chapter 17
Across from Henry, Holland rested his elbows on the table and leaned forward, interlacing his meaty fingers, the extra flesh of his neck pinched by his shirt collar.
"First guy I ever worked for," he said, "could rattle off every loan on his book, quote you the rate, and tell you who was past due, all without so much as glancing at a balance sheet. Sean Hickey. Manager for Hartford Savings. He told me to forget whatever they'd taught me and learn to read a man's face. That was the training. To sit beside him in meetings with the local entrepreneurs and give him my thumbs-up or thumbs-down. I picked the ones with the flash - the talkers. He rejected every one of them. You're thinking short, he'd say. You want steady. All that seems like a hundred years ago. It's a trader's game now, a pure trader's game."
The Bierstadt canvas hanging on the wall behind Union Atlantic's chairman and CEO depicted an untouched Yosemite in early fall or late spring, the verdant grass and mountain lake beneath the peaks struck by columns of sun descending from a gap in the clouds. Half Dome was capped with snow melting into falls that ran off the lower cliffs, the fine mist emanating from the cascades of water giving the painter away for the Romantic he was, that mystical, German idealism struck here in a grander key on the subject of the American West.
Thirty-eight million, Henry thought. That's what Holland had earned last year. And if the board forced him out, he'd collect twice that.
Through the doorway into the private dining room, a waiter in a black suit and tie approached, a plate in each hand.
"Cracked native lobster tails, gentlemen, served with poached organic eggs, papaya salsa, and Old Bay hollandaise sauce. Fresh ground pepper with your breakfast, sir?"
"No, thank you," Henry replied, unfurling his napkin.
"I appreciate you coming here this morning," Holland said. "I don't know if I ever told you, but I voted for you back when I was at Chase, when I was on your board. We were glad to have you for the job."
Henry had known as much. Holland would have preferred the appointment of a colleague from the private sector, someone more instinctively friendly to the industry's interests. But once others had coalesced around Henry, he'd taken a friendly approach.
"You worry in the right way," he said. "Which is important."
If the FBI and the U.S. attorney's office had had their druthers, they would have staked out Union Atlantic for months in order to build their case all the way up to Holland. But given the size of the problem, Henry hadn't been able to wait. He had come through the front door, as it were, only forty-eight hours ago, and straightaway Holland had offered Fanning and his trader up on a platter. The bank had been running its own internal investigation, he claimed, which showed Fanning involved in rogue activity and attempts to cover his tracks. Given that Holland's lawyers were themselves former federal prosecutors, former banking regulators, and former IRS commissioners, he knew the drill well enough: hide nothing, or at least appear to hide nothing.
In the months and years ahead, at a cost of millions, the matter of Holland's own culpability would be the subject of multiple lawsuits, civil and criminal, with teams of his attorneys vetting every discovery request of every party, the lives of associates in some corporate firm devoted to nothing else, billing thousands of hours as they went, as the perfectly straightforward question of what he had known and when was fed into the numbing machinery of modern litigation, there to be digested at a sloth's pace. Young lawyers would buy condominiums or town houses with their bonus checks, employing architects and builders and decorators who would, in turn, spend a little more themselves on cars or vacations or flat-screen TVs, though that particular trickle from the economy of distress would barely register against the job losses bound to come with the restructuring of Union Atlantic Group.
But all that was for later. Personally, Henry suspected Holland had approved of the Finden Holdings arrangement and the proprietary trading scheme it had facilitated as a way to save his share price. But it would serve no practical end to indulge in an airing of his views. What Henry needed was a functioning institution capable of playing its role as the situation unfolded. If Holland was the man who could deliver that, then so be it. Others would decide his fate.
"It's a sad case, really," Holland observed. "Doug was a bright guy. If anything, I probably promoted him too quickly. I blame myself for that. Obviously the pressure got to him. He lost his judgment. I don't know if you heard about the other stuff ... I hesitate to mention it. But it seems he might have gotten into some trouble with this kid, a boy actually, might even have been underage, I'm not sure. Surprised the hell out of me. I'd never seen any indication of that. But I guess it fits the pattern. You deceive people in one part of your life, and if you get away with it, it just takes over."
He paused here, trying to gauge his progress with Henry. Apparently doubtful of his headway, he pressed on.
"Off the record," he said, "there's a good chance this'll make your sister's life easier. I don't think Doug will be out there in Finden much longer. He'll have to pay his lawyers with something."
This had occurred to Henry, though he had said nothing about it to Charlotte. Only a few days ago she had learned that her legal victory had been reversed. The news had struck her hard. Winning that case had at last justified her crusade, not only against Fanning and the town but against her larger enemy: that general encroachment of money and waste and display. Having it taken away had crumpled something in her. Her hectoring voice had grown subdued. When he'd once more mentioned the idea of moving, she had made none of her usual protests. Knowing that he was going to be in Boston, he'd asked Helen to set up an appointment at the assisted-living home that Cott Jr. had recommended, and he and Charlotte were scheduled for a visit there that afternoon.
What good would it do now to share the news of Fanning's downfall? It would only give her false hope. Even if the man were forced to sell, the house itself wasn't going anywhere.
He took a bite of lobster, letting his lack of response to Holland speak for itself.
"Fanning's not my concern," he said eventually. "Perhaps we could proceed to business?"
"Of course."
"Let me start by saying that if you or your board is under the impression that Union Atlantic is too big to fail, you're mistaken. There's no question here of a bailout. If you go under, the markets will take a substantial hit, but with enough liquidity in the system we can cut you loose. I hope you understand that."
