew of bank traders. The dispatch contained a simple spreadsheet—basically just a box of numbers—pasted into the body of the message. It listed where every tenor—the technical term for time period*—of yen Libor had stood the past day or two and where Goodman expected it to end up that day. He called that last figure “Suggested Libors.” Each morning, he prefaced the data with the same simple note: “GOOD MORNING YEN RUN THRU.”
The run-throughs had been an ICAP fixture since the late 1990s. Before long, ICAP’s marketing team had sensed their commercial potential. Every so often, an executive traipsed around to a bunch of banks and touted the run-throughs as a valuable service ICAP provided important clients. And so the number of recipients on Goodman’s run-through list grew. Libor submitters received it. Derivatives traders received it. Even Bank of England officials received it.
Read and Goodman had realized something interesting about the mundane run-throughs. Employees at some banks—including Citigroup, J.P. Morgan, Royal Bank of Scotland, WestLB, and Lloyds in Great Britain—who were in charge of submitting Libor data sometimes appeared to simply copy ICAP’s data rather than go through the onerous process of coming up with their own hypothetical estimates of what it would cost to borrow across different currencies and time periods.
… Once, when Goodman’s run-through contained a typo, suggesting six-month Libor at 1.10 instead of 1.01, Read noticed that Citigroup and WestLB copied it, even though it represented a huge leap from the previous day’s level. When Goodman corrected it the next day, the banks again followed suit. (c)
Q:
Nobody ever told him it was inappropriate—legally, ethically, or otherwise—to lobby outsiders for help on Libor. What kept him up at night wasn’t that what he was doing was wrong. It was that he wasn’t doing it well enough.
Hayes was so open about, and preoccupied with, his strategy that he would change the status on his Facebook page to reflect his daily desires for Libor to move up or down, a self-deprecating poke at his nerdy fixation. (c)
Q:
In December 2007, UBS’s CEO, Marcel Rohner, gave a presentation to investors in London. Projected on a screen in front of the audience, the presentation cited “structured Libor” as one of the bank’s “core strengths” and as a “high growth/high margin business.” (c)
April 8, 2017
Yesterday, (April 6, 2017) the very same Southwark Crown Court that had previously sentenced Tom Hayes to 14 years in prison arrived at a very different decision in the case of his Barclays counterparts, Ryan Reich and Stylianos Contogoulas, making for some very poignant reading as I was finishing The Spider Network.
The argument David Enrich builds over 450 fact-packed pages could not be simpler: on both sides of the Atlantic the justice system is starved of both resources and expertise and has repurposed itself to closing cases by pinning them on the lowest credible perpetrator; conversely, recent troubles notwithstanding, the banking giants control billions and deal in trillions. When the world went upside down in 2008 and the public was baying for blood, a natural alliance was formed between the justice system and the banks with the simple aim of bigging up and scapegoating an Aspergers’ sufferer who had been careless about the manner in which he’d gone about doing the job his superiors 100% knew he was doing, had fully encouraged him to do and had headhunted him from one bank to another to carry on doing.
I totally buy it, and, now there’s one guy behind bars to atone for everybody’s sins, so do the courts, it seems.
And yet, for all its unspeakably detailed portraits, histories and descriptions, for all the evident access the author has had to the main characters in this play, the book is a failure. The reason is simple: it ducks the main issue, which cannot possibly have been “was Tom Hayes framed,” much as he undeniably was. The big issue, that sadly goes unanswered in this book, has to be “is it unethical to mess with LIBOR?”
Disturbingly, it is not only the government and the justice system that lacks basic knowledge of finance, but also, it seems, our corps of financial journalists. In summary, the Wall Street Journal’s financial investigations editor is not equipped to judge on the merits or otherwise of banks going low or going high in their LIBOR submissions. In a 450 page book he devotes a page and a half to a hastily-put-together, self-professed list of potential “victims” of the “LIBOR fraud” and not one sentence on whether we should carry on using LIBOR in the future or not.
A month ago I read “The Fix,” which is actually a bad book covering the exact same story as “The Spider Network,” (I’d go as far as to say that with the benefit of hindsight it feels plagiarized from the serialized version of this book) so I’ll copy verbatim what I wrote when I reviewed it. To wit,
“Somebody from inside the market will one day write a book about all this that will be worth reading, and allow me to take you through the main ideas it should contain:
1. Markets were once small. At that time, the feeling was that they were best left to the people who operated inside them. Over the years, however, (mainly due to demographic reasons) they ballooned in size from roughly 1 GDP around 1980 to roughly 6 GDPs today and (more importantly) they became very widely-held. It thus became the job of government not only to sustain them (zB via the Greenspan put) but also to make sure that an idiot could get involved without getting hurt. So Salomon was punished in 1991 for overbidding in auctions (pause to think how weird that is), Deutsche some ten years later for forcing suboptimal delivery in the Bobl contract (that only professionals can trade and whose rules were on the book for a decade), rule NMS forced everybody to give “best execution” a few years after that (and gave rise to the “Flash Boys”) and some poor bastard went to jail last year for…spoofing, believe it or not. Imagine if real estate brokers got jailed for that! Tom Hayes’ main crime was that he was doing in year 2005 stuff that stopped being acceptable (between us girls) around 1995. And UBS was the kind of shop where nobody knew to put him in his place. E basta.
2. The true crimes of finance in this century, the ones bankers ought to have been punished for, but got away with, came in exactly two flavors: (i) crimes involving the little guy (post Edwin Artzt we leave the big guy alone), who was lured into borrowing money he would never be able to pay back to buy assets, goods and services he could not afford, and indeed put in competition with the fellow little guy to buy the house in the good school district, the nice vacation, the boat etc. You can say he brought it on himself, but that would be unfair: if borrowing is what it will take to send your kids to the better school or to keep your spouse from divorcing you, you are put in a tragic position. We all know how that ended, with home ownership in the US first rising to 69% and then falling to 61%. And with Spanish families being sweet-talked into buying the sub debt of their home lender etc. etc. (ii) post Glass-Steagall, crimes involving the discounting of decades of receivables that were to be found in the loan books of banks using the mark-to-mark methods found at the investment banks they were allowed to merge with and the conversion of this spurious P&L into bonus, resulting in the urge to “source” even more, often dubious, receivables.
The two above trends fed into each other, rather famously, and the crash in the market for CDOs, CLOs and the squares thereof, SIVs and side-pockets has only really resulted in three convictions thus far, the rather interestingly named Lee Farkas the email-shy Karim Serageldin, and now the hapless Tom Hayes, who had zilch to do with it, but had confessed to a completely unrelated misdemeanor, had spent some of his employers’ money on petty bribes and rubbed the judge the wrong way with his curt answers. 50k fine and an industry ban would not have been terribly lenient, if you ask me.
Meanwhile, the people whose fiduciary duty it was to make sure the abolition of Glass-Steagall did not result in this mess not only walk the streets, but are regularly invited to tell us where it’s at.
3. There is no free lunch. If you are going to buy a valuable service, you will have to pay for it. Either (i) it works like it does for goods, where there is a wholesale price between professionals and a retail price for customers and you don’t care that the shoes you paid 100 for cost the merchant 30, or alternatively (ii) you pay what is advertised as the wholesale price, but in reality the wholesale price moves around and it’s higher when you are paying it. If it’s not one of those two, then the guy who is selling you the service will go out of business and you won’t be able to buy that service again. That is, for example, the business model behind the New Zealand time zone. It is the time when FX trades the least, so you can move the price against your customers’ orders. Significantly, customers know this. It is a convention they accept.”
With this rather large parenthesis out of the way, and since the author has decided to dodge it, allow me to opine on the main issue here, namely “is it unethical to mess with LIBOR?”
I will do so in three parts and I will start with the “bond math:”
1. A swap has two legs, fixed and floating. When you first enter a swaps trade, the fixed leg has a rate that is equal to a blended average of the fair price you would pay for the expected value of all the future LIBOR fixings of the floating side.
2. A basis point change in the fixed side changes the mark-to-market value of the entire swap. A basis point change in the LIBOR fixing only changes the accrued interest of the very next three-month or six-month payment.
Conclusion: Tom Hayes’ “crimes” have zero to do with the type of activity that brought us the financial crisis. They belong to the “accrual” column rather than the “mark-to-market” column of the ledger. It is an absolute triumph of the banking industry that it managed to deflect the scrutiny of the authorities and the ire of the general public to an issue that is pretty much at right angles with the crash of 2008.
Second, derivatives transactions between banks (at anywhere between 500 trillion and one quadrillion dollars) are a large multiple of transactions between banks and their real-world clients (at well under 30 trillion). This is actually a protection for clients. Because they borrow money against LIBOR, clients collectively pay LIBOR fixings. The fact that all these derivatives exist means the banks’ incentive that would normally have been to always set LIBOR high is mitigated by the fact that transactions with corporate clients are a small part of every bank’s book.
The author does pick on this when he mentions that in Tom Hayes’ catalog of trades not a single one was with a non-bank, non-hedge fund. Bottom line, banks are so busy trying to cheat each other on the first coupon of their derivatives that this activity actually provides cover to the corporates that borrow against LIBOR.
I’d go one further and say corporates fully know this, and that’s how come they are comfortable fixing their issues off of LIBOR! And of course, they also benefit when in times of crisis banks low-ball their submissions to look solvent.
So we have established that cheating on LIBOR (i) has zero to do with the financial crisis and (ii) by-and-large benefits, rather than hurts, clients, but I still need to get to the third point I promised: “is it wrong to mess with LIBOR?”
When my friend Andrew Hulme first joined the traders on the arb desk at Salomon in the early nineties, they started him on the Danish book. Rates worldwide were coming off, so he picked up the phone to a Danish bank and, Salomon style, received fixed in a billion DKK. Rates came off, as expected, and a few days later he closed it out with a tidy profit, paying fixed on a billion DKK.
A short six months later, there was some screaming from across my desk. CIBOR had fixed 30 (count’em) basis points higher. Out of the blue! Did not really cost him a bomb. Even on a yard, the fifteen cents that corresponded to the 30 basis points of 6m fixing was a mere 1.5 million DKK, which only really registered with poor Andrew.
