The article is light on the description of what actually happened but there is a section about the impact of his action and whether he relised the impact.<p>One thing to understand is that there was not one but two distinct manipulations of Libor.<p>The first is the one this article refers to, which is before the financial crisis, swap traders influencing the libor submitters to move their contribution to the fixing by a tiny amount, often a couple of basis points, to fit the massive future positions they were sitting on. Completely unethical and illegal but unlikely to have any noticable effect on the market, kind of like stealing a penny from a million bank accounts. It’s still stealing, but the impact on the market is limited.<p>The second manipulation was of a different nature. It is at the height of the financial crisis, when banks were failing as a result of bank runs every week, libor submitters, probably under instruction / tacit consent from their management and regulators, low balled their contribution to the libor fixing to not appear to be struggling to fund themselves (by having a high cost of borrowing) since these contributions were public and investors were trying to infer what bank was next to fail. These low balling were probably in the 50-300 basis point range, ie with a material impact on the wider maket (borrowers should have paid significantly higher interest rates during that period). And this is the one whistle blowers complained to regulators about, falling into deaf ears.
>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. That’s just a tremendous missed opportunity, in my opinion.<p>Ah yes, I love when my government hassles innocent people to make a point to everyone else.
The book might show how big FinTech houses were behind this but the article is light in that regard. The moments where people feel they can ask inside their own bank 'can guy move the LIBOR just a few thou' and not realise that's an otfense, breaks Chinese walls, breaks bounds.. and then institutionalization sets in...and you're off and running.<p>Those moments felt to me like 'its not a conspiracy, it's Lowe grade decision making by people who aren't reminded of their obligations' so maybe the book tells it better.<p>Always a bit of a sad moment, when the journo realised they like their subject. How do you maintain objectivity once you humanize the devil? Gitta Serenyi had that with Albert Speer.
<i>"The mastermind of the LIBOR scandal was a guy named Tom Hayes, a mildly autistic mathematician"</i><p>How convenient is to have such people around /s. Developers should learn from stories like this as well -- don't do anything illegal, even though your superiors tell you so, because when shit hits the fan, <i>you</i> will be the one held accountable.
What is surprising to me is that LIBOR setting was not based on actual transactions but on the assumptions what I would pay bank X to borrow money. The perceived punishment for lying was laughable too. All around this just invites actors with bad incentives.<p>I believe as of today LIBOR is set based on actual transactions. But who was the genius who created the original LIBOR? Perhaps it all started as something hacky in the 60s and they could not foresee how important LIBOR would become?
> first, you identify inefficiencies in the market: weaknesses, loopholes, things like that<p>Huh? That's not what inefficiency means. It means that an asset costs more (or less) then it's worth.
My bank was involved with the LIBOR scandal but they won't let my wife pay small amounts of cash into my account just in case we're up to something dodgy.<p>If I temporarily have a large amount of cash in the account then they send me brochures trying to lure me into some premium 'exclusive' club which feels more than slightly greasy.<p>I would switch banks but it's a lot of hassle. Plus I don't get the sense that any of them would be working for me. They're working for the regulator, or for the forces of darkness, or for someone else.