The Billion Dollar Sure Thing

by Paul E. Erdman

  “Did they want details?”

  “No. But I’m positive that we have not heard the end of it by any means.”

  “Is it really any worry of ours? After all, we did put a stop to him by asking for that additional $50 million margin.”

  “Not exactly. The margin arrived first thing this morning.”

  “And what did you do?”

  “Well, what could I do? We made our conditions and he met them. We have been proceeding on his instructions.”

  “Sometimes, Kellermann—” Hofer decided not to finish his thoughts aloud. Instead he turned abruptly without any further word and moved down the corridor to his office. It was seven forty-five central European time.

  His secretary appeared the minute he reached his desk.

  “Dr. Hofer, there are dozens of people who have already been trying to reach you this morning. At least half of them from the press. What should we do?”

  “The usual. Tell them I’m not available. You know whom to put through if it’s absolutely necessary.”

  “The Times man has been especially insistent. They have always been quite decent toward us, you know. He’s on the line right now, again.”

  “All right, put him through. But that’s all. No other press for the rest of the day.”

  Almost as soon as he had settled behind his desk, the phone rang. He lifted the receiver carefully, as he always did.

  “Hofer speaking.”

  “Dr. Hofer, this is Fred Hastings from the Times. I guess you know why I’m calling.”

  “I’ve a fairly good idea, yes.”

  “Well, I know that you hardly want to make any statement under the circumstances, but I would very much appreciate your thoughts on what might happen today. There are very strong rumours that you people are going to suspend foreign exchange trading this morning. Is that correct?”

  “No, sir. That is incorrect. Frankly, I think you are talking to the wrong bank in the wrong country. The current problem is a dollar problem, not one of the Swiss franc. The issue is one facing the United States, not Switzerland. If trading is suspended, it will have to be the New York fellows who do it. We are open for business. All day.”

  “Is it true that you people, along with those in Eastern Europe, have been as responsible as anyone for this sudden run against the dollar?”

  “Hastings, you ought to know better than to ask a thing like that. Every time a currency gets into trouble, we in Zurich get accused by every boulevard paper on earth. You at the Times know that is simply preposterous. We are a very small fish in a huge pond. My position on the dollar is quite well known. I have said for years that it must be made convertible into gold. But I have always stated that this must be done in an orderly fashion, in cooperation with all the major countries in the world. These waves of speculation help no one.”

  “But it is true that you would stand to make huge profits, on gold, for example, if such a decision were taken?”

  “That is also not true. We maintain a stock of gold, just like our partner banks, because we make a market in gold. It’s quite logical that you can’t make a market in anything if you don’t have something on the shelf. But we have our risk in both directions as a result—as you yourself have pointed out in more than one article, Mr. Hastings.”

  The Times man knew better than to press too much on this subject.

  “Well, let me ask something else. If I walked into your bank right now and asked you to short a million dollars for me, would you do it?”

  “It would depend upon the reason. We are not here to promote speculation. If you could show us a good commercial reason, or could demonstrate that you needed to hedge your private holdings, and if you were a client of our bank of long and good standing, we certainly would try to do our best for you. So would any other bank in the world. Whether we would advise you to do it at this time is another thing. The statement out of Washington yesterday was quite clear. If you short the dollar right now, it could turn out to be a very expensive bit of insurance, you know.”

  “I deduce that you are quite sceptical concerning a dollar devaluation at this time?” asked the Times man.

  “I am always sceptical about any devaluation rumours. Especially where the dollar is concerned.”

  “May I quote you on that, Dr. Hofer?”

  “You may. Now, Mr. Hastings, I’m afraid that I must go.”

  “I understand. Thank you very much, sir. I appreciate your talking to me.”

  As he hung up, Dr. Hofer’s secretary again entered the room.

  “There’s one thing which I feel I should bring to your attention,” he said. “A certain Dr. George Bernoulli called very early this morning and left a message. He would like to see you, very urgently, on a private matter this morning. He suggested that he would be here shortly after nine and would appreciate it if you could receive him for just a few minutes.”

  “That must be the young Bernoulli boy. All right, I think I can fit it in. Just send him right in when he arrives. I’ll be spending the next half hour or so getting up to date from the market reports stacked on my desk. Remember that at ten I expect the people from South Africa. After that I don’t want to be disturbed by anyone. Lunch should be sent into my office for all of us. And there must be absolutely no mention of this conference and the people involved to anyone in the bank. The only executive who will be involved is Kellermann. He will be here shortly before ten. Just have him come right in also.”

  He turned his attention back to his desk.

  Three stories down, in the foreign exchange department, the phones had just begun to light up. At eight forty-five twenty traders went into action simultaneously. The Deutsche Bank in Frankfurt was offering $25 million spot. The General Bank agreed to take them at the rate of 3.3015, the absolute floor price for the dollar, a level that had never been reached before. The Deutsche Bank accepted. The Crédit Lyonaise in Paris offered $50 million. They did not like the price. They would come back in ten or fifteen minutes. The Banque de Bruxelles wanted to sell $35 million three months forward. The trader consulted Zimmerer. They decided to put a 5 percent discount on the forward dollar: they offered Brussels the corresponding rate of 3.136. They did not even hesitate but accepted immediately. Two minutes later the Banca Nazionale de Lavoro was offered the same rate on $40 million. They also accepted. The traders huddled with Zimmerer. They decided to drop the three months forward rate another full percent. Then came the break.

