The Domino Effect

by Davis Bunn

  Craig pulled his chair in closer and leaned over. “Very,” he said.

  Esther lined up the four frames like little square soldiers. “This is how they’re bought. One and then another and then another. Before they’re purchased, we run two sets of numbers. The first is standard risk analysis. What is the likelihood the value will swing in our favor and the bank will make money? In this case, we are betting against the market.”

  “Betting,” Craig repeated. “How much?”

  “Each of these represents many hundreds of millions. Billions in the case of interest-rate swaps and some currency trades.”

  “So, a lot.”

  “Yes, but for many derivatives the bank does not pay the full value of the underlie. The bank pays a percentage, and this percentage is hotly negotiated.”

  “Just like a private trader working on an account.”

  “True, but that’s not the important thing here. Well, it is, but it’s not . . .”

  “You’re doing great,” Craig said gently. “Tell me what’s important.”

  “The real risk, the important risk, comes from this.” Slowly Esther reached out and drew the four into a single tight square. “The bank bundles them.”

  “They take the four assets and make one,” Craig said.

  “Right. And this joining creates a completely different risk structure. We can measure this too. The bank has a series of algorithms specifically designed to measure how risk changes according to such groupings.”

  “So you buy them separately and then bundle them, and the risk changes, and so does the price,” Craig said. “That’s brilliant.”

  Esther rose from her crouched position and returned to her chair. “It’s also highly dangerous.”

  “Why is that?”

  “Two reasons. First, these bundlings don’t happen overnight. A legal structure has to be formed. That can take weeks, sometimes even months. Then the bank’s traders have to go out and sell the new product. This means analysts at other banks make their own calculations and determine whether the claims of our traders are real.”

  “Which means you’re holding the assets on the bank’s books,” Craig said.

  “They don’t just hold the assets, they hold the risk. And so long as the market moves as we anticipate, as we have measured, the total risk goes down, which means the assets we hold go up in value. But what if the economy goes down? I don’t mean, enters into recession. I mean, what if there is even a fractional shift in the factors that govern this particular area of the global market?”

  Craig’s voice had become as tense as her own. “What happens, Esther?”

  “The risk is magnified beyond all the bank’s carefully constructed boundaries.”

  “And the downside becomes a threat to the bank, possibly to the economy.”

  Esther nodded. “Now we apply the second factor, the reason this has become such a menace. The size of these bets.”

  “Billions,” Craig repeated.

  “These four components of this one bet represent a sizable portion of the bank’s total assets. If the market swings in the wrong direction, the response within the derivatives market would be like a catapult. A small adjustment downward becomes a huge change in the asset value.”

  Craig’s eyes had gone dark. It was remarkable how they seemed to change color according to his mood. “And it’s not just one bet, is it?”

  “No, there are many. Every day. And the risk they represent overlap. Banks tend to follow the trends that make them profit. That means they become overweighted in one sector.”

  Craig watched her with unblinking intensity. Then he leaned back. Not disconnecting. The energy between them was strong as a steel cable. He said, “So you think there is going to be another financial crash.”

  “I do.”

  “Have you developed a timeline?”

  “I have, yes.”

  “How long do we have?”

  “Perhaps six months.”

  “Perhaps?”

  “Yes.”

  “But it might be less, correct?”

  She paused, then let out a sigh. “It could be a matter of days.”

  Craig turned to the group. He showed them open palms. Inviting them in. And not even that gesture changed the feeling Esther had of being connected. The simple motion invited her to join with the entire gathering. She looked up and met their gazes. She was pleased to find it did not frighten her.

  In fact, it felt exquisite.

  The same man who had spoken earlier asked, “I have the same question as before. Is there anything we can do?”

  She nodded slowly. “I’ve been thinking about that.”

  “And?”

  “I have an idea. Actually, it’s just part of one. But I think it might make a difference. If I’m right.”

  When she stopped, the others let the silence linger until Patricia asked, “Will you tell us?”

  13

  Half an hour later, Esther and Craig emerged from the Saunders home. The mid-April afternoon had warmed, transforming the earlier rainfall into a humid blanket. In a few weeks, such days would be oppressive. Now the air was crystal clear and fragrant. Esther said, “All I can see are the holes in my ideas.”

  “At this stage I’d say that’s pretty normal,” Craig replied. “Where is your car?”

  She pointed down the block. “Do you think my structure has potential?”

  Their footsteps were punctuated by shrieks of children playing in the street. He was silent long enough for Esther to fear he thought her idea lacked merit. Instead, Craig said, “Do you really want my opinion?”

  “Of course.”

  “You’re asking the wrong question.”

  She stopped where the sunlight pierced the branches overhead. “Explain.”

  “The real issue is, why are you doing this? I know, I know, the economy is under threat. But you could easily build yourself a financial bunker and wait it out.”

  A fitful breeze shivered the high branches, sprinkling the sidewalk with a few raindrops. Where the sunlight touched them, the rain shone like gemstones. “I don’t follow.”

