The Labours of Libor

by .
Originally published in Impact Investor

The apparently endless shabby saga of the rigging of the international exchange rate known as Libor – the London Interbank Offered Rate, although there are several and not just one rate, to give it its grand title – has taken a further step, with the start of the first criminal trial in London, of Tom Hayes, the 35 year-old foreign currency trader formerly employed by two of the world’s biggest banks, UBS and Citigroup. The QC leading the prosecution, Mukul Chawla, said in court that this case is about the “dishonest rigging of bank rates for profit…the motive was a simple one: greed.”

I defy anyone to loathe the big banks more than I do; but for Mr Hayes I have a considerable amount of sympathy. Our judicial system squashes pawns rather than cures structural flaws – and Mr Hayes is nothing more than an exceedingly well-paid pawn. Greedy he may have been for all I know, but I suspect his defence will be a version of “Befehl ist Befehl” – orders are orders, as most of the defendants pleaded at Nuremberg after 1945. Hayes’ mission was to maximise his employers’ profits; that’s why they handsomely rewarded him. He faces eight counts of conspiracy to defraud over the period 2006-2010. In other words, alleged fraud pre- and post-crash. He has also been charged with criminal fraud in the US.

The wrong person is in the dock. In fact, it’s a grotesque error that any single individual is in the dock. Anyone who knows the background – and I am sure that I am not the only person with close friends in the foreign currency trading world – knows full well that the kinds of activities Hayes is accused of were a scarcely hidden secret, and would still have been going on today had it not been for the financial crash. A fish rots from the head down; Hayes’ activities were tolerated by many superiors, many layers of bank management above him.

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