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Libor Scam/Tom Hayes: Goes Much Higher Than Me

Posted by Larry Doyle on February 8, 2013 9:04 AM |

I have long maintained that senior executives on Wall Street were very much aware of the collusive racketeering in the Libor rigging scandal. Why so? When a trader ‘makes it rain,’ that is, he is connected to a P/L that generates hundreds of millions of dollars, you better believe that the execs up the chain of command will want to know how the money is being made.

To think otherwise would display a level of naivete not found in these markets.

What evidence do we learn this morning that supports my premise that senior execs on Wall Street were aware that Libor was being manipulated? Let’s navigate as the WSJ writes about the “Rain-Man” >>>>>>>>

Many anonymous traders are implicated in the tall stack of documents regulators published this week detailing Royal Bank of Scotland Group 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.”

Regulators portray that man, Tom Hayes, as the connective tissue in pervasive efforts by several banks to boost trading profits by manipulating the London interbank offered rate.

Mr. Hayes hopscotched from RBS to the Royal Bank of Canada to UBS to Citigroup Inc., picking up the contacts and know-how that would be necessary to game Libor.

In one electronic chat released in connection with regulators’ $612 million settlement with RBS this week, Mr. Hayes asked another bank to skew Libor “too low for the next few days,” promising to “return the favour as when you need it.”

Yet Mr. Hayes often acted with the knowledge of bosses mindful of his ability to rack up big trading profits. When Citigroup in 2009 sought to lure him away from UBS with a $5 million job offer, some at UBS fought to keep Mr. Hayes by telling UBS executives of his ability to tap contacts who could nudge Libor up or down. His “strong connections with Libor setters in London [are] invaluable,” his boss wrote in an email to executives, including one who now runs the bank’s noncore division.

Mr. Hayes hasn’t filed a plea to the Department of Justice charges. In a text message to The Wall Street Journal, he said: “This goes much much higher than me.”

Never a doubt. How high? What execs specifically?

Hayes has real leverage here. He and his lawyers certainly know that. The key question is how do regulators and judicial officials pursue this? Boy, would I love to be a fly on the wall or a bug in the phone to listen in on some of these conversations. Honor amongst thieves? Never.

But in regard to whether senior execs knew of the Libor manipulation? I mean, come on. Are you kidding me? The lawsuits should add Hayes’ quote to their pile of ammo and to their requests for discovery.

I wish I could get the movie rights to this one.

Sense on Cents/Libor Scandal

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • nitu

    This is very good trading advice. I’ve been studying your site and this other site.

  • Mark J. Novitsky

    I’m certain that Mary Jo White will get right after all of this…as soon as she names her husband John as the new Director of Enforcement…DOJ goes after Ratings Agencies (Pre-emptive fear of Downgrades?) and leaves all the banksters free and clear. If you accuse the Ratings agencies of knowingly approving toxic junk…by association should you then also go after the banksters who created, packaged, lied, sold, BET AGAINST the same JUNK? Statute of limitations geeting ready to expire.

  • Peter Sivere

    This may be old news to some but worth the look on this snowy night.

    Parliamentary Commission on Banking

    Of interest at 1:23:00

  • Jake

    I very much enjoy your feeds – more BS on the LIBOR scandal

    Banks Urge US Judge To Throw Out Libor Lawsuits

    One of the banks lawyers defense seems fishy at best – isn’t a price for a product in a competitive process really an estimate as well – such as selling cars? Do these arguments have some merit or is this smoke screen?

    The antitrust claims should be dismissed because there is no documented agreement among the banks to keep LIBOR low, argued Robert Wise, a lawyer for Bank of America.

    Further, he told the judge, the banks did not restrain trade because LIBOR is an estimate they provide on their borrowing costs, not a price for a product they set in a competitive process.

    “LIBOR is not something that is bought, or sold, or traded,” said Wise, who also argued that the plaintiffs lacked standing to bring the lawsuits. “It is simply a benchmark, an average.”

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