The Wall Street Journal's award-winning business reporter unveils the bizarre and sinister story of how a math genius named Tom Hayes, a handful of outrageous confederates, and a deeply corrupt banking system ignited one of the greatest financial scandals in history. In 2006, an oddball group of bankers, traders and brokers from some of the world's largest financial institutions made a startling realization: Libor - the London interbank offered rate, which determines the interest rates on trillions in loans worldwide - was set daily by a small group of easily manipulated functionaries, and that they could reap huge profits by nudging it to suit their trading portfolios. Tom Hayes, a brilliant but troubled mathematician, became the lynchpin of a wild alliance that among others included a French trader nicknamed "Gollum"; the broker "Abbo", who liked to publicly strip naked when drinking; a Kazakh chicken farmer turned something short of financial whiz kid; a broker known as "Village" (short for "Village Idiot") and fascinated with human-animal sex; an executive called "Clumpy" because of his patchwork hair loss; and a broker uncreatively nicknamed "Big Nose". Eventually known as the "Spider Network", Hayes's circle generated untold riches - until it all unraveled in spectacularly vicious, backstabbing fashion. The Spider Network is not only a rollicking account of the scam, but a provocative examination of a financial system that was crooked throughout, designed to promote envelope-pushing behavior while shielding higher-ups from the consequences of their subordinates' rapacious actions.
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Tom Hayes (in his sort of lingo) took all the upsides, meanwhile mispricing the risks. (So too, then, he mispriced the upsides.) He was busily playing his video game of choice while somebody came along and knocked him upside the head. A lot of somebodies, it turns out.
What upsides? Copious money, status, pricey play, toys, sugar-rushes of vanity. Risks? Legal risks. And these far surpass the popular image of being caught in a legal bear-trap: plodding through gray corridors of dull public buildings, selling off the house for bloodsucking legal fees, nodding out in interminable, pedantic proceedings. These risks are much more luridly colorful: they are an involuntary ticket into the modern circus of popcorn-chomping rubes in multitudes, chasing the infamous bad guy for selfies, and tossing off brutish and seemingly improperly-intimate personal judgments (like this review here by this rube is doing). Tom's character traits were precisely those that caused him to fence out the messy, squishy, nonlinear, combinatorially incalculable swaths of nonlinear realities that were the TRUE full gameboard he was on. He was a creature fashioned for this particular trap, and not all involuntarily. He took the bait. He fashioned himself to be its taker. And legally, "the mild Asperger's ate my conscience" is no defense, as the book points out. And never has been, else we slide into a quicksand of personalized excuses, of special pleading by every wrongdoer. Law forces us (assuming we are not utterly in another reality) into something of a mold morally, and for seriously necessary reasons. Because in legal thinking since ancient days, Tom took advantage of his freedoms and payoffs, tossing off the matching constraints, and he cannot suddenly claim he was always unfree by reasons of his peculiarities (as depicted here). Else he must relinquish the fun parts, and accept beilng something of an unfree slave. Which, not at all ironically, he now is. Force of legal logic, the rule of law, old chap. Freedom isn't free, as the song intones. So too, the ploy is spurious, that "everybody else is doing this sleazy thing so leave me alone to do it too."
Oh yes, the book.
The book is in the top rank of the true finance genre, but its lower edge. It is well-crafted, well-paced, engagingly written. It explains just enough tech to fit the human story side, without bogging down. It is not a textbook of market structure, etc. Access to players at least appears to have been careful and thorough; I wish we could check the scholarship more precisely with audiobooks to know how much access the author had to the players, to better evaluate the thoughts imputed to each person by the author, but it rings true, and he seems to have played them well. The book respects the reader's intelligence by flitting between different takes, different points of view, including moral and legal aspects, on events and the players' choices. It manages to stay out of the gutter of being too strident for or against anything or anyone, but it is helpful in dropping little hints of how one might choose to view events. I hope this author writes more.
Why top rank, lower edge? Why 4 stars for an otherwise excellent book in all ways? What is missing: the big upshot. Tom takes a massive hit, and his mates slip the noose and have a party. Roll credits. As not merely a popcorn-chomper and trading-gawker, but a history and legal thinker, I'm scratching my head. What, aside from the tiny tragedies and victories of the individual human interest angle, HAPPENED or DIDN'T happen on the big stage? What changes, if any, or none, happened to LIBOR(s), and to the rigging thereof? And did the riggers flee, or are they still there, in new avatars? And how do we fit this into the creep of such things as Artificial Intelligence and the other floods of tiny demons of tech? This last bit of the author's sticking to the one clean human story (and ending it in a pub) leaves me empty at the end. OK, Tom is cooling his heels. The legal system still has these uneven outcomes, but it is (by my lights) necessary and proper, pending some other way to catch and deter misbehavers as best we can. And?
Excellent Expose on a Scam and its Naive Ringleader
Anyone involved in finance is aware of the LIBOR rigging scam. It made headlines for quite a while, and was a perfect example of the corruption that goes on in the Derivatives Market. Manipulating a benchmark such as the LIBOR allows traders in derivatives to make millions very easily.
This story is about that rigging, but more importantly, about one of the people involved who was made a scapegoat for the corruption of his colleagues and the industry in general. These colleagues and even his superiors at the different banks he worked for were not only complicit, but in many cases encouraged or even requested the behavior.
An engaging and very enjoyable book, with an equally stellar performance on the audio. Will be of interest to anyone in the financial professions, as well as those interested in white collar crime.