The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number by Liam Vaughan

The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number by Liam Vaughan

Chapter 1
The End of the World
At the Tokyo headquarters of a Swiss bank, in the middle of a
deserted trading floor,Tom Hayes sat rapt before a bank of eight
computer screens. Collar askew, pale features pinched, blond
hair mussed from a habit of pulling at it when he was deep in thought,
the British trader was even more disheveled than usual. It was Sept. 15,
2008, and it looked, in Hayes’s mind, like the end of the world.
Hayes had been awakened at dawn in his apartment by a call from his
boss,telling him to get into the office immediately. In New York,Lehman
Brothers was hurtling toward bankruptcy.At his desk,Hayes watched the
world process the news and panic. Each market as it opened became a sea
of flashing red as investors frantically dumped their holdings. In moments
like this, Hayes entered an almost unconscious state, rapidly processing
the tide of information before him and calculating the best escape route.
Hayes was a phenom at UBS, one of the best the bank had at trad-

ing derivatives. So far, the mounting financial crisis had actually been
good for him. The chaos had let him buy cheaply from those desperate
to get out and sell high to the unlucky few who still needed to trade.
While most dealers closed up shop in fear, Hayes, with a seemingly lim-

itless appetite for risk, stayed in. He was 28, and he was up more than
$70 million for the year.
Now that was under threat.Not only did Hayes have to extract him-

self from every deal he’d done with Lehman, but he’d also made a series

of enormous bets that in the coming days interest rates would remain
stable. The collapse of the fourth-largest investment bank in the U.S.
would surely cause those rates, which were really just barometers of risk,
to spike. As Hayes examined his tradebook, one rate mattered more than
any other: the London interbank offered rate, or Libor, a benchmark
that influences $350 trillion of securities and loans around the world.
For traders like Hayes, this number was the Holy Grail. And two years
earlier, he had discovered a way to rig it.
Libor was set by a self-selected, self-policing committee of the world’s
largest banks.The rate measured how much it cost them to borrow from
each other. Every morning, each bank submitted an estimate, an aver-

age was taken and a number was published at midday. The process was
repeated in different currencies, and for various amounts of time, ranging
from overnight to a year. During his time as a junior trader in London,
Hayes had gotten to know several of the 16 individuals responsible for
making their bank’s daily submission for the Japanese yen. His flash of
insight was realizing that these men mostly relied on interdealer brokers,
the fast-talking middlemen involved in every trade,for guidance on what
to submit each day.
Hayes saw what no one else did because he was different. His inti-

macy with numbers, his cold embrace of risk and his manias were more
than professional tics; they were signs that he’d been wired differently
since birth. Hayes would not be diagnosed with Asperger’s syndrome
until 2015, when he was 35, but his co-workers, many of them savvy
operators from fancy schools, often reminded Hayes that he wasn’t like
them. They called him “Rain Man”.1 Most traders looked down on
brokers as second-class citizens, too. Hayes recognized their worth. He’d
been paying some of them to lie ever since.
By the time the market opened in London, Lehman’s demise was
official. Hayes instant-messaged one of his trusted brokers in the U.K.
capital to tell him what direction he wanted Libor to move. Typically, he
skipped any pleasantries. “Cash mate, really need it lower,” Hayes typed.
“What’s the score?” The broker sent his assurances and, over the next
few hours, followed a well-worn playbook.Whenever one of the Libor-

setting banks called and asked his opinion on what the benchmark would
do,the broker said—incredibly, given the calamitous news—that the rate
was likely to fall. Libor may have featured in hundreds of trillions of

The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number by Liam Vaughan