Next morning, the CIBOR fixing was straight back down to where it had been the day before. The thieving Danish banks had all put up their fixing by 30 basis points as a favor to Andrew’s counterparty. The message was clear: stay out of our market.
Andrew knew what to do, his bosses did not need to tell him. Had he left things as they were there would be no immediate impact to his book, but every time he had a fixing, the Danes would collude to take 30bp from him. He called up his original counterparty, with whom he’s luckily done both trades, and asked what it would cost to cancel them both. When the guy on the other side of the phone sucked air through his teeth and said it would cost us money, Andrew made the correct decision that he would “pay up and look big.”
Did he stop trading DKK? Hell, no! But from that day onward he played in smaller size that would not make it sensible for people to gang up on him. He stopped being the brash American investment bank and played “Danish rules.” Profitably, too.
In short, we investment banking-side dealers have long had to pay tribute (in terms of shifting LIBOR fixings) to the rate-setting banks and the problem first got weaponised when banks and investment banks merged after 1999, before innovation came in and diffused it all in the form of fixing-matching services. But it's never been anything much more than a "cost of doing business."
Which brings me to my conclusion: Tom Hayes was a killer trader. He played all the angles. He left nothing on the table. And that included the LIBOR fixings. That he carried on doing so in 2008 shows he had a tin ear for politics, but most certainly does not make him a criminal. Merely a guy who did not realize the rules of the game had changed.
The argument David Enrich builds over 450 fact-packed pages could not be simpler: on both sides of the Atlantic the justice system is starved of both resources and expertise and has repurposed itself to closing cases by pinning them on the lowest credible perpetrator; conversely, recent troubles notwithstanding, the banking giants control billions and deal in trillions. When the world went upside down in 2008 and the public was baying for blood, a natural alliance was formed between the justice system and the banks with the simple aim of bigging up and scapegoating an Aspergers’ sufferer who had been careless about the manner in which he’d gone about doing the job his superiors 100% knew he was doing, had fully encouraged him to do and had headhunted him from one bank to another to carry on doing.
I totally buy it, and, now there’s one guy behind bars to atone for everybody’s sins, so do the courts, it seems.
And yet, for all its unspeakably detailed portraits, histories and descriptions, for all the evident access the author has had to the main characters in this play, the book is a failure. The reason is simple: it ducks the main issue, which cannot possibly have been “was Tom Hayes framed,” much as he undeniably was. The big issue, that sadly goes unanswered in this book, has to be “is it unethical to mess with LIBOR?”
Disturbingly, it is not only the government and the justice system that lacks basic knowledge of finance, but also, it seems, our corps of financial journalists. In summary, the Wall Street Journal’s financial investigations editor is not equipped to judge on the merits or otherwise of banks going low or going high in their LIBOR submissions. In a 450 page book he devotes a page and a half to a hastily-put-together, self-professed list of potential “victims” of the “LIBOR fraud” and not one sentence on whether we should carry on using LIBOR in the future or not.
A month ago I read “The Fix,” which is actually a bad book covering the exact same story as “The Spider Network,” (I’d go as far as to say that with the benefit of hindsight it feels plagiarized from the serialized version of this book) so I’ll copy verbatim what I wrote when I reviewed it. To wit,
“Somebody from inside the market will one day write a book about all this that will be worth reading, and allow me to take you through the main ideas it should contain:
1. Markets were once small. At that time, the feeling was that they were best left to the people who operated inside them. Over the years, however, (mainly due to demographic reasons) they ballooned in size from roughly 1 GDP around 1980 to roughly 6 GDPs today and (more importantly) they became very widely-held. It thus became the job of government not only to sustain them (zB via the Greenspan put) but also to make sure that an idiot could get involved without getting hurt. So Salomon was punished in 1991 for overbidding in auctions (pause to think how weird that is), Deutsche some ten years later for forcing suboptimal delivery in the Bobl contract (that only professionals can trade and whose rules were on the book for a decade), rule NMS forced everybody to give “best execution” a few years after that (and gave rise to the “Flash Boys”) and some poor bastard went to jail last year for…spoofing, believe it or not. Imagine if real estate brokers got jailed for that! Tom Hayes’ main crime was that he was doing in year 2005 stuff that stopped being acceptable (between us girls) around 1995. And UBS was the kind of shop where nobody knew to put him in his place. E basta.
2. The true crimes of finance in this century, the ones bankers ought to have been punished for, but got away with, came in exactly two flavors: (i) crimes involving the little guy (post Edwin Artzt we leave the big guy alone), who was lured into borrowing money he would never be able to pay back to buy assets, goods and services he could not afford, and indeed put in competition with the fellow little guy to buy the house in the good school district, the nice vacation, the boat etc. You can say he brought it on himself, but that would be unfair: if borrowing is what it will take to send your kids to the better school or to keep your spouse from divorcing you, you are put in a tragic position. We all know how that ended, with home ownership in the US first rising to 69% and then falling to 61%. And with Spanish families being sweet-talked into buying the sub debt of their home lender etc. etc. (ii) post Glass-Steagall, crimes involving the discounting of decades of receivables that were to be found in the loan books of banks using the mark-to-mark methods found at the investment banks they were allowed to merge with and the conversion of this spurious P&L into bonus, resulting in the urge to “source” even more, often dubious, receivables.
The two above trends fed into each other, rather famously, and the crash in the market for CDOs, CLOs and the squares thereof, SIVs and side-pockets has only really resulted in three convictions thus far, the rather interestingly named Lee Farkas the email-shy Karim Serageldin, and now the hapless Tom Hayes, who had zilch to do with it, but had confessed to a completely unrelated misdemeanor, had spent some of his employers’ money on petty bribes and rubbed the judge the wrong way with his curt answers. 50k fine and an industry ban would not have been terribly lenient, if you ask me.
Meanwhile, the people whose fiduciary duty it was to make sure the abolition of Glass-Steagall did not result in this mess not only walk the streets, but are regularly invited to tell us where it’s at.
3. There is no free lunch. If you are going to buy a valuable service, you will have to pay for it. Either (i) it works like it does for goods, where there is a wholesale price between professionals and a retail price for customers and you don’t care that the shoes you paid 100 for cost the merchant 30, or alternatively (ii) you pay what is advertised as the wholesale price, but in reality the wholesale price moves around and it’s higher when you are paying it. If it’s not one of those two, then the guy who is selling you the service will go out of business and you won’t be able to buy that service again. That is, for example, the business model behind the New Zealand time zone. It is the time when FX trades the least, so you can move the price against your customers’ orders. Significantly, customers know this. It is a convention they accept.”
With this rather large parenthesis out of the way, and since the author has decided to dodge it, allow me to opine on the main issue here, namely “is it unethical to mess with LIBOR?”
I will do so in three parts and I will start with the “bond math:”
1. A swap has two legs, fixed and floating. When you first enter a swaps trade, the fixed leg has a rate that is equal to a blended average of the fair price you would pay for the expected value of all the future LIBOR fixings of the floating side.
2. A basis point change in the fixed side changes the mark-to-market value of the entire swap. A basis point change in the LIBOR fixing only changes the accrued interest of the very next three-month or six-month payment.
Conclusion: Tom Hayes’ “crimes” have zero to do with the type of activity that brought us the financial crisis. They belong to the “accrual” column rather than the “mark-to-market” column of the ledger. It is an absolute triumph of the banking industry that it managed to deflect the scrutiny of the authorities and the ire of the general public to an issue that is pretty much at right angles with the crash of 2008.
Second, derivatives transactions between banks (at anywhere between 500 trillion and one quadrillion dollars) are a large multiple of transactions between banks and their real-world clients (at well under 30 trillion). This is actually a protection for clients. Because they borrow money against LIBOR, clients collectively pay LIBOR fixings. The fact that all these derivatives exist means the banks’ incentive that would normally have been to always set LIBOR high is mitigated by the fact that transactions with corporate clients are a small part of every bank’s book.
The author does pick on this when he mentions that in Tom Hayes’ catalog of trades not a single one was with a non-bank, non-hedge fund. Bottom line, banks are so busy trying to cheat each other on the first coupon of their derivatives that this activity actually provides cover to the corporates that borrow against LIBOR.
I’d go one further and say corporates fully know this, and that’s how come they are comfortable fixing their issues off of LIBOR! And of course, they also benefit when in times of crisis banks low-ball their submissions to look solvent.
So we have established that cheating on LIBOR (i) has zero to do with the financial crisis and (ii) by-and-large benefits, rather than hurts, clients, but I still need to get to the third point I promised: “is it wrong to mess with LIBOR?”
When my friend Andrew Hulme first joined the traders on the arb desk at Salomon in the early nineties, they started him on the Danish book. Rates worldwide were coming off, so he picked up the phone to a Danish bank and, Salomon style, received fixed in a billion DKK. Rates came off, as expected, and a few days later he closed it out with a tidy profit, paying fixed on a billion DKK.
A short six months later, there was some screaming from across my desk. CIBOR had fixed 30 (count’em) basis points higher. Out of the blue! Did not really cost him a bomb. Even on a yard, the fifteen cents that corresponded to the 30 basis points of 6m fixing was a mere 1.5 million DKK, which only really registered with poor Andrew.
Next morning, the CIBOR fixing was straight back down to where it had been the day before. The thieving Danish banks had all put up their fixing by 30 basis points as a favor to Andrew’s counterparty. The message was clear: stay out of our market.
Andrew knew what to do, his bosses did not need to tell him. Had he left things as they were there would be no immediate impact to his book, but every time he had a fixing, the Danes would collude to take 30bp from him. He called up his original counterparty, with whom he’s luckily done both trades, and asked what it would cost to cancel them both. When the guy on the other side of the phone sucked air through his teeth and said it would cost us money, Andrew made the correct decision that he would “pay up and look big.”
Did he stop trading DKK? Hell, no! But from that day onward he played in smaller size that would not make it sensible for people to gang up on him. He stopped being the brash American investment bank and played “Danish rules.” Profitably, too.
In short, we investment banking-side dealers have long had to pay tribute (in terms of shifting LIBOR fixings) to the rate-setting banks and the problem first got weaponised when banks and investment banks merged after 1999, before innovation came in and diffused it all in the form of fixing-matching services. But it's never been anything much more than a "cost of doing business."
