John wanted that run by him again, and then once more, with sketches and numbers scribbled on a piece of paper, before he understood that business really could be done like this. He just couldn’t believe it.
“That really works!?” he finally admitted.
“Indeed,” McCaine said, “as if someone made the rules just for us.” He had a look of victory in his expression as he added: “And it gets better.”
“Better than this?”
“Much better. The next thing we’ll do is set up our own bank.”
A year, almost to the day, from the founding of Fontanelli Enterprises, a new bank was launched. Originally, McCaine bought up several small banks mainly from the Mediterranean area and merged them to become the Banco Fontanelli di Firenze. It was the world’s largest private bank and headquartered in Florence, Italy. Since the Fontanelli name was associated with vast sum of one trillion dollars, everyone assumed it was the largest bank in the world. It wasn’t, it was ranked around 400th.
John Fontanelli had only a small amount of money in his own bank’s account, at least when compared to what he held in some of the large American and Japanese banks. Since Banco Fontanelli was a private bank, and had only a limited disclosure requirement, such details were never made public. The regular guy on the street thought this bank had a trillion dollars.
A bank assumed to have such vast capital naturally generated a lot of trust, and because the Banco Fontanelli offered a number of attractive opening offers numerous large investors switched their accounts to it. Weeks later the bank had already climbed to 130th and it continued to grow.
“We will soon be the largest bank in the world,” McCaine prophesized confidently, “and all of this with other people’s money.”
“What do we need a bank for?” John wanted to know.
“To control money,” McCaine told him without looking up from the files he was studying.
Their plane was heading towards Florence, flying over a gleaming blue Mediterranean Sea with small fluffy clouds moving slowly below the plane. They were going to a meeting with the chairmen of the board and would fly back to London that same day. They’d be back just in time to congratulate Marco, who was getting married today.
“But how can a bank control other people’s money? I mean, the owner of the account can get his money whenever he wants and do whatever he wants with it.”
Now McCaine looked up. “That is not so with most deposits. Besides, not everyone wants access to their money all at once; that would ruin any bank. No, the money that the bank customers deposit in the account is used by the bank for other things.”
“But we have to pay them interest for their money.”
“Of course.”
John took the paper with the current interest rates of Banco Fontanelli. “To be honest, this does not look very lucrative to me.”
“That’s because you’re looking at the interest rates like the man from the street. Three percent for a savings account and ten percent for borrowed money, so you think that the bank earns seven percent, which sounds acceptable. But that’s not how it works.”
“How do you mean?”
McCaine smiled his usual thin smile. “When you hear this for the first time it sounds unbelievable. But it is true, and you can check it in any textbook on banking.
“This is how a bank works: Let’s assume we have deposits of one hundred million. There are laws that make us keep ten percent as reserves. The other ninety million we can offer as loans. If someone wants a loan from us they need to have a bank account, which may well be with us and is more likely the bigger the bank is, and we could even make this a requirement of the loan. This means that the money we lend will end up with us again. So after loaning out the money we still have ninety million dollars, which we, after keeping another ten percent reserves, have another eighty-one million dollars to lend, which will land up back in our accounts once again, and so forth. This way we can turn one hundred million in deposits into nine hundred million in loans, on which we charge ten percent interest. This brings us ninety million dollars in interest. Does this look like a good deal now?”
John could not believe his ears. “Is that really true?”
“Yes it is. Sounds like a license to print money.”
“It sure does.”
“And we’re in control. We can choose who we loan money to and who we reject. We can ruin a company by demanding our money back from one day to the next. This is our right. By the way, all we have to give as a reason is fear the loan won’t be repaid. Fascinating, isn’t it?”
“But that’s not legal, is it?”
“Totally legal. These rules are made and controlled by governments. Bankers are the most respected and honored people around. And we,” McCaine grinned as he looked back down on his papers, “are now members of this illustrious circle of people. People will tell us secrets no one else knows. We will do business deals that are impossible for others. But that’s not all, as bankers we can make financial transactions without the long noses of government officials snooping around. If banks didn’t already exist, we would have to invent them.”
The boring 11-story sandstone building stood in the shadow of the World Trade Center skyscrapers, described by McCaine as a literal perversion of the truth. There hung a giant gold-plated relief over the entrance with the words: Credit is the lifeblood of free trade. It has contributed more than a thousand times as much to the wealth of nations as all the gold mines in the world. John’s eyes were still blinded by the light as they went inside the building belonging to Moody’s Investors Service, the world’s largest investment assessment firm.
Moody’s appraises companies, nations, and anything else one can invest in to determine their risks. No other place in the world kept as many national and corporate secrets. No visitor was allowed into the offices of its employees, not even the pope. Analysts, sent there by national finance ministries to check the books, always came in twos, to prevent bribery and had to divulge their personal investments to prevent a conflict of interest.
