The Fix

Chapter 3 Beware of Greeks Bearing Gifts

In 1969, Neil Armstrong walked on the moon, Richard Nixon became president of the United States and 400,000 hippies descended on a sleepy farm near Woodstock. On the other side of the Atlantic, on a winter's day in London, a mustachioed Greek banker named Minos Zombanakis was taking his own small step into the history books. He had hit upon a novel way to loan large amounts of money to companies and countries that wanted to borrow dollars but would rather avoid the rigors of U.S. financial regulation.

As the sun set over the rooftops of London's West End, Zombanakis was standing by his desk in Manufacturers Hanover's¹ new top floor office, drinking champagne and eating caviar with Iran's central bank governor, Khodadad Farmanfarmaian. Zombanakis had just pulled off the biggest coup of his career with the signing of an $80 million loan for the cash-strapped Shah of Iran. The Iranians had brought the beluga caviar and Zombanakis the vintage champagne—the party went on into the night.

The Iranian loan was one of the first ever to charge a variable rate of interest that reflected changing market conditions and be split among a group of banks. It was just as revolutionary in the staid world of 1960s banking as the moon landing, though celebrated with less fanfare, and it marked the birth of the London interbank offered rate, or Libor.

“I felt a sense of achievement to set up the whole thing, but I didn't think we were breaking ground for ...