CHAPTER 7
ROTTEN APPLES
When the journalist asked me whether I recognised myself in characters that feature in Wall Street, American Psycho or Cosmopolis, I gave an evasive answer.
‘The books and films you mention are bestsellers and blockbusters, even Oscar winners. Although, like many such films, they tend to over-dramatise life as a trader, of course there are some truths in them,’ I said.
‘Many people, not only traders, can relate to the drama and characters in these stories, otherwise they would not be such universally popular films. They deal with power, guilt, humanity and morality, as in much of literature – in Dostoyevsky, Kafka … or in Heinrich Böll’s books, to mention one of my favourite German writers.’ To me, asking traders or rogue traders whether they identified themselves with Bud Fox or Gordon Gekko was like asking a policewoman whether she identified herself with Sarah Lund in The Killing or a policeman with Kurt Wallander in one of Henning Mankell’s crime novels.
The interview never made it to print.
I could have elaborated much more in my answer to the question, which was cleverly phrased to prompt me into explaining what really goes on in the mind of a rogue trader. Who do rogue traders see as their mentors, sources of inspiration and role models? I had not seen the film Cosmopolis, nor read the book it was based on, but I did like Wall Street a lot. I also thought Bret Easton Ellis’s American Psycho was an excellent novel. Patrick Bateman, the anti-hero, was exactly that: a psycho who happened to be American. But as to whether any of these films and books held any fundamental truths about traders, I was dubious. Even so, I decided not to tell the journalist that, a very long time ago, I used to book squash courts under the pseudonym Pat Bateman.
I believe that perceptions, or rather misperceptions, about LIBOR, foreign exchange and other closely linked markets and benchmarks were a key factor in enabling various forms of wrongdoing to go on for such a long time – without governments, regulators, academics, the media or members of the public taking notice. In a way, there was an omnipresent view of how things worked, or ought to work, in the dealing rooms, with few people bothering to question whether this view was actually correct. In hindsight, it is clear that some banks profited from the status quo established by this perception, and only seriously began to alter their practices once it became obvious that their house of cards was on the verge of falling apart.
Even though banks have been punished for staging the arena in which manipulative behaviour took place, much of the blame has fallen on relatively few individuals working in the dealing rooms of these banks. Banks have paid fines, settled lawsuits, sorted out what they often refer to as ‘legacy issues’ and, albeit under much more scrutiny, moved on with business. Meanwhile, a small number of employees whose conduct has been classified as ‘unacceptable’, to use the words of UBS in relation to the FX scandal, have been disciplined, sacked, banned from the industry or even criminally charged. Despite often being highly paid employees, these ‘rotten apples’ have tended to be relatively lowly in the hierarchy. However, rotten apples, particularly in the glamorous world of finance, make juicy headlines.
But do the pre-existing (and often understandably) negative stereotypes of rotten apples in finance that dominate the popular imagination get in the way of understanding how traders really think and operate? Does it matter?
I believe it does, although I can only speak from my own experience. To me, some perceptions about traders – and in particular about rotten apples such as ‘rogue traders’ – are often completely misguided, no matter how convenient they might be. The industry is not stuffed with Patrick Batemans – it would certainly be easier to deal with if it were true. But such a perception, like misperceptions about the market more broadly, obscures the true, pernicious nature of the system. Portraying the problem as being just a few rotten apples enables people to give the tree a clean bill of health.
***
In January 2015, I was invited to give a talk to business students from the University of Iowa. My spontaneous reaction to delivering a lecture about my rogue trading history was always going to be a ‘No thanks’. Talking about my case, even privately, had not been a positive experience. So why do it in front of a large group of people who did not know me? But I could see that the professor had honest, constructive and refreshing intentions behind his proposal. I accepted, knowing that I was not going to be able to hide my nervousness, but hopeful that I could put together a lecture that might be different.
I decided to use the journalist’s question as an anecdote in my presentation, because, for me, it captured an important point about how the financial markets tend to be perceived. Although I felt there was no real point in challenging the common view of what life on the trading floor was like – the reality often manages to trump the portrait depicted in fictional stories or by the media – I wanted to show how a stereotype can be constructed, how perceptions can turn into misperceptions, and what the consequences of this are. For instance, the fact that I, an ex-rogue trader, used to book squash courts under the pseudonym of a fictional Wall Street psychopath could be seen as hugely revealing. It might trigger a reader to think about the connection, to seek out causes and motives that led me to turn rogue. They might assume that I chose it because I admired Bateman in some way. In the end, the students laughed, and understood the point I was trying to make. The truth behind the squash court bookings, as I will go on to explain, was rather more prosaic.
A year later, a journalist visited my class when I was planning to give a lecture on a similar topic. Having reported on the LIBOR scandal for the Wall Street Journal, and being in the process of writing a book about Tom Hayes, he was very familiar with traders in trouble. For a moment, I contemplated not including the same anecdote. Although I largely trusted him, I also knew he wanted to sell newspapers. Then I thought, perhaps over-optimistically: ‘If I mention I used to book squash courts under the name of Pat Bateman, then also say I could never reveal this to journalists, surely he must not only feel privileged to hear the background to why I did it, but also be uneasy about including it without explaining the whole story.’