The evaluation of credit worthiness of government bonds had an effect on risk-markup on the markets, meaning the interest that those governments had to pay on their treasury bonds. Moody’s didn’t make any exceptions, and it was immune to any governmental attempts to put pressure on it. If Moody’s announced an assessment of a country’s financial status just before elections, it could mean the government in power had practically lost the elections already. That was exactly what had happened in Australia in March, when the Labour Party suffered one of its worst defeats.
McCaine and John had no overriding reason for visiting Moody’s. “Moody’s is one of the few true centers of power in the world,” McCaine simply said. “It won’t hurt to show up there as long as we’re in the area.”
They were asked to wait in a waiting room with thick carpets, and then they were taken right up to the 11th floor. They went into an elegant conference room where they were greeted by the president of the firm, which had been founded at the start of the twentieth century. “What an honor, Mr. Fontanelli, to get to know you personally,” he said keen to show his enthusiasm.
He assured them that the Banco Fontanelli di Firenze, of course, had the highest and coveted triple-A rating. He told them with a gleam in his eyes that if there were a fourth A, the bank would get that one too. John would not have been surprised if the gray-haired man had asked for an autograph. Just from the expression on his face, he could tell that the man Moody’s president was looking at was a John Fontanelli that he himself had never seen. As the richest person on earth, John was the most credit-worthy person possible, from the aged analyst’s point of view. A legend. God, or Mammon in the flesh.
“Nice to hear that,” John said and smiled as the bright rays of August sun light reflected off the glass of the World Trade Center
Over the coming weeks and months they went to visit other institutions that John had never heard of before including the Society for Worl
dwide Interbank Financial Telecommunication, known as SWIFT. There too the bankers felt honored to receive a visit from John Fontanelli. A limousine with tinted windows took them out of Amsterdam along a winding road until they reached a building the size and scale of which it was hard to make out at first glance.
“Signor Vacchi was here once too,” the pale bareheaded Dutchman told them as he led them down a hallway. They could see endless rows of computers behind bullet-proof glass. “But that was a while ago. How is he doing?”
“Good,” John just said. He was in no mood to touch that subject.
SWIFT, he learned, organized five hundred million money transfers every year worldwide. It assured that banks were able to make binding agreements electronically with military grade encryption methods. SWIFT messages had to be confirmed twice before the actual process could be initiated. It was impossible to penetrate this system from the outside. The nerve system of the global finance structure was as secure as a missile silo and the codes were just as secret.
When they went to Brussels for a meeting with members of the European Parliament they stopped by Euroclear, an organization that handled international securities trading. Their office building was an ordinary granite and glass structure on the Avenue Jaqumain. They were not allowed to view the computer rooms, much less go in. Only ten out of the nine hundred employees were permitted to go in there. But they were shown the emergency power generators and coolant tanks on the roof, also for emergencies. They were told that another facility with the same setup was running parallel to this one in a secret location, should the main facility suffer a failure. Stock market transactions were being done by the second and on call. But, although the best electronic equipment money could buy was used and the system globally linked, a transfer could take up to three days, because apart from the trade partners involved in the deals, there were also national depot centers and banks involved.
“Would it not be better to transfer all the money I have scattered in the other banks into my bank?” John asked when they were airborne again.
“I’ve been thinking about that too for a while,” McCaine said and cocked his head. “The yield would be more. On the other hand the other banks are terrified you might do just that, and I like that.”
And so they raced around the globe and managed gigantic reorganizations and restructuring, purchased and sold, and organized measures of rationalization during meetings that hardly lasted more than a half hour. If it looked like a meeting might last longer than that they held it in the air, on the way to the next conference; then their meeting partners had to fly back home with a regular scheduled flight.
When they spoke, people listened, when they commanded, they were obeyed, when they praised someone, that person was on cloud nine. They were masters of the universe. Most of the world didn’t know it yet, but they would be the rulers of the coming century, and they were invincible.
$26,000,000,000,000
THE OWNERSHIP OF a bank that grew to monstrous size with incredible speed on the global markets opened new and unforeseen opportunities. Some of these opportunities were not quite legal, for instance when they used cloak-and dagger-methods to study account activities to learn about their competitors’ plans, relationships, and condition, or to plan a takeover. The people working in the analytical department didn’t ask where McCaine got the lists he put on their desks, but they did find them very informative.
But it turned out that it was the totally legal methods that were the most effective ones. Making use of investment strategy specifications and credit criteria alone they could promote whole industries or regions or cause them serious problems if they chose. They could throw Third World governments into crisis or save them. In the aftermath of one such crisis, they were able to acquire dozens of companies in Malaysia, South Korea, and Thailand dirt cheap. There wasn’t a single authorization or concession that Fontanelli Enterprises would have been refused. They owned more prospecting rights, fishing rights, and drilling permits than anyone could exploit before the end of the century. By now there was hardly a person on the planet who wasn’t in some way affected by decisions made in the flying command center of the Fontanelli empire.