Which brings me to my conclusion: Tom Hayes was a killer trader. He played all the angles. He left nothing on the table. And that included the LIBOR fixings. That he carried on doing so in 2008 shows he had a tin ear for politics, but most certainly does not make him a criminal. Merely a guy who did not realize the rules of the game had changed.
July 11, 2017
The most disturbing thing about this book wasn't the fraud. It was the culture that incentivized and looked the other way while the fraud was committed. I lived in this world (the world of "Wall Street") for more than 20 years. I saw the culture from the inside and Enrich absolutely nailed what it felt like. Customers are dopes to be taken advantage of; human value is determined by how much money you make and ethical values are a sign of weakness. It is insidious and takes a toll on how one views the world.
That is not to suggest that there is no one in financial services with morals - I'm sure there are some. But the culture of big money banks provides ample incentive to ignore the rules created to assure fairness in the marketplace. If someone isn't smart enough to avoid being cheated, the unwritten rule states, then they deserve what they get.
It is appalling how widespread the LIBOR fixing fraud was and how few were held to task for defrauding the average Joe. Yet, that has been the recurring pattern in all of the major Wall Street based financial fraud cases. Someone is singled out as the scapegoat and all the senior managers, who are aware but look the other way, get off without even a slap on the wrist.
My career never crossed paths with the legions of traders and brokers who played the game of fixing LIBOR, but I recognized them all. I have seen their counterparts in other areas of the business. Part of the culture is the disturbing, but ubiquitous thinking that if everyone is doing it, it must be ok.
Reading this book brought back all of those memories and was a disturbing reminder of why I ultimately left that field.
Yet, I would take exception with one aspect of Enrich's story. He makes Tom Hayes (the trader at the center of the LIBOR fixing prosecution) something of an innocent. He is portrayed as someone whose Aspergers made him trust the wrong people and blinded him to the ethical right and wrong of his actions. I do not doubt that Hayes was the scapegoat in this story - the fall guy for a system and culture that wanted his gains and ignored his methods. But he is no hero. He committed fraud on a large scale. Perhaps, as Enrich suggests, he was the fly in the spider web rather than the spider. Perhaps he was the victim of others rather than the mastermind of the strategy. Nonetheless, he was guilty. He never once asked himself whether what he was doing was wrong.
I don't think he deserved the sentence he received - or more accurately, I think others deserved his harsh sentence more. But there is no excuse for his actions.
What is most disturbing is that the victory party at the end of the book reinforces the reality that nothing changed. Somewhere on Wall Street, someone is committing financial fraud by bending or ignoring the rules. Somewhere someone is telling themselves, "well if everyone is doing it, it must be ok." I fear that the system will never change. And perhaps that is the most frightening thing of all.
That is not to suggest that there is no one in financial services with morals - I'm sure there are some. But the culture of big money banks provides ample incentive to ignore the rules created to assure fairness in the marketplace. If someone isn't smart enough to avoid being cheated, the unwritten rule states, then they deserve what they get.
It is appalling how widespread the LIBOR fixing fraud was and how few were held to task for defrauding the average Joe. Yet, that has been the recurring pattern in all of the major Wall Street based financial fraud cases. Someone is singled out as the scapegoat and all the senior managers, who are aware but look the other way, get off without even a slap on the wrist.
My career never crossed paths with the legions of traders and brokers who played the game of fixing LIBOR, but I recognized them all. I have seen their counterparts in other areas of the business. Part of the culture is the disturbing, but ubiquitous thinking that if everyone is doing it, it must be ok.
Reading this book brought back all of those memories and was a disturbing reminder of why I ultimately left that field.
Yet, I would take exception with one aspect of Enrich's story. He makes Tom Hayes (the trader at the center of the LIBOR fixing prosecution) something of an innocent. He is portrayed as someone whose Aspergers made him trust the wrong people and blinded him to the ethical right and wrong of his actions. I do not doubt that Hayes was the scapegoat in this story - the fall guy for a system and culture that wanted his gains and ignored his methods. But he is no hero. He committed fraud on a large scale. Perhaps, as Enrich suggests, he was the fly in the spider web rather than the spider. Perhaps he was the victim of others rather than the mastermind of the strategy. Nonetheless, he was guilty. He never once asked himself whether what he was doing was wrong.
I don't think he deserved the sentence he received - or more accurately, I think others deserved his harsh sentence more. But there is no excuse for his actions.
What is most disturbing is that the victory party at the end of the book reinforces the reality that nothing changed. Somewhere on Wall Street, someone is committing financial fraud by bending or ignoring the rules. Somewhere someone is telling themselves, "well if everyone is doing it, it must be ok." I fear that the system will never change. And perhaps that is the most frightening thing of all.
September 16, 2019
Ugly, ugly, ugly.....the underbelly of the finance world and the practices to make more and more money are revealed in this book by Wall Street Journal Finance Editor, David Enrich. And if not illegal, these practices certainly walk a very fine line.
Tom Hayes overheard some classmates at the University of Nottingham discussing trader internships available at the London offices of the Swiss bank, UBS. Hayes, a math genius who suffered from Aspergers Syndrome decided to look into it and was surprised to be accepted. From a part-time job, it turned into his profession as his mathematical skills were recognized by the bank's higher-ups.
He soon discovered that there seemed to be little or no rules regarding LIBOR, which determines the interest rates on trillions of dollars world wide. He also discovered that those who set those rates were lower echelon employees who were ripe for a little "You scratch my back and I'll scratch yours" business. The traders could then offer incentives to these functionaries to nudge the LIBOR up or down and make millions for their portfolios. This practice, although seldom talked about, was commonly used throughout most of the world's largest banking institutions. So Tom Hayes jumped on board and became the man with whom everyone wanted to deal.
The story provides detailed information about Hayes's rise and fall and his trial for fraud. His defense was that everyone was doing it and why was he suddenly the fall guy. An engrossing tale which makes you think twice about where you want to put your investments and is your friendly banker really friendly. Recommended.
Tom Hayes overheard some classmates at the University of Nottingham discussing trader internships available at the London offices of the Swiss bank, UBS. Hayes, a math genius who suffered from Aspergers Syndrome decided to look into it and was surprised to be accepted. From a part-time job, it turned into his profession as his mathematical skills were recognized by the bank's higher-ups.
He soon discovered that there seemed to be little or no rules regarding LIBOR, which determines the interest rates on trillions of dollars world wide. He also discovered that those who set those rates were lower echelon employees who were ripe for a little "You scratch my back and I'll scratch yours" business. The traders could then offer incentives to these functionaries to nudge the LIBOR up or down and make millions for their portfolios. This practice, although seldom talked about, was commonly used throughout most of the world's largest banking institutions. So Tom Hayes jumped on board and became the man with whom everyone wanted to deal.
The story provides detailed information about Hayes's rise and fall and his trial for fraud. His defense was that everyone was doing it and why was he suddenly the fall guy. An engrossing tale which makes you think twice about where you want to put your investments and is your friendly banker really friendly. Recommended.
July 30, 2017
The Rest of the Story: Since this book's publication, the following related events have taken place:
– Libor will be phased out in 2021.
– Two Barclays traders acquitted of Libor-related charges in the UK. I believe these are the prosecutions mentioned in a footnote at Kindle location 7082.
– Two other traders, from Dutch Rabobank, had their US convictions overturned. The convictions are mentioned in this book at location 5917.
– Tom Hayes, the “Math Genius” of the title, has complained to police that a government witness at his trial misled the court.
Also, the “Tom Hayes Support Group” (“crowdfunding for a new appeal”) has a Twitter feed, website, and a fundraising site. The website calls author David Enrich's Wall Street Journal account of the Hayes-Libor scandal (upon which this book expands) “the most accurate printed version to date”.
Book Review: This book's strength is also its weakness.
A book like this is a witness, and as a witness this is a great book. The author explains that, in an instance of good fortune which tends to find people who work hard, he got both Hayes and his wife, after the conviction of Hayes, to put an enormous pile of previously off-the-record communications on the record. He also acquired another “journalistic gold mine” (l. 5976) – evidence amassed by the Britain's Serious Fraud Office in their investigation of Hayes and others.
That's a lot of information, and Enrich does a good job sorting and explaining it. Sometimes you have to go flipping back and forth to the “cast of characters” in the front, when (for example) somebody who hasn't been mentioned for 30 pages suddenly pops back into the story. But, on the whole, the story was easy to follow, not as easy as a novel perhaps but well within the ability of anyone with the average amount of patience.
However, a book like this is also a story, and as a story this is only a good book. The book's portrayal of virtually everyone involved, including Hayes and (to a lesser extent) his wife, is damning. Everyone involved with this scandal (traders and their supposed regulators, lawyers and clients, executives and working-level folk) seemed to behave abominably. I guess the author called it the way he saw it. He certainly had enough evidence. But it's hard to read hundreds of pages of relentlessly awful behavior, even if it's all true. If I wanted that, I'd pay more attention to the news.
At one point, Michael Lewis gets a shout-out (as one of Hayes' favorite authors) and there are obvious parallels here with The Big Short: Inside the Doomsday Machine – the autistic main character, the rampant greed, and self-serving regulatory stupidity, to name a few. But Lewis managed to extract a few characters (including the autistic man) who, while occasionally irritating, are clearly on the right side of history and are, in their own small way, heroic, which was a welcome relief from the rest of the book. Nothing like that here. Everyone is, simply, greedy, ungenerous, and short-sighted. No one is interested in fairness and justice except occasionally as cloaks to advance their narrow interests.
I think it's important to read about things like this to stiffen my resolve against the hellish chorus of those who say black is white, up is down, and leaving everyone to act in their self-interest is best for society. But resolve-stiffening can sometimes be a little like taking medicine: you know it's good for you, but you don't always like it while you are doing it.
– Libor will be phased out in 2021.
– Two Barclays traders acquitted of Libor-related charges in the UK. I believe these are the prosecutions mentioned in a footnote at Kindle location 7082.
– Two other traders, from Dutch Rabobank, had their US convictions overturned. The convictions are mentioned in this book at location 5917.
– Tom Hayes, the “Math Genius” of the title, has complained to police that a government witness at his trial misled the court.
