Glory Days for Investigative Journalists

An Interview with Liam Vaughan, the co-author, with Gavin Finch, of The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number.

Investigative journalism is alive and well, thanks in part to two English reporters, Liam Vaughan and Gavin Finch, who weren’t even alive when Carl Bernstein and Bob Woodward covered Watergate for The Washington Post. They’re both in their mid-30s, they both write for Bloomberg and Businessweek and they both share the same keen instincts as the reporters memorialized in the movie, All the President’s Men. Like Woodward and Bernstein, Vaughan and Finch have a healthy skepticism about wealth and power. Then, too, they know how to ferret out sources and persuade them to talk on the record. Their specialty is white-collar criminals and rigged markets. The reporting they did for Bloomberg on the big lie behind Libor brought them acclaim in England and the U.S and led to their new book, The Fix.

Libor — the average of interest rates estimated by the big banks in London — affected every prospective homeowner who applied for a mortgage and every student who sought a loan. As Vaughan and Finch showed, the banks rigged it all. Their reporting didn’t bring down a president or a prime minister, but it led to $10 billion in fines for JPMorgan, Barclays and UBS. Still investigating and still searching for stories, they keep their pens razor sharp. Though they share equal credit on the stories they write together, they agreed that Liam Vaughan, who lives outside London, would answer the questions for this interview.

I’ve been hunting unsuccessfully for biographical information about you. Are you under cover so you can ferret out stories?

Not undercover exactly, but we are very conscious about keeping information about us to a minimum given the nature of the work we do. I’m 37, born and raised outside London. I’ve been a journalist for about 12 years, predominantly writing financial journalism. I started out working for local newspapers. I’m getting married this year to another journalist. She says I’m work-obsessed but outside of work I’m a keen runner and I’ve got a season ticket for Arsenal Football Club games.

Is it harder to be a Woodward and Bernstein today than it was in the 1970s?

In some ways it’s easier to be an investigative journalist now, with the advent of the Internet, increased corporate transparency and better methods for tracking down people and information. Despite the struggles of the newspaper industry, there’s a huge amount of incredible investigative work published every day. Podcasts and blogs provide outlets and create a strong, supportive community. Finding somebody to pay is another matter.

Did your British charm open doors?

Most people declined our initial invitations to talk, but we kept on calling, sending emails and knocking on door. Persistence paid off; once one person talked it set off a chain reaction. Others began to talk.

Your story seems to show that capital and capitalists (or bankers and traders if you prefer) move around the world. Are there any places outside the big banking system?

Not really. Finance has always been ahead of other industries in terms of globalization and internationalization. Activity is focused in London, New York and Hong Kong, but its reach is worldwide. I don’t think many places are immune. The actions of traders affect interest rates, currency rates, and the cost of food, energy and property. The hands of the traders rock them all.

You once interviewed Alan Greenspan when he was the Chairman of the Federal Reserve of the U.S.

Yes, on the subject of white-collar crime. He told me, “How were we to know there were so many bad guys?” I think he was willfully naive. Wherever lots of money is available they’ll be scoundrels.

Reagan and Thatcher unleashed the greed mentality that’s still around. Where and when have you observed it in operation?

I see that mentality every single day. The cultures at banks and hedge funds are frequently problematic, but there’s a vast sea of employees who play by the rules, have strong ethics and don’t slip up. 
Reagan and Thatcher did promote the idea that making money for money’s sake is admirable, but it has been challenged in recent years with the financial crisis, scandals, and as the wealth gap widens.

It makes sense that trading would be addicting, as you suggest in your book, since trading is like gambling.

There are different types of gambling. There’s the guy at the roulette table blowing off steam with his buddies on payday. Then, there’s the professional at the racetrack who spends days studying forms and picking winners. Financial trading, if it’s done properly, should be akin to the latter. But it’s all ultimately gambling. Traders are hostages to fortune because markets are inherently unknowable. That’s why so many traders end up losing millions.

If you don’t fix the market you’re at the mercy of the market; on the other hand, if you fix the market you can get caught and go to jail. Is it possible to be an ethical trader or broker?

It’s a quandary. One of the things we tried to avoid in our book was making moral judgments. We wanted to piece together what happened in a complex episode in financial history and to do it in an engaging and fair way. It’s up to readers to draw their own conclusions.

It seems to me that there’s always a financial crisis. When will the next one hit?

As a journalist my skills lie in depicting the past not predicting the future, so I’m not the man to answer that question. There’s a sentiment in economics that cycles of boom and bust are shrinking as technology and modes of communication speed up. Historically, people have talked about crashes occurring every seven years. By that token we’re due for another one soon.

How much did you think about holding the interest of readers who aren’t in the world of finance?

A book about financial benchmarks has the potential to be dry, so we knew we had to work hard to make the subject accessible to a broad audience. We learn on the job. We read a lot of the classics of the genre — Too Big to Fail, When Genius Failed and The Smartest Guys in the Room. We read everything by Michael Lewis, the master at making techy subjects appealing to a mass market, and aimed to do what he does.

When I think of London, banks and bankers I think of Dickens. Wouldn’t he see the literary possibilities in your subject?

I’d love to think so. Certainly, a lot of our real-life characters would make good Pickwick characters: the gangly, bumbling officials, the working class brokers and the grasping senior executives. The backdrop, with the City of London’s back-alleys, boozers and cobbled streets, definitely has an air of Dickens.

When I reached the end of The Fix, I saw your main character, Tom Hayes, as a “white collar criminal,” but I also felt he was a scapegoat.

I’m glad you say that because we had a degree of sympathy for him. He was a difficult guy and undoubtedly a product of the system. He was also a highly intelligent fellow who chose to ignore the many warnings to cease his behavior. He was so focused on making money for his employer and himself that he ignored the moral and legal implications of his deeds.

What might you say to young reporters who aspire to be like you?

Investigative journalism is the best job in the world. Unfortunately, it’s getting harder and harder to find mainstream avenues for it. Gavin and I are fortunate to work for Bloomberg, which is a very profitable business and can afford to invest in long-term projects. We both started out covering banks. I think it’s important for young journalists to have a foundation as a beat reporter, to write lots of stories day-in and day-out and learn the craft.

How in hell did you manage to work together with Gavin and still have both your names on the cover of the book?

Gavin and I reported together on Libor and other big stories for years, so we knew we could work together on the book. The project had its challenges for sure, but we’re still friends, so we must have done something right!

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