Rigged (eBook)

The Incredible True Story of the Whistleblowers Jailed after Exposing the Rotten Heart of the Financial System

Andy Verity (Autor)

eBook Download: EPUB

2023 | 1. Auflage
352 Seiten
Flint (Verlag)
978-1-80399-397-3 (ISBN)

Infos

Rigged exposes a cover-up at the highest level on both sides of the Atlantic, upending the official story of the biggest scandal since the global financial crisis. It picks up where The Big Short leaves off, as the dark clouds of the financial crisis gather. Banks' health is judged by an interest rate called Libor (the London Interbank Offered Rate). The higher the Libor, the worse off the bank; too high and it's goodnight Vienna. Libor is heading skywards. To save themselves from collapse, nationalisation and loss of bonuses, banks instruct traders to manipulate Libor down - a criminal practice known as lowballing. Outraged, traders turn whistleblowers, alerting the authorities. As Rigged reveals, their instructions come first from top bosses - then from central banks and governments. But when the scandal explodes into the news, prosecutors allow banks to cover up the evidence pointing to the top. Instead, they accuse 37 traders of another kind of interest rate 'rigging' that no one had seen as a crime. In nine trials from 2015 to 2019, nineteen are convicted and sentenced. Rigged exclusively shows why all the defendants are innocent, and how any real culprits go unpunished. How could this happen? Turns out, it's not just the market that's rigged. It's the entire system.

ANDY VERITY is the award-winning economics correspondent for BBC News, covering finance and business on the BBC radio and TV bulletins as well as reporting for BBC's Panorama, Newsnight and BBC Radio 4's investigative strand, File on Four. He has led the media in exposing the true story behind the scandal of interest rate rigging, including a Panorama film revealing the Bank of England's role in it and The Lowball Tapes a 2022 podcast for BBC Radio 4 shortlisted for two awards. This is his first book.

Textauszug

1

LOWBALL

‘Peter Johnson?’

‘Hey Peter, it’s Ryan.’

‘Hello, Ryan.’

‘Hey man, uh—’

‘This is so fucking sick. It’s so, so fucking wrong.’

‘Should be higher?’

‘Much, much higher.’

‘Really.’

‘Much, much higher. Believe me, you’ve got no idea how much higher.’

‘Wow.’

(Barclays traders Ryan Reich, 25, in New York and Peter Johnson, 52, in London

29 November 2007)

Barclays cash trader Peter Johnson returned from a three-week family holiday at the end of August 2007 to find the world’s financial system on the verge of meltdown. The 5,000 workers streaming towards the gleaming thirty-three-storey, million-square-foot Barclays headquarters in Canary Wharf that morning had plenty to worry about. French bank BNP Paribas (the eighth largest in the world) had announced that it had frozen three of its hedge funds because they’d put billions of dollars in investments linked to defaulting mortgages in the USA that might never be repaid. There were rumours that British banks – Northern Rock in particular – were similarly exposed and fast running out of cash. No bank was willing to lend to any other bank for fear that they might go bust. The global credit crunch, the biggest financial disaster since the Great Depression of the 1930s, was officially under way.

Johnson, a greying 52-year-old smoker with a gravelly voice, had been with Barclays since 1981. Known to everyone at work as PJ, he had an unusually strong sense of right and wrong, and liked to speak his mind in forceful language, no matter who was listening. It was his job to borrow billions at a time and lend it on to departments within Barclays that needed cash, making sure the money flowing out of the bank in loans and investments was matched by money coming in. He’d seen his fair share of financial crises over the course of his career, so, putting rumours to one side, he got on with the business at hand.

Checking the ever-changing streams of data on the computer screens gathered in a crescent around his desk, PJ spotted something amiss: Barclays’ Libor rate was far too low.

What the Dow Jones or the FTSE 100 is to share prices, Libor (London Interbank Offered Rate, pronounced Lie-bor) is to interest rates: an index, updated every day, that tracks what banks are paying to borrow cash from each other. For the past thirty-five years, the repayments on millions of consumer loans and mortgages have depended not on the official interest rates you hear about on the news, set by central banks like the Federal Reserve or the Bank of England. Instead, they go up or down with the real cost to banks of getting hold of cash on the international money markets. Libor keeps track of that cost by showing the average interest rate banks are paying to borrow funds.

Every morning, PJ had a chore to do – a chore he’d been carrying out for two decades. He was the bank’s ‘Libor submitter’ for US dollars. That meant he had to submit an estimate, to at least two decimal places, of what interest rate he thought Barclays would have to pay to borrow a large lump of cash – in dollars – from the other banks just before 11 a.m. that day. He might put in, say, 3.43%. His counterparts at the fifteen other Libor-setting banks would each do the same thing; for example, Citigroup might estimate 3.41%, Lloyds 3.42%, and so on. Their estimates, known as ‘submissions’, would be ranked, high to low, and made public. The top four and bottom four submissions were struck out and an average taken of the middle eight to get the official London Interbank Offered Rate. Banks like Barclays had billions of dollars in loans, investments and trades linked to the Libor average, so they could make or lose money if Libor rose or fell. A tiny movement might sometimes make or lose the bank a million dollars.