Also, the “Tom Hayes Support Group” (“crowdfunding for a new appeal”) has a Twitter feed, website, and a fundraising site. The website calls author David Enrich's Wall Street Journal account of the Hayes-Libor scandal (upon which this book expands) “the most accurate printed version to date”.
Book Review: This book's strength is also its weakness.
A book like this is a witness, and as a witness this is a great book. The author explains that, in an instance of good fortune which tends to find people who work hard, he got both Hayes and his wife, after the conviction of Hayes, to put an enormous pile of previously off-the-record communications on the record. He also acquired another “journalistic gold mine” (l. 5976) – evidence amassed by the Britain's Serious Fraud Office in their investigation of Hayes and others.
That's a lot of information, and Enrich does a good job sorting and explaining it. Sometimes you have to go flipping back and forth to the “cast of characters” in the front, when (for example) somebody who hasn't been mentioned for 30 pages suddenly pops back into the story. But, on the whole, the story was easy to follow, not as easy as a novel perhaps but well within the ability of anyone with the average amount of patience.
However, a book like this is also a story, and as a story this is only a good book. The book's portrayal of virtually everyone involved, including Hayes and (to a lesser extent) his wife, is damning. Everyone involved with this scandal (traders and their supposed regulators, lawyers and clients, executives and working-level folk) seemed to behave abominably. I guess the author called it the way he saw it. He certainly had enough evidence. But it's hard to read hundreds of pages of relentlessly awful behavior, even if it's all true. If I wanted that, I'd pay more attention to the news.
At one point, Michael Lewis gets a shout-out (as one of Hayes' favorite authors) and there are obvious parallels here with The Big Short: Inside the Doomsday Machine – the autistic main character, the rampant greed, and self-serving regulatory stupidity, to name a few. But Lewis managed to extract a few characters (including the autistic man) who, while occasionally irritating, are clearly on the right side of history and are, in their own small way, heroic, which was a welcome relief from the rest of the book. Nothing like that here. Everyone is, simply, greedy, ungenerous, and short-sighted. No one is interested in fairness and justice except occasionally as cloaks to advance their narrow interests.
I think it's important to read about things like this to stiffen my resolve against the hellish chorus of those who say black is white, up is down, and leaving everyone to act in their self-interest is best for society. But resolve-stiffening can sometimes be a little like taking medicine: you know it's good for you, but you don't always like it while you are doing it.
December 15, 2017
This is a story about how prosecutors bankers can go wrong. When the entire system is involved in corruption as was obvious with LIBOR and people find out about it and get mad, someone has to go down. Who do you pick? Usually someone vulnerable, sometimes that person was a particularly bad offender. This book pairs nicely with Black Edge where someone went to jail and the rest of the industry stayed put. There's a problem here with the system and people want bankers to pay, but do these criminal prosecutions work to deter wrongdoing? Probably not.
June 25, 2018
Šo grāmatu ar viduslaikiem raksturīgu nosaukumu pa pusvāku es ieraudzīju Jānī Rozē. Uz vāka tika solīts, ka šī esot detektīvam līdzīga, saistoši uzrakstīta un dikti līdzīga Michael Lewis; uz to arī iekritu. Pirku vien nost, jo pēdējos mēnešus man grāmatu pirkumi diez ko nevedās, viena grāmata mēnesī ir dikti konservatīvi. Sāku lasīt tūlīt pat, braucot mājās ar vilcienu.
2006. gadā baņķieru, treideru un brokeru grupa, kas pārstāvēja lielākās finanšu institūcijas, nonāca pie pārsteidzoša secinājuma. Libors – Londonas starpbanku tirgus likme, kas nosaka procentu likmi aizņēmumiem triljonu vērtībā visā pasaulē, ir atkarīgs no nelielas administratoru grupas. Bija iespējams manipulējot ar tiem iegūt milzīgu peļņu “sarunājot” likmes izmaiņu par pāris procentu daļā. Vēlāk par galveno grēkāzi atzīs kādu Tom Hayes, taču lielākā daļa labuma guvēju paliks neskarti. Kādēļ tā un kas patiesībā notika, to izstāstīs šī grāmata.
Atzīšu uzreiz, ka lasītājam ir kaut nedaudz jāapjēdz kā strādā pasaules finanšu tirgus, starpbanku transakcijas un kā tiek noteiktas procentu likmes. Autors gan vietām cenšas šo to izskaidrot, bet lielākoties mētājas ar terminiem pa labi un pa kreisi, un lasītājam nākas kulties pašam, kā nu māk. Lai ko tur arī neteiktu anotācijā, līdz Michael Lewis līmenim autoram vēl ir kur augt. Ja stāsts būtu tikai par vienu no gadsimta lielākajām blēdībām, tad tā droši vien būtu par divām trešdaļām plānāka, bet četrreiz interesantāka. Taču autors ir izvēlējies apjoma uzpūšanas ceļu. Lasītājam nākas saskarties ar pārdesmit personāžiem, ar dažiem garāmejot ar dažiem visas grāmatas garumā. Autoram šķiet, ka lasītājam varētu būt interesanti lasīt par visu viņu ģimenes dzīvi, ģērbšanās paradumiem un māju renovācijas projektiem. Lai visam piemestu nelielu asumiņu daļa no notikumiem autors pārstāsta vairākkārt. Iespējams, ka ir noteikta lasītāju grupa, kurus tas interesē, bet man šoreiz vairāk satrauca manipulācijas ar Libor.
Par tām jau patiesībā nav nekā daudz stāstāma, nabaga treideriem daži brokeri iegalvo, ka viņiem ir sviras, ar kuru palīdzību manipulēt ar Libor likmes noteicējiem. Mūsu galvenais varonis Tom Hayes izrādās grēkāzis, jo viņa sociālās prasmes varētu būt labākas. Cilvēks dzenoties pēc lielā piķa nemaz neaizdomājās par tādiem niekiem kā ētika un savas rīcības sekām. Savukārt uzraugošās institūcijas savā vēlmē regulēt industriju īpaši neatšķiras no pasaules vidējā līmeņa, tas ir nedarīt neko un cerēt, ka viss pāries pats no sevis. Nevar teikt, ka ļaudis nezināja, šis, iespējams, bija visu laiku sliktāk slēptais noslēpums pasaulē. Laiku pa laikam kāds baņķieris sāka izmeklēšanu, kāda institūcija sapņoja par paraugprāvu, kāds zinātnieks tika pie doktora grāda, bet pa lielam industrijai bija vienalga. Lai cik smieklīgi tas neliktos, briti sarosījās tikai, kad amerikāņi nolēma uztaisīt paraugprāvu. Tad pēkšņi visi sāka meklēt aizsardzību savās jurisdikcijās, jo amerikāņu cietumos neviens nevēlējās sēdēt.
Grāmatai lieku 7 no 10 ballēm. Autors mīl izplūst un atkārtoties, lasīt var un vajag, taču pietrūkst kodolīguma.
2006. gadā baņķieru, treideru un brokeru grupa, kas pārstāvēja lielākās finanšu institūcijas, nonāca pie pārsteidzoša secinājuma. Libors – Londonas starpbanku tirgus likme, kas nosaka procentu likmi aizņēmumiem triljonu vērtībā visā pasaulē, ir atkarīgs no nelielas administratoru grupas. Bija iespējams manipulējot ar tiem iegūt milzīgu peļņu “sarunājot” likmes izmaiņu par pāris procentu daļā. Vēlāk par galveno grēkāzi atzīs kādu Tom Hayes, taču lielākā daļa labuma guvēju paliks neskarti. Kādēļ tā un kas patiesībā notika, to izstāstīs šī grāmata.
Atzīšu uzreiz, ka lasītājam ir kaut nedaudz jāapjēdz kā strādā pasaules finanšu tirgus, starpbanku transakcijas un kā tiek noteiktas procentu likmes. Autors gan vietām cenšas šo to izskaidrot, bet lielākoties mētājas ar terminiem pa labi un pa kreisi, un lasītājam nākas kulties pašam, kā nu māk. Lai ko tur arī neteiktu anotācijā, līdz Michael Lewis līmenim autoram vēl ir kur augt. Ja stāsts būtu tikai par vienu no gadsimta lielākajām blēdībām, tad tā droši vien būtu par divām trešdaļām plānāka, bet četrreiz interesantāka. Taču autors ir izvēlējies apjoma uzpūšanas ceļu. Lasītājam nākas saskarties ar pārdesmit personāžiem, ar dažiem garāmejot ar dažiem visas grāmatas garumā. Autoram šķiet, ka lasītājam varētu būt interesanti lasīt par visu viņu ģimenes dzīvi, ģērbšanās paradumiem un māju renovācijas projektiem. Lai visam piemestu nelielu asumiņu daļa no notikumiem autors pārstāsta vairākkārt. Iespējams, ka ir noteikta lasītāju grupa, kurus tas interesē, bet man šoreiz vairāk satrauca manipulācijas ar Libor.
Par tām jau patiesībā nav nekā daudz stāstāma, nabaga treideriem daži brokeri iegalvo, ka viņiem ir sviras, ar kuru palīdzību manipulēt ar Libor likmes noteicējiem. Mūsu galvenais varonis Tom Hayes izrādās grēkāzis, jo viņa sociālās prasmes varētu būt labākas. Cilvēks dzenoties pēc lielā piķa nemaz neaizdomājās par tādiem niekiem kā ētika un savas rīcības sekām. Savukārt uzraugošās institūcijas savā vēlmē regulēt industriju īpaši neatšķiras no pasaules vidējā līmeņa, tas ir nedarīt neko un cerēt, ka viss pāries pats no sevis. Nevar teikt, ka ļaudis nezināja, šis, iespējams, bija visu laiku sliktāk slēptais noslēpums pasaulē. Laiku pa laikam kāds baņķieris sāka izmeklēšanu, kāda institūcija sapņoja par paraugprāvu, kāds zinātnieks tika pie doktora grāda, bet pa lielam industrijai bija vienalga. Lai cik smieklīgi tas neliktos, briti sarosījās tikai, kad amerikāņi nolēma uztaisīt paraugprāvu. Tad pēkšņi visi sāka meklēt aizsardzību savās jurisdikcijās, jo amerikāņu cietumos neviens nevēlējās sēdēt.
