Transcript: NYT’s David Enrich



The transcript from this week’s MiB: David Enrich of NYT, WSJ is below.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.



ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have a special guest, his name is David Enrich and he is a reporter for the New York Times. But more importantly, he is the author of The Spider Network, the wild story of a math genius, a gang of backstabbing bankers, and one of the greatest scams in financial history, it is all about LIBOR and how that scandal which is not even a decade old, unfolded, we’re talking about not just millions of dollars, not just billions of dollars, but hundreds of trillions of dollars that were manipulated in different directions for people to capture some trading profits.

And when you stop and think about all the assets that trade based on LIBOR, if you have a of variable mortgage or car loan or credit card loans or student loans, you may have been paying more for those interest payments due to some of these manipulations by various bankers, arguably, occasionally you are paying less because they manipulated it in the other direction.

The book is really quite fascinating, I’m not finished with it yet, I’m working my way through it but it really reads like you know, an Ian Fleming novel, it’s a spy tail — there some fascinating characters in it, it really is a great narrative and David does a wonderful job bringing some really arcane minutia to life in a way that’s fascinating and understandable.

I think that if you are remotely interested in the world of fixed income or borrowing or derivatives, this is a must read and it’s going to enter the pantheon of great financial narratives.

So with no further ado, here is my conversation with David Enrich.

ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My guest today is David Enrich, he is a New York Times reporter and editor since the summer of 2017. Prior to that, he worked for the Wall Street Journal for a decade writing about banking and finance in the United States. He has won numerous journalism awards including the overseas press club award for his coverage of the European debt crisis, the George Polk Award for coverage on insider trading, he won two Society of American Business Editors and Writers Awards.

David was part of two teams of Journal reporters who were finalists for Pulitzer prizes in both 2009 and 2011, he won the prestigious Gerald Loeb Award for feature writing for his coverage on the unraveling of Tom Hayes, The Expose About the LIBOR Scandal, that eventually led to him writing a book on it titled The Spider Network, How a Math Genius and a Gang Of Scheming Bankers Pulled Off One of The Greatest Scams in History.

David Enrich, welcome to Bloomberg.


RITHOLTZ: I’m fascinated by the LIBOR scandal, folks like you and I who cover this are pretty familiar with some of the minutia and details about LIBOR but for the layperson listening to this, what exactly is LIBOR and why is it so important?

ENRICH: It’s an acronym that stands for the London Interbank Offered Rate and it is the world’s most important number.

RITHOLTZ: The world’s most important number.

ENRICH: That is quite a claim.

RITHOLTZ: It is, explain why it’s such an important number. What is it used for?

ENRICH: It sets interest rates on all sort of debt over the world so if you have an adjustable-rate mortgage, the interest rate is based on LIBOR, if you have a credit card, a student loan, an auto loan, it is likely based on LIBOR. If you are a big company and are issuing debt, the interest rate might be based on LIBOR. Same if you are a town or a city, there trillions and trillions of dollars of this stuff.

RITHOLTZ: Trillions.

ENRICH: Trillions. And the biggest part is not the just normal debt, it’s derivatives that are that you know originally companies or investors were using them to protect themselves to hedge against the possible fluctuations in interest rates and later as you know often happens in the financial world they became a playground for speculators and traders.

RITHOLTZ: So I learned a lot of different things from the book, one of which was that essentially decades ago, a Greek banker was trying to arrange an $80 million loan for the Shah of Iran and the syndication process led to a question how are we going to set rates and that effectively is the origin of LIBOR, is that right?

ENRICH: Yes, that is right. And this is, I really like history and it so researching this is just fascinating for me and there, originally, you know if you think about how does an interest rate coming to be when a bank offers a loan to someone, how do they determine what they’re going to pay?

And the general rule of thumb is that they are going to base the interest rate they’re putting on a loan based on how much it costs the bank to borrow money.

RITHOLTZ: So it’s the borrowing rate plus some margin rate becomes a profit.

ENRICH: Right, yes, exactly, and so obvious that the banks need to have a profit and so they eventually normally that would be simple with just one bank making a loan but the history of this is that at the kind of dawn of the era where loans — big loans are being syndicated, you have a big group of banks getting together to team up to make big loans, in this case, it was a loan, an $80 million loan to the Shah of Iran at the time.

And how do you — if different banks have different funding costs, how do you determine the interest rate and so the innovation here was that you can have — you can come up with an average basically and you can look at how much is it if you got 10 banks on it, you take that — their average funding cost and that can be the interest rate plus a little bit and the challenge though is that funding costs change and what you’re — if you’re making a 20 year loan, your funding cost a year one could be very different from your funding cost of year 10 or 20. And that is a very scary thing for the banks because you know if the funding cost go up, you could just be locked into a loan that is deeply unprofitable for the bank.

And so the innovation here with that — they would have a mechanism where the interest rate would fluctuate over time based on the bank’s funding cost.

RITHOLTZ: So given those kind of murky origins the — a Greek banker’s syndicated loan to the Shah of Iran, how did this become the most important number in the world, how did this become so widely accepted everywhere?

ENRICH: Yes, so in the mid-1980s, the British Bankers Association which with a trade organization, basically a lobbying group —


ENRICH: Yes, the BBA for not only the big British banks but for many of the biggest banks in the world that had set up shop in London, they got together with the Bank of England ,the central bank there, and they decided that the use of derivatives is really booming, and they figured they needed a standardized way instead of every time there’s a loan or any to type of financial contract cobbling together this kind of ad hoc system for determining interest rates, they figured it would be a much better way to standardize — or a much better idea to standardize this.

And so LIBOR came into existence as something that was every day around lunchtime in London, a group of the world biggest banks would estimate how much it costs them to borrow money from each other and you know, you could do it in different currencies so in pounds sterling and dollars and euros and Japanese yen and you can do it over different time period.

So you know, it is going to cost a bank a different amount to borrow money for one day or a week or a month or a year and the longer the duration of that loan the higher the interest rate generally, and you can every day — so everyday at lunchtime, a group of the world’s biggest banks gets together, someone comes up with an estimate for theoretically how much it would cost them to borrow money in a specific currency over a specific time periods.

All those numbers gets smooched together, the high estimate and the low estimates get booted out and the rest are averaged and presto, you got LIBOR.

RITHOLTZ: That’s quite fascinating.

You raised a couple of really interesting points I have to follow up on. The first is why lunchtime? Almost everything else is set at the close of business during the end of the day, why the middle of the banking day, the trading day would you want to set interest rates? What is that about?

ENRICH: Because this was this was developed in the pre-computer era, was the mid-1980s and to determine how much a bank — it cost the bank to borrow money you needed to check with various parts of the bank so that someone — there is usually a pretty low level person with kind of in the bowels of the bank and he would come in the morning and start making phone calls to different parts of the bank to try and assess how much it cost them to borrow money and remember this isn’t one phone call because this is most of these banks are global at this point and they have operations all over the world and it you know so he is — this guy has to call the treasury desk in Tokyo, Singapore, in New York —

RITHOLTZ: It is actually a full-time job determining LIBOR.

ENRICH: Well it was kind of a half-time job, let’s say.


