Nast nodded, and he could imagine exactly how Reid would react to her.
Pennington got up from behind his expansive leather-topped desk and came around to pump Nast’s hand, his smile as pompous as his silver-streaked hair and five-hundred-dollar haircut.
At Yale he’d been the rush chairman at Alpha Delta Phi, one of the most exclusive fraternities on campus. They had turned down Nast, who’d been an awkward, ugly kid on an academic scholarship.
“Will we be seeing you and Mildred at the thirtieth?” Pennington asked. “We Elis have to stick together.” Mildred was Nast’s wife.
“I wouldn’t know, Don,” Nast said, his tone even. “I was too busy studying to socialize much.” He’d graduated summa cum laude, while Pennington had skated along with gentleman’s Cs. “Reunions aren’t my thing.”
“You were always our academic star,” Pennington said. “And look where it’s taken you.”
He escorted Nast over to a pair of Queen Anne chairs that everyone knew came from the Pennington family mansion on Philadelphia’s Main Line.
“Not to Alpha Delta Phi.”
“Our mistake, for sure, Spence,” Pennington said. “Now, what brings you over here this morning?”
“This isn’t about me, Don, it’s about you. Word is that you want to be the next Treasury secretary.”
“I’ve thought about it, but Bob Nichols has been doing a bang-up job down there. And to tell the truth, I’m happy right here.”
“Nichols has told the president that he wants to step down at the end of the year. And naturally your name came up.”
Treasury secretary was on par with the chairman of the Fed, Pennington’s boss. It was a quantum leap above the president of the New York branch.
“That’s interesting,” Pennington said, his tone nonchalant. “I’m a fan of President Farmer, of course. A fine fellow. I’ll mull over the idea.”
Nast was irked. The bastard was up for a major promotion—to top dog in the financial world—and he was being cagey. It was as if he were saying: Naturally I deserve it, but I don’t know if I want the bother.
“I brought your fucking name up, it wasn’t the president’s idea,” Nast said. “A simple ‘thank you’ would be appropriate.”
Pennington blanched. “Sorry, Spence. I mean it. I was just taken aback, is all. Of course I’d consider it an honor just to be mentioned.”
“Of course it is,” Nast said, setting the hook and yanking on the line. “But you gotta earn it, Don. Play ball with us, and the job is yours.”
Pennington’s left eyebrow rose. “I don’t know if I understand exactly what you’re saying.”
“Saving this nation from the debt bomb.”
“You’re talking about the PBOC.”
“What else,” Nast said. And he was tempted to add: You overbred asshole.
“I have it on good authority that their central bank is ready to bail out regional banks that are on the edge of failing,” Pennington said. He didn’t seem overly concerned.
But he never had to be concerned. He had risen to the top of JPMorgan Chase, thanks to his charm and connections, the same qualities that brought him to the New York Fed. He was a major party donor and a world-class networker, and the sec Treasury job would be another easy step.
In Nast’s judgment, Pennington was another Treadwell, but without the intelligence and ruthlessness. Reid, a penniless kid from a small Ohio town, had fought inch by bloody inch to get where he was. There’d never been any high-end family or friends to open doors for him until he married into money. The man had battered them down by sheer will, and Nast was in awe of him, as well as in fear.
“I don’t know what good authority you’re talking about. Liu and PBOC are going to stick it up Hua’s ass. There’ll be no bailouts. If the little banks are too stupid to manage their affairs, too bad.”
Pennington shook his head. “That makes no sense whatsoever. I’m friends with both men, and both of them are just as concerned about their nation’s welfare as we are about ours.”
But they don’t have Abacus, Nast wanted to say. “Don’t be naive. The PBOC is going to serve Beijing a pile of horseshit. It was Chairman Hua and his predecessors heading the government who pushed the commercial banks into making those stupid loans. It’s even worse than our subprime fiasco in ’08. Now they’re going to have to pay for it. And when the system goes south, Liu can blame the chairman and bump him aside.”
“That makes no sense either. Their entire economy would collapse. Real people would suffer, big-time.”
“Don’t be so gullible. China’s power structure has never given a damn about its people. Mao starved and murdered millions of his loyal subjects, his own people, to get what he wanted. It was power, and Liu is no different.”
“Assuming what you say is true—”
Nast interrupted. “No assuming. And that’s why we’re heading to a major economic meltdown.”
“Right here?” Pennington demanded. “So we can’t sell the Chinese our soybeans or buy their cheap toys and clothes for a while. So what?”
Nast tapped his forehead. “Is there anyone home?” he asked. “You’re the president of the New York Federal Reserve Bank, for Christ’s sake. Think!”
Pennington puffed up. “No need to be rude, Spence.”
“There’s no need to be ignorant, either. ’Cause when the shit hits the fan, which it will, we’ll be in danger of going down the chute, Don. And it won’t be just the soybean farmers, it’ll be our entire economy. And would you like to hear why?”
“Yes,” Pennington said, his voice so soft now it was barely audible. He knew that he was in trouble; it was clear by his expression and by how he held himself stiffly erect.