Grāmatai lieku 7 no 10 ballēm. Autors mīl izplūst un atkārtoties, lasīt var un vajag, taču pietrūkst kodolīguma.
February 20, 2019
This is the true story of a young man, Tom Hayes, who may or may not have understood that manipulating stocks was wrong. He apparently had Asberger Syndrome and, with an ability to hyper focus, bordering on obsession, Hayes was out to achieve success by any means possible.
Why might he not have understood that manipulating a stock to go up or down to get people to invest or not is not ethical, moral, or even legal? Because apparently it was the norm for many stock brokers and investors. And with Asberger's he was a concrete thinker.
In The Spider Network we get a close up view of the people who work for banks and large companies and how they massively profit from stock market investments. We also get a personal view inside one eccentric man's world to gain an understanding as to how he was able to operate and profit for so many years by nudging functionaries to reap big profits for their trading portfolios.
Anyone interested in how banking investments and stock markets work and how the people who run them get fabulously wealthy will find this book interesting.
Why might he not have understood that manipulating a stock to go up or down to get people to invest or not is not ethical, moral, or even legal? Because apparently it was the norm for many stock brokers and investors. And with Asberger's he was a concrete thinker.
In The Spider Network we get a close up view of the people who work for banks and large companies and how they massively profit from stock market investments. We also get a personal view inside one eccentric man's world to gain an understanding as to how he was able to operate and profit for so many years by nudging functionaries to reap big profits for their trading portfolios.
Anyone interested in how banking investments and stock markets work and how the people who run them get fabulously wealthy will find this book interesting.
September 8, 2021
Demands for accountability became particularly loud after the 2008 financial meltdown. In particular the cries were directed at Attorney General Eric Holder, after his “too big to fail” pronouncement. Surely someone should have gone to jail for causing such a debacle. Author David Enrich touches on that subject of accountability from a very different vantage point. He intertwines the rise of investment banking superstar Tom Hayes with competitive economic strategies crafted in London and Washington decades earlier.
Prospective readers might be dismayed by the long cast of characters in the opening pages of the book. However, there are only a few key points to remember. Banks employ traders, or “market makers.” Each trader has an area of expertise – a specific currency, a country, or type of security. They rely on middlemen employed by brokerages to find a trading partner. These brokers make it their business to develop strong personal relationships with traders from all the big investment banks, in order to pitch the deal. For their matchmaking efforts they earn a commission. The more trades they broker, the more commissions they earn.
The big players here will be Royal Bank of Scotland, Royal Bank of Canada, UBS, Citigroup and Deutsche Bank on the investment side and ICAP, R.P. Martin, and Tullett Prebon on the brokerage side.
The inanimate entities in this drama, interest based derivatives and Libor, are even more important cast members. Enrich provides a lucid and succinct explanation of derivatives. “They were instruments whose values derived from something else. What you were buying or selling was not the thing itself (widgets, bushels, gold bars) but something related to that thing, maybe its future value, or how it compared to something totally different. If you wanted to buy ten gold bars, that was straightforward; if you wanted to place a bet that nine months from now the price difference between ten gold bars and fifty bushels of wheat would be twice the difference between five bushels of wheat and sixteen widgets, then you were playing with derivatives.” (p.31)
Libor (London Interbank Offered Rate) was officially launched in 1986. Banks submitted an estimate of what interest rate each of them expected to pay for securing a short-term loan from another bank. The estimates were averaged by Thomson Reuters and reported daily. Those numbers determined either in whole or in part the interest rates of bonds, adjustable rate mortgages, and dozens of other financial products. One/one-hundredth of a percent change in Libor would move the value of a derivative valued at one million dollars up or down by $10,000. A hedge fund trader might make thousands of daily transactions resulting in gains and losses in the millions.
Two events set the stage for this drama. First, the 1986 “Big Bang” – Margaret Thatcher's launch of British banking deregulation. Second, the passage in 1999 of the Gramm-Leach-Bliley Act in the U.S. Both events removed restrictions separating investment banks from commercial banks. Raw profit for the bank replaced customer service.
In 2001 Thomas Hayes began his banking career at the Royal Bank of Scotland. He had an uncanny facility with numbers and a unique skill for designing predictive algorithms. By this time, Libor had spawned multiple variants: Tibor (the Tokyo interbank offered rate); the Euribor (the Euro version); Hibor (the Hong Kong version) and so on. Each iteration netted the British Banking Association a licensing fee, so the Association encouraged this proliferation. “Hayes organized his bets around derivatives that would deliver profits if, at a specific date, the difference between two interest rates – say, those in the United States and those in Japan – narrowed or widened by very precise margins. Hayes might wager the U.S. dollar Libor might fall relative to yen Libor.” (p.91)
It soon occurred to him that since each bank's submission to Thomson Reuters was an estimate, that estimate could be tweaked up or down. All he needed were the right personal connections. An avuncular broker like Darrell Read at ICAP or Terry Farr at R.P. Martin would have just those sorts of connections and would be eager to do him “a favor” by talking to some of their banking contacts. Libor swings favored the holdings of reporting banks; and ultimately a collection of colluding traders.
A deregulated banking environment, huge global transactions instantaneously effected, a key index based on subjective and undocumented “guesses,” a caste of superstar traders rewarded by the amount of money their trades generated, exchanges of kickbacks between brokers and traders for favors, and what Enrich repeatedly refers to as a “frat house culture” .... the fixes became more frequent and blatant.
A little over half the book is devoted to Tom Hayes’ rise in spite of an abrasive personality oblivious of social niceties (there was a general consensus he displayed Asperger’s Syndrome characteristics). This was the most interesting part of the book. The second half chronicles a slow but inevitable downfall and surprising denials of his “friends,” colleagues, and supervisors. Enrich converts what could have been a dry financial narrative into a mind-blowing story of hubris and reckless greed. He even garners a bit of sympathy for the unrepentant Hayes. The story poses a dilemma: who exactly was culpable? Not even the foot-dragging compliance investigators can be said to be blameless.
Prospective readers might be dismayed by the long cast of characters in the opening pages of the book. However, there are only a few key points to remember. Banks employ traders, or “market makers.” Each trader has an area of expertise – a specific currency, a country, or type of security. They rely on middlemen employed by brokerages to find a trading partner. These brokers make it their business to develop strong personal relationships with traders from all the big investment banks, in order to pitch the deal. For their matchmaking efforts they earn a commission. The more trades they broker, the more commissions they earn.
The big players here will be Royal Bank of Scotland, Royal Bank of Canada, UBS, Citigroup and Deutsche Bank on the investment side and ICAP, R.P. Martin, and Tullett Prebon on the brokerage side.
The inanimate entities in this drama, interest based derivatives and Libor, are even more important cast members. Enrich provides a lucid and succinct explanation of derivatives. “They were instruments whose values derived from something else. What you were buying or selling was not the thing itself (widgets, bushels, gold bars) but something related to that thing, maybe its future value, or how it compared to something totally different. If you wanted to buy ten gold bars, that was straightforward; if you wanted to place a bet that nine months from now the price difference between ten gold bars and fifty bushels of wheat would be twice the difference between five bushels of wheat and sixteen widgets, then you were playing with derivatives.” (p.31)
Libor (London Interbank Offered Rate) was officially launched in 1986. Banks submitted an estimate of what interest rate each of them expected to pay for securing a short-term loan from another bank. The estimates were averaged by Thomson Reuters and reported daily. Those numbers determined either in whole or in part the interest rates of bonds, adjustable rate mortgages, and dozens of other financial products. One/one-hundredth of a percent change in Libor would move the value of a derivative valued at one million dollars up or down by $10,000. A hedge fund trader might make thousands of daily transactions resulting in gains and losses in the millions.
Two events set the stage for this drama. First, the 1986 “Big Bang” – Margaret Thatcher's launch of British banking deregulation. Second, the passage in 1999 of the Gramm-Leach-Bliley Act in the U.S. Both events removed restrictions separating investment banks from commercial banks. Raw profit for the bank replaced customer service.
In 2001 Thomas Hayes began his banking career at the Royal Bank of Scotland. He had an uncanny facility with numbers and a unique skill for designing predictive algorithms. By this time, Libor had spawned multiple variants: Tibor (the Tokyo interbank offered rate); the Euribor (the Euro version); Hibor (the Hong Kong version) and so on. Each iteration netted the British Banking Association a licensing fee, so the Association encouraged this proliferation. “Hayes organized his bets around derivatives that would deliver profits if, at a specific date, the difference between two interest rates – say, those in the United States and those in Japan – narrowed or widened by very precise margins. Hayes might wager the U.S. dollar Libor might fall relative to yen Libor.” (p.91)
It soon occurred to him that since each bank's submission to Thomson Reuters was an estimate, that estimate could be tweaked up or down. All he needed were the right personal connections. An avuncular broker like Darrell Read at ICAP or Terry Farr at R.P. Martin would have just those sorts of connections and would be eager to do him “a favor” by talking to some of their banking contacts. Libor swings favored the holdings of reporting banks; and ultimately a collection of colluding traders.
A deregulated banking environment, huge global transactions instantaneously effected, a key index based on subjective and undocumented “guesses,” a caste of superstar traders rewarded by the amount of money their trades generated, exchanges of kickbacks between brokers and traders for favors, and what Enrich repeatedly refers to as a “frat house culture” .... the fixes became more frequent and blatant.
A little over half the book is devoted to Tom Hayes’ rise in spite of an abrasive personality oblivious of social niceties (there was a general consensus he displayed Asperger’s Syndrome characteristics). This was the most interesting part of the book. The second half chronicles a slow but inevitable downfall and surprising denials of his “friends,” colleagues, and supervisors. Enrich converts what could have been a dry financial narrative into a mind-blowing story of hubris and reckless greed. He even garners a bit of sympathy for the unrepentant Hayes. The story poses a dilemma: who exactly was culpable? Not even the foot-dragging compliance investigators can be said to be blameless.
April 15, 2017
This is a great work of journalism that reads like a thriller. I enjoyed it all the more because I had previously read David Enrich's reporting on Tom Hayes and his trial in the Wall Street Journal two years ago.
