by Tom Clancy
The power of the people in this room was so stunning that even they rarely thought about it. By a simple decision, the people around the table had just made everything in America cost more. Every adjustable-rate mortgage for every home, every auto loan, every credit card revolving line, would become more expensive every month. Because of that decision, every business and household in America would have less disposable income to spend on employee benefits or Christmas toys. What began as a press release would reach into every wallet in the nation. Prices would increase on every consumer item from home computers to bubble gum, thus reducing further still everyone’s real buying power.
And this was good, the Fed thought. All the statistical indicators said the economy was running a little too hot. There was a real danger of increasing inflation. In fact, there was always inflation to one degree or another, but the interest raise would limit it to tolerable levels. Prices would still go up somewhat, and the increase in the discount rate would make them go up further still.
It was an example of fighting fire with fire. Raising interest rates meant that, at the margin, people would borrow less, which would actually reauce the amount of money in circulation, which would lessen the buying pressure, which would cause prices to stabilize, more or less, and prevent something that all knew to be more harmful than a momentary blip in interest rates.
Like ripples expanding from a stone tossed into a lake, there would be other effects still. The interest on Treasury bills would increase. These were debt instruments of the government itself. People—actually institutions for the most part, like banks and pension funds and investment firms that had to park their clients’ money somewhere while waiting for a good opportunity on the stock market—would give money, electronically, to the government for a term varying from three months to thirty years, and in return for the use of that money, the government itself had to pay interest (much of it recouped in taxes, of course). The marginal increase in the Federal-funds rate would raise the interest rate the government had to pay—determined at an auction. Thus the cost of the federal deficit would also increase, forcing the government to pull in more of the domestic money supply, reducing the pool of money available to personal and business loans and further increasing interest rates for the public through market forces over and above what the Fed enforced itself.
Finally, the mere fact that bank and T-Bill rates would increase made the stock market less attractive to investors because the government-guaranteed return was “safer” than the more speculative rate of return anticipated by a company whose products and/or services had to compete in the marketplace.
On Wall Street, individual investors and professional managers who monitored economic indicators took the evening news (increases in the Fed rate were usually timed for release after the close of the markets) phlegmatically and made the proper notes to “go short on” (sell) their positions in some issues. This would reduce the posted values of numerous stocks, causing the Dow Jones Industrial Average to sink. Actually, it was not an average at all, but the sum of the current market value of thirty blue-chip stocks, with Allied Signal on one end of the alphabet, Woolworth’s on the other, and Merck in the middle. It was an indicator whose utility today was mainly that of giving the news media something to report to the public, which for the most part didn’t know what it represented anyway. The dip in “the Dow” would make some people nervous, causing more selling, and more decline in the market until others saw opportunity in stock issues that had been depressed farther than they deserved to be. Sensing that the true value of those issues was higher than the market price indicated, they would buy in measured quantities, allowing the Dow (and other market indicators) to increase again until a point of equilibrium was reached, and confidence restored. And all these multifaceted changes were imposed on everyone’s individual lives by a handful of people in an ornate boardroom in Washington, D.C., whose names few investment professionals even knew, much less the general public.
The remarkable thing was that everyone accepted the entire process, seemingly as normal as physical laws of nature, despite the fact that it was really as ethereal as a rainbow. The money did not physically exist. Even “real” money was only specially made paper printed with black ink on the front and green on the back. What backed the money was not gold or something of intrinsic value, but rather the collective belief that money had value because it had to have such value. Thus it was that the monetary system of the United States and every other country in the world was entirely an exercise in psychology, a thing of the mind, and as a result, so was every other aspect of the American economy. If money was simply a matter of communal faith, then so was everything else. What the Federal Reserve had done that afternoon was a measured exercise in first shaking that faith and then allowing it to reestablish itself of its own accord through the minds of those who held it. Holders of that faith included the governors of the Fed, because they truly understood it all—or thought that they did. Individually they might joke that nobody really understood how it all worked, any more than any of them could explain the nature of God, but like theologians constantly trying to determine and communicate the nature of a deity, it was their job to keep things moving, to make the belief-structure real and tangible, never quite acknowledging that it all rested on nothing even as real as the paper currency they carried with them for the times when the use of a plastic credit card was inconvenient.
They were trusted, in the distant way that people trusted their clergy, to maintain the structure on which worldly faith always depended, proclaiming the reality of something that could not be seen, an edifice whose physical manifestations were found only in buildings of stone and the sober looks of those who worked there. And, they told themselves, it all worked. Didn’t it?
