Posted: October 27th, 2014 | By: Rachel Wallen
Professor Andrew Verstein is quoted in a new book released September 2014 entitled, “Open Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions.”
Authored by Erin Arvedlund, financial reporter and former Wall Street banker, the book examines major banks and hedge funds in London who manipulated the London Interbank Offered Rate (LIBOR) during the financial crisis of 2008. In the midst of the recession, while most of the world was focused on Wall Street, these bankers covered up their company’s failures and cost investors as much as $1 trillion.
“For several years, it appears that major banks were involved in the manipulation of what some called ‘the world’s most important number.’ LIBOR is a benchmark for interest rates, and it is frequently used in contracts – from mortgages to complex derivatives. The first media attention to LIBOR involved some articles in the Wall Street Journal in April 2008, but then things quieted down,” said Verstein.
“I wrote the first scholarly discussion within the legal academy about LIBOR, which was the first discussion anywhere about the role that benchmarks play in our society. It was circulating just as litigation and governmental investigations of LIBOR were heating up,” Verstein adds. This paper states that, contrary to common belief, benchmarks like LIBOR can be manipulated with or without a conspiracy. Verstein authored two follow-up papers: “The Law and Economics of Benchmark Manipulation” and “Revolution in Manipulation Law: The New CFTC Rules and the Urgent Need for Economic and Empirical Analyses.” The latter is coauthored with the first economist to write on LIBOR.
Verstein joined the Wake Forest faculty in July 2013. He teaches Business Associations, Contracts, Financial Services Regulation, and Securities Regulation. Professor Verstein’s research focuses on financial regulation and contract law, including examinations of crowdfunding and dispute management in incomplete contracts. He has also written and spoken widely on the manipulation of markets through financial indices, such as Libor. Professor Verstein frequently discusses financial law topics in the media, such as on CNBC’s Squawk Box and Worldwide Exchange, and BBC’s World Report, and in Bloomberg and the Wall Street Journal.
Read his full bio here.