  “Why are you so concerned, Esther? What is the purpose behind your feeling this need to speak out? Is it some vague notion of punishing the wrongdoers?”

  “There’s nothing vague about this.”

  “No, you’re absolutely right. That was not the right word. I apologize.”

  She had not expected such a quick retreat. Esther could see he was ready to drop the subject entirely. It troubled her in a way she could not explain, as though his words had worked beneath her skin. Still, she felt a faint resonance, a need to understand. She said, “Tell me what the answer is.”

  That pleased him. “You’re the analyst. And this is your issue, not mine. You need to reach the conclusion yourself.”

  Once again she felt as if she were not staring at a handsome man but rather an internal mirror. She had no idea how to respond.

  “Here’s what I think. You’ve been so worried for so long, you’ve not permitted yourself to think beyond the problem. But you’re no longer alone. You have allies now. You have the workings of a plan. But this is only the first step.”

  “I know I need to work out the details.”

  “Not the plan, Esther. The plan is fine.” Craig pointed back toward the house. “You have a lot of people in there right now who are claiming the plan as their own. They’ll flesh things out. That’s why I suggested we leave, so they can build the wings your plan needs to fly.”

  She turned away from him and squinted into the brilliant light. She knew he was right. But she still did not see . . .

  “The people inside that house came because they are worried. They’re afraid. They’ve spent months and years feeling totally helpless. And until you showed up, they could not name what scared them. Only that something about their financial world was wrong.”

  Esther could see the tiny shards of an answer flickering in and out of focus in the s
unlight. But try as she might, she could not bring them together into a cohesive whole. Finally she said, “I need to think about this.”

  Craig waited for her to beep her locks, then opened her door. “Will you see your brother tomorrow morning?”

  “Seven-thirty.”

  “May I join you?”

  “I’d like that.”

  “So would I.” He looked down at her for a long moment, then said, “You did really, really well in there.”

  14

  MONDAY

  The next morning, Esther woke up feeling weightless. The sensation was so unfamiliar, she had finished at the gym and was on her way to the clinic before she could actually identify what was happening. The previous day had marked a major transition, far deeper than divulging secrets or spending time with a very nice man. Esther had chosen a different course. She did not regret the move, not even when the normal boundaries of her life were being erased. She was scared, but she had been living with fear for months.

  She pulled into the rehab center’s parking lot and wondered which car belonged to Craig. More than her growing interest, stronger than her hope that this guy might actually be different, was a relief that she was not entering this transition alone.

  But when she entered the building, she was met by a very different man. Craig Wessex looked ravaged by his own set of midnight ghosts. Esther walked with him down the corridor and entered Nathan’s room. She shut the door and kissed her brother’s cheek. Then she asked, “Will you tell me what’s the matter?”

  Craig tried to shrug it away. “We have more important things to focus on.”

  “Craig, please. Something clearly is wrong. Tell me what’s happened.”

  He took a long look at the man lying in the bed. “There are times,” he said, “when I envy your brother.”

  Nathan had adopted the same position for the past nine weeks, rolling over so all she saw of him was his back. He would remain inert and silent until she kissed his cheek a second time and departed.

  Craig said, “Yesterday, after our session, I visited with my daughters. They don’t like their stepfather. And they blame me for their having to live with him.”

  When he went silent, she prodded, “How old are they?”

  “Abigail is eleven. Samantha will be fourteen next month.”

  “Those are difficult ages to be facing this kind of issue.”

  He gave no indication that he had heard. “They’re angry with me. They think if I had been a better father and husband, none of this would have happened. The fact that my wife was the one who left doesn’t change a thing in their minds.”

  “And you feel helpless,” Esther said.

  “Of course I do. Everything I say to them, every attempt I make to improve things only makes it worse in their eyes.” He kept his gaze on Nathan. “I let it slip yesterday that I had stayed in Charlotte because of them. Theology training at UNCC is fairly weak, and I feel frustrated by how much more I could be doing at a better seminary. I could have studied anywhere. I was accepted . . .”

  When she was certain he had run out of steam, she said, “How did they respond?”

  “Abigail has adopted her mother’s attitude. She says she’s embarrassed that I want to enter the ministry. She says I should go back to being an accountant—that’s the only thing that makes any sense.”

  “And the older girl?”

  “Samantha says I’m just making things worse by being here.” Craig sighed.

  “You know they don’t mean what they said. They are deeply hurt and angry. And Samantha is a teen. She’s lashing out at you because she can.”

  Craig ran a hand through his hair. “Maybe they’re right.”

  Esther waited. When he finally looked up, she said, “It’s easy for me to sit here and give you advice. But I think you should wait.”

  “Wait for what?”

  “For them to come to you.”

  “But that could take years.”

