by Tom Clancy
What it had done was sufficiently ghastly that the FBI agents on the case were joking grimly that the advent of sealed thermopane windows in Wall Street office buildings was probably saving thousands of lives. The last identifiable trade had been put up at 12:00:00, and beginning at 12:00:01, all the records were gobbledygook. Literally billions—in fact, hundreds of billions of dollars in transactions had disappeared, lost in the computer-tape records of the Depository Trust Company.
The word had not yet gotten out. The event was still a secret, a tactic first suggested by the senior executives of DTC, and so far approved by both the governors of the Securities and Exchange Commission and the New York Stock Exchange. They’d had to explain the reasons for it to the FBI. In addition to all the money lost in a crash such as had taken place on Friday, there would also have been quite a bit of money made through “puts,” the name for derivative trades used by many brokers as hedges, and a means that allowed profit on a falling market. In addition, every house kept its own records of trades, and therefore, theoretically, it was possible over time to reconstruct everything that had been erased by the Easter Egg. But if word of the DTC disaster got out, it was possible that unscrupulous or merely desperate traders would fiddle their own records. It was unlikely in the case of the larger houses, but virtually inevitable in the case of smaller ones, and such manipulation would be nearly impossible to prove—a classic case of one person’s word against another’s, the worst sort of criminal evidence. Even the biggest and most honorable trading houses had their miscreants, either real or potential. There was just too much money involved, further complicated by the ethical duty of traders to safeguard the money of their clients.
For that reason, over two hundred agents had visited the offices and homes of the chief executive officers of every trading establishment within a hundred-mile radius of New York. It was a feat easier than most had feared, since many of the executives were using their weekend as a frantic work period, and in most cases they cooperated, turning over their own computerized records. It was estimated that 80 percent of the trades that had taken place after noon Friday were now in the possession of federal authorities. That was the easy part. The hard part, the agents had just learned, would be to analyze them, to connect the trade made by every house with the corresponding trade of every other. As irony would have it, a programmer from Searls’ company had, without prompting, sketched out the minimum requirements for the task: a high-end workstation for every company-set of records, integrated through yet another powerful mainframe no smaller than a Cray Y-MP (there was one at CIA, and three more at NSA, he told them), along with a very slick custom program. There were thousands of traders and institutions, some of whom had executed millions of transactions. The permutations, he’d said to the two agents who were able to keep up with his fast-forward discourse, were probably on the order of ten to the sixteenth power ... maybe eighteenth. The latter number, he’d had to explain, was a million cubed, a million times a million times a million. A very large number. Oh, one other thing: they’d better be damned sure that they had the records of every house and every trade or the whole thing could fall apart. Time required to resolve all the trades? He’d been unwilling to speculate on that, which didn’t please the agents who had to return to their office in the Javits Federal Office Building and explain all this to their boss, who refused even to use his office computer to type letters. The term Mission: IMPOSSIBLE came to their minds on the short drive back to their offices.
And yet it had to be done. It wasn’t just a matter of stock trades, after all. Each transaction had also held a monetary value, real money that had changed electronic hands, moving from one account to another, and though electronic, the complex flow of money had to be accounted for. Until all of the transactions were resolved, the amount of money in the account of every trading house, every institution, every bank, and ultimately every private citizen in America—even those who did not play the market—could not be known. In addition to paralyzing Wall Street, the entire American banking system was now frozen in place, a conclusion that had been reached about the time that Air Force One had touched down at Andrews Air Force Base.
“Oh, shit,” commented the Deputy Director in Charge of the New York Field Division of the Federal Bureau of Investigation. In this he was more articulate than investigators from other federal agencies who were using his northwest-corner office as a conference room. The others mainly just looked at the cheap carpet on the floor and gulped.
The situation had to get worse, and it did. One of the DTC employees told the tale to a neighbor, an attorney, who told someone else, a reporter, who made a few phone calls and drafted a story for The New York Times. That flagship paper called the Secretary of the Treasury who, just back from Moscow and not yet briefed on the magnitude of the situation, declined to comment but forgot to ask the Times to demur. Before he could correct that mistake, the story was set up to run.
Secretary of the Treasury Bosley Fiedler practically ran through the tunnel connecting the Treasury Building with the White House. Not a man accustomed to strenuous exercise, he was puffing hard when he made it into the Roosevelt Room, just missing the departure of the Japanese Ambassador.
“What is it, Buzz?” President Durling asked.
Fiedler caught his breath and gave a five-minute summary of what he’d just learned via teleconference with New York. “We can’t let the markets open,” he concluded. “1 mean, they can’t open. Nobody can trade. Nobody knows how much money they have. Nobody knows who owns what. And the banks ... Mr. President, we have a major problem here. Nothing even remotely like this has ever happened before.”
“Buzz, it’s just money, right?” Arnie van Damm asked, wondering why it all had to happen in one day after what had been a rather pleasant few months.