Here's the central question: if a trader rigs Libor — the rate that determines your mortgage payments and credit card bills — would you blame him or his bosses who expect that of him, or the system where everyone who can is rigging it to make millons?
What Tom Hayes did was wrong, but he was made a scapegoat while the people who rewarded him for rigging Libor rates went scot-free. Everyone who colluded with him turned around when investigators closed in and threw Hayes under the bus. The saddest part is that Hayes, a mathematical prodigy and one of the best financial traders, never realized that people he thought of as friends would not hesitate to turn on him.
That doesn't mean what he did was right (a lot more of that in the book), but it does force us to question the measures taken by governments after the 2008 financial crisis. Banks paid a lot in fines, but almost all of its top brass not just escaped jail but made millions off the crisis. Something similar happened with the Libor rigging scam, where Hayes was portrayed as the ring leader of a vast criminal conspiracy when in reality he was one among many mid-level traders and brokers who were actively working to rig Libor.
This book is definitely one of the best works of investigative business journalism, in the same league as "Barbarians at the Gate" or "Den of Thieves". And thanks to Enrich's excellent writing, you don't even need to know a word of financial jargon to understand it.
Here's the central question: if a trader rigs Libor — the rate that determines your mortgage payments and credit card bills — would you blame him or his bosses who expect that of him, or the system where everyone who can is rigging it to make millons?
What Tom Hayes did was wrong, but he was made a scapegoat while the people who rewarded him for rigging Libor rates went scot-free. Everyone who colluded with him turned around when investigators closed in and threw Hayes under the bus. The saddest part is that Hayes, a mathematical prodigy and one of the best financial traders, never realized that people he thought of as friends would not hesitate to turn on him.
That doesn't mean what he did was right (a lot more of that in the book), but it does force us to question the measures taken by governments after the 2008 financial crisis. Banks paid a lot in fines, but almost all of its top brass not just escaped jail but made millions off the crisis. Something similar happened with the Libor rigging scam, where Hayes was portrayed as the ring leader of a vast criminal conspiracy when in reality he was one among many mid-level traders and brokers who were actively working to rig Libor.
This book is definitely one of the best works of investigative business journalism, in the same league as "Barbarians at the Gate" or "Den of Thieves". And thanks to Enrich's excellent writing, you don't even need to know a word of financial jargon to understand it.
May 15, 2017
Full disclosure: I didn't finish reading this book. As a business school academic, I've read a lot of the literature that has been spawned by financial scandals, in the hope of finding books to engage my students. Some authors - Michael Lewis, for example - manage to spin a really gripping story out of often unpromising material. The journalist David Enrich (an oddly resonant surname) doesn't pull it off.
The over-exuberant title gave me pause before I'd even started reading: when I requested the ARC from Netgalley I was not aware of the part after the colon. The lengthy dramatis personae at the start was also a bit worrying: the idea that I would need to keep referring back to identify members of the cast suggested that the author might not have done a very good job of characterisation.
But the most off-putting aspect for me was that the author never seemed to make up his mind about his audience. How much knowledge of the context could he assume? How much explanation did he need to provide? He never seemed to decide on this. The complexity of LIBOR and the banking culture and processes surrounding it demands some level of explanation, more than a journalist probably needs to provide in a short news article but the balance here tended to the didactic, which I found irritating. And I'm not at all keen on footnotes which in this case were particularly distracting.
If you want to read about the machinations of bankers, I recommend the work of Joris Luyendijk: https://www.theguardian.com/profile/j...
The over-exuberant title gave me pause before I'd even started reading: when I requested the ARC from Netgalley I was not aware of the part after the colon. The lengthy dramatis personae at the start was also a bit worrying: the idea that I would need to keep referring back to identify members of the cast suggested that the author might not have done a very good job of characterisation.
But the most off-putting aspect for me was that the author never seemed to make up his mind about his audience. How much knowledge of the context could he assume? How much explanation did he need to provide? He never seemed to decide on this. The complexity of LIBOR and the banking culture and processes surrounding it demands some level of explanation, more than a journalist probably needs to provide in a short news article but the balance here tended to the didactic, which I found irritating. And I'm not at all keen on footnotes which in this case were particularly distracting.
If you want to read about the machinations of bankers, I recommend the work of Joris Luyendijk: https://www.theguardian.com/profile/j...
April 18, 2017
An interesting look at the Libor scandal from an American investigative journalist lens.
The book charts the story of how the Libor rate - the London interbank lending rate that many variable-rate products such as credit cards depend on - was manipulated, thus affecting many unsuspecting individuals worldwide.
This is a book for those that don't have much understanding of the financial workings that underpin the financial sector, with simple-to-understand explanations and examples to illustrate the issues. For those that do, there are some fascinating snippets of the history of financial instruments and the characters behind them, although you'd have to (like I had to) grin and bear the at times over-zealous banker-bashing that the author occasionally gets drawn into. Overall, an interesting mix of investigative journalism and history that would have been brilliant had it not viewed every person and action from a bitterly critical perspective.
*Thank you to the publisher for my free review copy via NetGalley.
The book charts the story of how the Libor rate - the London interbank lending rate that many variable-rate products such as credit cards depend on - was manipulated, thus affecting many unsuspecting individuals worldwide.
This is a book for those that don't have much understanding of the financial workings that underpin the financial sector, with simple-to-understand explanations and examples to illustrate the issues. For those that do, there are some fascinating snippets of the history of financial instruments and the characters behind them, although you'd have to (like I had to) grin and bear the at times over-zealous banker-bashing that the author occasionally gets drawn into. Overall, an interesting mix of investigative journalism and history that would have been brilliant had it not viewed every person and action from a bitterly critical perspective.
*Thank you to the publisher for my free review copy via NetGalley.
March 28, 2018
OK story, but much too long
Our local CFA chapter hosts a quarterly book club, and for this quarter we selected this book to discuss. Otherwise I would not have bothered to finish it.
The author told the story ably, just not concisely. I found his formula of heaping on backstory after backstory annoying. Was he hoping to emulate Michael Lewis? If so, I don't think he succeeded, because this book's backstories were mostly superfluous.
The whole time I was reading this I wondered how much shorter and better this book might have been had it been written by the late John Brooks. In John Brooks' hands, I imagine this story fitting into 80 to 120 pages and being interesting and gripping the whole way.
Our local CFA chapter hosts a quarterly book club, and for this quarter we selected this book to discuss. Otherwise I would not have bothered to finish it.
The author told the story ably, just not concisely. I found his formula of heaping on backstory after backstory annoying. Was he hoping to emulate Michael Lewis? If so, I don't think he succeeded, because this book's backstories were mostly superfluous.
The whole time I was reading this I wondered how much shorter and better this book might have been had it been written by the late John Brooks. In John Brooks' hands, I imagine this story fitting into 80 to 120 pages and being interesting and gripping the whole way.
April 2, 2017
The Spider Network is a bonafide thriller. It's the inside story of one of the most audacious bank heists of all time. But it's also a classic of muckraking journalism that exposes how insiders can manipulate the complexities of the global financial system to enrich themselves. On another level, it's a fascinating character study of a brilliant, complex and unpredictable man haunted by his own personal demons who, with a few keystrokes, could affect the lives of billions of people. It's rare to find a book that you feel like you should read, but that you also can't put down. David Enrich is the rarest kind of writer, someone who is steeped in the arcane details of a subject few people understand, but also has the ability to step back and tell a story.
April 6, 2019
The Spider Network is a great story of a math genius and a gang of backstabbing bankers. The book details one of the greatest scams in financial history. The author is David Enrich, a Wall Street Journal’s award-winning business reporter.
In a nutshell, the scandal involves something that very few non-financial people have heard of but is enormously important. It’s called LIBOR which is an acronym that stands for the London Interbank Offered Rate. This is a kind of international benchmark that represents the interest rate at which various banks offer to lend short-term loans to one another in the interbank market. LIBOR is so important because it is the DNA for the interest rates that people around the world pay their mortgages. Credit cards, student loans or car loans are also valued by this benchmark. This is also a basis for the interest rates the multinational companies pay when they borrow money, or even when cities borrow money, their interest rates are often based on LIBOR. The LIBOR is compiled every day by a group of bankers who basically conduct an estimation of how much it costs them to borrow funds from each other. Suddenly, a bunch of bankers figured out that this rate was extremely easy to manipulate and decided to operate in order to enhance their own financial positions and make a lot of money by trading assets valued on LIBOR.
The story concentrates on an analyst named Tom Hayes who is a mildly autistic mathematician and a star trader for a succession of the world’s biggest banks. Throughout his career, he makes a ton of money these banks and is heavily recruited by one bank after another as UBS, Goldman Sachs and other banks of that calibre.
There are other characters portrayed in the book, nevertheless, what I would like to emphasize is that most of these guys, at the moment they arrived at the bank out of their business school, they are specially trained to basically hunt for loopholes, weaknesses and inefficiencies in order to push as far as they could every single time with the sole goal being to make as much money as they can and as quickly as they can. In that context, it is not that surprising that such scandals are rough and it is even more surprising that they are being encouraged to push as far as they can and... (if you like to read my full review please visit my blog https://leadersarereaders.blog/the-sp...)
In a nutshell, the scandal involves something that very few non-financial people have heard of but is enormously important. It’s called LIBOR which is an acronym that stands for the London Interbank Offered Rate. This is a kind of international benchmark that represents the interest rate at which various banks offer to lend short-term loans to one another in the interbank market. LIBOR is so important because it is the DNA for the interest rates that people around the world pay their mortgages. Credit cards, student loans or car loans are also valued by this benchmark. This is also a basis for the interest rates the multinational companies pay when they borrow money, or even when cities borrow money, their interest rates are often based on LIBOR. The LIBOR is compiled every day by a group of bankers who basically conduct an estimation of how much it costs them to borrow funds from each other. Suddenly, a bunch of bankers figured out that this rate was extremely easy to manipulate and decided to operate in order to enhance their own financial positions and make a lot of money by trading assets valued on LIBOR.
The story concentrates on an analyst named Tom Hayes who is a mildly autistic mathematician and a star trader for a succession of the world’s biggest banks. Throughout his career, he makes a ton of money these banks and is heavily recruited by one bank after another as UBS, Goldman Sachs and other banks of that calibre.
