You can question some of the life choices that Tom Hayes, a/k/a Trader A, UBS’s Libor-manipulating-est Libor manipulator, has made, but this seems to me inarguable:
Citigroup executives wooed him in June 2009 at a swanky bar in Tokyo. As they showered him with praise, say people who were there, Mr. Hayes rarely spoke, instead letting his girlfriend, a lawyer, answer questions.
Shady traders: date lawyers! And let them do all the talking for you.
That detail is from this amazing Wall Street Journal article about Hayes. When we last discussed Hayes and his totally open and casual requests to people he’d just met to manipulate Libor for him, I asked “is this: (1) all of these people did not fully realize that they weren’t supposed to be doing what they were doing, (2) UBS’s culture was one of complete lawlessness and fuck-around-ery, or (3) both of those things are true and reinforce each other?,” and per the Journal the answer is fascinatingly (3).
I’ve occasionally said that Hayes made a career of Libor manipulating but that’s not entirely right. He started at RBS and, per the Journal‘s account,1 spent his time there mainly being smart and dressing “like a college student — with washed out jeans, a polo shirt and sometimes a threadbare sweater” rather than IMing people to ask them to fix Libor. (That, at RBS, seems to have come later.) Then he moved to UBS: Read more »
It’s getting to be a struggle to be amused by Libor manipulation chats. RBS took its lumps today, and the CFTC and FSA orders are full of quotes, and you can read them in variousround-ups, but, meh. Even Bart Chilton is bored; today’s imagery (“sends a signal to those who would monkey around with benchmark rates … much more than a slap on the wrist …”) is a letdown after his UBS masterpiece (“Financial sector violations are hurtling toward us like a spaceship moving through the stars”) just a few weeks ago. I get it! Everyone manipulated Libor! In writing! And then they were like “heh, fukin awexome man, u manipluated libor, gud work, i sexx u now, w champain.” Fabulous.1
Part of why RBS provides less delight than its predecessor Libor-settlers is that RBS made use of the oldest and most reliable way to avoid typos: not typing. From the CFTC order: Read more »
The Wall Street Journalstory today about the next Libor domino to fall – RBS, which will be coughing up $700mm or so to regulators in the next few weeks – is full of quietly hilarious lines, perhaps none more so than the Journal‘s deadpan clarification that “the Justice Department has the power to file criminal charges without the bank’s blessing.” For sheer backwardness, though, I think it’s hard to top this:
As part of UBS’s settlement last month, the Swiss bank’s Japanese unit pleaded guilty to wire fraud, a felony. Justice Department officials were heartened by the lack of a negative reaction in the markets and among regulators around the world to UBS’s guilty plea. Before the settlement deal, some officials had worried it could destabilize the bank. That has emboldened officials to pursue similar actions against banks like RBS, according to a person familiar with the matter.
The way a lot of people – sometimes even people at the Justice Department! – think about criminal law goes something like this:
If you do something naughty, we will charge you with a crime.
If you are convicted of that crime, bad things will happen to you.
You don’t want bad things to happen to you.
So you won’t do anything naughty.
This is called “deterrence.” All of the parts of it are important: if you are convicted of a crime and bad things don’t happen to you, then the whole system is mostly pointless. When the Justice Department is “heartened by the lack of a negative reaction” to a criminal conviction – when they’re like “yay, no deterrent effect!” – then … then … gaaah. Read more »
I assume that there’s someone somewhere whose job it is to think about this, but the big Libor fine that appears to be in UBS’s future got me wondering: how do they decide how big these fines are supposed to be? In most fraud cases you can tot up how much someone stole and use that as a starting point, inflating or deflating it for different levels of evil or remorse. But that doesn’t seem to be a promising avenue in Liborgate, where the money involved is hard to calculate and mostly flowed around the manipulating banks without touching them directly. The fine-setters seem to have about four things to think about:
how much bad stuff did the bank do,
how much money did they make doing it,
how caught are they, and
how sorry are they now.
On how much bad stuff … really the point of these settlements is that you’ll never quite know. The Barclays settlement documents contain tons of delightful emails, but they’re framed by the usual prosecutorial boasting that they are “just some examples of the numerous trader requests over the years in question.” They’re a sampling thrown in for scandalous effect, not a real accounting of Barclays’ rate manipulation. For the CFTC to actually publish every instance that it discovered of rate-fixing, in a settlement, would be silly. For one thing, the settlement is designed to avoid the necessity of doing the work to get such an accounting. For another, the settlement is designed to avoid the public release of such an accounting, which would be ammunition for the private lawsuits that have sprung up around Libor.
So we’re unlikely to get a real official read on whether UBS was worse than Barclays and by how much. But the fine is obviously a clue that they were pretty bad. From David Merkel’s data they actually seem to have been middle-of-the-pack as a Libor submitter, without the extreme submissions and big swings that Barclays had. But to be fair that is in 3-month USD and part of UBS’s thing seems to have been manipulating Libor in more tenors and currencies than Barclays did. Read more »
Just because their manipulation of Libor has gotten the most notice doesn’t mean it’s the only thing like to mess with. Don’t box them into that corner, like your one-trick ponies at Barclays. Read more »
One thing that most people probably agree on is that having their instant messages, e-mails, and phone call transcripts end up court would be cause for at least a little embarrassment. Everyone’s thrown in an emoticon they aren’t proud of, some of us have used company time to chat with significant others about undergarments, and the vast majority of workers have spent a not insignificant amount of the workday talking shit about their superiors. Of course, the humiliation gets ratcheted up a notch in the case of people who ‘haha’ (and in extreme circumstances ‘hahahah’) their own jokes* which, just for example, involve habitual Libor manipulation. Tan Chi Min knows what we’re talking about:
“Nice Libor,” Tan said in an April 2, 2008, instant message with traders including Neil Danziger, who also was fired by RBS, and David Pieri. “Our six-month fixing moved the entire fixing, hahahah.”
And while having such an exchange become public would be tremendously awkward for most, you know what’s really ‘hahaha’ about this whole thing? That 1) Tan was the one who wanted people to read the above, which was submitted as part of a 231-page affidavit earlier this month and 2) He’s trying to use it as evidence that he didn’t deserve to be fired. Read more »
Like Bank of America, RBS has some big goals for the coming year, chief among them being the firing of several thousand investment bankers. (For those skeptical they can do it, according to a PowerPoint presentation presented yesterday, re: the “exits,” quite a bit of progress has already been made.) Read more »