“No, it’s not just money.” Heads turned because Ryan was the one who answered the question. “It’s confidence. Buzz here wrote a book about that back when I was working for Merrill Lynch.” Perhaps a friendly reference would steady the man down some, he thought.
“Thank you, Jack.” Fiedler sat down and sipped a glass of water. “Use the 1929 crash as an example. What was really lost? The answer in monetary terms is, nothing. A lot of investors lost their shirts, and margin calls made it all worse, but what people don’t often grasp is that the money they lost was money already given to others.”
“I don’t understand,” Arnie said.
“Nobody really does. It’s one of those things that’s too simple. In the market people expect complexity, and they forget the forest is made up of individual trees. Every investor who lost money first gave his money to another trader, in return for which he received a stock certificate. He traded money for something of value, but that something of value fell, and that’s what the crash was. But the first guy, the guy who gave the certificate and got the money before the crash—notionally he did the smart thing, he didn’t lose anything, did he? Therefore the amount of money out in the economy in 1929 did not change at all.”
“Money doesn’t just evaporate, Arnie,” Ryan explained. “It goes from one place to another place. It doesn’t just go away. The Federal Reserve Bank controls that.” It was clear, however, that van Damm didn’t understand.
“But then, why the hell did the Great Depression happen?”
“Confidence,” Fiedler replied. “A huge number of people really got slammed in ’29 because of margin calls. They bought stock while putting up an amount less than the value of the transaction. Today we call that sort of thing leveraging. Then they were unable to cover their exposure when they had to sell off. The banks and other institutions took a huge beating because they had to cover the margins. You ended up with a lot of little people who were left with nothing but debts they couldn’t begin to pay back, and banks who were cash-short. Under those circumstances people stop doing things. They’re afraid to risk what they have left. The people who got out in time and still have money—the ones who have not actuall
y been hurt—they see what the rest of the economy is like and do nothing also, they just sit tight because it simply looks scary out there. That’s the problem, Arnie.
“You see, what makes an economy isn’t wealth, but the use of wealth, all the transactions that occur every day, from the kid who cuts your grass for a buck to a major corporate acquisition. If that stops, everything stops.” Ryan nodded approval to Fiedler. It was a superb little lecture.
“I’m still not sure I get it,” the chief of staff said. The President was still listening.
My turn. Ryan shook his head. “Not many people get it. Like Buzz said, it’s too simple. You look for activity, not inactivity, as an indication of a trend, but inactivity is the real danger here. If I decide to sit still and do nothing, then my money doesn’t circulate. I don’t buy things, and the people who make the things I would have bought are out of work. That’s a frightening thing to them, and to their neighbors. The neighbors get so scared that they hold on to their money—why spend it when they might need it to eat when they lose their jobs, right? And on, and on, and on. We have a real problem here, guys,” Jack concluded. “Monday morning the bankers are going to find out that they don’t know what they have, either. The banking crisis didn’t really start until 1932, well after the stock market came unglued. Not this time.”
“How bad?” The President asked this question.
“I don’t know,” Fiedler replied. “It’s never happened before.”
“ ‘I don’t know’ doesn’t cut it, Buzz,” Durling said.
“Would you prefer a lie?” the Secretary of the Treasury asked. “We need the chairman of the Fed in here. We’re facing a lot of problems. The first big one is a liquidity crisis of unprecedented proportions.”
“Not to mention a shooting war,” Ryan pointed out for those who might have forgotten.
“Which is the more serious?” President Durling asked.
Ryan thought about it for a second. “In terms of real net harm to our country? We have two submarines sunk, figure about two hundred fifty sailors dead. Two carriers crippled. They can be fixed. The Marianas are under new ownership. Those are all bad things,” Jack said in a measured voice, thinking as he spoke. “But they do not genuinely affect our national security because they do not pertain to the real strength of our country. America is a shared idea. We’re people who think in a certain way, who believe that they can do the things they want to do. Everything else follows from that. It’s confidence, optimism, the one thing that other countries find so strange about us. If you take that away, hell, we’re no different from anybody else. The short answer to your question, Mr. President, is that the economic problem is far more dangerous to us than what the Japs just did.”
“You surprise me, Jack,” Durling said.
“Sir, like Buzz said, would you prefer a lie?”
“What the hell is the problem?” Ron Jones asked. The sun was already up, and USS Pasadena was visible, still tied to her pier, the national ensign hanging forlomly in the still air. A fighting ship of the United States Navy was doing nothing at all, and the son of his mentor was dead at the hands of an enemy. Why wasn’t anyone doing something about it?
“She doesn’t have orders,” Mancuso said, “because I don’t have orders, because CINCPAC doesn’t have orders, because National Command Authority hasn’t issued any orders.”
“They awake there?”
“SecDef’s supposed to be in the White House now. The President’s been briefed in by now, probably,” ComSubPac thought.
“But he can’t get his thumb out,” Jones observed.
