“My husband,” the former Sirkka Numminen coolly informed him, “is probably with the young actress who was at the party last night, indulging in what the Americans call a ‘matinee.’ I wonder what the French word is for matinee.”
Nicely embittered, Davidov judged, and she was adept at the nuances of multilingual slang. “Is he aware of your service for Stasi?”
“No. And I would do anything to keep it from him.”
But that showed the Finnish economist was not very well informed. The KGB man could recall documents demonstrating beyond doubt that Karl von Schwebel was fully aware of his second wife’s work for Stasi, the East German secret service, and suggesting he was at least partially aware of her subsequent service to Russian FI. Obtaining that information about Sirkka and suppressing it at the source had cost the publisher a great deal of money. Von Schwebel was either very much in love with his second wife or eager to protect his reputation for sound judgment at the Bundesbank. Probably the latter; if he were motivated by love, the media magnate would have told her what steps he had taken to protect the both of them. As matters stood, he could take advantage of her guilty conscience about what she thought she was withholding from him.
The Fifth Directorate chief held up his hand lightly, indicating he would not take advantage of his position or hers. The woman in his thoughts along those lines at the moment was Liana, who he considered had comported herself with more dignity than the other women at the party. Her departure with Fein disturbed him more than he wanted to admit; the KGB tail had lost them in a noisy bar in Greenwich Village. Davidov presumed the other shadow, reporting to the Feliks people, had not been so easily shaken. Those followers were longtime professionals.
He had to work his way around to the “Who is Mariner?” question lest she refer him to her Foreign Intelligence handler. “I have seen some of your economic reports,” he lied, “and congratulate you on their value.” He assumed she had passed on the early realization by the Bundesbank directors that the incorporation of East Germany would depress the Federal Republic’s economy. “Your assessment of the likelihood of Kohl’s raising taxes to avert a huge deficit was on the mark.”
“You are the first to say that. My work is rarely appreciated.” She corrected herself: “The Memphis banker told my husband last night my piece on disintermediation was brilliant. That was extra nice of him, to say it behind my back that way.”
When he asked what were some of her other achievements, she inundated him with useful data about transmissions to Moscow of the German central bank’s deliberations in the early nineties. He wished he had his own Michael Shu to follow them up instead of his bumbling crew at Yasenovo; to remember the specifics, he used his epistemologist’s trick of placing key words and names in three-dimensional mental space.
“And more recently, were you able to coordinate with your counterpart at the American Fed?”
She hesitated. “These are matters for you to discuss with my handler, or his superior in Moscow.”
That door back home would surely be slammed in his face. “The correct answer. But I must move quickly on a matter while I am here, and will straighten out the channels when I return.” He used the code word picked up from a Memphis wiretap: “Have you dealt directly with the old Mariner?”
Reluctantly, Sirkka answered, “Usually not. Someone in the U.S. coordinates our data. I should not be discussing this with anyone, even you, with no disrespect.”
“Usually not, but sometimes you deal directly with him.” He hardened his voice. “Madame von Schwebel, I am a KGB counterintelligence officer. I have reason to suspect the Mariner may have been turned by the Americans. I expect you to help my investigation.”
“Of course, Director Davidov.”
He could not reveal he did not know the Fed mole’s identity. “When did you see him last?”
“At the World Economic Forum in Davos, Switzerland, in January.”
“What was he doing there?”
“Acting as spinmeister to the press on behalf of the Americans. He has credibility, assisting the Chairman of the Federal Reserve on international negotiations, as always.”
“As always.”
“Yes. Mort has had that job with Fed Chairmen going back to Arthur Burns. It’s as close as the Americans come to a British civil service.”
First name Morton or Mortimer; that was all he needed, but Davidov continued questioning as a cover. “Careful, now. Has he given you any reason to think he is under suspicion by American counterintelligence? Or has already been turned? Any sign at all?”
She leaned back in the armchair of the cocktail lounge and drew her tawny hair back. Scandinavian women bloomed in their forties; Davidov enjoyed playing with her this way. “Recently we had occasion to speak on the telephone—openly, as sherpas for our countries, preparing for next year’s Davos meeting. He seemed worried, not his usual smooth self, and cut me off in the middle of a sentence. Said he was under great stress.”
That was a bonus. He gambled: “Was he worried about a sleeper?”
“About what?”
“Worried about his sleep, loss of sleep, from feelings of guilt, now that capitalism has triumphed over communism?”
“Maybe. I couldn’t read his mind.”
“Okay, end of interrogation. I must warn you not to report this meeting to your handler or anyone else in FI. This is a Federal Security Ministry counterintelligence matter. Do you understand?”
“Yes, sir.”
He picked up his ginger ale. “I am always interested in the origin of code names. Was the Mariner a Marine, or some sort of sailor? Did Mort reach into some poetry?”
“Nothing to do with that.” Sirkka recrossed long legs in raw silk trousers. “The first Chairman of the Federal Reserve was a man named Marriner Eccles. Mort wrote his biography long ago.”
