This morning, the stress had tightened its grip on Eric’s facial muscles beyond normal. Before he could even try to flash a semblance of a smile and greet me, he was on another phone call and speaking into the headset. He motioned for me to sit on the couch by the window. Listening to Eric, I quickly realized that he was talking to our CEO, who, as usual for this time of year, was in Palm Beach. It was the first time I’d witnessed Eric in what appeared to be the financial equivalent of code blue. He spoke clipped, rapid-fire sentences into his headset.
“As of this morning cash reserves were at twenty-nine billion,” Eric said. “I’ve checked with the finance desk, the repo desk, the treasurer and asked each of them point-blank-has anyone heard of any margin calls from our major lenders? No. A trade gone bad? No. Anything out of the normal course? Across the board the answer was absolutely not. No problems.”
The call lasted another two or three minutes, and it was abundantly clear that my identity theft and personal financial problems were not on the president’s radar. Eric ended the call by ripping off his headset and throwing it on the floor. He was seething, apparently in desperate need of a punching bag. But he was the ultimate multitasker, never missing anything out of the ordinary.
“What the hell happened to your hand?”
I looked down and saw it was turning lobster red. I told him quickly about the package.
“Shit like that happens when people lose money. We’ve had nuts walk into branch offices and start shooting. Be careful. Did you call the police?”
“Sonya’s got the FBI on it,” I said. “But this is just the latest in a much larger problem.”
“No shit,” he said, and suddenly we were no longer talking about me. “Biggest financial crisis Saxton Silvers has faced in its hundred-fifty-seven-year history, and I can’t get our CEO to cancel his tee time and deal with it.”
I said nothing. I knew by now when to shut up and let him process his anger. Finally he looked at me and said, “It’s going to hit the fan today-huge.”
“What’s wrong?”
Eric went to the window and looked off into the distance. The morning sun gave a warm glow to the new leaves and blossoms in Central Park, confirming that April showers really do bring May flowers. Eric seemed oblivious to the spectacular view, still stuck in the icy grip of winter.
He said, “The plan had been to hold the bad news until after the close of trading today. But it leaked. Nothing we can do now but watch the big board and hold on to our asses.”
“How bad is it?” I asked.
He shook his head and said, “Another subprime write down.”
I swallowed hard. At the start of the housing slump last autumn, Eric had been forced to confirm a leak to the media that Saxton Silvers would burn $1.6 billion of its cash reserves to bail out two of its wholly owned hedge funds that were on the brink of bankruptcy from subprime losses. The firm still managed to report a profit of $9.3 billion for the year, even after payment of $16.5 billion in compensation and benefits.
“How big is this one?” I asked.
Eric turned and looked at me. “Twenty-two.”
The number hit me like a five iron to the forehead. “I assume you don’t mean million.”
“If only,” he said with a mirthless chuckle.
It was a staggering sum, but it was what happened when mortgage originators linked up with an unregulated Wall Street-two wires you really don’t want to cross. The irony was that since 9/11, most of the federal dollars that had gone toward regulation of financial institutions had been redirected to Homeland Security. Now, in the absence of that regulation, Saxton Silvers was writing down another $22 billion in losses-nearly half the entire annual budget for Homeland Security.
“Is it all subprime?” I asked.
“Every penny.”
Eric turned away again and looked out the window. His gaze swept across Midtown from Madison to Seventh Avenue, where in turn he could literally see the shining world headquarters of Bear Stearns and then Lehman Brothers. Sandwiched between the two, painted on the side of a building, was a big blue-and-white ad for AIG.
“And who the hell knows where it really ends?” he said.
11
CHUCK BELL GOT TO WORK EARLY-EIGHT HOURS BEFORE HE USUALLY checked in for his talk-and-analysis program, Bell Ringer, the top-rated television show on Financial News Network.
“Morning, Chrissie,” he said on his way through the FNN lobby.