ENRICH: And again this is someone who is usually a clerk an entry-level job, an aspiring trader —

RITHOLTZ: So the most important number to quote you in the world a bunch of lowly clerks running around or sitting at their desks in London making calls everywhere?


RITHOLTZ: And that’s how this number gets assembled.

ENRICH: Yes, well, and the joke is that in the reason I wrote a book on this and there’s been so much media coverage on this is because it was — just they were they got the point where they weren’t even really making calls, this became a number that was being pulled more or less out of thin air by bankers at a low level and why were they pulling it out of thin air, they’re doing it because their traders ask them to, because the traders had especially by the 1990s and early aughts had huge amounts of money that they were wagering on whether LIBOR was going to go up or down by very tiny increments.

RITHOLTZ: And we are talking about positions that are trillions of notational value, trillions.

ENRICH: Hundreds of trillions.

RITHOLTZ: Hundreds of trillions.

ENRICH: This is kind of like asking how hot is the sun, right? The actual temperature in degrees Fahrenheit or Celsius doesn’t make any difference, the number is so astronomically large it literally is —

RITHOLTZ: So all of this raises the obvious question. On the one hand the banks are collectively setting the number, on the other hand, they are totally interested parties who have enormous amounts of capital running on the outcome of those numbers, how could that ever possibly go wrong?

ENRICH: How could there be a conflict of interest in the banking industry?

RITHOLTZ: Unbelievable.

ENRICH: Yes, I mean it’s funny because I’ve been covering this at this point for eight years I would say and it’s — that is such a fundamental question and it’s true, it’s such a deeply embedded conflict of interest that is just completely inappropriate.

RITHOLTZ: So who is to blame for that conflict? Was it just happenstance the way it developed and where were the regulators when you guys deal with hundreds of trillions of dollars bet on the direction of LIBOR, set the rate yourself, that’s fine with us.

ENRICH: Yeah this is like so many other problems in the financial arena, this is something that had fairly benign origin, and this is something that was it really was meant to be to simplify and increase the efficiency of a very complicated and cumbersome London process and gradually, over a period of a decade or two, this rate first of all became embedded in hundreds of billions of dollars worth of American mortgages.

And it didn’t start out —

RITHOLTZ: Hundreds of billions.

ENRICH: Yes, and there is —

RITHOLTZ: Because way back in the day, it was either fed funds rate or some other US-based number, when did LIBOR infiltrate US mortgages?

ENRICH: In the early 90s and that was partly a product of LIBOR at the time was viewed as a very reliable way for banks to estimate their funding costs and it was — and again, that is something that in theory, if it works probably is very good for everyone, it’s good for the banks, it is also good for the consumers, it’s an efficient way, it relieves the banks of any anxiety they might have that if they price a loan at a low interest rate that they’re going to get burned a year or five years later. This allows them to — it relieves them of all that anxiety and that’s — that allows him theoretically to loan money at a lower interest rate.

RITHOLTZ: And those loans typically look like LIBOR plus 2 per, LIBOR plus 3 percent, so that’s their markup, that’s the cost of the loan to the borrower it’s the profit theoretically to the bank but it seems kind of funny that they get to set what LIBOR is.

ENRICH: Yes, it does seem kind of funny.

RITHOLTZ: Did anybody question that arrangement?

ENRICH: Originally not really and originally this was seen as — and keep in mind that the alternative to this is that just banks are arbitrarily setting loans, it’s not something that is — not only this is replacing a heavily regulated kind of government imposed rate.

RITHOLTZ: Previously, it was just market forces you negotiate the best you can for the loan and that’s it as opposed to LIBOR plus.

ENRICH: Yes, or maybe it was the Fed funds rate or something like that that was but then again since that is going to change less frequently than LIBOR would, you then, the banks were then adding an additional buffer so instead of maybe LIBOR plus 2 point, it would be fed funds plus three points.

RITHOLTZ: And it makes the loans more expensive.

ENRICH: Yeah exactly and so this is something that the big problem wasn’t the introduction of LIBOR into the mortgage market, it was the introduction of LIBOR into the derivatives market.

And that happened in the mid-90s and that was something that at the time, the commodity futures trading commission had to approve this because it was the Chicago Mercantile exchange that was looking to kind of have LIBOR embedded as a mechanism and interest rate swaps. And that was — it was seen as a way to make swap the swaps market much more accessible and much more efficient and much more liquid.

But at the time, a number of traders warned the CFTC that if you do this, you are inviting disaster because traders at the big banks know how LIBOR works, and they were just — it is completely unregulated by central banks or by financial regulators, and they — it’s very easy — if you give banks a huge profit incentive to manipulate something, guess what? They’re going to manipulate it.

RITHOLTZ: So let’s say in that point, in the book you discussed Gary Gensler, you just mentioned the Commodity Futures Trading Commission, Gensler is the person who pretty much defanged the CFTC and then he ends up running it as the LIBOR scandal is unfolding and for reasons I still don’t understand, falsely takes claim for initiating an investigation to LIBOR, it actually predated his tenure by a year explain this mania because this is crazy also.

ENRICH: Well this is — the regulatory pendulum has swung so wildly and I think it’s a common misconception right now in 2018 to look at this as a product of Democrats versus Republicans and Democrats are Barack Obama versus Donald Trump, and that is not what it is.

RITHOLTZ: It predates that.

ENRICH: Well, and this started in the Clinton administration, the administration oversaw one of the great regulatory rollbacks in the — of the 20th century, and it was Bob Rubin and Gary Gensler who are leading that charge.

RITHOLTZ: Well, let me push back a little bit.


RITHOLTZ: So you have a number of significant Republicans in the Senate pushing for this — I’m drawing a blank on somebody’s name —

ENRICH: Phil Graham is —

RITHOLTZ: There it is. So Phil Gramm is really the ringleader of all this, Rubin so behind Graham, we basically overturn under Clinton and Robert Rubin and Larry Summers I’m not going to disagree with you, they kind of went along to went along to get along, we overturned Glass-Steagall, we passed the Commodity Futures Modernization Act which basically said the derivatives free-for-all and we basically took the Commodity Futures Trading Commission and turned it into a toothless tiger, Clinton signed all these things, some of these passed the house like 93 to 1, it passed the Senate 93 to 1.

ENRICH: There was a consensus in both parties at the time that the key — one of the keys to economic growth and to kind of economic growth spreading globally in the US maintain its competitive advantage when it came to financial services was to embrace a really aggressive laissez-faire attitude toward all walks of financial life.

And look, it’s clearly not only the Clinton Administration, they — but you know, the administration empowered any given year wields a tremendous amount of clout on these things and if Bob Rubin, a guy who is coming from the upper echelons of Goldman Sachs wasn’t a cheerleader, this wouldn’t have happened. And the — and Gary Gensler as well, another Goldman Sachs guy.

RITHOLTZ: Didn’t Rubin end up —

ENRICH: He ended up at Citi.

RITHOLTZ: Citi, right.

ENRICH: So he oversaw the repeal of Glass-Steagall which paved the way for the creation of the modern Citigroup which was travelers and sellers in Citicorp and it then lo and behold after leaving immediately gets hired in a very lucrative contract to do not a whole lot at Citigroup.