  “Zimmerer, come quick. It’s the Foreign Trade Bank, Moscow. They want to buy—buy!—$100 million spot and another $100 million three months forward. What should I do?”

  “Gimme the call.”

  He argued for a full five minutes before settling on a rate. He looked completely puzzled as he hung up the phone.

  “Zimmerer, it’s Budapest. They want to buy $50 million spot. But they want a better rate.”

  “Offer them 3.31.”

  A pause.

  “They want 3.3050.”

  “Done.”

  “For Christ’s sake,” came a scream from across the room. “It’s the goddamned Deutsche Bank in Frankfurt again. Now they want to buy $50 million. I offered them 3.33 and they took it. What the bejesus is going on?”

  During the next fifteen minutes the dollar rose steadily in strength, minute after minute. After starting at 3.3015 on the first trade, by a few minutes after nine it was up to 3.3645. At five minutes after nine a girl brought Zimmerer a flash from the Telex. He stopped all trading to read it to the room. UPI reported that the German-Russian pipeline deal was to be signed and that the Russians agreed to switch from dollars to German marks as the basis for payment. Within the next five minutes the dollar was up to 3.38. It had become obvious that all the professionals in the business were covering their short positions; the only sellers of dollars left in the market were the suckers, still way behind on news, still believing that the events of the previous day would continue. Zimmerer was in a bind. The General Bank was $2 billi
on short. During the past twenty minutes, the book value of this position had gone down in value by a full 90 million Swiss francs. He picked up the phone and asked for Dr. Hofer. He accepted the call immediately.

  “Zimmerer here. Look, Dr. Hofer, I think it would be good if you came down here. The market has completely reversed itself. The dollar is up to 3.38 and gaining. We’re down a good 90 million francs on our position and it’s getting worse every minute. I think we should cover before we have a real catastrophe.”

  He listened for ten seconds, and hung up.

  “I sure hope he knows what he’s doing,” Zimmerer muttered, and then stood up to put on his jacket. He had to prepare for the gold fixing at ten. That was forty-five minutes off.

  At nine-fifteen on the dot Dr. George Bernoulli entered the immense office of Walter Hofer. Hofer rose to greet him. Bernoulli was a full eight inches taller than Hofer, who had to look well up to meet the younger man’s eyes. Which he did, for Hofer was known as an eye-to-eye man.

  “George. I do hope you don’t mind me calling you that. But I’ve used your first name since you were a rather small boy. How is your father?” Hofer led Bernoulli over to a chair and offered him a cigar.

  “No thanks, Dr. Hofer. Father is, as far as I know, quite fine. Actually, I haven’t been home for a number of months now. But at least I can say that I’ve heard no bad reports.”

  “How is your work coming along in Bern, anyway? I’ve heard that you are moving right up the ladder.”

  “I’m quite satisfied. Would you mind, sir, if perhaps we got right down to the reason for my call. Actually, it concerns the government, but if you agree, I think we should be able to keep it on a quite unofficial level. I realize this may seem a bit unorthodox to you, but I think you are quite accustomed to a touch of that from our family.”

  Hofer chuckled. He had heard about George Bernoulli’s cockiness from more than one side and had in fact witnessed it on one occasion in the house of his parents more than a few years ago.

  “You just go right ahead, George. What’s the problem?”

  “Quite simple. What do you know about a man called Stanley Rosen?”

  “He’s a client of our bank. Has been for years over at the branch in Basel. Works with large sums of money for investment purposes. He’s identified with at least twenty-five or more closed-end investment companies, all domiciled outside the United States. It is said that he may be connected with the Mafia. We have no proof of it.”

  “I appreciate your candor, Dr. Hofer. We know that he has been visiting the bank here regularly during the past few days. May I ask for what purposes?”

  Walter Hofer’s eyebrows rose. He looked George squarely in the face and for a moment did not reply. Even a member of the Special Branch of Federal Police required a court order to ask such questions of a Swiss bank, and both of them knew that quite well.

  “Well, George, it’s none of your business at this stage, and you know it. But I’ll tell you. He wants to buy $200 million of gold bullion and wants us to use it as collateral for selling an immense amount of U.S. dollars short. He’s obviously speculating in a very major way on a fundamental change in the status of the dollar and gold.”

  “When you say, very major, what do you mean?”

  “He’s talking in terms of a billion and more dollars. Short.”

  “And you?”

  “We don’t like it.”

  “Why do you think this man is taking such an immense plunge? There is absolutely nothing in his background that suggests that he is a currency expert.”

  “I have no idea. But from what I’ve been told, he’s extremely sure of himself.”

  “Is it possible that he has some inside information from somewhere?” asked Bernoulli, perhaps not quite as shrewdly as he would have liked.