Of course, PJ couldn’t just submit any old rate. It had to be realistic, based on the interest rates his bank was really paying, or could pay, to borrow funds that morning. If there was more than one offer to lend in the market that Barclays might take up, those offers wouldn’t be at exactly the same rate. Chase London might offer 3.41%, HSBC Hong Kong slightly higher at 3.43%, Bank of China Beijing 3.42% and so on. PJ could realistically borrow at the highest interest rate, or the lowest, or somewhere in the middle. That gave him a narrow range of accurate rates to choose from as his Libor estimate: up or down by no more than a hundredth of a percentage point or two.

Libors were calculated in ten currencies from US dollars to sterling to yen, and PJ could see that the Libor submissions in all currencies that morning were way out. There was no way anyone was offering cash at the cheap rates the banks were posting. He prided himself on setting an honest rate and, after studying the latest market data, corrected Barclays’ dollar number upwards by 0.15%.

This simple action – an attempt at honesty – set off a chain of events that would end up exposing the financial and judicial systems’ rotten heart, wrecking PJ’s life (among many others) in the process.

That morning, however, PJ had no idea of the consequences of his actions. After setting Barclays’ dollar Libor, he checked and rechecked the data for every other bank. He could hardly believe what he was seeing. All the banks were ‘lowballing’ – pretending it was much cheaper to borrow cash than it really was. The banks, almost devoid of cash and with no one prepared to lend to them, were lying through gritted teeth to prevent anyone realising how desperate they were. They were pretending they could get cash at the same cheap interest rate that other banks were putting in as their Libor estimate. But then they were going into the market to borrow funds at a much higher rate.

It proved the rates were false. If the cheap rates they were saying they could borrow at were accurate, why would they pay more? PJ called a colleague to vent: ‘I think these Libors are all fucked.’ He then emailed his boss, Mark Dearlove, head of liquidity management, a more polite assessment, finishing with: ‘Draw your own conclusions about why people are going for unrealistically low Libors.’

Dearlove came from a wealthy establishment family. His uncle was Sir Richard Dearlove, the former head of MI6. PJ had known Mark since the 1990s, when he’d been introduced as the new managing director of the cash desk where PJ worked. Dearlove was thirteen years PJ’s junior and on a gilded career path to the top of the bank, but PJ was pleasantly surprised to discover that didn’t mean he’d be pulling rank. He’d always taken time to listen, and they’d struck up a close working relationship over the years. When it had been a stressful day on the trading floor, they’d frequently blow off steam together after work as the alcohol flowed freely, and the younger boss relied heavily upon the benefit of PJ’s experience, especially during the financial crisis.

A concerned Dearlove forwarded PJ’s email to the Federal Reserve Bank of New York1 (the New York Fed, the USA’s equivalent of the Bank of England). He received no reply. PJ then received a call from Thomson Reuters. This was the financial information service to which he sent his Libor number. Reuters gathered all the numbers into a tidy report and sent it on to the Bank of England, the British Bankers’ Association (BBA, at the time the administrators of Libor and a trade organisation that represented 200 banks), along with other financial institutions. Reuters wanted to know why Barclays’ Libor was so much higher than everyone else’s. Was PJ sure it should be that high? He told Reuters he was absolutely sure. The other banks were putting in their Libor estimates way too low. His was the most honest rate.

PJ then copied several colleagues into an email: ‘Have a look at the range of Libors set by contributor banks. Needless to say I think I am correct and UBS at 5.10 is obviously smoking something fairly powerful.’ He told another colleague on the phone: ‘Some of the Libors that people have been putting in have been an absolute disgrace […] I’m leading the campaign to get Libors more realistic […] I think they’re doing it to try to persuade themselves that if they keep on putting in low Libors they might get some money, but it doesn’t work that way.’ On the phone to another trader: ‘It’s just such bollocks […] it’s absolute rubbish […] I mean you cannot get money there.’ Followed by another email: ‘Fun and games in Libor land where the popular premise seems to be that Barclays must be in trouble because it is setting its Libors so high. But other Libor contributors will almost certainly be setting their Libors lower than where they are paying […] As you can see there is something wrong in the State of Denmark and it certainly is not my Libors.’

What was wrong, of course, was that most banks, like Northern Rock, were fast running out of cash. No one was prepared to lend them money for more than a few days, for fear that they might have lost so much money on bad US mortgages that they wouldn’t even exist in a month. The only way they could get money was if they paid significantly higher interest rates. But they weren’t ready to admit what they would really have to pay to get the funds they needed. PJ’s...

Produkt-Details

• Erscheint lt. Verlag: 1.6.2023
• Verlagsort: London
• Sprache: englisch
• Themenwelt: Geschichte ► Allgemeine Geschichte ► Zeitgeschichte
• Themenwelt: Recht / Steuern ► Strafrecht ► Kriminologie
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre
• Schlagworte: 2008 financial crisis • andy verity • bank crimes • Banking • banking crime • BBC News • corrupt bankers • corrupt banks • Credit Crunch • Economic crisis • file on four • Financial Crisis • Great Recession • libor. libor scandal • London Interbank Offered Rate • miscarriage of justice • Panorama • rigged interest rates • rigging interest rates • rig libor • The Big Short • The Incredible True Story of the Whistleblowers Jailed for Exposing the Rotten Heart of the Financial System • traders • Wall Street Journal
• ISBN-10: 1-80399-397-9 / 1803993979
• ISBN-13: 978-1-80399-397-3 / 9781803993973