“Our national debt is out of control,” Nast said. “Everyone knows it. We’ve been selling T-bonds like they’d never go out of style, often fifty billion dollars in each auction. Record amounts, Don. We’ve reached the point where investors around the world wonder if they should keep buying. We spend more than we take in from taxes. And nothing can keep going up forever. A day of reckoning is coming.”
Pennington said nothing.
“In fact it’s here.”
“Why’s China the bellwether?” Pennington asked.
Nast couldn’t believe what he was hearing. “They hold two trillion in our T-bonds, because we’ve never defaulted, never refused to redeem our bonds when they came due, and never skipped an interest payment. But right now it’s getting a lot harder for us to keep the pledge. Maybe impossible sooner than we’d like to think.”
Pennington continued to hold his silence.
“Are you with me so far?” Nast asked.
“Yes.”
“The PBOC will almost certainly not bail out the commercial banks. And how will the government react to that? Without the PBOC’s help, Hua is going to start unloading every T-bond of ours that he can get his hands on so that the central government can save the banks. But dumping all those bonds on the open market all at once will cause the price to drop into the cellar overnight. Too much supply, too little demand.”
“Trouble,” Pennington muttered.
Nast, who’d been a college professor, felt like he was lecturing an Economics 101 class. “Our Treasury bonds back an enormous amount of private-sector debt in the U.S. Mortgages, business deals, interbank loans, you name it. They’ve always been great collateral—past tense. When their value drops, all that debt will be called into question. Lenders will want their money, but borrowers won’t have the cash. Catastrophe.”
“Okay, you have my attention. What does the White House suggest we do?”
“We need to pull the economy back from the brink, and the Federal Reserve will be at the center of it. But first we’ll have to slog through a big mess.”
Pennington was actually frightened.
“Look, I wanted to give you the heads-up, but I don’t want you to worry. We can cover it if we work together.”
“Okay,” Pe
nnington said, but he wasn’t convinced yet.
“I have a couple of suggestions, and if we stay the course, everything will turn out okay. When the dust settles, after all the heavy lifting gets done, you’ll come out the hero and the Treasury secretary of the United States. The man who saved the nation.”
“I’m on board here, Spence.”
“Another thing, first,” Nast said. “Some Wall Street firms are going to be in trouble when the crash hits, which it will. But some are going to come out of it okay. Once it’s over, people will want to punish the guys who were smart enough to survive. The Fed has a big role in regulating the Street, but we don’t see a need to penalize success, do we?”
“I agree,” Pennington said. “I’m totally on board.”
“Good,” Nast said. “Mr. Secretary.”
18
After the board meeting, Treadwell went down the hall to his glass-enclosed office, his mind going in a dozen different directions, most of them good. In less than twenty-four hours, he thought Abacus will have taken effect, the markets here in the States will have crashed, and the domino effect will have spread around the world nearly at the speed of light.
The computer scientist downstairs who somehow had gotten onto the virus would no longer be a problem by the end of the day, according to Dammerman. Treadwell wanted to believe it, but it was one of the worries nagging at him.
What they had put in place was about as foolproof as any complicated scheme could be, and he had a great deal of confidence in his people that by tomorrow he would be a rich man—even richer than he was at this moment—plus, he would come out smelling like a rose. The hero of the crisis. The man who’d saved not only Burnham Pike but also the investors savvy enough to have listened to him.
His secretary, Ashley Coburn, looked up with a broad smile when he walked in. “How’d it go, boss?”
“Like taking candy from a baby,” he said. At thirty-one she was beyond cute, with a great ass, and more than once he’d thought about fucking her. But mixing pleasure with business at home plate was just a bad idea in any book, including his.
“They know a good bet when they see one.”
“Clyde should be showing up soon.”
“I’ll buzz you and send him right in.”
“Why don’t we say the hell with it, and take my plane down to Acapulco for a long weekend?” It was a running joke between them.
“Say the word,” Ashley said.
He laughed and went into his sanctum.
Glass-walled offices and open spaces where everyone could see just about everyone else all the time—total transparency for a new age, the architects were calling it—was the new thing in just about every financial institution in New York City. Except his office was soundproof. Anything said inside could not be heard beyond the confines of the glass walls.
Treadwell’s office was laid out like a miniature trading floor. A flat-screen television was usually tuned to CNBC, but with the sound off. The chyron display crawling along the bottom of the picture showed breaking market news. Next to his white enamel desk was a Bloomberg terminal that accessed market data in real time, and unlike Dammerman’s desk, Treadwell’s held only a laptop, a telephone, an appointments calendar, and a few papers neatly arranged.
“An uncluttered workspace for an uncluttered mind,” he’d told a visitor once.
His cell phone pinged. He took it out of his jacket pocket and brought up the text icon. Heather had sent him a message.
19
Looking forward to our lunch. XXOO
He was about to send a reply when Ashley buzzed him, and he picked up.
“Mr. Rockingham is on the line.”
Treadwell knew what the old man wanted. He’d been expecting the call. He picked up. “Hi, Keith. What’s up?”
“Not our stock, I can tell you that much. The traders are underpricing us.”