Bell called the receptionist Chrissie only because everyone knew that he hated to be called anything but Christopher. Bell continued through the lobby, slowing only to rub the hoof on a miniature replica of the famous seven-thousand-pound bronze sculpture of a charging bull that sits in the Financial District two blocks from the New York Stock Exchange. Bulls are good on Wall Street. Bears are bad. The financial world is big on animal references, most of which come from the nineteenth-century London Stock Exchange, including “lame duck,” which originally meant a debtor who couldn’t pay his debts.
This morning, Bell was poised to break a story that would turn plenty of bull riders into lame ducks in the classic sense.
Bell had made his mark as a hugely successful hedge-fund manager, and then he retired at the age of thirty-seven to pursue a second career in journalism. His first show on FNN-a serious attempt at market analysis-was a total flop. His research was suspect, his predictions were usually wrong, and the “nice-guy” demeanor the network foisted upon him just didn’t fit. Bell had been notorious for his temper in the business world, and finally the geniuses at FNN realized that he came across as someone who knew what he was talking about only when shouting angrily at the top of his lungs. They renamed the show Bell Ringer, created a set that looked more like a boxing ring than the stock exchange, and let Bell just be himself. The show was an instant hit. “Suze Orman meets Jerry Springer,” critics called it. Viewers especially loved his stunts-like the time Bell rolled up his shirtsleeves, pulled on a pair of boxing gloves, and beat the living crap out of two guys dressed up as Smokey and Yogi the last time the market went from bull to bear. Whenever something good happened-a stock catching fire, or a bear hitting the canvas-it drew the same reaction from the host:
“That’s a Bell Ringer!” he would shout.
Normally Bell’s show didn’t air until five P.M., but today’s big news was happening before breakfast. Bell wanted a piece of the story in real time.
“Go home, Chuck.”
Bell turned to find Rosario Reynolds standing two feet away from him. Rosario was the female half of FNN’s popular morning duo-the young, energetic, and gorgeous counterpart to the stodgy old Wall Street fat cat who, bloggers said, couldn’t keep his dirty-old-man eyes off her breasts.
“Rrrrrosario,” Bell said, trilling the R for added annoyance. “How’s my international superstar this morning?”
“Back off, Bell. If you think you’re going on the air this morning to scoop the Saxton Silvers news, dream on. Roger and I are live in ten minutes.”
“Rosario, Rosario,” he said with a condescending shake of the head. “Don’t you know that at FNN the Money Honey is always the last to know?”
“This Money Honey has a bigger set of balls than you do. So like I said: Back off. This story is mine.”
“You don’t have a story.”
“I broke it this morning. Another twenty-two billion in subprime write-downs.”
“That’s not the story,” he said, smiling thinly. “That’s the tip of the iceberg.”
Her eyes narrowed. “What do you know?”
He laughed way too hard, then snagged an assistant producer as she was trying to sneak past the two clashing stars in the hallway.
“Sandra,” said Bell, “how are we coming on the Palm Beach connection?”
Sandra checked her clip board. “Shooting for nine forty, maybe nine forty-five at the latest.”
“That’s during my show!” said Rosario
The assistant producer hurried away
without a word. Rosario shoved Bell so hard that his shoulder blades bumped against the wall.
“What are you trying to pull?” she said sharply.
“I’m not trying to do anything. It’s done. FNN is bumping you for a special edition of Bell Ringer.”
“That’s not fair! I worked hard on this story.”
“Aww,” he said, patting her head. “Poor Money Honey.”
She knocked his hand away. “You’re such an asshole.”
“Thank you.”
“I am not going to let this happen,” she said.
“You don’t have a choice,” said Bell. “If these subprime write downs create the kind of liquidity problems that people are talking about, this could be the beginning of the end for one of the oldest investment banks on Wall Street. But all you’ve got are rumors. I’ve got a source.”
She gave him an assessing look. “You’re lying.”
“Maybe I am. Maybe I’m not.”
“I’ll have your ass if you bump my show and don’t have someone on the inside.”
He smiled thinly. “Under normal circumstances, I might be worried. But you’re overlooking one crucial fact, Rosario.”
