I recommend reading an interview with author David Enrich who wrote a book “The Spider Network: The Wild Story of a Math Genius, and a Gang of Backstabbing Bankers, And One of The Greatest Scams in Financial History.” Below are excerpts of comments made by Mr. Enrich during the interview, “What’s Behind One of the Biggest Financial Scams in History.” The interview appeared on February 19, 2017 in Knoweldge@Wharton.
- “The mastermind of the LIBOR scandal was a guy named Tom Hayes, a mildly autistic mathematician who was a star trader at some of the world’s biggest banks.”
- “[m]y iPhone buzzed with a text message from a number I didn’t recognize. And it said, “This goes much, much higher than me. Not even the Justice Department knows the full story. I’m willing to talk to you, but I need to make sure I can trust you.” It was Tom Hayes.”
- “He felt like he was doing something that was really just false and misleading. And he took solace in the fact that the bosses knew about and generally approved of what he was doing. But as most of us learn from a very early age, just because everyone is doing something bad doesn’t mean it’s OK for you to do something bad yourself. That’s a message that was really lost on an entire generation of people in the financial industry, I think.”
- “And prosecutors, instead of going after people at the top of the food chain — the CEOs and business leaders who are responsible for setting the culture at their institution, responsible for in many cases the practices of their institutions — instead of going after those guys, they uniformly went after a small group of relatively low-level people. Don’t get me wrong, Hayes in particular did things that were wrong, he knew they were wrong, or at least should have known they were wrong, and deserves to be punished. But what is crazy to me is that Tom Hayes is currently serving an 11-year sentence in a maximum-security prison. And as far as I can tell, he is the only banker currently in jail for crimes committed during the financial crisis.”
- “The thing is, prosecutors do not like to lose cases, so they’ve taken, in general, a very conservative approach to what cases they’re going to bring because they don’t want to gamble on losing. They’ve built up these very impressive win/loss records as prosecutors. Some of them are undefeated. And they boast about that.”
- “To me, that’s a really unhealthy sign, because the thing that would scare some of these bank CEOs is not losing some money or losing their jobs; it’s the prospect of being perp-walked in front of TV cameras in handcuffs, or the prospect of possibly losing your liberty in front of a jury of your peers. That is a terrifying thing. To me, the great missed opportunity of the financial crisis was that prosecutors didn’t do that a single time with a CEO or a top executive of any major financial institution. They might have lost those cases, but at least it would have struck some fear in the hearts of people.”
- “Again, I’ve developed a lot of sympathy for them [Hayes and his family] and their situation there. I do want to make clear that he is not an innocent victim here. He is someone who was participating, and he was not acting properly. He was acting illegally, and I think deserves to be punished. I just find it galling that he is alone in being punished.”
- “My concern is that as memories of these massive penalties [fines] fade and memories of the crisis fade, the pressure is going to return for banks to amp up their profits. As that becomes the priority among shareholders, it’s going to become the priority among senior executives. At that point, the cultural stuff goes out the window, and the No. 1 priority once again becomes just making as much money as quickly as you can.”
The book, The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History is available on Amazon here.
Thanks to my friend Toni Hill who forwarded the Wharton@Knowledge interview to me. Toni and I worked together in the Philadelphia Field Office of the Antitrust Division on several high profile (and many low-profile but fascinating) cartel cases.
 The Wharton@Knowledge interview recap had this introduction:
David Enrich followed the story while he was working for The Wall Street Journal and got close to the central figure in the scandal — star derivatives trader Tom Hayes. In the book, The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History, Enrich, now with The New York Times, shares the tale of this brazen scam on the Knowledge@Wharton show on Sirius XM channel 111.