  “Possibly.” She pointed to the figure in the bed. “When our parents died, we went to live with our grandparents. I never got along with them, even when my parents were alive. Nathan left the following year for university. He chose a school in Minneapolis so he could visit me as often as possible. And most of our weekends together I spent ranting. I was angry all the time. Nathan didn’t argue with me. Instead, he helped me reshape my anger into something that . . .”

  “Brought you here,” Craig finished for her.

  The sense of being understood, of sharing the helpless moments with another individual left Esther fighting back tears. “He was such a good brother.”

  “What happened to him?”

  “A traffic accident on the interstate. A truck blew a tire and crushed the passenger side of their car. His wife was killed. She was three months pregnant. The police say he was probably driving well over the limit. I suppose Nathan blames himself.” So much power compacted into a few short sentences. “His wife meant everything to Nathan.”

  They walked out together. Though they did not touch, it seemed to Esther that the moment carried a new intimacy, as though some juncture had been reached through the act of sharing the impossibles of life.

  When they reached the sunlight, Craig’s phone buzzed. He pulled it out, sighed, and told her, “I invited a couple of friends from school to join us yesterday. They phoned last night to ask if you’d be willing to speak on campus.”

  “When?”

  He lifted the hand holding the phone. “They just texted me. This afternoon at three?” When she hesitated, he said, “I can put them off.”

  “No, no, it’s okay. I just . . .” She inspected him. In full daylight his features looked physically bruised. “Did you sleep any last night?”

  “A little.”

  Which meant she would have to carry the entire session on her own. But Esther replied, “Tell them yes.”

  Esther drove straight from the clinic to the bank. The difficult time with Craig and Nathan had not entirely erased her earlier sense of weightlessness. This shielded Esther during a pair of tense meetings. The first was with Jasmine, who laid out the team’s own sleepless weekend’s worth of calculations. They had identified three projects with genuine potential to repeat the previous week’s gains. Esther could see that Jasmine had failed to evaluate fully the underlying global conditions. Jasmine was very sharp, and she had a firm grasp of the bank’s risk measurements. But she had not spent years analyzing the core elements that supported the world’s economies. Esther knew she owed Jasmine an explanation, but it would have to wait until her own course was clear.

  The second meeting was chaired by Jason, who drew Esther’s analysts into his normal Monday meeting with the senior traders. She told Jasmine to handle the pitch. Esther had done this several times in the past, giving the pedestal to a team member who had actually done the work. Esther knew Jason considered this a sign of weakness, but Esther did not care. Especially today. She listened as Jasmine and three of her team ran through the potential investments. The senior traders responded with the hungry excitement of pack dogs.

  Jason rewarded them with a grudging nod, the only approval she or her team ever received from their boss. For the first time, though, Esther remained isolated from the tension and attrition that dominated Jason’s division.

  As usual, Esther ate lunch by herself. She opted for a smoothie and a bagel at a local health-food store. She returned to the office only long enough to check the markets, then told Jasmine she was lecturing at UNCC. They both occasionally were asked to speak at business schools or industry groups. The only difference today was that Esther did not ask her number two to make the presentation. Jasmine relished being the intelligent and attractive black woman addressing a sea of mostly white male faces. Usually Esther was only too happy to let her go out and rock their boats.

  Esther drove over to the UNCC Center City Building. The university’s main campus was located ten miles from downtown on a thousand-acre neo-Georgian campus. H
owever, the university had recently completed construction on a unique academic tower located in Charlotte’s First Ward.

  First Ward ran east of the intersection of Trade and Tryon Streets. Until just before Esther arrived, First Ward had been the most dangerous place in Charlotte. Which was saying quite a lot, for as recently as the eighties Charlotte had one of the highest per-capita murder rates in the United States. But the Charlotte city fathers had turned their trouble spots completely around. First Ward was now the hottest nightlife and arts quarter in the Carolinas. The university’s Center City Building was the new jewel in the First Ward crown. The tower was, quite simply, a showstopper. The building was designed as a series of semitransparent cubes that rose as three rotating masses.

  Esther parked across the street and spotted Craig pacing in front of the entrance. When she approached, he said, “Maybe this isn’t a good idea.”

  “I said I would do it, and I will.”

  “No, listen, I invited the academic dean yesterday. He’s brought some people from the business school.”

  Esther placed her hand on his arm. “It’s okay.”

  “What if word gets back to the bank?”

  “That’s my job, worrying about how the bank might respond.”

  He seemed to see her for the first time. “You’re so calm.”

  “I’ve been thinking a lot about what you said yesterday. I haven’t reached any conclusions, but I know you were right.”

  Craig looked genuinely confused. “About what?”

  “About my need to start asking the right questions.” Only then did she realize it was the first time they had touched. She left her hand there a moment longer, then dropped it and said, “Let’s go inside.”

  15

  But when Esther pushed through the glass doors and entered the crowded atrium, her sense of calm confidence evaporated. A man she recognized from the previous day rushed over to them and said, “This thing has gotten totally out of hand.”