Deng knew what he was looking for. The way to Bernadette was through Ben Coleman—by creating sympathy for his minder in the American’s psyche. The story of how he had landed Bernadette was well documented in the state security files. His profile was one of a hopeless romantic buried deep within his enormous intellect. Zhang Jin was perfect to appeal to his heroic American psyche. She was professional, but with a touch of genuine vulnerability. Ben would fall for her at some point. It was simply a matter of patience.
Deng congratulated himself at the brilliance of his choice. Now that the mouse was in the cat’s paw it was time to savor the moment as the mouse struggled to escape.
* * *
“Mr. Chairman, thank you for joining us on ‘Squawk Box’ this morning. I know you’re going to be having a busy day.”
“Thank you for having me, Kelly.” Ben had decided to get his message out first, before any questions. There were three reporters on the show and any one of them could lead him down a path he had not intended. “Yes, it is going to be a busy day. But I want to begin by assuring every American that the U.S. banking system is solid. It is our job at the Fed to make sure that is the case. We will be using our discount window as needed to guarantee liquidity. We are also going to follow through on the commitment I made last night. Whatever the People’s Republic of China chooses to do with its holdings of Treasuries, the Federal Reserve will engage in open market operations to maintain the structure of interest rates.”
“Mr. Chairman.” It was Andrew, who doubled as a New York Times reporter. He was not where Ben wanted to go at the start, so he was glad he had led off with his statement. “The wire services are running stories that Citi, Morgan, and HSBC have fallen below their capital requirements on a mark-to-market basis. Doesn’t this require regulatory action?”
“Andrew,” he said, “those wire services are remarkably well informed. Or should I say self-informed. They seem to have made up the stories themselves. Let’s start with the fact that marking to market is done after the business day is completed, at four this afternoon. Nine hours from now. How they could have discerned market prices that haven’t occurred yet and then done the math and run that story is beyond me. As a reporter, Andrew, you should know you can’t run a story about an event that hasn’t happened yet.”
Andrew said, “Well I’m sure they were hypothetical calculations—”
Ben stayed on him. “Andrew, central bankers do not deal in hypothetical calculations. They deal in real-time facts.” He held up the palm of his hand to stop Andrew from interrupting. “And as I said, the Federal Reserve is going to engage in open market operations to maintain the structure of interest rates. That is not a statement of some limited amount of intervention. We are going to be in the market with whatever it takes to maintain the structure of interest rates.”
Andrew tried again. “But how do you know—”
“We are going to do whatever it takes to maintain the structure of interest rates.” Ben made sure his voice was firm, not loud. “That means at four o’clock this afternoon the yields at every point on the curve will be back to where they were when markets closed last week. That is what maintaining the structure of interest rates means. Interest rates will be coming down and bond prices will be going up, simple as that. What you are calling hypotheticals aren’t that at all. They are fairy tales.”
Ben knew he was hammering Andrew too hard, but this was a battle that could not be lost. Markets needed to be convinced that the Fed would return things to where they had been. The more convinced the markets would be, the less the Fed would actually have to do. Markets were self-correcting. In essence he had just said, If you buy bonds now you will make money by the end of the day and the Fed will make sure of it. When markets are told how to make money, they do it.
Kelly stepped in to steer away from the blood on her colleague’s face. “Your point is well taken, Mr. Chairman. But what do you make of what China is trying to do?”
“That is a good question, Kelly. When Governor Li announced their intention to sell their Treasuries when the Chinese markets opened, he said it would be done in an orderly fashion. He said they were going to let their bonds run off as they matured. That was a very sensible decision. It would assure that the Chinese government would not lose any money in the process of liquidating their positions.
“However, it appears that Li’s sensible approach was overridden by someone who does not understand markets or economics. It does appear that after their markets closed the Chinese began a massive selling operation in London. It has driven bond prices down. So the Chinese are now selling bonds at prices below where they bought them and at prices below where they are going to be this afternoon. If they were a U.S. company the Securities and Exchange Commission would immediately begin an investigation.” Ben knew he was on a roll. Now for the coup de grâce.
“Frankly, as an American taxpayer, I hope that the Chinese will keep selling at these prices. We will keep on buying. We’ll be getting a bargain. The Chinese are now selling our Treasuries to us at a three percent discount. That means for every billion they sell, they put $30 million in our pockets. If they sell their entire holding of $1.5 trillion, we make $45 billion. Not bad for a day’s work, don’t you think? So, to whomever overruled Governor Li’s very sage advice I say, bring it on and thank you very much.”
Andrew, Kelly, and Becky, the third anchor, could all see where Ben was going and decided to play along. Becky asked, “Why are the Chinese doing this?”
Ben felt like it was Christmas. “Becky, a very wise man once told me politicians think desperate times require desperate measures, but that central bankers know desperate times require calming measures.” He hoped that Li was watching.