  “My dear George. You’ve been close enough to your father’s business to know that everybody thinks he has some kind of inside information. I really can’t answer that one. I’ve never met the man. I’ve heard about him strictly secondhand from our man Kellermann. If you like, I can ask him up.”

  “No, I don’t think that will be necessary. I guess you would not be able to tell me who else, if anybody, is also involved with Rosen’s accounts?”

  “You are right, George. Actually, I’ve gone much too far as it is. I’m afraid that you’ll have to go through official channels if you want that sort of information. What’s up? Are the Americans after him?”

  “No. We think he may be involved with the theft of some documents from the Bank for International Settlements.” Bernoulli’s eyes followed Hofer with the intensity of a laser beam as he spoke these words. Not a flicker of response.

  “Aha. In connection with the dollar perhaps?” This time Hofer was the man who had his partner under the most careful observation.

  “Perhaps,” replied Bernoulli. He continued, “Why do you ask that?”

  “Now George,” chuckled Hofer. “I know that you think that both your father and I are two completely senile old men. But we can still add two and two together, at least before noon during week-days.”

  “Well, you’re right. There might be some connection. If there is, Dr. Hofer, I’m sure you are quite aware of the fact that this would not be good for your bank or for the entire banking community here in Switzerland.”

  Hofer nodded. “I think I see the point. But perhaps you could be somewhat more specific, George.”

  “Well, I’ll try to be. We are not sure, but it may be that some strategic American documents were stolen from the home of the secretary-general of the Bank for International Settlements. At least they seem to be missing. It happened about ten days ago. A week or so after Bollinger returned from a trip to London. I believe that you were in London about the same time.”

  “What was that?”

  “I said, I believe that you happened to be in London at the same time, and in the same hotel as Bollinger. I think you know each other quite well.”

  “Of course we do. But I still don’t quite get the implication. You say that Bollinger and I were in London in the same hotel some time last month. What’s that supposed to mean?”

  “It’s not supposed to mean anything. It’s just a fact.”

  “Now, George, I don’t think you raised the subject just to make a bit of conversation.”

  “Well, there is something more perhaps. Did you notice whether Bollinger was perhaps in any way acting out of character in London? Or perhaps was in the company of peculiar people? You know what I mean.”

  “Now, Bernoulli. Do you mean that you suspect that Bollinger might have been involved in some sort of hanky-panky? That is totally ridiculous.”

  “I’m not indicating we suspect anything or anybody. We just know that some documents seem to be missing and that the explanations are either too pat or too wildly improbable. Thus a rather simple question about Bollinger.”

  “Well, I did see Bollinger very fleetingly in the Grill Room of the Savoy, yes. He was, I believe, dining with one of the monetary officials from Washington. But it was merely a fleeting impression, as I just indicated. They left together shortly after I noticed them. We did not even greet. Haven’t seen him since.”

  “Tell me a bit about Bollinger’s character. I believe that you have had rather close relations with the man, both professionally and privately, for quite a number of years.”

  Hofer said, “Well, I think ‘close’ is the wrong word. We dealt with each other on a regular basis, yes. Also, we have more than once ended up sitting beside each other at various dinner parties and the like. I can tell you this without any doubt. He’s the best man in Europe, and maybe the world, in the field of international monetary matters. Absolutely tops.”

  Hofer’s phone rang. “Excuse me, George,” he said, and then listened very carefully for a full minute before hanging up.

  “Unbelievable. The dollar is being bought all over Europe. The short artists appear to be running for cover.”

  Berno
ulli’s face showed his astonishment. “Come again, Dr. Hofer? I’ve been on the train during the last hour. What’s happened to the Russians and all?”

  “Amazing thing. I know, since I have been closely watching the activity in our foreign exchange department all week. For obvious reasons. Around eight forty-five the Eastern Europeans apparently switched from the major sellers of yesterday to major buyers. The Germans followed a few minutes later. Then the news came out about the Russian sales of gold, and the tide now seems to have turned.”

  “The Russians are selling gold?” asked Bernoulli, incredulously.

  “Yes. It’s been confirmed, according to our people. Am I disturbing some of your theories, George?”

  Touché.

  “Right now I’m not quite sure. You might be. It seems I keep changing theories about every other hour. The latest one popped up on the train on the way over. Maybe it should pop right down again.”

  “The Bollinger theory?”

  “I would not exactly put it that way. But let’s say, I’m interested in knowing a bit more about Bollinger. What are his political views?”

  Hofer reached for the cigar box, a delicately designed Persian piece, gold filament superimposed upon thin silver, with the usual enamelled patterns.

  “He has none. But I see what you’re driving at. Maybe Bollinger and the Russians have been working together, against the dollar. Not a chance. And the events of the past few minutes obviously prove it.”

  “I agree.”

  “It would seem to me that our Mr. Rosen is a much better candidate.”

  “I also agree there. Do you know a man named Rolf Lutz of Swiss Security Consultants A.G. in Geneva?”

  “Now, what was that again, George?” answered Hofer.

  “Lutz. Security Consultants. Do you know him?”

  Hofer replied, “What in the devil does that have to do with Bollinger or Rosen?”