Davidov had to laugh; there was such a thing as overanalysis. “You’ve been helpful to me. How can I be helpful to you?”
“Keep the secret of my Stasi work from my husband.”
“Why is that so important to you?”
“He would be ashamed of me. He would be ashamed of himself. And Karl is a vengeful man—he would cut me loose, and make sure I never worked again.”
The KGB man pondered that a moment. Sirkka Numminen von Schwebel had been more helpful to him than she knew; he now had learned of a person who might know the American identity of Berensky, or at least know a cutout who did.
“Your husband knows all about you,” Davidov said at last. “He bought your file from the Stasi keeper of archives in 1989 for five hundred thousand marks. The only copy of your file, and only a small part of it, is under the Foreign Intelligence chief’s personal control in Moscow. Those files are state secrets, never to be revealed, not to the Foreign Ministry, not even to our Ministry. I know of your file’s existence, but I have not seen it, probably never will.”
She sat stunned. Finally: “That bastard. He knew all along.”
“Yes, but on the other hand, he never betrayed you.” He gave her husband the benefit of the doubt. “Possibly he didn’t want you to know that he knew because he loves you.”
“I have no reason to believe that. Karl just wants total control of me.”
“Well, now you won’t tell him that you know—that he won’t tell you that he knows. Puts you in control, although you’re the only one who knows it.”
She smiled faintly at the prospect of a walk down that silvered corridor.
Davidov, interested in the triple cross as epistemological sport, took her one reflection further. “Or you could confess to him, never letting on you know he already knows. That would establish your bona fides with him, and he could never reveal he knew all along, putting him on the defensive with you.” When she blinked, he added, “We do this all the time. Consider it part of your training as an agent, an occupation from which nobody can ever resign.”
“I’m grateful to you, Nikolai Andreyevich. Tell me—if one copy of
my file exists in Moscow, and it’s not in your agency, how did you come to see all my economic reports?”
“I never saw them.”
Her look was blank, not understanding.
“I tricked you just now, playing on your professional vanity. I needed your secret.”
Her expression changed from puzzlement to profound shame. Davidov added in his kindest voice: “No, do not be angry with yourself: learn. Never trust anybody in this business. Never assume the obvious truth is true.”
CHICAGO
A chime sounded and the green light on the telephone went on, signaling a call from Leo Bellow’s highest-activity account. The broker put earphones on so he could use the computer with his hands unimpeded.
“Bellow here.”
“Leo,” the familiar voice said, “I have an order for you that may take up most of your morning.”
“I have the summary of your account on my screen, sir.”
“Will you call me from the candy store?”
The broker switched to an encrypted line for both the talkphone and the modem. Use of the antitapping device would one day call suspicion on his actions from the regulators, but the account insisted on impenetrable secrecy, and what this account wanted, it got.
“I want to liquidate my long position in yen options and use it all to buy dollar options before noon. Full leverage.”
He took a deep breath—this was a $400 million switch in position—and typed the order, hitting the modem switch for visual confirmation by the client, wherever he was. He always reached his client with a local call, but it could be automatically switched to London or Hong Kong. Or maybe the man placing the order was in Chicago today, down the hall in the Merc.
“Accurate. Execute the order.”
Bellow typed the command that started the huge switch in position. The computer automatically asked, “Are you sure?” and he felt like passing that question along to the client, but did not. He typed “Y” and hit the enter key.
“I should tell you, sir, that I got a query from VDG Investment Advisers about a visit they got in Miami from a man who said he was a financial reporter. Asking about ownership, clients, all the things he couldn’t find from a D&B.”
“What sort of reporter?”
“They think he was more of an accountant. An Asian-American. I wouldn’t bother you with this, but the same fellow showed up next day in the Antilles doing a story about offshore banks.”
“Anything else along that line?”
He didn’t want to unduly worry the client, nor did he want to hold back any relevant data. “Maybe a coincidence—probably is—but the Federal Reserve notified all national banks it is doing a detailed survey of all major incoming transfers, using the first week of this month. The questionnaire concentrates on the Antilles and Liechtenstein. You’ll recall how busy a time that was for us.”
“Nice to know. Keep me informed and notify me of the completion of the order before noon Chicago time.”
“It will be done.”
“This afternoon, I will want to know how many swaptions are available on corporate bonds with calls attached.”
“They would go through the roof if interest rates drop,” the broker said. The Open Market Committee of the Federal Reserve was scheduled to meet in New York later in the week, and was not expected to take any action on rates. But this client was remarkably intuitive about the Fed’s decisions, guessing right nine out of ten times, if guessing was what he was doing. Bellow had an agreement with his other funds not to follow VDG judgment with his own trades until the client’s trades were concluded, which gave him an added incentive to conclude them quickly. The last broker to try to jump the gun on this client lost all the business and had to close up shop; Bellow would do what he was told.
He could get fifty-to-one leverage on these bonds: for $400 million of the client’s investment, he could buy options on $20 billion worth of bonds. If the Fed surprised the market and lowered interest rates, the bonds would jump, but the bonds with calls would add a substantial kicker. The gamble was on the grand scale: if the Fed went one way, the client would lose his whole $400 million; but if the Fed went the way the plunging investor anticipated, the client would stand to make double-digit billions.