So in any case the Gensler — Gensler in the treasury department in the Clinton Administration was one of the proponents of essentially neutering the CFTC, not having it be a powerful force for the regulation of derivatives. He then in the Obama era is eager to — he sees the winds shifting, we’ve just had the financial crisis, he is eager for a senior administration position and the opposition to him on Capitol Hill was intense because he had was so deeply embedded with the Rubin wing of the Democratic Party.

And he underwent a remarkable makeover and Bernie Sanders was one guy on the Hill who had been a vigorous opponent of Gensler getting any powerful position and Gensler just pulled this remarkable about-face and to his credit unlike most politicians he admitted that he had been catastrophically wrong in the Clinton administration, in the Clinton era, and he just gotten it wrong, and he said he had learned a lesson and was embracing very enthusiastically this pro-regulation pro-government view of the financial world and so he came into the CFTC which of the time was this kind of scrappy underfunded backwater of an agency in Washington and did everything he could to — he wants scalps, he wanted to — he wanted to see the CFTC developing a reputation for being one of the toughest, scariest, gunslingers on Wall Street.

And what became, his investigation into LIBOR, that became the perfect vehicle for him.

RITHOLTZ: What’s so astonishing is a lot of the people who set up the financial crisis during the Clinton administration and let’s hold the Republicans aside guys like Phil Graham, but when you look the Democrats, you have Lawrence Summers eventually goes on to get a chairman of the CEA for Obama, Tim Geithner who was New York Fed chief, eventually becomes Treasury Secretary, Gensler gets appointed to the agency that he helped to dismantle, it’s really pretty astonishing if you look at the fields of aviation or medicine when a plane crashes or there’s a surgical problem, you don’t send the same pilot back to tell you what went wrong, you don’t send the same surgeon to do a postmortem, someone else with fresh eyes comes in that is not what we saw take place during the financial crisis.

ENRICH: No, it’s totally true, we had a lot of the same old characters coming in and a lot of them, Geithner is an exception to this, I think, but a lot of them hailed from Wall Street and these were these are the same guys who would not only not stunk the financial crisis but in a number of cases either worsened it or profited from it, and take your pick, I don’t know which of those is worse.

And again in fairness to people like Summers and Gensler, I think there is a human capacity to learn from one’s mistakes and arguably the experience of having screwed up royally and watching the financial world burn as a result in part of your mistakes is probably a pretty sobering educational moment.

And look, everyone got it wrong, it is not just these guys, right? The media got it wrong.

RITHOLTZ: Not everybody got it wrong, lots of people —

ENRICH: A lot of people got it wrong.

RITHOLTZ: You know,, there were plenty of people who were complaining about it and warning about it, I just — I’ve always found it fascinating that wait, there aren’t people who weren’t major contributors to the crisis to take the role of CEA chair or Treasury Secretary? I’ve always learned when you really screw up, hey, you know, you are not going to get that promotion. Apparently, DC and Wall Street, that doesn’t seem to be —

ENRICH: Yes, and one of the revelations to me in writing this book is that most of the things on Wall Street in the financial world, and I think in politics too, it boils down to incentives.

RITHOLTZ: Of course.

ENRICH: And people are actually pretty rational actors if you can figure out what motivating them to do what they’re doing.

And so you this is anywhere from the kind of a low-level trader starting out on Wall Street to someone at the upper echelons of the bank like Gary Gensler, Bob Rubin, or if you put them in government service, the same things.

So they are responding to the incentives, whether it’s compensation incentives or feedback or just approval ratings or things like that and they — they’ve — everyone incentives matter and they explained them, and I think that’s why, to me that when the next crisis inevitably happens and the next scandal inevitably erupts —

RITHOLTZ: And it will.

ENRICH: It will, it’s a question of when and where, but when it does, I think we’re going to look back and see that a lot of the lessons we should have learned from the financial crisis in terms of shaping incentives in a way to encourage sober, careful, prudent behavior ,were not really heated, we instead just imposed — erected all these new regulations that are just designed for the sake of regulation, they are not actually looking very closely at what motivates people to behave the way that they do.

RITHOLTZ: So let’s talk a little about Tom Hayes, the man in the middle of this, you actually want a Loeb Award for your coverage of the unraveling of Tom Hayes. Who was Tom Hayes and how did he find himself in the middle of the LIBOR scandal?

ENRICH: So Tom Hayes is mildly autistic mathematician, he was a trader at some of the world biggest banks he was a guy who like most mathematicians who are mildly autistic and get into banking was very good at creating models, detecting patterns, things like that, not very good —

RITHOLTZ: Not just very good at detecting patterns, people described him as just —

ENRICH: He was a genius.

RITHOLTZ: Just brilliant at this.

ENRICH: He was a genus and that he was one of the best traders that a lot of his colleagues had ever seen. He also was someone who was very well trained to do what traders do best especially in a decade ago, which was to look for tiny little inefficiencies and find ways to exploit them, and that could mean having a faster trading system, it could mean having better intelligence, it could mean having stupider clients, it could mean finding ways to manipulate something that you are betting on the outcome of.

RITHOLTZ: So let’s talk about stupider clients for a second because this comes up in the book with — there is a whole list of characters and there are really some very colorful characters, what is the relationship of the brokers who are working with the traders and how do people identify smarter and dumber clients?

ENRICH: Yes, so brokers serve this role as the great middlemen in the banking industry and when two traders — when a bank, a trader bank A and a trader bank B both want to do a transaction, they are often not talking to each other, they’re talking to a broker who is in the middle and realizes that trader bank A wants to buy something and trader bank B is looking to sell the same thing.

And so they’ll serve as a middleman for that service, they take a cut of the value of the transaction and that’s fine. The brokers serve another role though which is information brokers essentially and they peddle gossip and they are paid in large part to develop relationships with these traders and the way they do that, I love this thing, it’s they have — the ratio of how — or a percentage of the revenue that each trader generates you are supposed to as a broker recycle that back to the trader —

RITHOLTZ: Define recycle in real life, what does it look like?

ENRICH: Entertainment it’s called, which is —

RITHOLTZ: Just a giant teeny budget, drinks, food, strip clubs and —

ENRICH: Yes and it and if you’ve got some of these traders who are generating millions and millions of dollars a year in brokerage fees spending 10 percent of that on steak dinners and nice drinks is very hard.

RITHOLTZ: But it is not just steak dinners and nice drinks —

ENRICH: No, so they —

RITHOLTZ: You tell some stories, this is G rated, but you tell some stories in the book, these guys are animals.

ENRICH: No, they get creative, they get very creative about ways to spend hundreds of thousands of dollars a year on a particular person, and so what does that mean? That means drugs, that means women, it means trips to various places, it means just all sorts of ludicrous misbehavior. And it is something that again is the book singles out a number of individuals for involvement with this is widespread industry practice at the time and Hayes, Tom Hayes was not a guy who liked going to strip clubs, he is not a big drinker, his idea of a fun night out was going to KFC getting a bucket of fried chicken, sitting at home eating it while watching Seinfeld reruns.