“That’s something that happens,” Treadwell said.
“We paid you good money, goddamnit. What are you going to do about it?”
“Nothing can be done. It’s the bad news from China that’s hitting everyone hard—not just you. But you have a solid company, and your stock, along with just about everyone else’s, will be back as soon as the craziness has passed. Happens all the time. Part of the business.”
“That’s what your asshole in the blue jacket told me. Name of Schneider.”
“Seymour is giving you good advice; he knows what he’s talking about because he’s been on the floor forever. Patience.”
“Patience? Do you know what the bastard told me?”
Treadwell had a good idea. Seymour was a colorful character. People either loved or hated him, but everyone respected his opinions. “No.”
“He told me to take off all my clothes and run around the floor telling everyone how good my company was. I want you to fire the bastard!”
“He’s a trader, and they’re all like that. But he’s one of our major assets, so there’s no way I can fire him. How about we do dinner tomorrow night? My nickel.”
“I’m going home this afternoon. But Heather tells me that you and she are having lunch today.”
“She wants some business advice, and I’m happy to oblige. It’ll help your bottom line in the long run.”
“I’ve heard you’re a ladies’ man.”
“I’ve been married for ten years, Keith. Happily. And breaking bread is part of my job.”
“How about if I tag along with you two?”
“Fine with me, but we’ll be talking about marketing, not the stock market.”
“I may put in a word or two, but I’ll let you two talk,” Rockingham said, a different edge to his voice now. The bastard was old but no less shrewd.
“Listen, whatever you and your daughter decide is fine with me.”
Ashley buzzed.
“I have someone on the other line,” Treadwell said, and he broke the connection.
“Mr. Schneider is on the line,” Ashley said.
Treadwell picked up. “Seymour, how is trading going?”
“Up and down. I expect that Rockingham is going to call you sometime this morning.”
“Just hung up with him. ‘Run around the floor with no clothes’?”
“It’s a wonder the idiot ever managed to put together a decent business,” Schneider said. “But we might have a bigger problem coming our way.” He summarized the high points of his talk with Betty Ladd. “She’s pissed off, and she’ll do anything to stick it to you.”
“Poor loser.”
“She’s head of the NYSE, and she can make bad stuff happen, you know this. If we didn’t tell our clients to take their proprietary capital and cash out like we’ve been doing, we could end up doing serious time.”
Less than twenty-four hours … “I’ll take care of Betty. She and I are old friends.”
Schneider chuckled. “If you say so, Reid. In the meantime, what the hell is ‘abacus’?”
Time suddenly stopped, and Treadwell felt as if he’d been kicked in his solar plexus. It took him a moment to get ahold of himself. “I don’t know,” he said. “It’s the thing with beads that you can use to add and subtract. They teach it in fourth grade or something.”
“On the floor this morning, Julia said something about an abacus that was going to put the brakes on Rockingham, or something like that, and you told her to shut up.”
“I have no idea what you’re talking about, Seymour.”
“Well, I heard the two of you.”
“I’ll be seeing her later today, maybe she can jog my memory,” Treadwell said. “Maybe it had to do with our earlier conversation about teaching Rockingham how to add and subtract before he got himself involved in the market.”
20
Dammerman came barreling into Treadwell’s office at the same moment Ashley buzzed to say the COO was on his way.
Treadwell motioned for him to close the door.
“The Russians are set to rock and roll—” Dammerma
n said, but then he stopped short. “What’s wrong?”
“I just got off the phone with Seymour. He said he heard Julia bring up Abacus on the floor this morning, and he wondered what it was.”
“What’d you tell him?”
“I said I had no idea what he was talking about, but I’d talk to Julia later today and maybe she could jog my memory.”
“She’s got a fucking big mouth.”
“No problem, trust me. But Betty Ladd could be a problem, at least in the short term. She and Seymour had a chat about us going to cash, and she warned him that if we were protecting our own positions without doing the same for our clients, we could go down.”
“She’s got a hard-on for you.”
“I’ll take care of it,” Treadwell said. He buzzed his secretary.”Give Betty Ladd a call, tell her I’d like to have a little talk in her office sometime this morning.”
“Will do,” she said, and Treadwell hung up.
“She’s not going to want to meet you face-to-face, given your history. Just give her a call. Unless you think she still has the hots for you.”
“I said I’ll take care of it, Clyde. Now, what about the Russians? Are they one hundred percent?”
“Butch dug them up, and he knows the score. They’re good. Anyway, they remind me of the wiseguys I grew up with in Queens.”
Butch Hardy had been a tough cop, about as corrupt as they came, and Treadwell had hired him on Dammerman’s advice.
“Will they handle the problem with Cassy Levin as well?”
“They’re outsourcing it to some Russian mob hard cases out in Brighton Beach.”
“The Spetsnaz guys will be out of the country before noon tomorrow, but the locals might be traced, and it could come back to us.”
“These guys are good, and we’re paying them two mil to make sure her mouth stays shut.”
“It should have been part of the original deal.”
“We didn’t know enough about what the woman was up to when Butch hired the demolition crew.”
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