End Game

by Matthew Glass

‘Mr Custler?’

  Custler looked at the chairman of the committee, Bill Givens. In the wake of the election results, in which three Republican members of the House in Givens’ home state of Louisiana had been deposed, the Senate Banking Committee chairman was toying with the idea of staging a run for the Republican nomination in two years’ time. He had no interest in protecting the president. By inflicting some damage on him in this hearing, he had the opportunity to get his own run started.

  ‘Did the president speak to you in the days before you declared bankruptcy?’ Givens asked.

  Custler shook his head. ‘No, sir.’

  ‘Did you speak to anyone in the administration?’

  ‘Yes, sir. Naturally, I had a number of conversations and meetings with Secretary Opitz and Mr Rabin of the Federal Reserve and Mr O’Brien of the SEC and various of their officials.’

  ‘But you didn’t speak to the president?’

  ‘No, sir.’

  ‘Has he spoken to you since?’

  ‘No, sir.’

  ‘Has any member of the administration?’

  ‘I’ve spoken to Secretary Opitz and Mr Rabin and various of their officials.’

  ‘Have they suggested to you or intimated to you in any way what you should or should not say before this committee?’

  ‘No, sir.’

  ‘You say you spoke to Secretary Opitz and Mr Rabin in the days before the bankruptcy. Do you think it’s feasible the president was not aware of what they were saying to you?’

  ‘That would be–’

  ‘Do you think it’s feasible the president would not have approved of what they were saying to you?’

  Custler waited to see if the senator had finished. ‘That would be speculation, sir.’

  ‘Would you care to speculate?’

  ‘No, sir.’

  Givens nodded. ‘Are you aware if the president spoke to President Zhang of China during this period of time?’

  ‘No, sir. I am not aware if the president spoke to President Zhang.’

  ‘There are persistent reports that President Knowles spoke to President Zhang about your bank, Mr Custler, shortly before you filed for bankruptcy. I am going to ask you again whether you are aware if President Knowles did make such a call.’

  ‘No, sir,’ said Custler. ‘I am not aware.’

  Givens stared at him silently.

  Custler stared back.

  ‘Mr Custler, I want to ask you a question I asked before. Has any member of the administration, or anyone you have reason to think might be connected to the administration, suggested what you should or should not say before this committee?’

  ‘No, Senator,’ replied Custler firmly. ‘And if such an approach had been made, it would not make any difference at all to the answers I’m giving. I’m not here to protect or defend President Knowles or any member of his administration.’

  ‘What are you here to do?’

  ‘I am here to tell the truth in response to the questions you ask.’

  ‘Not to tell the truth about the way your bank collapsed?’

  ‘Of course, Senator. If that’s what you want to know.’

  ‘ To tell the truth about why a commercial offer was rejected for this bank? To tell the truth about why an offer that might have saved the jobs of eighteen thousand people was not taken up?’

  ‘Yes, sir.’

  ‘Then I invite you to answer the question Senator Goss asked you a short time ago. Did the People’s Investment Corporation of China instruct you to reject this offer?’

  Custler’s lawyer put his hand over the microphone and whispered in his ear.

  ‘I have already answered those questions to the best of my ability.’

  ‘Mr Custler, you declined to answer.’

  ‘Yes, sir.’

  ‘And that’s answering to the best of your ability? You just told me you came before this committee to tell the truth. If that’s the way you do it, Mr Custler, I doubt very much the American people will believe you.’

  They didn’t seem to. Or at least the press didn’t. Interpretation of Custler’s performance in the media over the ensuing twenty-four hours was that his silence was admission, and that the People’s Investment Corporation, backed by President Zhang, had been the prime mover behind the rejection of the offer for Fidelian.

  The markets, which had been sitting nervously in limbo, began to falter. But the thing that really sent them into a new nosedive wasn’t so much the remarks that Bill Custler made in front of the Senate Banking Committee as a statement that was issued from a foreign capital two days later.

