The Spider Network

by David Enrich

  “It’s about making money, I thought?” Hayes said.

  * * *

  In December 2007, UBS’s CEO, Marcel Rohner, gave a presentation to investors in London. Projected on a screen in front of the audience, the presentation cited “structured Libor” as one of the bank’s “core strengths” and as a “high growth/high margin business.” This was the business that Hayes, along with his counterparts trading variations of Libor linked to currencies other than the yen, had helped turbocharge.

  A relatively small chunk of Hayes’s profits for UBS—he would later estimate at most $5 million a year—came from his attempts to get the benchmarks moved in favorable directions, the rest deriving from some combination of luck and skill. Moving Libor was a team effort at UBS. Rank-and-file traders received help from their managers, who in turn sought support from their bosses. Pieri sometimes lobbed in his own requests to Hayes’s brokers. The same month that Rohner delivered his presentation, Hayes’s group had a huge position about to mature: For every basis point, or 0.01 percentage points, that three-month yen Libor rose, Hayes’s portfolio stood to gain $2 million in value. He had been trying to get UBS to hike its Libor submissions in order to help push the overall average higher. But he was running into resistance. So Hayes turned to Pieri.

  “We have been riding a wave on this trade, but everyone will be trying to influence the fixing next Monday reflecting their position,” Pieri e-mailed Sascha Prinz. Prinz said he would talk to another executive. A few days passed. Pieri checked back in on December 14. “I need some assurance they will put their rate up please,” Pieri pleaded. “Our rate input can make a significant difference.” Pieri was successful. The trade would notch roughly $500,000.

  A week later, a similar thing happened. Hayes was back in England for a three-week vacation. Naomichi Tamura, a Tokyo trader a rung above him, sent an e-mail to Hayes’s personal account asking for help shifting Libor up. Hayes deferred dealing with Tamura’s request, and more pleas, increasingly urgent, soon followed. After opening presents with his family on Christmas morning, Hayes and Robin drove more than three hours to the southwestern city of Plymouth to see Queens Park Rangers lose, 2–1. The game didn’t end until around 5 p.m., but with Tamura frantic about Hayes not managing to get Libor higher, Hayes glumly decided they needed to drive back to London so that he could show up at UBS’s offices by the time Japanese markets opened for business in the middle of the British night. There was work to do. He could nap at his desk if he really needed to. Hayes stayed up all night at work while Robin dozed in a hotel.

  * * *

  As he and his brother had driven back to London, Hayes had been in a foul mood. It wasn’t just because QPR had lost again. He wondered what he was doing in this job—and he wasn’t the only trader harboring such misgivings. Not many of those who filed into trading floors around Wall Street or in Canary Wharf really enjoyed the work. Sure, plenty—probably most—felt that aspects of what they were doing were worthwhile. Some found satisfaction in solving the mathematical riddles that financial markets presented. Others enjoyed the frat-house atmosphere. Still others basked in the social and professional glory of being near the top of the great investment banking totem pole. And just about all of them liked the money: The sturdy six-figure paycheck, the anticipation of ever-greater riches in the form of your annual bonus, the prospect of being lured to a rival bank or hedge fund in exchange for a massive payday. There were also the pleasures that all that money could buy: Luxury vacations, first-class plane tickets, fast cars, penthouse apartments, great seats at marquee sporting events and concerts, top-of-the-line watches and jewelry, access to the most exclusive clubs and the best Michelin-starred restaurants.

  But ask most traders if they were happy with their professional lives, if they found their jobs fun, if they intended to do it forever. The answer was almost always an unequivocal “no.”

  Part of it was that the jobs were stressful. The hours were long, the competition relentless, the pressure—to not only perform well but also perform better than your rivals and even your colleagues—never-ending. The lifestyle was rarely healthy. Traders ate bad foods and drank too much. They didn’t get enough sleep. Anger flowed freely on trading floors. Shouting matches were encouraged as a sign of machismo. Friendships among traders were often mirages. And the job itself just wasn’t all that enjoyable, especially when you worked at a global bank. Once you got the hang of trading, it became monotonous. Hour after hour, day after day, month after month, the trader sought to exploit tiny price differentials to make small amounts of money in the hopes that it would add up to a sizable profit for the bank and therefore a bigger bonus for himself. But aside from money for the sake of money, there was no purpose. You weren’t building anything of value, other than more trading opportunities for your colleagues and rivals. Around and around it went. Behind their cocky facades, many traders wallowed in self-doubt and wrestled with existential questions. They were dispirited. And so it was that in the world’s major financial districts, discretely signposted mental health clinics peddling treatments for depression and anxiety were competing with gyms, coffee shops, and steak houses for scarce real estate.

