Rip roaring tale! Finance nerd stuff. Loved the story. Well told, well researched. Hard to believe only one guy got nailed for this. And 14 years! Crazy. Worth the read. ( )

I had been sort of aware of the Libor fixing scandal without ever really understanding the causes and effects of it. David Enrich skillfully navigates through this world balancing the needs to explain the intricacies of the scandal without weighing the reader down with too much detail.

Going beyond this is a very real personal story of Tom Hayes and his family who being at the centre of the scandal seems very much to have been the fall guy for actions that went much further than one trader. ( )

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/2019/03/07/thelasttycoons) ( )

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.

Review originally appeared:

https://www.compliancebuilding.com/2018/07/21/weekend-reading-the-spider-network... ( )

Very interesting read to see how the whole Libor thing unfolded and more interesting to see how the whole banking industry is built on greed and people who shouldn't be allowed anywhere near money. Sad part is that in the end the people who enabled the whole mess, the senior bank officers, all go free and prosper. I really shouldn't be surprised by that. ( )