In many ways Wall Street was the one part of America in which Japanese citizens, especially those from Tokyo itself, felt most at home. The buildings were so tall as to deny one a look at the sky, the streets so packed that a visitor from another planet might think that yellow cabs and black limousines were the primary form of life here. People moved along the crowded, dirty sidewalks in bustling anonymity, eyes rigidly fixed forward both to show purpose and to avoid even visual contact with others who might be competitors or, more likely, were just in the way. The whole city of New York had taken its demeanor from this place, brusque, rapid, impersonal, tough in form, but not in substance. Its inhabitants told themselves that they were where the action was, and were so fixed on their individual and collective goals that they resented all the others who felt precisely the same way. In that sense it was a perfect world. Everyone felt exactly the same. Nobody gave much of a damn about anyone else. At least, that’s the way it appeared. In truth, the people who worked here had spouses and children, interests and hobbies, desires and dreams, just like anybody else, but between the hours of eight in the morning and six in the evening all that was subordinated to the rules of their business. The business, of course, was money, a class of product that knew no place or loyalty. And so it was that on the fifty-eighth floor of Six Columbus Lane, the new headquarters building of the Columbus Group, a changeover was taking place.
The room was breathtaking in every possible aspect. The walls were solid walnut, not veneer, and lovingly maintained by a well-paid team of craftsmen. Two of the walls were polished glass that ran from the carpet to the Celotex ceiling panels, and offered a view of New York Harbor and beyond. The carpet was thick enough to swallow up shoes— and to deliver a nasty static shock, which the people here had learned to tolerate. The conference table was forty feet of red granite, and the chairs around it priced out at nearly two thousand dollars each.
The Columbus Group, founded only eleven years before, had gone from being just one more upstart, to enfant terrible, to bright rising light, to serious player, to among the best in its field, to its current position as a cornerstone of the mutual-funds community. Founded by George Winston, the company now controlled a virtual fleet of fund-manage
ment teams. The three primary teams were fittingly called Niña, Pinta, and Santa Maria, because when Winston had founded the company, at the age of twenty-nine, he’d just read and been captivated by Samuel Eliot Morison’s The European Discovery of the New World, and, marveling at the courage, vision, and sheer chutzpah of the restless navigators from Prince Henry’s school, he’d decided to chart his own course by their example. Now forty, and rich beyond the dreams of avarice, it was time to leave, to smell the roses, to take his ninety-foot sailing yacht on some extended cruises. In fact, his precise plans were to spend the next few months learning how to sail Cristobol as expertly as he did everything else in his life, and then to duplicate the voyages of discovery, one every summer, until he ran out of examples to follow, and then maybe write his own book about it.
He was a man of modest size that his personality seemed to make larger. A fitness fanatic—stress was the prime killer on the Street—Winston positively glowed with the confidence imparted by his superb conditioning. He walked into the already-full conference room with the air of a President-elect entering his headquarters after the conclusion of a successful campaign, his stride fast and sure, his smile courtly and guileless. Pleased with this culmination of his professional life on this day, he even nodded his head to his principal guest.
“Yamata-san, so good to see you again,” George Winston said with an extended hand. “You came a long way for this.”
“For an event of this importance,” the Japanese industrialist replied, “how could I not?”
Winston escorted the smaller man to his seat at the far end of the table before returning toward his own at the head. There were teams of lawyers and investment executives in between—rather like football squads at the line of scrimmage, Winston thought, as he walked the length of the table, guarding his own feelings as he did so.
It was the only way out, damn it, Winston told himself. Nothing else would have worked. The first six years running this place had been the greatest exhilaration of his life. Starting with less than twenty clients, building their money and his reputation at the same time. Working at home, he remembered, his brain racing to outstrip his paces across the room, one computer and one dedicated phone line, worried about feeding his family, blessed by the support of his loving wife despite the fact that she’d been pregnant the first time—with twins, no less, and still she’d never missed a chance to express her love and confidence—parlaying his skill and instinct into success. By thirty-five it had all been done, really. Two floors of a downtown office tower, his own plush office, a team of bright young “rocket scientists” to do the detail work. That was when he’d first thought about getting out.
In building up the funds of his clients, he’d bet his own money, too, of course, until his personal fortune, after taxes, was six hundred fifty-seven million dollars. Basic conservatism would not allow him to leave his money behind, and besides, he was concerned about where the market was heading, and so he was taking it all out, cashing in and switching over to a more conservative manager. It seemed a strange course of action even to himself, but he just didn’t want to be bothered with this business anymore. Going “conservative” was dull, and would necessarily cast away enormous future opportunities, but, he’d asked himself for years, what was the point? He owned six palatial homes, two personal automobiles at each, a helicopter, he leased a personal jet, Cristobol was his principal toy. He had everything he’d ever wanted, and even with conservative portfolio management, his personal wealth would continue to rise faster than the inflation rate because he didn’t have the ego to spend even as much as the annualized return would generate. And so he’d parcel it out in fifty-million-dollar blocks, covering every segment of the market through investment colleagues who had not achieved his personal success, but whose integrity and acumen he trusted. The switchover had been under way for three years, very quietly, as he’d searched for a worthy successor for the Columbus Group. Unfortunately, the only one who’d stepped forward was this little bastard.