  * * *

  Despite UBS’s best vacation-ruining efforts, Hayes’s trip back to England wasn’t a total bust. He managed to catch five QPR matches, and his team eked out three victories—an impressive feat for the beleaguered squad. But that wasn’t the best part. Before he had returned from Tokyo, Hayes and Tighe had become friends on Facebook and talked on the phone a couple of times. In London, he spent time with her and her friends, and on Christmas Eve the two of them went to Basingstoke—a town so dull it was nicknamed “Roundabout City” for its large number of traffic circles—where they browsed a bookshop’s bargain rack and went out for burgers. Hayes spent several nights in Tighe’s one-bedroom flat in London’s Islington neighborhood. (Ever ignorant about appropriate behavior, he spent the time complaining about the fact that she didn’t have a TV and that her supply of hot water was inadequate.) The pair fantasized about Hayes returning to London or Tighe moving to Tokyo. Hayes was still with Ainsworth, but he was beginning to brainstorm about ways to finally extricate himself. In an attempt to express his hard-to-articulate emotions, Hayes offered to pay Tighe’s credit card bills. She politely declined.

  When Hayes returned to Tokyo in January, he was already stressed. For a change, it wasn’t related to work—it was the two Sarahs. “We’ve been together a long time,” he told Read. “I met someone else who I really like. I haven’t cheated on her, but it’s made me doubt the whole thing. Like whether she is the person for me for the rest of my life. I’ve never been in this position before.”

  Read patiently listened to Hayes’s dilemma, and then shared his own sad story. He had spent the holidays with his family in a national park in New Zealand. Despite the tranquil setting, he couldn’t get Libor or his lone client—his livelihood—out of his head. Hayes had several big trades riding on three-month Libor but, preoccupied with his courtship of Tighe, uncharacteristically wasn’t pestering Read. But the broker had a job to do; he tried to call Goodman in London to remind him to help. In the middle of the national park, however, Read’s cell phone couldn’t pick up a signal. Abandoning the holiday, he got in his car and started heading toward civilization. By the time the phone was back in range, Read had been driving for ninety minutes. The trip was pointless—it turned out that Goodman already knew about Hayes’s positions. “He told me to go away, he had it covered,” Read told Hayes.*

  It wasn’t hard to see why Goodman would want the Wellington-based broker to go away. Traders from banks including BNP Paribas, J.P. Morgan, and elsewhere also were pelting him with requests to move Libor. But Read was the most relentless. Goodman hated putting his credibility on the line for the sake of a broker in New Zealand and some obnoxious trader in Tokyo whom he hardly knew. And the requests kept pouring in, the buzz of his iPhone disrupting the tranquillity of his predawn train rides int
o Waterloo Station. Goodman occasionally tried to get Read off his back. Early one morning in March 2008, his train ride was interrupted by a text message from Read requesting slightly lower Libor. After seventeen minutes and no response, Read repeated his request.

  Goodman waited another twenty minutes before answering Read’s two texts. “Have compliance asking about various things, i.e. Libors,” he wrote, trying to get Read to shut up.* But the text-messaged requests kept coming and coming. Read’s appeals remained so dogged that when Goodman forgot to bring his cell phone to work one day, he e-mailed Read to let him know. “No mobile today.”

  “Bugger,” Read responded. Then he e-mailed over his daily request.

  * * *

  On February 27, UBS convened a special meeting of its shareholders on the outskirts of the medieval Swiss city of Basel. For the event, the bank rented out a venue called St. Jakobshalle, which was usually used for concerts and small sporting events. Investors were to cast their votes on whether the bank should be permitted to sell about $13 billion worth of its shares to Singaporean and Middle Eastern institutions. The goal was to fortify UBS’s rapidly deteriorating finances.