There are other characters portrayed in the book, nevertheless, what I would like to emphasize is that most of these guys, at the moment they arrived at the bank out of their business school, they are specially trained to basically hunt for loopholes, weaknesses and inefficiencies in order to push as far as they could every single time with the sole goal being to make as much money as they can and as quickly as they can. In that context, it is not that surprising that such scandals are rough and it is even more surprising that they are being encouraged to push as far as they can and... (if you like to read my full review please visit my blog https://leadersarereaders.blog/the-sp...)
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May 9, 2018I received my copy free through Goodreads Giveaways
January 6, 2018
Anyone who liked the movie "The Big Short" is sure to enjoy this read, written by Wall Street Journal writer David Enrich, which is the true story of how over a multi-year period actors across the financial system attempted to manipulate Libor (the London interbank offered rate). Managed by a British trade association and initially an obscure concept outside of the financial world, Libor had significant implications across the financial sphere in that it influenced banks' returns on interest rate-linked derivatives, mortgages, and loans that had incorporated Libor in their stipulations. A prevailing thought in the British government at the time was that regulation stifled the financial industry; Gordon Brown advocated for a "light touch," stating that while certain historical notions suggested that industry, left unregulated, would act irresponsibly, reputation was important enough to keep industry transparent and in check absent of strong regulation. The Spider Network is essentially the story of how traders and brokers across the banking industry, with tacit or explicit support of their supervisors and bank executives, worked to skew Libor in ways that would benefit each bank's trading positions.
Informative and extremely well-researched, the book focuses on one illustrious trader in particular, Tom Hayes, who had a central role in Libor manipulation. The first part of the book, which I enjoyed more than the second half, focuses on how the actual Libor scandal unfolded and was perpetuated. The second half focuses on the fallout of the scandal. Enrich's book probes into what professional incentives, morality, and integrity mean in a world where lines are consistently crossed (and, in fact, in which the system encourages them to be crossed). The book does a superb job of explaining financial jargon while simultaneously humanizing and providing a character portrait of key players. All-in-all a provocative and very worthwhile read.
Informative and extremely well-researched, the book focuses on one illustrious trader in particular, Tom Hayes, who had a central role in Libor manipulation. The first part of the book, which I enjoyed more than the second half, focuses on how the actual Libor scandal unfolded and was perpetuated. The second half focuses on the fallout of the scandal. Enrich's book probes into what professional incentives, morality, and integrity mean in a world where lines are consistently crossed (and, in fact, in which the system encourages them to be crossed). The book does a superb job of explaining financial jargon while simultaneously humanizing and providing a character portrait of key players. All-in-all a provocative and very worthwhile read.
March 13, 2017
This story is amazing. Not only were trillions of dollars worth of loans based on a Libor, but enormous amounts of derivatives contracts as well. Yet, as it turns out, Libor was easily manipulated by the traders and brokers involved in trading these derivatives. While Enrich outlines how the scandal unfolded in amazingly fascinating detail, what I really loved were the characters. You really get a feel for everyone from the regulators to the traders. I particularly enjoyed the working class partying brokers who kissed up to not only their math nerd client, but to their math nerd client's family as well. It is a real inside look into a particularly sleazy side of Wall Street culture.
April 26, 2017
Usually anything financial confuses and bores me. While I admit to skimming though a good portion of the "financial" stuff, I did thoroughly enjoy the people part, the journey to exposure and the author's "novelish" approach. It also left me exhausted at the thought of the mountains of tedious research he wrangled into a superior read. In the end, I realized what I thought all along about the greedy money people is even worse.
October 29, 2017
First of all iI should thank the publishers for giving me a copy before publication. However, I found this book a difficult read. Much of it felt repetitive -he phoned this that and the other colleague to fix the libor rate etc etc. The footnotes were irrelevant or could easily have been incorporated into the main text. it was ponderous and might have been more widely readable as a factional - fact written as fiction. It just felt like hard work
April 3, 2017
I was really intrigued by this, having never read anything like it before. It was like opening a secret window into the world of the big shots in finance! The corruption was simply astounding. It read like a best selling thriller, which I found pretty hard to put down at night. If you want your mind blown, this book is for you!
Thanks to the Penguin Random House for my early copy.
Thanks to the Penguin Random House for my early copy.
February 19, 2020
Uma história bem legal sobre como um grupo de banqueiros e investidores ingleses conseguiu usar e manipular um índice chamado Libor para escolher quanto os investimentos iam render. O livro conta o trajeto de como descobriram como manipular valores, como perderam a mão e como todo mundo menos o matemático sem conexões se safou. Um escândalo distante daqui, mas bem legal para entender o que os EUA passariam 2 anos depois.
Want to read
July 16, 2021sale until 2 Aug
August 29, 2018
Captivating. Read like fiction.
May 3, 2018
The overall plot wasn't all that "Wild", but the gang was rather backstabby. Not sure if I would have classified it as "One of the Greatest Scams in Financial History" either. It was another case of letting investment bankers be in control of a market metric that they could manipulate to some degree and then make bets on how things would be in the future (where they would try to manipulate the metric in their favor).
In this case the metric was Libor (London Inter-bank Offered Rate) or the average interest rate that one bank would charge another that was borrowing money from the lending bank in London. If you've read your credit card terms or adjustable mortgage terms, you've seen Libor referenced as a basis for setting those adjustable rates. The original metric proved so useful, a whole host of other countries with their banks and currencies created similar metrics. From this, derivative products could be bought by investors to hedge other investments in their portfolio. Brokers and traders that sold these derivatives often took up opposite positions to balance or hedge their risk. Unfortunately, the "foxes were in charge of the hen house" in many cases and brokers could influence trends in the Libor-like metrics.
The author does a good and simple explanation about Libor, its history and uses, and the concept of derivatives and making "bets" on how much Libor changes within a given period of time. These latter "financial products" were the crux and motivation for the whole scam. All in all, one more reason for stricter banking regulation and prosecution, IMO.
In this case the metric was Libor (London Inter-bank Offered Rate) or the average interest rate that one bank would charge another that was borrowing money from the lending bank in London. If you've read your credit card terms or adjustable mortgage terms, you've seen Libor referenced as a basis for setting those adjustable rates. The original metric proved so useful, a whole host of other countries with their banks and currencies created similar metrics. From this, derivative products could be bought by investors to hedge other investments in their portfolio. Brokers and traders that sold these derivatives often took up opposite positions to balance or hedge their risk. Unfortunately, the "foxes were in charge of the hen house" in many cases and brokers could influence trends in the Libor-like metrics.
The author does a good and simple explanation about Libor, its history and uses, and the concept of derivatives and making "bets" on how much Libor changes within a given period of time. These latter "financial products" were the crux and motivation for the whole scam. All in all, one more reason for stricter banking regulation and prosecution, IMO.
March 28, 2017
Enrich has collaborated with and interviewed Tom Hayes quite extensively for this book. So it’s not surprising that the book is slightly slanted in his favour, especially when it comes to the mitigating circumstances for his actions.
Readers should note that Hayes launched an appeal against his conviction in January 2017, and his defence is built on the grounds that he believes he did not have a fair trial. In his previous trial the judge wouldn’t allow his Asperger’s diagnosis to be taken into account or presented. His expert witness argues that the Asperger’s syndrome would explain his inability to see his conduct as dishonest or that others could perceive his conduct to be dishonest.
It is also worth noting that Hayes wasn’t diagnosed with Asperger’s until before his trial, so it kind of begs the question whether this is just a convenient excuse and/or basis for his diminished capacity of guilt defence.
Of course the other side of the coin is the fact that Hayes, his colleagues and indeed the entire financial industry functioned and worked in an environment with little or no restrictions or repercussions. Most of the dealings we now consider to be criminal were not considered to be so at the time they began using them. A perfect example of this is insider trading, which was once, not many decades ago. considered to be normal wink wink nudge nudge dealing between traders and brokers.
I think the Spider Network is an inside window into the world of big finance and the insidious nature of those at the top. The Libor rate is an easily manipulated money sucking scam created by rather greedy, but extremely clever men with masses of hypothetical money at their fingertips and no thought to the lives they might, and certainly did, destroy.
It has been noted that there are plenty of sociopaths in the world of big business and finance. They are capable of making ruthless decisions without being hindered by empathy and compassion. They don’t consider the moral implications or the little man at the bottom of the pyramid.
Whilst the story of who, how and what is fascinating it also important to remember all the people who have fallen prey to the Libor rate game of derivatives.
On a side note I would like to add that despite Enrich giving the reader an inkling of who Hayes was and is, especially in regards to his ASD and possible vulnerabilities, the picture isn't complete. The complexity of the case against him and why he is appealing isn't delved into as minutely. Enrich does leave one with food for thought though, especially if you think out of the box. Was Hayes really the spinning spider or just part of the silky web, which was considered disposable?
*I received an ARC of this book courtesy of the publisher via NetGalley.*
Readers should note that Hayes launched an appeal against his conviction in January 2017, and his defence is built on the grounds that he believes he did not have a fair trial. In his previous trial the judge wouldn’t allow his Asperger’s diagnosis to be taken into account or presented. His expert witness argues that the Asperger’s syndrome would explain his inability to see his conduct as dishonest or that others could perceive his conduct to be dishonest.
It is also worth noting that Hayes wasn’t diagnosed with Asperger’s until before his trial, so it kind of begs the question whether this is just a convenient excuse and/or basis for his diminished capacity of guilt defence.
Of course the other side of the coin is the fact that Hayes, his colleagues and indeed the entire financial industry functioned and worked in an environment with little or no restrictions or repercussions. Most of the dealings we now consider to be criminal were not considered to be so at the time they began using them. A perfect example of this is insider trading, which was once, not many decades ago. considered to be normal wink wink nudge nudge dealing between traders and brokers.
I think the Spider Network is an inside window into the world of big finance and the insidious nature of those at the top. The Libor rate is an easily manipulated money sucking scam created by rather greedy, but extremely clever men with masses of hypothetical money at their fingertips and no thought to the lives they might, and certainly did, destroy.