“Ownership” was the wrong term, of course. The true owners of the group were the individual investors who gave their money to his custody, and that was a trust which Winston never forgot. Even with his decision made, his conscience clawed at him. Those people relied on him and his people, but him most of all, because his was the name on the most important door. The trust of so many people was a heavy burden which he’d borne with skill and pride, but enough was enough. It was time to attend to the needs of his own family, five kids and a faithful wife who were tired of “understanding” why Daddy had to be away so much. The needs of the many. The needs of the few. But the few were closer, weren’t they?
Raizo Yamata was putting in much of his personal fortune and quite a bit of the corporate funds of his many industrial operations in order to make good the funds that Winston was taking out. Quiet though Winston might wish it to be, and understandable as his action surely was to anyone with a feel for the business, it would still become cause for comment. Therefore it was necessary that the man replacing him be willing to put his own money back in. That sort of move would restore any wavering confidence. It would also cement the marriage between the Japanese and American financial systems. While Winston watched, instruments were signed that “enabled” the funds transfer for which international-bank executives had stayed late at their offices in six countries. A man of great personal substance, Raizo Yamata.
Well, Winston corrected himself, great personal liquidity. Since leaving the Wharton School, he’d known a lot of bright, sharp operators, all of them cagey, intelligent people who’d tried to hide their predatory nature behind façades of humor and bonhomie. You soon developed an instinct for them. It was that simple. Perhaps Yamata thought that his heritage made him more unreadable, just as he doubtless thought himself to be smarter than the average bear—or bull in this case, Winston smiled to himself. Maybe, maybe not, he thought, looking down the forty-foot table. Why was there no excitement in the man? The Japanese had emotions, too. Those with whom he’d done business had been affable enough, pleased as any other man to make a big hit on the Street. Get a few drinks into them and they were no different from Americans, really. Oh, a little more reserved, a little shy, perhaps, but always polite, that’s what he liked best about them, their fine manners, something that would have been welcome in New Yorkers. That was it, Winston thought. Yamata was polite, but it wasn’t genuine. It was pro forma with him, and shyness had nothing to do with it. Like a little robot....
No, that wasn’t true either, Winston thought, as the papers slid down the table toward him. Yamata’s wall was just thicker than the average, the better to conceal what he felt. Why had he built such a wall? It wasn’t necessary here, was it? In this room he was among equals; more than that, he was now among partners. He had just signed over his money, placed his personal well-being in the same boat as so many others. By transferring nearly two hundred million dollars, he now owned over one percent of the funds managed by Columbus, which made him the institution’s largest single investor. With that status came control of every dollar, share, and option the fund had. It wasn’t the largest fleet on the Street by any means, but the Columbus Group was one of the leaders. People looked to Columbus for ideas and trends. Yamata had bought more than a trading house. He now had a real position in the hierarchy of America’s money-managers. His name, largely unknown in America until recently, would now be spoken with respect, which was something that ought to have put a smile on his face, Winston thought. But it didn’t.
The final sheet of paper got to his chair, slid across by one of his principal subordinates, and, with his signature, about to become Yamata’s. It was just so easy. One signature, a minute quantity of blue ink arranged in a certain way, and with it went eleven years of his life. One signature gave his business over to a man he didn’t understand.
Well, I don’t have to, do I? He’ll try to make money for himself and others, just like I did. Winston took out his pen and signed without l
ooking up. Why didn’t you look first?
He heard a cork pop out of a champagne bottle and looked up to see the smiles on the faces of his former employees. In consummating the deal he’d become a symbol for them. Forty years old, rich, successful, retired, able to go after the fun dreams now, without having to stick around forever. That was the personal goal of everyone who worked in a place like this. Bright as these people were, few had the guts to give it a try. Even then, most of them failed, Winston reminded himself, but he was the living proof that it could happen. Tough-minded and cynical as these investment professionals were—or pretended to be—at heart they had the same dream, to make the pile and leave, get away from the incredible stress of finding opportunities in reams of paper reports and analyses, make a rep, draw people and their money in, do good things for them and yourself—and leave. The pot of gold was in the rainbow, and at the end was an exit. A sailboat, a house in Florida, another in the Virgins, another in Aspen ... sleeping until eight sometimes; playing golf. It was a vision of the future which beckoned strongly.
But why not now?
Dear God, what had he done? Tomorrow morning he’d wake up and not know what to do. Was it possible to turn it off just like that?
A little late for that, George, he told himself, reaching for the offered glass of Moët, taking the obligatory sip. He raised his glass to toast Yamata, for that, too, was obligatory. Then he saw the smile, expected but surprising. It was the smile of a victorious man. Why that? Winston asked himself. He’d paid top dollar. It wasn’t the sort of deal in which anyone had “won” or “lost.” Winston was taking his money out, Yamata was putting his money in. And yet that smile. It was a jarring note, all the more so because he didn’t understand it. His mind raced even as the bubbly wine slid down his throat. If only the smile had been friendly and gracious, but it wasn’t. Their eyes met, forty feet apart, in a look that no one else caught, and despite the fact that there had been no battle fought and no victors identified, it was as though a war was being fought.