The hunt to nab [Tom] Hayes and his confederates – a group that one participant dubbed the “spider network” – exposed far more than a scheme to manipulate the underpinnings of modern banking. I began to see the saga as rooted in a corrupt, broken financial system, as well as the minimalist, see-no-evil regulatory infrastructure that theoretically was supposed to keep the industry in check. Hayes’s moral compass certainly was skewed – perhaps in part due to the mild case of autism he was eventually diagnosed with, which helped explain his incompetence at human relations and his affinity for numbers over people. But just about everyone I encountered suffered from a version of the same defect: obsessed with numbers and profits, eager to use other people as tools for self-advancement, convinced that anyone on the losing end wasn’t so much a victim as a sucker who deserved whatever mistreatment he got.
commentary: In Henry James’ The Europeans, a character says this:
If we have ever had any virtue amongst us, we had better keep hold of it nowand the story behind The Spider Network would make you feel the time has come to take that stand.
Just yesterday, ‘two former Barclays traders [were] acquitted by a jury of conspiring to rig Libor, which is used to set interest rates’ – see BBC news story here. This book couldn’t be more timely.
If you are not in the financial world, and you know anything at all about the Libor scandal, then you probably remember that it was kind of shocking and awful, and you know that traders tried to influence what should have been an objective and important banking rate… and then you fade away and aren’t quite sure of much more. Well that was me, anyway. This book is the perfect antidote – it is a riveting account of the scandal, told through the story of Tom Hayes, the leading figure, a man who is currently serving jailtime.
David Enrich (what a perfect name for a man writing about people who enriched themselves) is very good at explaining the ins and outs of the trading world, and he presents a clear and fair view. He outlines how he came to the story at the end of the book, but it is clear throughout that he had unparalleled access to Hayes and his wife and family, and to texts emails and recordings from the era in which the moneymen were running riot with Libor. He manages to present a very balanced view of Hayes and his activities – it must have been tempting to either condemn him outright, or present some special pleading, but he does neither.
The passage above comes from the beginning of The Spider Network, and goes on to say
The more I dug, the more it seemed that, at least in some ways, Hayes himself was that sucker, the hapless guy positioned to take the fall for an entire industry’s era of anarchic, reckless behaviour.-and I had my doubts. Really, not Hayes’s fault? And HE was a loser? While I would still take issue with the claim that Hayes was ‘that sucker’ (there were a lot more suckers who lost an awful lot), I did end up feeling sorry for him, and certainly feeling he got a very raw deal.
At the most simple level, he asked others to manipulate a key rate, in order to help his trades and make money. BUT, at that time this was not illegal (because no-one had thought to make it so). So he was charged with conspiracy to defraud – but how come he was the only one taking the rap? A conspiracy of its nature has to be more than one person.
The real shocker, the depressing part of the book, comes in the endless stories of life among the moneymen - the boys’ club, the favours, the turning a blind eye, the corruption and the endless endless money to be made through dubious practices. Hayes has to resign one job because of his activities, but his next employer is told ‘we have no reason to doubt the individual’s honesty and integrity.’ There is a description of ‘switch trades’ – a way of making money for friends, apparently out of nowhere.
About the Libor submissions, Hayes’ view was “Just give the cash desk a Mars bar, and they’ll set [the rate] wherever you want. They are usually staffed by fat people.” Enrich’s verdict is ‘He was kidding, kind of.’ But he doesn’t mean that the cash desk wouldn’t do that: the joke is about the Mars bar.
It does seem apparent that ‘everyone’ was doing it, and ‘everyone’ knew, and Tom Hayes was the one thrown to the lions. He doesn’t sound like a particularly nice man, and he plainly had a high opinion of himself, a lack of concern for the results of his actions, and a very defective moral sense – but he sounds no different from every other character in the book.
About those other characters. One very charming thing about David Enrich is that whenever he introduces a new person he tries to tell you three things that will define him (it is nearly always ‘him’). Here are some of the more splendid examples
… with a bulbous nose and hangdog cheeks, he had a slight resemblance to Kevin Spacey.
Tall and with muttonchop sideburns, Ewan played the guitar and loved the theatre.
Brash, cocky and hard of hearing, with his thinning white hair combed straight back, Cotchett had been a Special Forces paratrooper
He also frequently talks about people cycling through offices or cycling through the agency – I was disappointed to realize that this meant that they served time at different desks or offices, not that they rode their bike around the trading floor.
The wiry, floppy-haired man, with a fondess for jogging and golf
But the charming descriptions shouldn’t let us miss some other vital points. Gary Gensler is chair of the US Commodity Futures Trading Commission, and is ‘short and skinny with a long pointy nose’. But he also ‘didn’t use a computer’, doesn’t have one in his office. What? How could someone in his position not use a computer? It’s symbolic of the complete lack of rigour, compliance, oversight. People get jobs for political reasons, or because they know the right people, and it is expected that they will not rock the boat, that they will turn a blind eye.
The book is shocking, and depressing, and makes you feel that the whole financial system should be dismantled and restarted, because it is corrupt and broken and wicked. Enrich’s words in the extract above sum it up well.
The book is also very well-written, very compelling, and highly-recommended. It is quite long, and can be somewhat repetitious, but I think that is because Enrich is being scrupulous about laying out his case.
One of Tom Hayes’ favourite authors is Michael Lewis, who also writes so well about financial matters – his book about Daniel Kahneman, The Undoing Project, was on the blog recently.