It has been noted that there are plenty of sociopaths in the world of big business and finance. They are capable of making ruthless decisions without being hindered by empathy and compassion. They don’t consider the moral implications or the little man at the bottom of the pyramid.
Whilst the story of who, how and what is fascinating it also important to remember all the people who have fallen prey to the Libor rate game of derivatives.
On a side note I would like to add that despite Enrich giving the reader an inkling of who Hayes was and is, especially in regards to his ASD and possible vulnerabilities, the picture isn't complete. The complexity of the case against him and why he is appealing isn't delved into as minutely. Enrich does leave one with food for thought though, especially if you think out of the box. Was Hayes really the spinning spider or just part of the silky web, which was considered disposable?
*I received an ARC of this book courtesy of the publisher via NetGalley.*
July 17, 2018
When I was a junior corporate lawyer, I sat in a debt training session. One of the partners mentioned LIBOR. The explanation confused me. But as a young lawyer I didn't know very much about the workings of high finance.
It turns out that the benchmark is hodgepodge of figures voluntarily submitted by banks with little market check or control. I've heard plenty of stories in the news. For a detailed look, I recently read The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History.
LIBOR—the London interbank offered rate, determines the interest rates on trillions in loans worldwide. LIBOR is supposed to reflect the interest rate at which member banks could borrow from one another that day. LIBOR is a global benchmark used to price all types of debt from credit cards, to variable rate mortgages, to complex derivatives and to corporate loans.
Very few people knew exactly how the rate was calculated. (That included that partner giving my training.) Even among the member banks there was widespread confusion as to its exact definition.
David Enrich of The Wall Street Journal manages to make Libor interesting in The Spider Network. His key to the story is telling the story of UBS interest rate derivative trader, Tom Hayes. This socially inept, if not autistic guy, is set up to be the fall guy for the LIBOR scandal.
Banks had lots of internal conflicts on their LIBOR submission. The rate a bank submits is indication of its credit worthiness. If it submits a rate that is higher than its peers, people may wonder if there is a problem at the bank.
The other major conflict is that the banks have traders, like Tom Hayes, who could make money or lose money on their positions depending on whether LIBOR goes up or down.
“LIBOR is a widely utilized benchmark that is no longer derived from a widely traded market. It is an enormous edifice built on an eroding foundation—an unsustainable structure,” stated CFTC Chairman J. Christopher Giancarlo in his opening remarks at the CFTC’s Market Risk Advisory Committee meeting last week. At the same meeting Commissioner Rostin Behnam identified noted that “LIBOR has been subject to pervasive fraud, abuse, and manipulation. Since June 2012, the CFTC has levied sanctions of more than $3.3 billion for LIBOR-related misconduct.”
I would recommend The Spider Network to learn more about the LIBOR mess.
It turns out that the benchmark is hodgepodge of figures voluntarily submitted by banks with little market check or control. I've heard plenty of stories in the news. For a detailed look, I recently read The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History.
LIBOR—the London interbank offered rate, determines the interest rates on trillions in loans worldwide. LIBOR is supposed to reflect the interest rate at which member banks could borrow from one another that day. LIBOR is a global benchmark used to price all types of debt from credit cards, to variable rate mortgages, to complex derivatives and to corporate loans.
Very few people knew exactly how the rate was calculated. (That included that partner giving my training.) Even among the member banks there was widespread confusion as to its exact definition.
David Enrich of The Wall Street Journal manages to make Libor interesting in The Spider Network. His key to the story is telling the story of UBS interest rate derivative trader, Tom Hayes. This socially inept, if not autistic guy, is set up to be the fall guy for the LIBOR scandal.
Banks had lots of internal conflicts on their LIBOR submission. The rate a bank submits is indication of its credit worthiness. If it submits a rate that is higher than its peers, people may wonder if there is a problem at the bank.
The other major conflict is that the banks have traders, like Tom Hayes, who could make money or lose money on their positions depending on whether LIBOR goes up or down.
“LIBOR is a widely utilized benchmark that is no longer derived from a widely traded market. It is an enormous edifice built on an eroding foundation—an unsustainable structure,” stated CFTC Chairman J. Christopher Giancarlo in his opening remarks at the CFTC’s Market Risk Advisory Committee meeting last week. At the same meeting Commissioner Rostin Behnam identified noted that “LIBOR has been subject to pervasive fraud, abuse, and manipulation. Since June 2012, the CFTC has levied sanctions of more than $3.3 billion for LIBOR-related misconduct.”
I would recommend The Spider Network to learn more about the LIBOR mess.
May 5, 2022
Bankers gone so wrong...again. A great story of how a small coterie of players was able to distort the LIBOR (interbank lending rate) to allow them to make money off trades. Really well written, lays out how a small number of traders just kind of....fell into it. No grand plan at work, really. And how messed up that is. Oversight within the financial institutions themselves seems incredibly lax. And, not all those involved paid the price...except of course, a number of investors harmed by the market distortion. Yet another great tale of perfidy in the markets, accessible to lay readers.
April 10, 2017
This is a fascinating in-depth look at the people behind the Libor financial scandal. In particular it examines how Tom Hayes, one of the only people jailed for his part in the rate-rigging, came to be involved. Hayes, of course, is intent on appealing his sentence, so it remains to be seen if the outcome for him will change.
First up, it's important to note that I didn't know much of anything about trading, derivatives or Libor before I started this book. I'm also one of those readers who flushes out half of all knowledge attained as soon as I finish a book. But I still enjoy the journey for some reason.
Enrich does well to make a difficult subject accessible. I wouldn't say it's an immediately compelling read. It's not a page turner, more of a slow burn of interestingness (I know words, me). There aren't twists and turns so much as a deepening of understanding, a realisation as the book goes on as to how many people were implicated in the scandal and how so many got off completely scot-free.
The author worked closely with Hayes, which I think makes Hayes somewhat sympathetic as a result, but only because you understand him more, not because he's painted as completely innocent.
This is a man who may or may not be on the Asperger's Spectrum (and armchair diagnosis while reading a book would suggest he could be) but very clearly takes the wrong course of action for his own benefit, over and over again, steamrollering over friends and colleagues. I say friends - but of course he didn't have any genuine ones apart from his wife.
Ultimately, it's the tale of a man who determined to earn as much as he could for both himself but also his bosses. His bosses authorised what he did multiple times. Firms fought over this man precisely because of what he did with Libor! He never stopped to think of the consequences but he also never hid what he did, not really. That's why there was so much evidence against him. He thought he was doing his job, because the sector is/was so corrupt that earning as much as you could any way you could, was his job. I don't exactly feel sorry for him, but he is obviously just one piece of the network manipulating Libor.
An enjoyable read, if you like complex stories about sectors you don't fully understand!
First up, it's important to note that I didn't know much of anything about trading, derivatives or Libor before I started this book. I'm also one of those readers who flushes out half of all knowledge attained as soon as I finish a book. But I still enjoy the journey for some reason.
Enrich does well to make a difficult subject accessible. I wouldn't say it's an immediately compelling read. It's not a page turner, more of a slow burn of interestingness (I know words, me). There aren't twists and turns so much as a deepening of understanding, a realisation as the book goes on as to how many people were implicated in the scandal and how so many got off completely scot-free.
The author worked closely with Hayes, which I think makes Hayes somewhat sympathetic as a result, but only because you understand him more, not because he's painted as completely innocent.
This is a man who may or may not be on the Asperger's Spectrum (and armchair diagnosis while reading a book would suggest he could be) but very clearly takes the wrong course of action for his own benefit, over and over again, steamrollering over friends and colleagues. I say friends - but of course he didn't have any genuine ones apart from his wife.
Ultimately, it's the tale of a man who determined to earn as much as he could for both himself but also his bosses. His bosses authorised what he did multiple times. Firms fought over this man precisely because of what he did with Libor! He never stopped to think of the consequences but he also never hid what he did, not really. That's why there was so much evidence against him. He thought he was doing his job, because the sector is/was so corrupt that earning as much as you could any way you could, was his job. I don't exactly feel sorry for him, but he is obviously just one piece of the network manipulating Libor.
An enjoyable read, if you like complex stories about sectors you don't fully understand!
April 4, 2017
I received a copy of this book from NetGalley in exchange for an honest review.
Addictive non-fiction that lets the reader take a look into a fascinating, complex scandal that spanned years and involved people right at the top of the banking industry. Enrich tells the story in minute detail, giving a real sense of exactly what was going on, making the most of the brilliant sources he had access to. It is narrative non-fiction, and the scene is set well. It reads so much like a story that I found myself hooked and wanting to know how it was all going to play out.
As well as what was happening with Libor and its variations, there's a strong focus on the banking environment and community, something which I, with no ties to the industry at all, found shocking and utterly engrossing! We get to see how manipulating Libor evolved - from becoming standard practice across many banks, to 'do it but don't talk about', to it completely unravelling and no one wanting to admit they had ever even seen it happen.
I would most strongly recommend The Spider Network to those with some understanding of the financial markets, looking for a more in depth look at what happened from sources right at the heart of it. There is obviously a necessary use of financial terms, all of which are explained, and it can sometimes be name heavy, but it is still accessible to a layperson. I went in with very little knowledge, only to find myself both educated and engaged!
Addictive non-fiction that lets the reader take a look into a fascinating, complex scandal that spanned years and involved people right at the top of the banking industry. Enrich tells the story in minute detail, giving a real sense of exactly what was going on, making the most of the brilliant sources he had access to. It is narrative non-fiction, and the scene is set well. It reads so much like a story that I found myself hooked and wanting to know how it was all going to play out.
As well as what was happening with Libor and its variations, there's a strong focus on the banking environment and community, something which I, with no ties to the industry at all, found shocking and utterly engrossing! We get to see how manipulating Libor evolved - from becoming standard practice across many banks, to 'do it but don't talk about', to it completely unravelling and no one wanting to admit they had ever even seen it happen.
I would most strongly recommend The Spider Network to those with some understanding of the financial markets, looking for a more in depth look at what happened from sources right at the heart of it. There is obviously a necessary use of financial terms, all of which are explained, and it can sometimes be name heavy, but it is still accessible to a layperson. I went in with very little knowledge, only to find myself both educated and engaged!
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