Newsletter | Volume 1

Issue I
Issue II
Issue III
Issue IV
Issue V
Issue VI
Issue VII
Issue VIII
Issue IX
Issue X
Issue XI
Issue XII
Issue XIII
Issue XIV
Issue XV
Issue XVI
Issue XVII
Issue XIX
Issue XX
Issue XXI
Issue XXII
Issue XXIV
Issue XXV
Issue XXVI
Issue XXIX
Issue XXX
Issue XXXI
Issue XXXV

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Banksters are turning into gangsters

Is it the rotten tone at the top, facilitated by blindness of middle management and the check-the-box support given by the bottom the reason why the financial institutions have behaved badly? Or is the reason as simple as that there is enough free money to play with that makes them act so arrogantly?

Many anonymous traders are implicated in the tall stack of documents regulators published recently a report detailing Royal Bank of Scotland's attempts to rig the lending benchmark known as Libor. But only one trader is cited by name: a 33-year-old so brainy yet socially awkward that colleagues nicknamed him "Rain Man."

It is claimed that he often acted with the knowledge of bosses and was mindful of his ability to rack up big trading profits. Competition sought to lure him away with multimillion $ job offers. The strong connections with Libor setters in London [are] invaluable.

Better late than never

Some of the revelations for own soul searching in the financial services industry are:
  • This goes much much higher than me.
  • To rig Libor was common industry practice.
  • Who was I to question what they were doing?
  • I thought it was weird, but that's how they did it,
  • Based on practices at the bank and feedback from the bosses, the method was considered it part of the job.
  • The boss was aware of his actions (Justice Department).
  • Many derivatives traders and managers were involved in the manipulative conduct (U.S. Commodity Futures Trading Commission)
  • Each morning at a meeting he told colleagues which way he planned to push Libor that day, and was so open about his strategy that he would change his status on his Facebook page to reflect his daily desires for Libor to move up or down. (according to the Justice Department).
  • Though generating tens of millions of dollars a year in revenue, the bosses weren't satisfied. (Management still pushing me for more, in a note to a trader at another bank in November 2007)
  • The risk management reins were loose. The bank let him take so much risk that he could lose up to $3 million for every hundredth of a point rates moved.

So he caught the attention of rival banks. Competition continued to put out informal feelers about hiring Hayes, according to people familiar with the matter.

Source: The Progress report. Rain Man Claims LIBOR Scandal Goes Much Higher