And so this is not a guy who you can easily — he is a huge trader but is it was very hard and the brokers were dying to do business with him because of the huge volumes he was doing but this is not someone who is very easy to spend your 10 percent of the commissions on.

And so the brokers found another way to reward him which was that Tom Hayes was making huge, huge bets on the direction of interest rates which meant that he had a huge, huge stake in the direction of LIBOR everyday and Tom Hayes on a given day would have millions and millions of dollars riding on whether LIBOR went up or down by a basis point which is a 100th of a percentage point.


ENRICH: So a tiny little move that no one would ever notice, Tom Hayes not only would notice but care deeply about LIBOR moving in these tiny little increments. And so that’s where the brokers came in for Tom Hayes. He realized and the brokers realized that LIBOR set not — Tom Hayes at this time worked at UBS but this was —

RITHOLTZ: Not set by the market but it is set by the banks themselves.

ENRICH: By the banks.

Tom Hayes works at one bank and Tom Hayes as with standard industry practice at the time, the traders who are making wagers based in the direction of interest rates would call up the little clerk of the in the bowels of the bank and say hey mate I need LIBOR up-to-date, can you please move UBS’s submission up by as much as you can or move it down by as much as you can.

RITHOLTZ: It was that raw.

ENRICH: It was yes, very explicit, people are very open about it they were encouraged to do it, this was under the umbrella at the time of banks trying to improve the coordination of different parts of the bank working together all pulling the same direction.

RITHOLTZ: And what role does the brokers play with these clerks?

ENRICH: So the brokers — the brokers’ role is that they — Tom Hayes can tell the guy at UBS just call him to move LIBOR up and down, what Tom Hayes can’t do quite as easily is call Citigroup or J.P. Morgan or Royal Bank of Scotland.

RITHOLTZ: The other ten banks.

ENRICH: The other ten bank, because he doesn’t know these guys and why would they listen to him anyway.


ENRICH: But he can call in a favor with the brokers and so that he had brokers at ICAP which is the biggest and some other firms as well just every single day routinely going out into the market and telling all of their contacts with all these other banks move LIBOR up or down and it was basically to benefit Tom Hayes’; trading positions and the trading positions of Tom Hayes’ colleagues.

RITHOLTZ: Was this unique to Hayes and UBS or was this standard practice?

ENRICH: Well it was standard practice to be manipulating LIBOR, Hayes was a really clever guy and a relentless guy and took this to a new level, so the introduction of the broker to something that Hayes pioneered and that was really his innovation, that was the way that he got an edge and everyone always talked about getting an edge on the trading floor and Hayes had found one.

RITHOLTZ: You were in London in the mid 2000s, how did you find your way to London? How does a Wall Street Journal reporter based in New York end up in London?

ENRICH: It was actually the late 2000s and the financial crisis here in the US had ended, banks were getting back to normal more or less boring stuff but a financial crisis was just dawning in Europe, I have never lived overseas and was eager for an adventure and London seemed like an adventure.

RITHOLTZ: So you are late 20s at this point, it’s a decade ago.

ENRICH: I think I was early 30s.

RITHOLTZ: Early 30s, so now you’re in London for a couple years, you are covering financial, you are covering the banks, middle of the night you get a text from a phone that you don’t recognize the number of comes in, tell us about that.

ENRICH: So I was covering I’ve been covering the LIBOR — what it was now known as the LIBOR scandal and the governments have investigated all these banks and it in a couple of cases including with UBS which was Tom Hayes’s former employer had reached this huge settlements where the banks had to pay hundreds of millions of not billions of dollars in penalties and admitted that they been part of this global scheme to manipulate interest.

RITHOLTZ: How many banks of wrote how much money —

ENRICH: Well, ultimately it was more than a dozen banks and probably five or six or seven or eight or nine or $10 billion in penalties —

RITHOLTZ: So huge, widespread, common —

ENRICH: And this is this is in 2013 — at the very end of 2012, for the first time a guy was actually, a guy, an individual, a person was held accountable for this and that guy was Tom Hayes.

He was arrested in the UK and is criminally charged here in the US.

RITHOLTZ: In the US, I remember this.

ENRICH: He was the first person to be charged and my boss at the time, a game named Bruce Orwall, he is a great editor at the Wall Street Journal, wanted me to write a profile of Tom Hayes and of course that seemed like a thankless task, Hayes had been you know, he had been criminally charged, this guy is not going to talk.


ENRICH: And so after much to-ing and fro-ing, I agreed to do this and found a woman who was his former business school classmate and got her to talk to me and it started paying this picture — nothing was known about Tom Hayes at this point other than that he was a very successful trader who said some really stupid seemingly damning stuff in messages, and this woman thought, painted a much more interesting nuance picture of Tom as someone who is mildly autistic, he was a nerd, he was just doing what everyone else is doing, it seemed like.


ENRICH: And I convinced her to pass on my phone number to Tom Hayes and she said of course there’s no way he is going to call, either his lawyers won’t let him, blah blah blah. And I was sitting at home that night on the sofa watching TV with my wife and I got a text message from an unknown number and it said this goes much, much higher than me, not even the Justice Department knows the full story. And it was Tom Hayes and I could not believe that he agreed then to meet me the next day.

And he said, maybe if I can trust you and I said, of course you can trust me, I’m a journalist, and told me he’d be standing in Victoria station which is the big busy train station in London, outside the Burger King wearing a brown leather jacket, and of course no one even knows this guy looks like at this point. And I as you can imagine was pretty excited about that, I kind of pictured myself as Bob Woodward —


ENRICH: And unfortunately he canceled the next morning because his wife had found his phone and realized he was off to meet a journalist and his wife is a lawyer and decided I was not a wise thing to do.

But that was the start of what became a years long relationship I had with Tom Hayes that initially started over text messages but ultimately and I was spending would seem that the majority of my waking hours either with him on the phone with him and eventually his wife as well and they did let me inside their life for a pretty substantial period of time from early 2013 until mid-2015 when Tom Hayes eventually went on trial for manipulating LIBOR.

And so that was the basis for this Wall Street Journal series, the unraveling of Tom Hayes that I watched this guy who would become kind of this unlikely public face of financial crime and I watched him his life disintegrate, it was fascinating and kind of upsetting.

RITHOLTZ: So Hayes eventually loses the case, gets what was a 14 year sentence? Something like that?

ENRICH: 14 years.

RITHOLTZ: So there is section in the book, it’s jaw-dropping, his former bosses, his associates, all the traders he worked with, all the brokers he worked with, nobody else gets into trouble, how was that — not only do they not get into trouble they’re all doing fine, they are all still working in the industry, they’re all still making millions of dollars, how did this one guy become the fall guy and everybody else skates away scot free?