“The Chinese are in some very desperate times right now. When I was there last week, I found myself caught in the midst of a massive bank run. Every bank on the street had people outside it pounding on the doors to get in. Soldiers showed up and fired point-blank into the crowds. The Chinese politicians who ordered that brutal act were taking desperate measures.
“Their mass liquidation of Treasuries is another desperate measure. Desperate people who do desperate things only make their situation worse. Our intervention to preserve the structure of interest rates is a calming measure, the very opposite of shooting into a crowd or screaming ‘Sell everything.’ ”
Andrew saw an opening and a chance to regain some stature. “Mr. Chairman, there are reports of bank runs happening right here in New York City.”
“I have heard those reports,” Ben said, “and we both know how misinformation gets spread at times like this, especially through social media. So let me repeat. The U.S. banking system is perfectly safe. No depositor need fear at all for the safety of their deposits.”
Andrew wasn’t done with him. “Are you saying it is unpatriotic to take your money out of an ATM?”
“Of course not,” said Ben. “If you need some cash, go to an ATM and get some. If you don’t, don’t. It’s up to you. There is plenty of cash to meet the demand. The Fed’s cash divisions will be working full-time today to get cash to wherever it is temporarily needed. If your local branch ATM runs out, come back in a few hours or go inside and make a withdrawal the old-fashioned way. Right now, we have over $5,000 in cash printed for every man, woman, and child in America. If we need more, we’ll convert some other assets into Federal Reserve notes—money. In America, your money is yours. You can do with it what you want.”
Perhaps using the patriotism card had caused a twinge of guilt, or perhaps a producer talking into his earpiece was saying to get back on the right side. Whatever the case, Andrew now decided to help. “And you can’t do that in China, as you saw for yourself last week. Another reason why we are proud to be Americans. Good luck today in your efforts, Mr. Chairman.”
“And thank you.”
As Ben walked off the set he turned on his cell phone to find a text from Steinway. Good job. We made back half our losses during
your time on set. You really built confidence.
Confidence, Ben thought. Yes, confidence. That was what stood behind all money. It wasn’t gold or silver or even the full faith and credit of the government. It was confidence. Ben felt himself square his shoulders. Today he was going to have to exude confidence. That was his job. It wasn’t doing anything on a calculator or a spreadsheet. There were no regressions or complex economic models involved. Those might be useful another day. Right now, it’s all about confidence.
CHAPTER EIGHT
WHEN HECTOR LOPEZ ARRIVED AT his office at seven-thirty his secretary had some unexpected news. “Mr. Director, Monica Jenkins and Richard Wei have requested a meeting with you at your earliest convenience. They said it was fairly urgent, came here personally. I put them in the side conference room and told them you would be here shortly.”
“Thank you, Bob. Give me about three minutes and then bring them in.”
Jenkins and Wei were his top China people. He had wanted to see them as well, not so much for analysis as for a bit of bureaucratic politics. They were about to be hit with a not-so-minor invasion of their turf and Lopez knew better than to leave them totally blindsided. “Anything else?”
“Sir, Secretary Steinway would like to have a word with you. But he is tied up in a meeting until six. I took the liberty of setting up a call for you at that time. This would seem to be a busy time for both of you. Also, Mrs. Lopez called but did not leave any information other than to say call when you get a chance. I hope six works for the Steinway call; if not I will arrange another time.”
“No, we’ll make it work. More precisely, you will make it work by interrupting me.” He didn’t wait for the inevitable “Yes, sir,” but headed straight into his office. Bob Franks was one of his best finds. He ran his life with military precision the way quality Army staff sergeants were supposed to. Franks had worked at the Pentagon but had been commended by his superiors to Hector when he had come on board. Even the fact that he was gay was not an issue like it had been in the past. When he came out the Army counseled him wisely: as long as you are upfront with us, we know you can’t be blackmailed. Avoiding the potential for blackmail over some deep secret was one of the primary reasons for having clearances.
Jenkins and Wei arrived, and they got right down to business.
“We have analyzed the recording of the call between Chairman Coleman and Governor Li,” said Monica Jenkins. “We have high confidence that there was someone else in the room with Li when the call was made. The sounds of at least one other individual were clear. Signals Intelligence says with reasonable confidence that it was Deng Wenxi. We know that General Deng made a call from the vicinity of PBOC headquarters about half an hour after Li’s call was made. No other calls had been made from Deng’s cell phone within half an hour on either side of the Coleman-Li call.”
“Good work, Monica. Though we probably should not be surprised. Deng is the top enforcer for his faction and Li is probably perceived as being too close to outsiders. I doubt the Politburo would have allowed the call had Deng not been there to supervise. Any thoughts on the call, Richard?”
“Sir, I found it odd that Governor Li would tip his hand like that to Chairman Coleman. It would seem that he was giving up the element of surprise.”
“Surprise can lead to miscalculation of the deadliest sort,” said Hector. “This is a huge gamble by China and Li knows it. Transparency, at least in small quantities, can be quite helpful. That was the whole idea behind establishing the Hot Line between the White House and the Kremlin back in the sixties. What would you say is your division’s degree of confidence about what is motivating the Chinese at this particular point in time?”