The real story behind my squash court alias is rather uninspiring. Looking back, both Jeppe (my squash partner back in the 1990s) and I agree that there were three reasons for using the fictional name when booking a court. First: boredom. We grew up in a small town in Finland, as far away from Wall Street as you could imagine. There was only one native English-speaking person around, an Australian named Paul Wilson who owned a record shop. English names stood out, so we used the pseudonym to prompt a reaction, or perhaps the opposite: a non-reaction to a name that so clearly could not exist in the place where we grew up. Nobody else we knew had read American Psycho, and it was a way of placing ourselves completely outside our own, somewhat dull, reality at the time. Moreover, we belonged to the Swedish-speaking minority, which made up less than 6 per cent of the tiny population. Claiming to have a name that belonged neither to the majority nor the minority felt like a statement in a country that had few ethnic outsiders at the time. Second: weariness at hearing yourself calling the sports centre over and over again using the same name. We played a lot, and, as it happened, my friend’s surname was rather similar to mine. Third: in American Psycho, Patrick Bateman frequently used pseudonyms himself when booking restaurants. I guess that was the real inspiration, rather than any admiration or empathy for the character. The truth is that Pat Bateman the squash player was not a psycho, nor anything close. Regardless of whether my friend or I had booked the court, he always turned up and paid for the session, and left no corpses behind.
‘In college, he booked squash courts under the name “Patrick Bateman”, the fictional investment banker and serial killer in the book American Psycho,’ the article in the Wall Street Journal read.1 Although the interview portrayed me as a much more multifaceted rotten apple than any previous article mentioning me, the back story behind my rationale for using Patric
k Bateman as an alter ego was not mentioned. Although initially I was frustrated, I went on to reflect that perhaps it only confirms my suspicion about how difficult it can be to break down stereotypical perceptions of traders. A boring or complicated truth can interfere with well-established prejudices or theories. The reason why I brought it up during the lecture was that, to my mind, it illustrated how difficult it can be to change perceptions not only of rogue traders but also of those LIBOR and FX manipulators who had begun to receive a lot of publicity in recent years. These are not psychos (as far as I know), but real people acting according to rationales that make sense in the context in which they are working, sometimes with the implicit encouragement of the banks they work for. The problem isn’t simply one of a few vilified rotten apples working against the banking industry; rather, it is symptomatic of a system that has supported, even rewarded, such behaviour.
Many people seem to think that rogue traders were rogue individuals who ended up as traders – rather than traders who ended up going rogue. Many people also seem to analyse the FX and LIBOR manipulators in terms of them being manipulators who happened to be involved in the trading of FX and LIBOR derivatives, rather than the other way round. In the years after the events of 2009, I had come to learn that I would always be judged in relation to those events and the media coverage that followed. Revealing my unusual choice of pseudonym would only serve to strengthen the perception that rogue, rather than trader, came first. It was like an anchor that had got stuck on the bottom of the sea. Every time I tried to pull it up, the currents worked against me.
When, following the New York Times article, the media storm hit, it lasted about 48 hours. I have since learned that two or three days are standard. The paparazzi disappear after that, and newspapers find other interesting events to write about. While 48 hours is a relatively short period, it did not feel like that at the time. A roller coaster ride rarely lasts for more than 60 seconds, but this felt as if it were a ride that would last forever and whose only direction was down. But when the ride eventually came to a halt, I did not feel happy that it was finished. Instead, it was as if I were unable to get off, with no way of judging when or whether the ride would start moving again. Those 48 hours made me see the people around me in a different way, and often it was not a pretty sight. At the same time, I could see how people now looked at me, bewildered, and mostly not liking what they saw either. Surprisingly few said anything to my face. Instead, Maria was used as a go-between. ‘You stood by him throughout the good times, now you need to stand by him during the bad times,’ she was advised by a neighbour after having dropped off our daughters at school. ‘Now you will learn how other people live their lives,’ a friend told her, as if she had been wearing rose-tinted spectacles throughout my career in banking. Others were less direct, asking in hushed tones whether I was ‘OK’ when I was out of hearing range or had left the room.
Examples of fraudulent behaviour were often brought up in dinner conversations. ‘My cousin fiddles with his taxes,’ someone could remark out of the blue. ‘A friend of mine lost £25,000 on a dodgy investment scheme,’ someone else added. I think many of such comments were well intentioned, told in order to break the ice somehow. They were desperate for me to deliver the whole story, and up until then they would tiptoe around me, and around the subject itself. Perhaps they also wanted to level the playing field, by stressing how many rogue people there were out there, that I wasn’t alone. During one dinner party, though, I got tired of the glances and the never-ending anecdotes of unsuccessful criminals or lousy investors. ‘If you haven’t lost 100 million, you don’t know what it feels like,’ I suddenly interrupted. Everyone fell silent. Then, a few seconds later, they burst out laughing – looking relieved that I had finally delivered the confession they wanted to hear: that I was actually the person they now thought I was.