ENRICH: I mean there are two basic reasons, two literal reasons to that. One is that Hayes was stupid and naïve and he did everything in writing, so there’s this rich trove of documentary evidence that showed Hayes in text messages or chat rooms or sometimes on recorded phone lines saying please move LIBOR up for me, I have a lot of money riding on this over and over and over and the thousands of times —

RITHOLTZ: So there is no way to avoid that —

ENRICH: Well and the second reason is that prosecutors and regulators are a little bit lazy, they wanted to nail some people but you know they don’t really want to take a risk, they want to go after the sure thing and the sure thing in this case was Tom Hayes, this is I think probably an unlosable case for them and they went after him and what is mystifying to me is what happened next which is that they did — they criminally charged a small handful of other people of his confederates, all of them got acquitted but they really didn’t go after anyone higher up, and you know this is the mystifying and a little bit frustrating to me because as much evidence as there is against Tom Hayes, there is also a lot of evidence that shows Hayes’ bosses, and his bosses’ bosses’ and his bosses’ bosses’ bosses not only knowing about and condoning what he was doing at the time but in some cases participating alongside him, and were they doing it as extensively and as aggressively as Hayes and as blatantly as Hayes? Absolutely not. But these are people who should’ve known better.

And the regulation prosecutors I think, most these are smart ambitious people, and they should recognize how the actions that they take going after certain people in the industry, those are — have the potential to be very powerful deterrent messages and this is a huge missed opportunity. There — they could have — I think they could have brought a lot more cases than they did.

RITHOLTZ: So Jesse Eisinger’s book which I can’t say the title on of on the air, the Chicken blank Club talks about the Comey, that phrase comes from the Comey speech about the prosecutors who were chickens, lazy and only take easy cases, it didn’t sound like a lot in your book though the picture you paint, it doesn’t sound like these are all that different, maybe the Hayes case was a laydown but there seem like a huge paper trail for another dozen people maybe another 50 people.

ENRICH: Yes, there are a lot of people who have — who are caught up in this and it there — to me, I love Jesse Eisinger’s book, everyone should read it, I think it’s a perfect complement to the Spider Network in the sense that the Spider Network shows when these cases where there was all this evidence and most of it just didn’t get used.

And Jesse’s book does a really good job of explaining some of the dynamics inside the Justice Department for why prosecutors are sometimes kind of cowardly.

And it — in this case and I think part of the issue is that these are complicated cases, it takes a lot to bring a case and there — but there is an enormous resistance in the financial world and a lot of these prosecutors are they really don’t want to lose. And to me, the power the prosecutors have here is the simple act of staging a perp walk of going and arresting a senior executive at a bank or another —

RITHOLTZ: Or it doesn’t.

ENRICH: Yeah that would have — and parading them in from of the TV cameras and making them go into court and face a jury of their peers and have the fear of God put in them, that they might not lose money or might lose some reputation or might lose their job, but might lose their freedom, that’s scary.

And if that prospect of the possibility of actually going to jail was hanging over people’s heads I think that would do a lot to change behavior. And we talked earlier about incentives and how people respond to the incentives they are given if both positive and negative, exactly, both positive and negative, so money is a positive incentive but prospect of serious life-changing personal consequences is another incentive.

RITHOLTZ: To say the least.

Let me sum up this conversation with the quote from the book and I want you to respond to it, there is a tension between “long-term effective functioning of the financial markets on one hand” I’m now paraphrasing you “and on the other hand, optimizing the current value of your securities portfolio.”

How do you square that circle, how do you resolve the tension between those two clearly potentially conflicting motivations?

ENRICH: So between just long-term and short-term?

RITHOLTZ: Well it’s long-term functioning of the financial markets, you know, during the subprime crisis, there were these bonuses that people called I’ll be gone you’ll be gone bonuses, that by the time it blew up, hey, we will be three jobs away, it seems that the short-term totally trumped the long-term, but that’s not what I’m asking you about here. This is the actual functioning of the finance markets so we don’t have a situation where the credit markets just freeze. How can that inherent tension between functioning markets ends optimizing portfolios? Can that be resolved?

ENRICH: I would probably not and the — one other thing that I found interesting recently though is that there are a lot of banks out there these days, banks used to be the model that was en vogue was to be this financial supermarket and that included, you know, your retail bank or credit card business, a mortgage business, a wealth management business but most of all the big revenue driver were these investment banks that a lot of it, not just prop trading although that was part of it, it was — but there is a huge business that sprung up around serving or making trades in the wake of or around the business of servicing big clients and big institutions.

And one of the things I found interesting recently that turned into a very risky business by the way because you know that a lot of that — a tremendous amount of volatility in the markets and yes you can make huge profits but you can also make huge losses when the markets turn if you don’t handle it perfectly.

And one of the things I found very interesting now is that if you look at the banks that investors think are the best deals, those are not banks that bear any resemblance to what was en vogue 10 years ago. You’re looking at banks and the UK has some really interesting examples of these banks, Lloyd’s and Royal Bank of Scotland that are these just — they are as boring as can be, they are just banks that do what banks used to do in the 1950s which is they take deposits, they make loans, and it is that simple. And it turns out that if you do that properly in an economy that’s pretty strong, that’s an enormously profitable business and it’s safe and it’s conservative and it also is valuable to not just the shareholders and executives but to an economy as a whole.

And I think to me, this is going to sound old-fashioned and I think a lot of people in the banking industry probably will view this as naïve and just a little too quaint for their taste but looking at things through the prism of is there some value — social economic value to what you’re doing, to me that would have — that’s a pretty good filter for activity that is not really good for shareholders either and the huge risks the banks are accustomed to taking, those turn out badly way too often.

RITHOLTZ: So how did RBS run into trouble because they are in deep trouble —

ENRICH: Well RBS is actually doing pretty well right now is the reality, and they were the world’s worst bank for in up until a couple years ago when they managed they had been on this acquisition spree, they were — every single crisis there was, RBS stepped —

RITHOLTZ: Right there, right in the middle.

ENRICH: Every single one, and there were a lot of banks that fit that mold, right? UBS is another good example, Citigroup, Deutsche Bank —

RITHOLTZ: Citi, unbelievable.

ENRICH: All these banks and —

RITHOLTZ: Bank of America.

ENRICH: Wells Fargo, I mean we couldn’t — it is hard to name banks that haven’t made these catastrophic mistakes.

RITHOLTZ: Chase J.P. Morgan is really the exception,

ENRICH: Yes, and Goldman too to a certain extent, I think. They have certainly had their blunders but they — they are not, those are banks that have been much more conservative and I think better managed.

RITHOLTZ: Morgan Stanley arguably sidestepped much of the debacle.


RITHOLTZ: We have been speaking to David Enrich about The Spider Network. If you enjoyed this conversation be sure and check out our podcast extras where we keep the tapes rolling and continue discussing all things LIBOR. We love your comments, feedback, and suggestions, write to us at where we keep the tape rolling and continue discussing all things LIBOR.

You can find that wherever finer podcasts are sold, Soundcloud, Overcast, Apple iTunes, and of course, you can check out my daily column on, follow me on Twitter @Ritholtz.

I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.

Welcome to the podcast, David, thank you so much for doing this and I found — I’m only halfway through the book but I found it to be absolutely fascinating and it unfolds like a spy novel. It’s really amazing characters and all these things going on and you’re kind of astonished along the way that wait, can they really do that? That seems like that doesn’t make any sense.

How much fun was this to research and write?