“What?”
He leaned closer, as if to share a secret. “There really is no adult supervision at FNN.”
12
THE THUMB AND INDEX FINGER ON MY LEFT HAND WERE STARTING to blister. I didn’t think I needed a doctor, but it hurt enough to make me reconsider the sender’s agenda. Maybe the FBI was wrong. Maybe it wasn’t just a warning.
Maybe he did want to see me dead.
I was still in Eric’s office waiting for a chance to fill him in on my situation, and he was still on the phone talking through his headset. He suddenly stopped pacing long enough to grab the remote control from his desk and switch on the flat screen that was mounted on the wall above the wet bar. Like everyone else on Wall Street, Eric’s television was pre-set to FNN. The only thing worse than a business news network spreading rumors was being the only financial player in New York who hadn’t heard them. Chuck Bell was on the air, which caused me to do a double take. I’d been awake all night and my internal clock was off, but I was pretty sure it was just coming up on nine-thirty A.M., not Bell’s regular time slot.
“Good morning, all you mavericks and moneymakers,” he said, his usual greeting. “And welcome to the second half hour of this special edition of Bell Ringer.”
The familiar ding-ding-ding-ding of the NYSE opening and closing bell pulsated over the television, followed by a streaming banner at the bottom of the screen that proclaimed the reason for the special edition of Bell’s show:
LIQUIDITY PROBLEMS AT SAXTON SILVERS?
It was classic FNN: report something outrageous and potentially libelous to grab the viewers’ attention, and then put a question mark after it to keep from being sued.
Eric was red faced with anger. “Bell, you son of a bitch.”
Bell continued on the air. “Rumors, rumors, rumors. Such a vicious thing on Wall Street.”
“Then why do you start them?” Eric shouted at the screen.
Bell said, “We here at FNN are dedicated to bringing you only the facts. Unfortunately, the facts have investors, lenders, and players at every corner of the financial world nervous about one of the most prestigious institutions on Wall Street: the investment banking firm Saxton Silvers.”
Eric took a seat, glancing nervously back and forth from the television to the NYSE ticker that streamed across the wall behind his desk. As always, trading had started at nine-thirty A.M., and we were keeping an eye on the price of Saxton Silvers’ stock.
“Here is what we know as trading begins this morning,” said Bell.
“God help us,” said Eric.
“Fact: Saxton Silvers reported last fall that a write-down of one-point-six billion in subprime losses would stop the bleeding. Fact: FNN has confirmed that Saxton Silvers will announce another twenty-two billion in subprime losses later today.”
Bell paused, and Eric looked at me, as if to will Bell to stop right there. It was merely a pregnant pause, however, and Bell proceeded to do what he did best, throw gasoline on smoldering embers.
“The question becomes: Can Saxton Silvers take a hit of this magnitude to its capital reserves? Is this latest write-down of twenty-two billion dollars really the end of the downward spiral? Why should investors think so when management told us six months ago that one-point-six billion was the real number? Could Saxton Silvers face charges from regulatory authorities for misleading investors about the full extent of its worthless mortgage-backed securities? Rightly or wrongly, can multibillion-dollar class actions alleging fraud and mismanagement be far behind?”
Bell kept talking, but I was watching Eric, who truly looked to be on the verge of an aneurysm.
“Somebody needs to shut that lunatic up,” said Eric.
Bell said, “Joining me now from Palm Beach is Saxton Silvers chief executive officer Stuart Wyle. What better person is there to address these issues? Sir, thank you very much for joining us on Bell Ringer.”
“Uh, you’re very welcome.”
I couldn’t help but cringe. Bell had just laid out a case of financial Armageddon for Saxton Silvers, and pictured on television screens everywhere was our fearless leader speaking from the golf course at the Breakers Hotel, his nose shiny with sun-screen and a plaid golf cap atop his head. He must have looked ridiculous to anyone who wasn’t within three blocks of tony Worth Avenue.