  But it wasn’t from Beijing.

  39

  IT WAS A month since Ed Grey had found himself hundreds of millions up thanks to his early bet against Fidelian and the rest of the banking sector. It felt like a year. If he had held on to the short positions he had accumulated, he would have quadrupled the profit he realized on those trades. Instead, the man who prided himself on never closing a trade until it had run its full course had closed out too early. Way too early, leaving him exposed to huge losses on long positions he held before the crisis began.

  Since then he had lived on his nerves as Fidelian went bankrupt and the markets plunged and then jack-knifed around driven by rumor and panic, selling stocks to meet margin calls by Red River’s banks. The money raised by the Fidelian trade had disappeared almost quicker than it had materialized, barely a drop in the ocean of cash the banks demanded of him. Red River had had to shed a further eight billion of assets to meet margin calls, selling them into falling markets in which every other DIV on the planet was doing the same. He was struggling to hold off redemptions from his investors that would have forced him to sell even more. And still he didn’t know if the market had bottomed. No one knew. If the market turned out to have been only pausing, if it was ready to take another slide, the banks would be scrambling for more cash and asset disposals would turn into a plummeting, self-fueling death spiral.

  Ed Grey had always prided himself on his ability to leave work at work. Good days, bad days – and he had known them both at the extremes in his years as a trader – he had always been able to sleep nights. But not now. At night he lay awake, wondering what might be the trigger that would set off another slide. Whatever it was, he knew it would probably turn out to be something no one was expecting. Another major bank failure was almost taken for granted. The markets might take it in their stride, might even show some relief when it finally happened. But something that wasn’t expected, an event the markets weren’t sure how to deal with – that was the danger.

  As Ed looked at the CNBC screen in his office, he wondered if this was it.

  The statement had been made shortly after 4.30pm in St Petersburg, 8.30am in New York. Within a half hour it was being replayed on just about every news and business website in the world.

  The Russian prime minister was standing in a room with white, gilt-edged wall paneling behind him. Anatoly Peskarov was a thin, red-haired man in his forties, the latest of Putin’s Puppets, as Russian leaders had come to be known. He had taken a question from one of the journalists at the press conference about how he thought Russia was going to be affected by the collapse in the US markets. Ed Grey listened to the voice of the translator as the prime minister made a brief comment about the strength of Russia’s domestic market, which was almost fifty per cent bigger than at the time of the economic crisis in 2008. He said something about the way Russia was playing its role in the G22 Financial Stability Council to ensure the losses were contained. ‘I can also add,’ said the translator over the rumble of Anatoly Peskarov’s voice, ‘that in case anyone is wondering, the investment funds of the Russian state operate only on a commercial basis with the aim of achieving the best result for their ultimate owners – the Russian people. When one of our investments fails, that is a loss we do not want to see.’ Ed Grey saw a slight smile steal across the Russian’s face. ‘That includes any businesses that may have failed recently. I can
’t speak for other governments, but the government of Russia has never and would never be tempted to use the people’s investment funds for political purposes. That is a guarantee I can give. To prove this, I will instruct any fund of the Russian state to cooperate fully, to even open its books to the regulatory authorities of any market in which it operates. I invite other governments to do the same.’

  The journalist asked if the prime minister could name any other government he had in mind.

  Peskarov shrugged. ‘I am not thinking of anyone.’ That same hint of a smile was there again. ‘You would have to ask them.’

  Ed Grey felt a tingle down his spine. It wasn’t a tingle of excitement. It was a tingle of fear.

  Peskarov was as good as saying, we didn’t fiddle Fidelian, but the Chinese did. If they didn’t – let them say so.

  And they hadn’t said a thing.

  Grey found a link on the CNBC website and watched the statement again. The fear in his belly was turning into a deep, deep sense of dread. He looked at the screens in his office. On the European bourses, the indices were turning red. Wall Street wasn’t open yet. Another ten minutes. Ed Grey winced. When the bell went, blood was going to flow.