ENRICH: So much fun. It was it was the most fun I’ve ever had as a journalist honestly.


ENRICH: I found getting to know these characters fascinating, I found the historical research fascinating actually really enjoy the writing part too, I felt like I got was a peaceful creative process for me and I just was happy as a clam.

RITHOLTZ: So you get to know the Hayes family, you spend almost a year with them, more than a year?

ENRICH: From early 2013 through middle of 2015. So and close to 2 1/2 years.

RITHOLTZ: Are you surprised that he’s the only person who ended up going to jail for this?

ENRICH: I’m on the one hand surprised because that doesn’t seem right or fair, there were a few other people who got very small jail sentences, not part of his ring but other people and other banks that were engaged in kind of similar behavior but the jail sentences were tiny fractions of what he received.

And another and I’m not that surprised and one of the things that I think has fueled the current populist movements, certainly fueled the rise of Bernie Sanders and Donald Trump in 2016 is the sense that Wall Street got away with murder and no one was held — no individuals were held accountable while so many people in the public lost their jobs, or their homes, or their savings as a result of this. And I think there is that feeling that’s been out there since the financial crisis that’s it lends itself to demagoguery and it’s often oversimplified and not very nuanced, but there is a big kernel of truth behind that.

RITHOLTZ: Drain the swamp is an effective slogan.

ENRICH: Drain the swamp is an effective slogan and the fear that Wall Street is taking advantage and people are — everyone is in the pocket of Wall Street whether it’s politicians or prosecutors that again is not that simple. But there is some truth to that and there’s no — to me, there’s no more powerful manifestation of that than looking at the almost uniformly low level, slightly dysfunctional, almost autistic guys who bear the brunt of the criminal accountability for actions committed during the financial crisis.

It’s not just Hayes, there’s people involved in London Whale, they are kind of a leg a little on the spectrum I don’t know them but that’s just the sense I get, the guy who’s been held accountable for the flash crash in 2010 is a guy who is like a little bit on the spectrum, there’s — this is a pattern.

RITHOLTZ: So what was the most shocking thing you discovered while you are researching this?

ENRICH: To me, it was not, it was not something that is going to make a sexy headline, but it was really the degree to which culture at banks matters and has real world dementia. As someone who has been covering the banking industry in the US and the UK for many years, I kind of dismissed as hogwash this notion of culture that consultants and bank executives pay lip service to.

But I actually realize that it’s true and there is the culture of the institutions where Tom Hayes worked was one where envelope pushing was not just acceptable but it was explicitly encouraged.

RITHOLTZ: Explicitly encouraged.

ENRICH: Explicitly encouraged. And the senior executives at a number of these institutions not just where Hayes worked but across the industry were doing things not just with their trading, but also does with their social, doing things that are just out-of-control drinking, womanizing, drugs, things like that that we — that you can’t help but look at the behavior of a top executive as an underling in an organization and take a cue from that person. If that person’s doings something that is just nuts, you’re going to get the message that it’s okay to be nuts.

RITHOLTZ: So you can identify a distinct cultural difference from bank to bank, executive to executive, even if not pushing the envelope means our profit level is going to be a little less, that works its way through the entire troops?

ENRICH: Absolutely and I think that’s what we’re talking earlier about how some — some of the banks have survived weathered crazies pretty well are the like and J.P. Morgan’s a good example, and it’s an enormously profitable institutions, made many, many mistakes, of course, but that’s an institution where it’s okay to leave some money on the table sometimes.

RITHOLTZ: Right. But they don’t seem to make existential mistakes like Lehman did, like Bear did, like Citibank apparently did.

ENRICH: the list of banks that have made existential mistakes is much longer than the list of banks that haven’t.

RITHOLTZ: I can’t believe it.

ENRICH: I really can’t think, I mean not all them — not all of the mistakes became existential because thanks largely to —

RITHOLTZ: They were bailed out, yes sure.

ENRICH: The taxpayers but there was I mean it’s really hard for me to think of a bank that really managed risks well and would’ve been fine without government intervention and that’s, that — okay, and there’s a lot of external circumstances at play and there’s good luck and bad luck, but the reality is these banks were — financial decisions in general were responding to again, incentives from shareholders to the analyst community to amp up profits as quickly as possible, quarter after quarter, and the best way to do that is to take more risks and that worked really well until it doesn’t.

RITHOLTZ: So before I get to my favorite questions, I have to ask you little bit about your writing process because it really is kind of fascinating how did you find your way to the Wall Street Journal, that was back in 07 before the crisis, is that right?

ENRICH: Yes, it was I started at the Journal in December of 2007 so the crisis was —

RITHOLTZ: Right as the recession was starting.

ENRICH: Yes, right, that was right — I started right after Chuck Prince and Stan O’Neal lost their jobs in Merrill and Citigroup, and I have been working at Dow Jones Newswires which is —

RITHOLTZ: Owned by the same parent company.

ENRICH: Yes, same parent company for a few years in Washington and in New York, and prior to that, had been doing other journalism stuff.

RITHOLTZ: And you were in Washington covering not banks, what were you covering in D.C.?

ENRICH: I was covering politics, my first job out of college was working for this little wire service, it was kind of a Washington D.C. bureau for a bunch of regional newspapers so I was covering D.C. for a newspaper in Wisconsin and one in Amarillo Texas where they which is home to the manufacturer of the V22 Osprey, you know this plane —

RITHOLTZ: The ones that don’t fly.

ENRICH: At the time they were does in the early 2000’s they were they kept crashing — they kept inviting me to go down and ride on one.

RITHOLTZ: No, no thank you.

ENRICH: I thought they were crazy.

They fly now, you see them around actually.


ENRICH: The UK uses them all the time, you see them flying around London.

RITHOLTZ: They were really considered wildly overpriced boondoggle —

ENRICH: I don’t remember the price, I just remember the fact they kept crashing, they weren’t safe at all.


Unsafe at any price.

ENRICH: They would crash like 10 percent of the time, that is a not a good ratio.

RITHOLTZ: That is a bad number.

So you find your way to the Journal, you stop covering politics, do you immediately start covering banks? How did that work?

ENRICH: Yes, I started current find at Dow Jones at Newswires and I had no idea I had fallen asleep for most of my ecom classes in college, I had no finance experience, but my first job at Dow Jones is actually my primary goal was to I had to read all these SEC filings and so I kind of taught myself what a balance sheet is, what an income statement is, how companies make disclosures that proved to be a really useful skill.

And I learned a lot about the industry and more importantly, I learned how to do research which is kind of the lifeblood of any good business reporter.

RITHOLTZ: So you are covering Tom Hayes for the Journal, you’re one of the five — you are one of the journalists responsible for the five-part series that led to the Loeb Award, what made you say let’s turn this into a book?

ENRICH: It was — you know what it was, it was that in that five part series, and that was, I don’t know, it was like 7,000 or 8,000 words which is really long by newspaper journalist standards, mainly journalist standards, and it — I looked at what I had as I wrote that and there was just I had so much more material and I felt like I was having to really leave so much on the cutting room floor and that was the narrative in that story to me and I think a lot of readers as well was really powerful, and it was putting a human face on someone who had been caricatured as a villain.