“Mr. Wyle, let me begin by asking you this: Why are traders dumping their shares in Saxton Silvers?”
“No one’s dumping anything,” said Wyle.
“Sir, it is now nine forty-six A.M. Eastern time, and in just sixteen minutes of trading your stock has dropped from one hundred ninety per share to one hundred thirty.”
“Because of you!” Eric said to the screen.
Our CEO, fortunately, kept his cool. “The firm’s capital reserves are more than sufficient to cover the write downs that we will announce later today. The market will correct itself, and the price will come back just as soon as these silly rumors stop.”
“If that’s the case, sir, then why are Saxton Silvers’ most talented people dumping their stock in the firm?”
“That’s ridiculous. I don’t have any idea what you’re talking about.”
“Well, let me give you an example. Michael Cantella has twice been named Saxton Silvers’ investment advisor of the year, correct?”
“I believe that’s true.”
Eric and I looked at each other, equally confused.
“He also holds the title of vice president, as head of your Green Division?”
“He’s certainly one of our most outstanding young talents.”
“No argument there,” said Bell. “He’s appeared a half dozen times on FNN, including twice on my own show-which, by the way, normally appears Monday through Friday at five P.M., so viewers, please set your TiVo.”
“And your point is?” said Wyle.
“Simple,” said Bell-and he seemed to be struggling not to smile. “My sources tell me that just yesterday, Mr. Cantella liquidated his entire personal holdings in Saxton Silvers-nearly two million dollars’ worth of stock and options.”
On screen, our CEO looked stunned. Across the room, Eric looked even more stunned. I stared at the screen with my mouth hanging open.
Bell said, “Sir, what about that?”
“I-I can’t comment, except to say that it sounds like more silly rumors.”
“It’s no rumor,” said Bell, holding up a document. “I have here-”
My cell rang, and I recognized the incoming number: It was Sonya, the general counsel.
“Be in my office in two minutes,” Sonya said, without even a hello.
“Michael, what the hell is going on?” said Eric.
“I can explain,” I told him, then went back to the phone. “Sonya, I’m with Eric.”
“I’ll be right there,�
� she said, and hung up.
“I’m listening,” said Eric.
“This is not what it looks like,” I said, taking a deep breath to start my story.
But Eric was now staring past me in disbelief. On FNN, Bell was going to a commercial-but not before the network flashed a new BREAKING NEWS banner on the screen: SAXTON SILVERS “ADVISOR OF THE YEAR” DUMPS ALL S &S HOLDINGS.
My burned hand was stinging worse by the minute, and echoing in my ear once again was Stanley Brewer’s warning about the type of work I did, the enemies I’d surely made-enemies I didn’t even know I had.
“That’s the thing about revenge,” I said, watching the screen.
“Revenge?” said Eric. “Who said anything about revenge?”
“No one, forget it,” I said, but the lawyer’s words were still ringing.
You never know when-if ever-they are going to call it even.
13
ERIC DIDN’T OFTEN MAKE ME SWEAT, BUT HE WASN’T WEARING HIS mentor hat this morning. It was hard to believe that twelve hours earlier I had been celebrating my birthday with scores of guests-including Eric-who probably thought I was one of the luckiest guys on the planet. Not one of them would have traded places with me now.
“Stuart is going to call me as soon as he putts out on the next hole,” said Eric, only slightly facetious about our CEO’s priorities, “so I need some straight talk: Is there any truth to what Chuck Bell just said about selling your stock?”
Eric had only a rough idea of my identity theft problems, so I laid out the details as quickly as I could. Sonya arrived just as I was getting to the FNN report:
“In typical FNN style,” I said, “the report is technically accurate, but it’s grossly misleading. True, all of my stock in Saxton Silvers was liquidated, but it was liquidated along with all of my other holdings-not by me, but by an identity thief who has taken everything I own and moved the cash into a secret offshore account.”
I expected Sonya to jump in and second my explanation, but she was silent. Not merely silent. She seemed skeptical.
Money to Burn Page 6