  IN THE WHITE HOUSE, Tom Knowles was handed a note summarizing Peskarov’s remarks soon after he started a morning-long meeting on the financial crisis with members of the National Economic Council and senior congressional leaders from both parties. He read it briefly, whispered in the ear of his personal aide to have a meeting set up for when the talks with the Congress people were done, and turned back to listen to a point one of the senators was making.

  A lunch of sandwiches was waiting in the Oval Office when he finally got back there.

  He stood and watched the footage of Peskarov’s statement, munching on a chicken sandwich. Then he sat down in disgust.

  ‘Well, that’s great. What the hell does Peskarov think he’s doing?’

  ‘He enjoyed it,’ said Dean Moss.

  Knowles nodded, picking a couple more quarters of sandwich off the plate on the table. He had seen the smirk on Peskarov’s weaselly face. ‘What’s happening on Wall Street?’

  ‘Exactly what you’d think,’ said Ed Abrahams, who had grabbed a plateful of sandwiches. It took a lot of fuel, he liked to say, to keep an Abrahams going, and he was never backward when the food arrived.

  The market had been open three hours by now and there was no way of knowing where the drop, currently six per cent, would clunk to a halt.

  ‘Zhang’s got to say something,’ said Knowles. ‘He’s got to say something now.’

  ‘He won’t say it today,’ said Abrahams, his mouth half full of ham and cheese.

  China was thirteen hours ahead of Eastern Time and it was now past midnight there. Even if Beijing was planning to issue a statement, it wasn’t going to happen immediately. Realistically it would be another eight to ten hours – at the very earliest – before anything could be expected. That was the whole trading day on Wall Street.

  They needed to be sure it happened. Unless a statement was rapidly forthcoming, Knowles would have to call Zhang again. That was obvious. Or he could call right now and wake the Chinese leader, but Zhang wouldn’t do anything until morning in China anyway. By then the trading day in New York would be finished. If Knowles waited until morning Zhang’s time, the Chinese would have all day in their time zone to issue a statement before New York opened again the next morning. All in all, they weren’t going to get a statement out of the Chinese president while the US markets were open today, so there was no point waking him.

  ‘Except it impresses him with the urgency of what’s at stake,’ said Gary Rose.

  ‘Let’s not treat him like an idiot,’ said Abrahams. ‘I’d assume he’ll have worked out it’s urgent for himself.’

  ‘In which case, Ed, I don’t need to call him,’ said the president. He took a bite out of another piece of chicken sandwich and chewed it quickly. ‘I called him once already so he knows it’s important. If he’s not an idiot he ought to have done something by now.’

  Abrahams smiled. ‘Fair enough.’

  But Knowles didn’t feel like smiling. He put down his sandwich in disgust. ‘Makes me sick to call him again.’

  ‘Maybe we should send him an email,’ said Abrahams, only half jokingly.

  In the aftermath of an unusually successful G20 meeting a few years previously, a network had been created of secure, direct email connections between the leaders. As far as Tom Knowles was aware, the US connection to the Chinese president had never been used.

  ‘Yeah, right. I can definitely see him responding to that.’ Knowles grimaced irritably. ‘What about our guys in Sudan? What about them, huh? Kidnapped and taken into some godforsaken shithole of a foreign country with a government that thinks it’s got us over a barrel. How long is it now? Two weeks! Why the hell can’t Pressler find them? Maybe Mr Zhang would like to give us a little help to get them out. Maybe I should tell him that as well.’

  ‘We need to separate the issues,’ said Abrahams. The complexity of trying to link everything up together was mind-boggling. ‘Let’s focus on this. The message is clear. We have a full-blown crisis brewing on the markets here and it’s going to hit there as well unless we get it under control. This is a shared crisis, not an American crisis. It’s as much in his interest as ours to resolve it. So we need to work together. He needs to step forward like Peskarov and–’

  ‘Peskarov! What the fuck does he think he’s doing? Like it’s some kind of joke! Saying he’ll open his books. Like hell he will! Raises the stakes with no risk of having to execute.’