ENRICH: You know, it turns out we all have a lot in common and you once you get to know someone, you can really relate to them more and to me, that was — this is great character, a great narrative arc, and a great opportunity to bring some of this finance stuff to a mass audience, because the finance industry over the past 20 years has done a really good job of kind of cloaking itself in opacity and making it seem like the stuff they’re doing is so complicated and so important that no mere mortal can actually understand it, and you know what? That’s nonsense.

RITHOLTZ: By the way, that is a feature not a bug when things are simple and transparent, you can’t charge big fat fees.

ENRICH: No, that is completely right, they have thrived on this lack of transparency in this case the mystification of the banking industry, they thrived on it and that drives me crazy and it so it — to me this was how do you get people to actually read a book about finance? Well, one way is to make it read like a spy mystery.

RITHOLTZ: And it does.

ENRICH: And that is gratifying to hear, that was the goal and at the same time you can get people to eat some of their like carrots and spinach —

RITHOLTZ: Sneak it in one of the —

ENRICH: Yes, sneak it in and I feel like there is I use my parents who don’t know too much about finance and as kind of guinea pigs and that was a laborious process that might have been great for my relationship with my parents.

RITHOLTZ: That is so funny you say theat. My wife is an art teacher, my mother is a real estate agent, and when I’m trying to explain anything in finance if I can get — if I can create an explanation that both of them easily get, I know —

ENRICH: You’re in business.

RITHOLTZ: I know I understand it and I know I can explain it.

ENRICH: That was one of the interesting things for me is that that act of trying to explain things, try to write them in really simple terms or explain them to human beings like my book editor for example —


ENRICH: The act of doing — I, at this point, have been covering banks for simply 2004 I think so this is more than a decade and I thought I did know the industry quite well but the act of trying to explain to someone what an interest rate swap is, what a derivative is, what does a bank actually do? That was a sobering moment for me because I realized that as well as I knew this industry, it has many you know hundreds if not thousands of stories written about it. I — it was very hard to explain these things.

And I don’t think I understood them fully so —

RITHOLTZ: I was going to say the old line is if you really want to understand something, teach it, because if you could teach it then you really you really get it.

ENRICH: So I found myself in writing this book, there is a section on what a derivative is and what an interest rate swap is and I remember sitting down and writing and I realized I was writing just nonsense, it was gibberish and it was a very obvious reflection of my lack of nuance and understanding of it.

So I had to go back and I found a bunch of professors who had were former traders to kind of walk me through it and I just read a lot and arrived at a point where I did understand and honestly a lot of the stuff is not that complicated when you boil down to its essence, it is that Wall Street does a very good job of make — cloaking everything in acronyms and jargon and you know just doubling the complexity for the sake of complexity itself.

RITHOLTZ: So August 2017, you leave the Wall Street Journal, you go to the New York Times, what motivated that change in and what is it like working at The Gray Lady?

ENRICH: What motivated that change is I’ve been with the Journal for a long time, I love the Wall Street Journal.

RITHOLTZ: Decades, right? You were there for —

ENRICH: I have been there — at the Journal for a decade and if you count my time at Dow Jones before that, it was closer to 15 years.

RITHOLTZ: And that was a decade where a lot of stuff was happening.

ENRICH: Yes, I mean a lot of stuff externally, the entire financial crisis, lots of internally — Murdoch bought the place and look, I love the Wall Street Journal, they day in and day out do great stuff. In fact this may or may not be a coincidence but since I left, they’ve just been on this tear, one awesome scoop after another so not sure if that’s because I left or despite me, but the times —

RITHOLTZ: Correlation does not equal causation, as we like to say.

ENRICH: I hope not. The Times is great, we are in the midst of trying to expand and revitalize our business and finance coverage —

RITHOLTZ: What do you cover there?

ENRICH: So I’m the finance editor so I run a team of I think nine or 10 reporters and we are hiring so everything from a banking in Wall Street in markets to insurance business, public pensions, the whole range of everything.

So it’s fun, it’s busy, it’s you know, this is — I think we might be entering a new turbulent era so there will be lots more to write about.

RITHOLTZ: So let’s get to my favorite questions, I ask these of all my guests, tell me the most important thing that people don’t know about you.

ENRICH: I have been bald since I was 15 years old.

RITHOLTZ: 15, Mike, you hear that? So my head of research a couple years ago and he’s early 30s just said “The hell with it, I’m just going to start shaving.”

ENRICH: That is smart.

RITHOLTZ: He gave up on it.

ENRICH: Shave as early and as often as you can, there is nothing to —

RITHOLTZ: But 15, 15 is — so what that was like in high school?

ENRICH: I can’t — the words bleeped out, it’s awful.

RITHOLTZ: And you are just at the edge of the Michael Jordan era so you wanted to be like Mike or if you just said, I’m done.

ENRICH: There is — well, I shave my head but I was not because I want to be like Mike, I was going bald in high school.

RITHOLTZ: Wow that’s amazing, who are some of your early mentors who influenced your research and writing styles?

ENRICH: My dad certainly, he’s a professor and —

RITHOLTZ: What is he teaching? What does he teach?

ENRICH: He teaches law at Northeastern University in Boston and my mom actually was a mentor and not in terms of writing but in terms of — she is a psychologist and I found that the — one of the most important things about being a successful journalist is an ability to get people to talk to you, people who often aren’t supposed to talk to you, get them to think that it’s in their best interest to do so and the best way to do that is to kind of understand where they’re coming from and show empathy and listen well, and other traits that my mom really taught me.

But I know — throughout college, have a number of great professors who taught me that you don’t use adverbs, don’t write passive sentences, use action verbs, things like that.

RITHOLTZ: Okay, don’t use adverbs, no passive, action words —

ENRICH: Short sentences, direct use you know don’t use a three syllable word when a one syllable word will do, there is —

RITHOLTZ: What is a one syllable word for syllable?


RITHOLTZ: I like that, very good.

Tell us the journalists who influence the way you approach covering the topic?

ENRICH: Kind of great inspirations in for me, at least in business journalism is not going to surprise you, Michael Lewis is one of the greats.

RITHOLTZ: Nobody focuses on characters in finance the way he does.

ENRICH: Absolutely, he is easily the best there is at that and that it’s just inspiring and to me, actually, my favor writer is actually not in the finance space, Moneyball is a book that changed — I’m a huge baseball fan and changed the way I watch baseball and think about baseball which is saying a lot because I had at that point I can’t ruin — that came out early 2000 probably and I that point spent my entire life obsessing over the Boston Red Sox and to then see, to view utility through this entirely different prism is something really exceptionally powerful and that is essentially a book about stats.

RITHOLTZ: Right, I was going to push back and say each shares a tremendous amount with the rise of quants in finance and rise in quants, it’s oh, we have computers and we understand math he was how to make the statement better —

ENRICH: Absolutely.

RITHOLTZ: It just doesn’t matter which the subject is, and he does a masterful job have. Have you ever read the The Blind Side of his?

ENRICH: Yes, I love the Blind Side as well.