“We are like a black hole,” McCaine said enthusiastically while rubbing his hands as they sat in their jet again. “We suck up everything around us, and the more we grow and stronger we get the faster we suck up even more. We will grow until we’re as large as the whole world.”
John didn’t look at him nor did he respond. He just looked out the window and watched the take-off. He didn’t quite like the thought of being a black hole, not as much as McCaine did.
Then came a bewildering piece of news. In a move that seemed almost out of a comic opera, German and Italian tax authorities raided branches of the Fontanelli banks in Frankfurt, Munich, Florence, Milan and Rome. They searched the offices and confiscated boxes of documents. Swarms of company lawyers, however, managed to regain possession of them again before one single official had the chance to set an eye on them.
“What in the hell does that mean!?” John exclaimed. “What are they looking for? And what can they charge us with?” He stared out the window but didn’t see anything.
“Nothing,” McCaine replied. “They have nothing on us. Don’t get upset, John, it’s not worth it.” He stood there and readjusted his tie.
“But we have to do something. We can’t just let them do this to us!”
“Of course, and we will. Now is the time to get in front of the cameras and tell the world that we’re gravely concerned. We are troubled about Europe as a financial environment. We will demand the free movement of capital, the inevitable globalization, and the international flow of money.” He laughed as if everything was an amusing game for him. “And they will swallow it all, hook, line, and sinker.”
John looked at McCaine doubtfully. “Can we do this? Control the international money flow?”
McCaine laughed again; a very amusing game indeed to him. “Yes, of course. Money flows through the computers of the banks without a single cent getting lost. Can control be any better?”
“And globalization? That’s a development that’s unstoppable …?”
“John, we are implementing globalization. The two of us, you and I, we are globalization. If all those countries out there were in agreement, they could stop us in our tracks. But they aren’t in agreement.” He messed with his cufflinks. “Divide et impera, that’s called, I think.”
A knock on the door. One of the secretaries stuck her red-haired head in and said. “Mr. Fontanelli, Mr. McCaine, the press is waiting down in the foyer now.”
“Thank you, Frances,” McCaine said. “We’ll be right there.”
John wished he could see the situation as calmly and confidently as McCaine did. He didn’t like this at all. He suddenly had the impression of walking on thin ice, singing at the top of their voices so as not to hear the cracking sounds beneath their feet.
Moneyforce 1 was flying north along the coastline of Borneo. The South China Sea glistened deep blue beneath the left wing, and the fogs and deep green jungles of Borneo passed by below the right wing. “You will like it,” McCaine had assured John. The jungle gave way to a huge bay with a large city in the middle that seemed to be floating on the water. The light reflecting from the golden domes of the mosques and palaces and it looked like a dream from One Thousand and One Nights.
John stared out of his window and eventually realized his jaw was hanging open. “You were right,” he said breathlessly. “I like it.”
McCaine took his eyes from a thick file and peered out to see what John meant. “Oh that, that’s nothing yet.”
Kompong Ayer, the city on the water, John found out later. It was a city build on posts centuries ago already. Arabian seamen had given it its modern name during the Middle Ages when the land around it was still called Sribuza. It had spread from both sides of the bay to the mainland and was now called Bandar Seri Begawa, and was the capital of Bru
nei Darussalam, the sultanate of Brunei. John could see it was a modern and wealthy city as they drove along the wide boulevards. There wasn’t an old car to be seen. The streets were lined with fancy bungalows and supermarkets. The muezzins called out to prayer from the minarets, and their driver stopped the car, got out, unrolled his carpet, and prayed.
“The people here have very good reasons to thank Allah,” McCaine said as he watched the driver through the window. “They pay no taxes. Education and medical treatment are free. Poverty does not exist, and there are even subsidies for building private houses. All the dirty jobs are done by foreigners, mostly Chinese.”
“And all this thanks to oil,” John threw in.
“Thanks to oil,” McCaine echoed. “It is quite remarkable how the Creator has put almost all major oil reserves underneath Islamic countries. Don’t you agree? Makes you think. Our colleagues from Shell pay the sultan so much that even after paying for all government expenditure he’s able to put two billion dollars into savings, where there are already thirty billion dollars. Sultan Haji Hassanal Bolkiah used to be the wealthiest man on the planet — until you came along.”
The driver rolled up his carpet again, put it into the trunk and drove on.
“And what exactly are we doing here?” John wanted to know, feeling slightly uncomfortable.
McCaine made a vague gesture with a hand. “It might not be a bad idea to get to know one another. The sultan will meet us and said he would be happy to get to know you.”
“Do I have to feel honored?”
“Good question. The sultan is dewa emas kayangan, the golden god who came from heaven, at least for his traditional thinking people. For the rest of the world he simply is the potentate, a potentate with oil.”
The car got to the waterside promenade and rolled towards a huge building with golden domes.
One Trillion Dollars Page 36