  ‘Zhang needs to do his bit. He doesn’t need to say he’s going to open his books. Everyone knows that’s just Peskarov trying to push it. But he does need to say there’s nothing behind this other than what we can see on the surface. It’s one bad bank going bust. That’s all, nothing else. There’s no political agenda behind it.’

  ‘You think he’s going to say that?’

  ‘That’s the message.’

  ‘Ed, I know that’s the message. That’s the same message we gave to Bai, and where did that get us? You just said we should assume he isn’t an idiot. He’ll know that’s the message.’

  ‘Sir,’ said Rose, ‘you do need to call him.’

  ‘Yeah,’ said Knowles grudgingly. ‘Let’s wake him up. That’ll make me feel a little better about it, at least.’

  ‘I wouldn’t do that.’

  ‘I’m kidding,’ growled the president.

  40

  FOR THREE WEEKS, Zhang had watched the movements on the American markets and tracked the impact in China. He had instructed Bai to do whatever was necessary to support the domestic economy and maintain order in the Chinese markets. Under command from the finance ministry, lending between banks was still strong. Intervention in Shanghai and Hong Kong through the PIC and other state investment funds had restricted falls in stock prices to under fifteen per cent. But there was a limit to the length of time such measures could continue. If they went on too long, the same kind of problems would be stored up as had burst out in 2014.

  Zhang’s faith in Bai was strong, but he was beginning to wonder whether the finance minister had been right in his advice. He hadn’t said, as Qin had done, that the American president would certainly save Fidelian. But he had said that if Fidelian failed, there would be a panic that would last days. The panic had certainly come, but it hadn’t lasted only days. By now it was three weeks. Was it a panic, or was it a crisis?

  In one respect, at least, a crisis was not unwelcome to Zhang. Internationally China was heavily involved in the many discussions that were taking place on coordinated action to be taken should the crisis continue. Western finance ministers were nervously looking for commitments that China would stimulate its economy, and many European leaders had been on the phone to him asking for that assurance. Again China’s strength was needed, as it had been needed in ’08 and ’09. In ’08 and ’09 there had
been so much talk, so many promises about the role China would be given in the institutions managing the global economy. Perhaps this time a few of them would be kept.

  But it was the excessive stimulus of the Chinese economy that had been required at that time that laid the seeds of the disturbances five years later and the near destruction of the Communist Party regime, which only the army had prevented. That was something Zhang would not risk again. This crisis could not be allowed to build to a point where such a stimulus was required. Bai continued to tell him there was no risk of that. As long as that was true, there was no need for him to do anything.

  The finance minister had delivered the message that he had received from the American Treasury secretary. Until now, Zhang had chosen to remain silent.

  It wasn’t so easy for him to make a statement. People both in the party and the army were watching. He knew from various sources that the power he seemed to have exerted over the American economy had made a strong impression. If he made a statement, if he seemed to be trying to moderate what he had done, they would draw their own conclusions.

  And yet if this ran out of control, if this turned from a panic to a crisis, it would present a pretext for Fan to step in.

  But the statement from Peskarov changed everything. He had been told about it as soon as it was made. In the morning he met with Bai over a breakfast of rice congee. He also had Qin in the room.

  Bai continued to maintain that the sense of panic would alleviate once there had been a few weeks without any more surprises. Peskarov’s statement, he said, was the last twist in a story that was coming to an end. It was mischievous, but didn’t change the economic fundamentals.

  ‘What about the political fundamentals?’ said Zhang sharply.

  ‘I think the world will soon see that Peskarov is merely meddling. That is what he is like.’

  Zhang grunted non-committally and took a spoonful of congee, adding a pickle to it with his chopsticks. He ate thoughtfully.

  ‘Everyone now expects me to say something,’ he said.