“Sir, I would say that we have as strong an analytic team as possible,” said Jenkins. “Our on-the-ground intelligence is as good as possible in an authoritarian state. Our signal intelligence is excellent.”
“Then why did we not see this latest move by the Chinese coming? The first we heard of it was the call from Li to Coleman. I haven’t seen a paper across my desk saying that the Chinese were about to risk a currency war at this point in time.” Hector realized he was being a bit too harsh and vowed to switch to his kinder and gentler tone.
But it was too late. Jenkins’s hackles were up, ready to defend her turf. “Sir, our emphasis has always been on the military and strategic threats China poses. We do not profess to be experts on global monetary policy.”
“Of course, Monica. We tend to defer to the Federal Reserve and the Treasury on those matters. We do have an economics branch, but they are more bean counters estimating GDP growth and things like that, not policy analysts. So I think it is time to bring in some outside help.” There it was; explosion about to happen.
“What do you mean, sir?”
“The President has decided that some very close interagency coordination at the very highest levels is essential if we are to deal with the current threat from China. We will be adding someone to the team who will have the President’s ear as well as that of the chairman of the Federal Reserve.”
“A new member of our division,” said Richard Wei.
“Not exactly. An independent agent.”
“But there is no time for the clearance process,” Wei said.
“Not an issue. The President himself signed the waiver for full code word clearance.”
Monica and Richard stared at each other, dumbfounded. Finally Monica said, “I’m not sure anything like that has ever been done before. We will have to look up the proper protocols.”
“No need. We will be setting the protocols as we go. And we will be doing so beginning at ten o’clock this morning. By the way, clear your schedules. Mandatory meeting for your division. Ten o’clock. Conference room.” Hector could feel stares of silent protest from his subordinates. “It’s a done deal. Presidential orders. Oh, by the way, our new asset doesn’t know the full details about her involvement. She is about to find out. So this is definitely not to leak—understood?”
“Yes, sir, of course. We will see you at ten with perhaps half a dozen of our top people if that’s okay?”
“Done.” And as he escorted them out of the room he said to Bob, “Get Mrs. Lopez on the line.”
* * *
The call to the Coleman household came in at nine o’clock as scheduled. “Mrs. Coleman, I have Director Lopez for you.” Bernadette could tell by the delay in the response time that the signal was being scrambled.
“Bernadette, how nice of you to take my call.”
“I don’t believe I had a choice, Mr. Director.”
“Okay, forget the pleasantries. Neither of us really has time for them, now do we? I will skip right to the point. What is your answer to the President’s question?”
“Why, Mr. Director, did you have the residence bugged?” She said it in jest but then realized it just might be true.
“Who told you?” said Hector. “No, let me guess. Was it Turner?” Lopez’s reaction was to be disarming, intended to make light of the whole issue. Whether it was true or not, he certainly wasn’t going to let on.
Bernadette said nothing.
“Damn him. I need to have a private word with that man. That’s twice in two days he’s burned me. What do you two have on him?”
“You wish,” Bernadette said. “Meantime, back to the President’s question. I thought for sure you would ask me all on your own.”
“Touché. Let’s say this has been hardwired.”
“Well then, Mr. Director, you already know my answer is yes.”
“I suspected it might be. A car will be there to pick you up in ten minutes. He is actually waiting down the street.”
“Now, Mr. Director. You are a married man. You should know that a woman can’t possibly be ready in ten minutes.”
“I’ve read your brief, Mrs. Coleman. You are already ready. In fact, I suspect you have been ready for over half an hour. The Red Ninja is never unprepared.”
Bernadette gri
maced. Of course, she was a known quantity. And she was about to go back into a world in which she was known inside and out—a world where people had files on her that reflected everything that was even remotely public about her behavior and had been analyzed and reanalyzed into a compartmentalized format. It was a world she thought she had left behind when she married Ben and moved to America. Whatever twinge of sympathy she had had for Ben and the day he would face had vanished. She was going to have a much rougher day.
She checked herself in the mirror one last time, said a silent prayer, and left the house. The car was an added twist. Lopez did not want to take chances. It would not be wise for her personal car to be seen pulling up at Langley. It was much harder for the curious to track where all the agency cars went about town. She would not be recognized. But she was also somewhat captive under this arrangement. It was subtle, and it would be a card he would never play, but Lopez controlled her transportation home.
* * *
“Don’t let this go to my head.”
The driver of the limousine looked at Bernadette through his rearview mirror. “Ma’am?”
“Webb. That’s your name, right? I’m sorry. I used to be so good with names, but that was practically a lifetime ago now. It used to be critical to what I was doing, but now it’s like a muscle I don’t use that much.”
“You’re fine, ma’am,” Webb said. “I like to say, ‘My name is Webb, but I’ve been called everything but that.’ ” He smiled as Bernadette laughed.
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