RITHOLTZ: It’s actually his funniest book I think, it’s just laugh out loud segments and it’s obviously a very personal book without spoiling any of it for anyone. Since we’re talking about books, well before we talk about books, anyone else in the media want to reference besides —

ENRICH: Yes, there are two others, one is Jim Stewart who is now a —

RITHOLTZ: Den of Thieves.

ENRICH: Den of Thieves.


ENRICH: Den of Thieves and like a zillion other —

RITHOLTZ: Right, but that was the one that really — I remember that.

ENRICH: Yes, that was an amazing book and he’s — I’m really proud, that is where my — one of the many great things I work in the Times these days and he is a colleague of mine and so I get to bounce ideas off him —

RITHOLTZ: That is great.

ENRICH: And he does sometimes the same with me and that’s very exciting.

And the one other person I will mention is not a journalist is but used to be is (Kirk Mellencamp) who is the guy who when he was a Wall Street Journal reporter basically uncovered the LIBOR scandal.


ENRICH: Not like he uncovered like there’s an investigation going on but he did the numbercrunching and the analysis and the sourcing to — and blew the whistle on it essentially and that to me is the most profound example I have seen in business journalism in a really long time of a newspaper story or a news story changing the world.

RITHOLTZ: Wow, so since we mentioned the Moneyball, what are some of your favorite books, finance, non-finance, fiction and nonfiction, what you really like?

ENRICH: I really like the business genre actually and there as you mentioned Michael Lewis, we mentioned Den of Thieves, by James Stewart, When Genius Failed by Roger Lowenstein is a great one.

RITHOLTZ: That’s a great read.

ENRICH: The thing I like about — I like books that have a narrative arc so whether it’s fiction or nonfiction and to me that’s it’s really — I mean, I got — I have no idea how to write a novel but there is in and I think that is a lot of ways harder than writing nonfiction, but nonfiction doing in a compelling way, I mean I have done this once and it’s hard.

RITHOLTZ: It is hard.

ENRICH: It’s really hard and being able to find characters and get them to open up to you and being able to tell their stories in a way that not only engages readers but is also honest and it really reflects what is going on in a non-superficial way is hard and is so powerful when you can get it right.

RITHOLTZ: Give us one more.

ENRICH: And another recent one is, I’m going to butcher her name but Sheila from the New Yorker, her book Black Edge on Steven Cohen is a great one.

RITHOLTZ: Sure, yes, that’s a really interesting title.

All right, let’s talk a bit about financial journalism, what excites you right now that’s going on in the world of financial media?

ENRICH: We are just finding new ways to tell a story, I mean the notion of a story as something with a lead and a nut graph and just altered and garbage in the middle that runs 800 to 1200 words is gone, right? I mean it’s not gone, it needs to be gone, it’s going away.

And we’re trying to — and again in the New York Times is not at all alone, it’s — The Journal is doing this, Bloomberg does is, everyone is doing this but trying to find creative ways to engage readers who are increasingly reading everything on their phone is hard and really disruptive but it is actually a lot of fun and you can be at the big media organizations that are investing a lot and hiring really talented people that are not just writers but are also graphics people, or computer programmers, or audio people, or video people and doing clever creative stuff is this whole new world that is not what I grew up in and loss of tolerance for experimentation and occasional failure is a lot of fun.

RITHOLTZ: So let us go down the list of these big interactive digital stories, the New York Times, The Wall Street Journal, Bloomberg, Washington Post, there have been some amazing things and if that’s the future of journalism, you have to be encouraged, right?

ENRICH: Yes, I think the future journalism is really bright right now and there is — look, what doesn’t work is giving away commoditized content for free, clear business model.

So but I think everyone gets that at this point, there’s not, there’s plenty commoditized of other that will be free but that’s not a business model, that is not sustainable, well, it just doesn’t generate revenue right?

No, I don’t want — I’m not going to pay for that. Are you? Probably not. Like you need to produce —

RITHOLTZ: I pay for the New York Times, the Washington Post, the Wall Street Journal, the Financial Times and a handful of magazines like the New Yorker and The Atlantic, but it’s high quality expensive content.

ENRICH: And I think that’s something and I think that’s probably much more media than the average person’s going to consume but there is I think people do in this day and age, I think there is the notion of fake news that has resonated a lot of people are — they want to know what’s really going on in the world, these are like dangerous times regardless of your ideology and people are willing to pay, and it is not just news, by the way, and the sports coverage is going through this renaissance where there’s all these of localized business models that are popping up all over the country where people — that is something people really care about, I care about that, and I subscribe to the Boston Globe for the sole reason that I want their sports coverage.

And that something that — that’s very valuable to me and I think a lot of people, you just need to do things that are valuable and not commoditized and people will pay for it.

RITHOLTZ: Tell us about a time you failed and what you learned from the experience?

ENRICH: Man I fail almost every day at something.


ENRICH: Yeah I mean I make mistakes all the time, there is — seriously, I make decisions that turn out not to be very good, I mean I have two little kids also that is just a huge recipe for one failure after another as a new parent, that’s — I do it all the time, I think the key is to just be able to, you know, own your mistake and move on.

RITHOLTZ: All right, that makes a lot of sense to me.

What do you do for fun? What do you do out of the office to kick back, relax, stay physically or mentally sharp.

ENRICH: I have two little kids so I play with them, I take them outside, I ride a bike, I read a lot, listen to music, go on vacation, I love to travel, just was down in Georgia where I’ve never been to —

RITHOLTZ: Work or vacation?

ENRICH: Vacation.

RITHOLTZ: Where did you stay in Georgia?

ENRICH: We were in Savanna and then Jekyll Island.

RITHOLTZ: Oh, lovely places.

ENRICH: The Jekyll Island is where the Fed —

RITHOLTZ: The Creature from Jekyll Island, a very a very favorite famous book.

If a millennial came to you and said they were thinking about a career in journalism or writing, what sort of advice would you give them?

ENRICH: Develop a skill that sets you apart whether that is being really good at getting people to talk to you or being really good writing or learning some element of computer programming or developing expertise and audio or video stuff, don’t go the route of just aiming to be at the Wall Street Journal or the New York Times, go develop some specialization.

RITHOLTZ: And our final question, tell us what you wish you knew about the world of banking and finance and LIBOR 15 years ago.

ENRICH: I wish I some of told me that everyone is going to try and make it seem much more complicated than it really is but when you boil it down to the essence, it’s pretty understandable for someone with a brain.

RITHOLTZ: That’s as good an answer as is I’ve ever heard.

We have been speaking with David Enrich of the New York Times. If you enjoyed this conversation, be sure look up an inch or down an inch on Apple iTunes and you could see any of the other 193 or so such conversations we’ve had previously.

We love your comments, feedback, and suggestions. Write to us at, I would be remiss if I did not thank my crack staff who helped put together the show every week. Medina Parwana is our producer/audio engineer, Taylor Riggs is our Booker/producer, Michael Batnick bald since late 20s, not quite 15.

ENRICH: That is nothing.

RITHOLTZ: So he had 12 good years on you, is our head of research who helps me assemble a lot of the details and questions and really makes these shows what they are.

I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.



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