  Shareholders were grumpy. Over the past six months, the bank’s stock price had tumbled nearly 40 percent, thanks to UBS’s awful bets on securities made up of risky American mortgages. The situation was all the more galling because of the bank’s history as a reliable, risk-averse Swiss institution. The proposed creation of the new stock meant that the already-ravaged existing shares would be worth even less.

  More than six thousand investors packed into St. Jakobshalle that morning. They grudgingly approved the proposal—and then took the opportunity to vent their rage. One after another, they marched up to the lectern and lashed out at the bank’s executives and board members.

  “As a good housewife, I know you shouldn’t put all your eggs in one basket,” one shareholder scolded. “A bank is not a casino.” “Put an end to the Americanization of the Swiss economy!” another shouted, before charging the podium and being dragged away by security guards. Some shareholders demanded the resignations of the bank’s chairman and fellow board members. Others called for UBS to recoup the bonuses it had just finished handing out to its investment bankers and executives.

  Sitting at their desks in London, two UBS traders, Andrew Walsh and Panagiotis Koutsogiannis, watched a live video feed of the meeting. The traders were disgusted, especially by the suggestion by “some tosser,” as Walsh put it, that UBS should rescind the bonuses.

  “As if,” fumed Koutsogiannis, universally known within the bank as Pete the Greek.

  “Morons,” Walsh said.

  “People don’t realize that the value of the firm is its people,” Pete said. He felt that the penny-pinching bank was already stiffing its star performers—a group, incidentally, that he considered himself to be an important part of. The Greek citizen had joined UBS straight out of college and had worked at the bank his entire career. By now he was a midlevel executive who still did some of his own trading. Like Hayes, he specialized in derivatives tied to interest rates. Also like Hayes, he regularly pinged the bank’s Libor submitters with requests to move the rate in directions beneficial to his trades. Walsh, who submitted some Libor data for the bank, was sometimes helpful in that regard. And so the two men alternated between plotting to skew Libor and complaining about their woebegone employer.

  “Hey mate, we want a really low fixing tomorrow,” Pete wrote to Walsh the day after the shareholder meeting.

  “That’s fine,” Walsh responded. For emphasis, Pete added that he had £100,000 riding on the outcome.

  A couple of months later, after the two agreed to keep Libor as high as possible, Pete the Greek said sarcastically that maybe UBS should form a committee to discuss where to set the rate—that’s how many people, he mused, were involved in the deliberations.

  * * *

  Hayes’s family sometimes turned to him for financial advice. Once, Robin was looking to buy a house and phoned his older brother in Tokyo to talk about getting a mortgage. Robin said the interest rate on the proposed loan was based on something called “lee-bore.” Hayes perked up, correcting his younger brother’s pronunciation. “That’s my whole job!” he exclaimed, before rattling off his projections for future changes in interest rates. It was a rare moment of recognition by Hayes of his job’s connection to the real world of ordinary people and their bank accounts.

  Hayes’s father, too, came calling, seeking counsel for his new pastime as an amateur investor. There were few things Tom Hayes was happier to talk about, and he happened to have a bright idea: Hayes had a friend who worked at Bear Stearns. Its longtime CEO, the pot-smoking, bridge-playing Jimmy Cayne, had gambled on instruments linked to the U.S. housing market, and the friend was convinced that his firm was circling the drain. His analysis struck Hayes as persuasive, so he told his dad to place a bet that Bear’s shares had further to fall.

  This wasn’t quite the plain-vanilla type of investing that Nick was comfortable with. After monitoring Bear’s shares for a couple days, he decided against the idea. At the time, the shares were trading above $30 each. On March 16, J.P. Morgan agreed to buy the stricken firm for $2 a share. The trade Hayes had suggested could have made his father a killing overnight.