By asking no questions, Leo Bellow learned no guilty knowledge. If he ever had to testify, he would say that some Fed-watchers were just more adept than others.
MEMPHIS
“Can I be absolutely honest with you?”
The banker looked at her quizically. “Are you sure you want to be?”
Viveca said yes. Having finally consummated her relationship with Edward Dominick after Ace’s party, she felt safe in revealing her economic ignorance.
“I’m an intelligent woman. I was graduated magna cum laude and I went to night school to earn a master’s degree in politics. I can grasp complexities and am willing to do my homework.”
“I’ll attest to that. You got out of bed afterward to read the on-line news.”
“Then why is all this financial derivatives stuff such a mystery to me? I walk through your war room, and listen to Mike Shu and the others talk about swaps and forwards and butterfly straddles, and I can’t put it together. Frankly, I’ve been faking it, Edward.” It was such a relief to let her guard down. “Would you explain to me what the hell you’re doing with all these numbers? Is it real money?”
His large hand reached out for her shoulder, and then slid down the back of her suit and caressed her intimately. She found it a pleasure not to have to draw back, even in an office; the door was closed and no building nearby was tall enough to provide a look into these windows. If he wanted to act possessive about her now, he had a right, as she hoped she did about him.
“With your master’s degree, you surely read Aristotle’s Politics,” he began, obviously delighted to turn teacher. “Do you recall his account of Thales the Milesian?”
“I could have been absent that night.”
“Thales was a philosopher, like Aristotle, but with a practical bent. He anticipated a big olive crop that year, and used what little money he had to rent in advance all the local olive presses. In a few months, when the bumper crop of olives came in as Thales the Milesian foresaw, he had the only equipment to squeeze out the olive oil. He made more money on that than Aristotle ever did in his life.”
“Got it.”
“Then you understand the basis of the theory of financial derivatives,” Dominick said. “Thales was buying an option—the ability to squeeze the olives at a rate agreed in advance. Underlying that option was the rental rate of the presses, which became much more valuable when the olives rolled in—but our Greek friend had his low rate locked in.”
“He gained what those who rented him the presses lost.”
“That’s the game. When the value of the ‘underlying’ changes, one party wins what the other party loses.”
“But what benefit is that to society?” That sounded pretentious. “I mean, if it’s just a crapshoot, what economic good does it do?”
“It transfers risk. When you want to limit your risk, you sell it to somebody willing to assume it. That’s what the owners of the olive presses did. Derivatives serve a business purpose, which is why they’re running at a rate of twelve trillion a year. And they were just beginning to boom when Berensky entered the markets.”
“Now show me what it did for him.”
Dominick reached over and lifted a long gold chain from her neck. He hefted it in his hand. “Three or four ounces.”
“I never weighed it. It was a gift.” From her first producer, who had dominated her life before she broke free of his malign influence. She wore it as a kind of vengeance; she would not see him again, but he did have good taste.
“If you want to sell this to me, I’m ready to pay the going price for four ounces of gold. Fifteen hundred dollars. Now come into the war room, and watch what I do.” Still carrying her necklace, hefting its weight in his hand, he led her to the
“gold desk,” a trader sitting at a computer and wearing telephone earphones. “You feeling good or bad about this necklace today?”
“Good,” she said. She felt upbeat about a lot of things: man, career, the sleeper story, life in general.
“Buy a hundred ounces of gold,” he told the trader. The screen showed the current cost, about $38,000.
“Don’t do it on my say-so,” she cautioned.
“Worried? Okay—sell a hundred ounces with a different broker. See? We didn’t make or lose anything, though we did establish a reputation for prompt payment with two brokers. Now let’s do what the sleeper does.” He ordered the trader to prepare to buy gold futures options. “Now, let’s say Berensky knows from somebody in our government that the economic indicators index is going to go up tomorrow.”
“Threat of inflation,” she responded. “Seek safety in gold.”
“Or he learns, before anyone else, that the German central bank will raise interest rates.”
“That stops inflation. Sell gold.”
“Or that Russia is unable to meet its gold production quota.”
“Shortage drives up prices,” she responded. “Buy gold.”
“Here we go.” He told the trader to buy the designated block of gold options.
Viveca worried about what they had just done. “Have we actually invested all that money? Just on a test?”
“If you’re worried about your information, let’s hedge.” With other traders, he put in orders to sell gold option futures. “Now it’s a wash. We’re about even no matter which way gold goes today.”
“So how will all this help us find the sleeper?”
“He’s doing the same thing,” Dominick said, “only without the hedging. We’re finding out who’s been incredibly right about gold futures in the past few years, and we’ve begun to mimic him. We have some of the same brokers, and not all of them are completely discreet. In time, we’ll have an almost parallel operation, though not with his resources. We’ll be capable of a financial impersonation.” He seemed very proud of that.
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