Top critical review
Too long, but encourages justice by naming the large circle of LIBOR manipulators
Reviewed in the United States on April 13, 2020
This book is too long, too detailed. Apparently, because the author had to sift through an enormous amount of information, we have to read it. However, I am glad I read it. Honestly.
The financial story is simpler than one might think. LIBOR is a bank interest rate benchmark, created from a sort of average from about a double-handful of banks. LIBOR is a solid number. Or is it? Each day, each bank's LIBOR number is reported to a central authority. People, not machines, report the number. Let's say Bob is the LIBOR reporter at each bank. Suppose I make trades based on the future value of LIBOR. Suppose I know Bob, or I have a close colleague who knows Bob. Suppose I ask Bob or I ask one of my friends-of-Bob to fudge the upcoming LIBOR number in a direction that will help my trades. Suppose I can influence a few Bobs. Remember, there are only around ten banks in the LIBOR circle. Also know, hundreds of thousands of dollars (euros, pounds, what-have-you) can be made on very large trades that move up or down only a small amount.
Suppose my name is Tom Hayes, the villain of this book. Then, of course, I get sentenced to 14 years in jail for bending the market for profit (later reduced to 12 years). Now let's look at the Bobs and my colleagues who helped convince the Bobs to alter the day's LIBOR reported value. None (none) of them went to jail. Yet, you can see that my LIBOR manipulation could not have happened without these people.
Now let's look at my career. I am very smart and I work very hard to understand the market. I make tens of millions of dollars (euros, pounds, what-have-you) for my employers, noting that only about 5% of my trades are around LIBOR. I am known in the industry as a star trader, so I regularly am asked to change companies. Sometimes I do. People in the industry know a lot about why I am a star trader, even the unspoken (?!) part about orchestrating LIBOR manipulation. That is, people just above me, and sometimes just above them, know that part of my power as a money-maker is to manipulate LIBOR. None of my bosses, none of their bosses accompanied me to jail for LIBOR manipulation.
But wait! How does the author know that I and my friends convinced the Bobs? How does the author know that my boss and bosses of bosses knew about my history of convincing Bobs to change their LIBOR reports? It seems there is a tremendous amount of record keeping in the finance sector. Records include chats, telephone calls, e-mails, texts, and who-knows-what.
Part of the power of this book is to open accountability to justice. If justice is ever to be served, this book shows that Tom Hayes should not be in jail alone, should not be serving a hugely unusual jail term. It also shows how the circle of LIBOR is made of a very large number of people colluding to manipulate a number that is a benchmark in name only. It's base should be solid but isn't and never was from day one.
Last observation: The simplest case of LIBOR manipulation would be a bank telling its very own Bob to jiggle the day's LIBOR report for the sake of its own in-house traders. Could that happen? Well, silly us! Not only did it happen, it is word-of-mouth of this that inspired Tom Hayes to make LIBOR manipulation one of his trading tools. It's in the book!