  Hayes, meanwhile, eventually worked up the nerve to dump Ainsworth—in the nick of time. He felt guilty, but she needed to be out of the picture before Tighe came to visit Tokyo. By the time she arrived, Hayes realized he was in love. Her visit lasted four days. Hayes introduced her to his local watering hole, a pub called the Windsor. The bar’s owners, a Japanese couple, had taken such a liking to their loyal patron that they’d given Hayes keys to the place and let him go behind the bar to pour pints for his friends even when the pub was closed. (He carefully detailed what he and his friends had consumed and paid the tab later.) Hayes was obsessed with Rod Stewart so he and Tighe listened to his songs on repeat. (Fortunately, Tighe had a high tolerance for “Da Ya Think I’m Sexy.”) At night, they watched movies and TV. Hayes was a huge Seinfeld fan and had memorized numerous episodes, but his favorite thing to watch was the 1997 movie As Good as It Gets. He could see shades of his own personality in Jack Nicholson’s obsessive-compulsive character. As he and Tighe watched it together, he recited every line of dialogue aloud. Tighe thought it was adorable. Lovestruck, they adopted the Rihanna song “Umbrella” as their personal anthem.

  Tighe started considering the logistics of moving to Tokyo. Before she took that leap, though, Hayes felt like he needed to get some things off his chest. He told her he wanted to engage in a “disclosure exercise.” In highly organized fashion, he cataloged all his faults to Tighe, among them his obsessive tendencies and awkward demeanor. At times, Hayes had wondered why Tighe was attracted to him. “Are you only with me for my money?” he asked more than once. Tighe assured him that wasn’t the case—although his wealth certainly was a nice perk. (He would continue to ask the question for months. Eventually, sick of the refrain, she threatened to break up with him if he asked one more time. He never did.)

  Two weeks later, Tighe handed in her resignation at work. “Moving to TOKYO!!!!!!!!!!” she posted on Facebook. She knew it was rash, but she overrode her cautious instincts. “When you know, you know,” she said.

  “I’m just happy for once,” Hayes gushed to Read.

  Before Tighe moved, Hayes returned to England. One of his priorities was to meet Tighe’s parents. In advance, Hayes familiarized himself with Tighe’s mother’s favorite TV shows so that he’d have something to discuss with her. “Look, I’m socially awkward,” he announced to her mother, Karen, when he caught her alone in the family’s kitchen. “It’s taken me all day to think of things to talk to you about.” Karen arched her eyebrows. He also met Tighe’s sister, Emma, who was eighteen months younger. The tall, blond siblings were sometimes mistaken as twins, a misperception they playfully encouraged. Emma, however, viewed anyone tied to London’s financi
al industry as suspect. Her ex-husband had been a broker (at ICAP, no less). Right off the bat, though, it was clear that Hayes wasn’t anything like her party animal ex, and she agreed to withhold judgment.

  Tighe planned to live in her own apartment in Tokyo, at least at first—after all, she didn’t really know Hayes very well. But he persuaded her that this was a waste of money. “Sarah loves Tom,” she posted on Facebook on May 12. When she arrived two weeks later, they moved in together.

  Now she could witness Hayes’s oddball personality up close. She would often return to their apartment in the evenings to find him and Nigel Delmar finishing up watching the same movie, The Blind Side, for the umpteenth time. Hayes adored the film, based on a book by his beloved Michael Lewis, and he subjected Delmar to countless repeat viewings. This was how it was with Hayes—when he liked something, he might watch it hundreds of times. It was safe, no surprises, each scene always the same as it had been before. Hayes was not putting Rod Stewart or Jack Nicholson on repeat because, like a critic, he was dissecting, searching for deeper meaning. He was doing it because the repetitive nature brought him an intangible but very real sense of comfort and security.

  His moods swung in lockstep with the markets. If he was making money, he was relatively calm and could even be jubilant. But if things weren’t going well, a switch would flip and he would become nearly catatonic. Tighe was stunned when she saw him in one of his zombie-like states, staring, refusing to answer questions. There was no middle ground, no moderation. Hayes never told Tighe, but during those money-losing stretches, he sometimes contemplated suicide. The idea would flit through his mind, then vanish just as quickly, but he kept the dark thoughts to himself.

  The trader gene in Hayes ran so deep that it extended to his wardrobe. He had more money than he knew what to do with, but he shopped for clothes on eBay—he loved the chase and trying to game rival bidders. He became fixated on Porsche, but he wasn’t about to buy a car in Tokyo, so he settled for items made by the company’s clothing and accessories arm, Porsche Design. He wouldn’t leave the apartment unless he was wearing a Porsche sweater or a Porsche polo shirt or at least was carrying a Porsche key chain in his pocket.