Someone told me a local newspaper in Finland had claimed I had been instrumental in causing the global financial crisis. Although I had been closer to the epicentre than most people, the statement was absurd. However, what kind of counterclaim could I possibly have come up with? Who, in March 2009, knew the true causes behind the crisis and whose fault it was? I certainly did not. My close friends in Finland were both supportive and concerned, but they were not approached by the media. What, really, could they have said, having no experience of the market at all? What is more, I was following Merrill Lynch’s instructions to keep my mouth shut, so there was little I could say to provide comfort to those whom I trusted without disclosing too many details.
People who had been nowhere near the Merrill Lynch dealing room demanded retribution. It was as if they felt a right to define what kind of guilt I should feel. ‘I will not pay back your deposit, because your media storm caused my wife to have a nervous breakdown,’ our landlord told me after my wife and I moved out of the flat we had lived in during the time it all happened. Less than a month after the article in the New York Times was published, I received an email stating: ‘Due to being door stepped by various people including the press as a result of you being investigated by the FSA, I have suffered loss of rental income which has also exacerbated my financial situation due to bankruptcy.’ In effect, he argued that the episode had affected him personally, and demanded compensation in cash. Although I felt exploited, I had bigger problems to deal with. We ended up settling out of court, and for a couple of thousand pounds I was relieved of my guilt towards him and his wife.
But not all comments related to money, at least not directly. ‘One day, I will put a bullet through your head,’ was the most extreme response I received. I had never received a death threat before, and it was frightening to hear it over the phone from someone I knew. But, as with the multitude of accusations and comments I had got used to, it also felt predictable somehow. I had grown accustomed to people looking at me suspiciously, to the degree that I would start a conversation by exclaiming ‘Google me!’ to avoid the awkward moment the next time we met and they had Googled me. If they wanted to do some ‘research’ on their own, I might as well make it clear that I was not trying to hide my Google history from them – and this included all the anonymous comments below the numerous online articles arguing that I deserved, at least, to be put in jail.
Others were afraid that, because of my past, I might cause them trouble in the future – or that, because of my past, I might be perceived by others as a person who could be a source of trouble for them in the future. Although I did not want to accept such thinking, I could see their logic. A job offer from a university was withdrawn when some faculty members had second thoughts about me delivering lectures on economics and finance to students who they thought were more susceptible to influence than they were. Although they did not necessarily perceive a direct risk in me teaching students how to ‘turn rogue’, it was quite plausible that fee-paying parents might do so. A sympathetic professor suggested that I should reapply if and when the FCA lifted my five-year ban from working in the financial industry. I found the idea daunting that the FCA had the power to decide who was fit and proper to work not only in the City but also on university campuses all around England. The regulator had no legal jurisdiction in academia, of course, but that did not seem to matter in my case. However, I did not know of any other ex-rogue traders applying for positions at academic institutions, so there was not much support in terms of a suitable precedent.
A vice chancellor at another university keen on hiring me was more supportive, but at the last minute called me on my mobile. The university wanted further assurances that I had now, beyond any doubt, come clean. I was told I needed to meet with the university’s board members in order to demonstrate that I was of good character and that they had nothing to fear by having me roam unmonitored around the campus. I could sense that he knew how disappointed I was, and he told me to think about it for a couple of days. Although I was confident I could provide sufficiently comforting answers in a boardroom, by this stage I had grown exhausted of conforming to
criteria that seemed to change every time I tried to move on. So I politely declined the opportunity to seek redemption in my new job – before I had even signed on the dotted line.
While I tried to appear calm and patient to others, inside it was a different story. Many of the comments above made me angry, upset and afraid. The continuing suspicion towards me planted seeds of doubt as to whether there would be a time when I would be able to look back and say: ‘It is finally over.’
When I met my friend, the broker, in Borough Market in 2011, I was certain he would end up feeling misunderstood in the years to come. Probably, like me, he would also be angry, upset and afraid. I was not only thinking about the upcoming and extremely complex LIBOR problem he had become embroiled in. I was also wondering whether perceptions about him personally would change if and when more information about LIBOR was made public. Since then, I have also thought a lot about all the other traders and brokers involved in or closely connected to the LIBOR and FX scandals – many of whom have made headlines, many of whom I know. I doubt whether any of them had spent much time reflecting on the consequences of ‘getting caught’, for lack of a better expression. Having operated within an environment where their behaviour (which today is classified as unacceptable or even criminal) merely resulted in retaliation by other market participants or, at most, a quiet exit from the bank or brokerage firm, there were few warning signs.
It would be only natural to want to distance yourself from them as much as possible, particularly if you had been a colleague or manager or had done business with them in the past. But it doesn’t stop there. The disorientation truly kicks in once you realise how neighbours, former classmates, taxi drivers and other ‘ordinary’ people have suddenly changed their perception of you. This sense of isolation is difficult to describe. ‘Imagine being a house, and that people find out that you have been contaminated with asbestos,’ I might say to those who ask. It is the closest image I can come up with.
Barometer of Fear Page 22