“He’s the President, Ron. We do what he says.”
“Yeah, like Johnson sent my dad to Vietnam.” Jones turned to look at the wall chart. By the end of the day the Japanese surface ships would be out of range for the carriers, which couldn’t launch strikes anyway. USS Gary had concluded her search for survivors, mainly out of fear of lingering Japanese submarines out there, but for all the world looking as though she’d been chased off the site by a Coast Guard cutter. The intelligence they did have was based on satellite information because it hadn’t been thought prudent even to send a P-3C out to shadow the surface force, much less prosecute the submarine contacts. “First out of harm’s way, eh?”
Mancuso decided not to get angry this time. He was a flag officer and paid to think like one. “One thing at a time. Our most important assets at risk are those two carriers. We have to get ‘em in, and we have to get ’em fixed. Wally is planning operations right now. We have to gather intelligence, think it over, and then decide what we can do.”
“And then see if he’ll let us?”
Mancuso nodded. “That’s how the system works.”
“Great.”
The dawn was pleasing indeed. Sitting on the upper deck of the 747, Yamata had taken a window seat on the portside, looking out the window and ignoring the buzz of conversation around him. He had scarcely slept in three days and still the rush of power and elation filled him like a flood. This was the last prescheduled flight in. Mainly administrative personnel, along with some engineers and civilians who would start to put the new government in place. The bureaucrats with that task had been fairly clever in their way. Of course, everyone on Saipan would have a vote, and the elections would be subject to international scrutiny, a political necessity. There were about twenty-nine thousand local citizens, but that didn’t count Japanese, many of whom now owned land, homes, and business enterprises. Nor did it count soldiers, and others staying in hotels. The hotels—the largest were Japanese-owned, of course—would be considered condominiums, and all those in the condo units, residents. As Japanese citizens they each had a vote. The soldiers were citizens as well, and also had the franchise, and since their garrison status was indeterminate, they were also considered residents. Between the soldiers and the civilians, there were thirty-one thousand Japanese on the island, and when elections were held, well, his countrymen were assiduous in making use of their civil rights, weren’t they? International scrutiny, he thought, staring out to the east, be damned.
It was especially pleasing to watch from thirty-seven thousand feet the first muted glow on the horizon, which seemed much like a garnish for a bouquet of still-visible stars. The glow brightened and expanded, from purple to deep red, to pink, to orange, and then the first sliver of the face of the sun, not yet visible on the black sea below, and it was as though the sunrise were for him alone, Yamata thought, long before the lower people got to enjoy and savor it. The aircraft turned slightly to the right, beginning its descent. The downward path through the early-morning air was perfectly timed, seeming to hold the sun in place all the way down, just the yellow-white sliver, preserving the magical moment for several minutes. The sheer glory moved Yamata nearly to tears. He still remembered the faces of his parents, their modest home on Saipan. His father had been a minor and not terribly prosperous merchant, mainly selling trinkets and notions to the soldiers who garrisoned the island. His father had always been very polite to them, Raizo remembered, smiling, bowing, accepting their rough jokes about his polio-shriveled leg. The boy who had watched thought it normal to be deferential to men carrying arms, wearing his nation’s uniform. He’d learned different since, of course. They were merely servants. Whether they carried on the samurai tradition or not—the very word samurai was a derivation of the verb “to serve,” he reminded himself, clearly implying a master, no?—it was they who looked after and protected their betters, and it was their betters who hired them and paid them and told them what to do. It was necessary to treat them with greater respect than they really deserved, but the odd thing was that the higher they went in rank, the better they understood what their place really was.
“We will touch down in five minutes,” a colonel told him.
“Dozo.” A nod rather than a bow, because he was sitting down, but even so the nod was a measured one, precisely of the sort to acknowledge the service of an underling, showing him both polite
ness and superiority in the same pleasant gesture. In time, if this colonel was a good one and gained general’s rank, then the nod would change, and if he proceeded further, then someday, if he were lucky, Yamata-san might call his given name in friendship, single him out for a smile and a joke, invite him for a drink, and in his advancement to high command, learn who the master really was. The Colonel probably looked forward to achieving that goal. Yamata buckled his seat belt and smoothed his hair.
Captain Sato was exhausted. He’d just spent far too much time in the air, not merely breaking but shredding the crew-rest rules of his airline, but he, too, could not turn away from his duty. He looked off to the left and saw in the morning sky the blinking strokes of two fighters, probably F-15s, one of them, perhaps, flown by his son, circling to protect the soil of what was once again their country. Gently, he told himself. There were soldiers of his country under his care, and they deserved the best. One hand on the throttles, the other on the wheel, he guided the Boeing airliner down an invisible line in the air toward a point his eyes had already selected. On his command to the copilot, the huge flaps went down all the way. Sato eased back on the yoke, bringing up the nose and flaring the aircraft, letting it settle, floating it in until only the screech of rubber told them that they were on the ground.