This, of course, was a bluff. Henry had already begun receiving calls from the Treasury Department. The secretary was confident, his deputies said in their transparent euphemism, that the Federal Reserve shared his concern about market stability. Translation: the White House is watching this one. The administration, while opposed under free market theory to the government rescue of a failing corporation, didn't want to see Union Atlantic fall apart. There were perfectly prudential reasons for this, many of which Henry agreed with, but the chatter coming out of the executive branch at the moment suggested another concern: the argument for the invasion of Iraq was hitting its stride now, and an event of this size could change the domestic and congressional equation. They didn't want distractions. That was the gist of it. By all means avoid the appearance of rewarding speculators - no moral hazard - but now's not the time for stringency.
Would he feel the satisfaction of justice done if an operator like Holland were brought to heel? Of course. Who wouldn't? But whatever spleen the liberals liked to vent on the captains of industry, there were certain hard facts that had little to do with individual actors. Five hundred points off the Dow was one thing. Disruption of the credit markets was another. Dry up the lending system and the losses would no longer redound to the investor class alone. The man working for the Texas theme-park company that had been bought out with leveraged debt it could no longer service would lose his paycheck soon enough. As a general matter, particularly in the mouths of politicians, Henry disliked the use of personal anecdotes to illustrate the workings of the economy. They were almost always a distortion, a falsely simple story of cause and effect. Truth lay in the aggregate numbers, not in the images of citizens the media alighted upon for a minute or two and then quickly left behind. Currency devaluations created more misery than any corporate criminal ever would. What the populist critics rarely bothered to countenance was the shape of things in the wake of real, systemic collapse. In Argentina, the middle class was picking through garbage dumps. The failure of Union Atlantic wouldn't deliver the country there, but then again, these were uncertain times. And whose risk was that to take?
"I don't think anyone's talking about a bailout," Holland said. "We're talking about capital injections. I think you'd agree, the brand has value, not to mention assets. All we're looking for is a way to reassure potential investors."
"You're talking to the Emirates?"
"Among others, yes. We've got some interest in Singapore as well. The issue is the timing. I've got seventy-two hours to make a margin call. That's not very long to roll out a sales pitch. If Citi or Morgan or someone of that scale were to come on board, even in a symbolic way, it would make a big difference."
Holland dipped his head to one side and gave a slight roll of the eyes, a gesture that combined genuflection with a modicum of fatalism. He was nothing if not a good actor. His fellow CEOs, who thrived on their relative appeal in the eyes of various corporate boards, were circling to watch the kill, despite what would be in the enlightened self-interest of their own companies - that is, to prevent a broader crisis. Meanwhile, the big foreign investors sensed opportunity but didn't want to be taken for fools. What Holland needed was Henry's back-channel cajoling and if not the Fed's cash, at least its imprimatur on the deal to save the bank. The loan he wanted was one of gravitas and prestige.
"And what if we say no?" Henry said, setting his silverware down on his plate. "What if I get on the phone and instead of suggesting the 'community' rally around to protect one of its own, what if I tell them you're an awfully bad bet and that in the end the market will do its job and decide what you're really worth? And if that's a dollar a share then so be it. What then?"
For the first time since they had sat down, Holland's big politician's guile fell away and he leveled at Henry a cold stare, his act of forthrightness and contrition gone.
Henry's instinct had been right: Fanning was too close to this man for Holland not to have been involved. He had been Holland's instrument.
"What then?" Holland echoed, in a slower, more deliberate voice. "Well, I guess I'd wonder if that was the outcome our government actually wanted."
"Really? Are you suggesting the Fed lacks independence? Are you suggesting we take our marching orders from the political branches?"
Holland leaned back from the table. "Come off it, Henry. I've spoken to Senator Grassley's people. I know what you're hearing from Treasury. So what's with the civics lesson?"
In his mouth, the phrase sounded almost dirty. Incredible, Henry thought. Here he was, Henry Graves, the gray pragmatist, accused of naivete. It made him wonder. Could it be that despite all the legalized venality he'd witnessed over the years, despite even what he would have said of himself not ten minutes ago, that he actually was naive? That some kernel of protest had survived in him? What would that even mean? That after forty years he should stand up and say to the system he'd spent his life protecting, I disagree? Stability doesn't save anyone. Regulation is just a ruse to cover up organized theft and it convinces no one but the public. He didn't believe this. And yet like some wide-eyed undergrad, like the philosophy major he'd once been, he felt an urge. A longing even. One he barely recognized.
A secretary appeared and handed Holland a note. He read it in a single glance and then crushed the paper in his fist.
"Make that forty-eight hours," he said, shoving his plate aside. "Singapore wants its margin Thursday morning."
Holland stood and signaled for the waiter to clear the table.
"Is that really what you want, Henry? You want to see us fail?"
IN THE CAR on the way out to Finden, Helen phoned to update Henry on the calls he'd missed during his meeting: two from the FDIC, an agency terrified of a bank the size of Union Atlantic winding up on its books; another from the Office of the Comptroller, whose examiners had been caught flat-footed; and two more from Treasury.
"And the chairman phoned," Helen said. "He spoke to the chief of staff over at the White House about an hour ago."
"I'm sure he did."
"What am I supposed to tell him? That you're unavailable? It's rather implausible, under the circumstances."
"Just buy me a few hours. I'll be on a plane by four."
He directed his driver through the center of Finden and out Winthrop Street to the house. As they came up the driveway he saw his sister wielding her clippers on a fallen branch of the old apple tree in the front yard. She didn't notice the car at first and turned only when she heard his door closing. Fragments of leaves covered the front of her fleece sweater and some had caught in the strands of her hair.
"What on earth are you doing here?"
"I called you about it - our appointment. Over at Larch Brook. I told you I'd be coming."
The dogs trotted over and sniffed at Henry's waist.
"We had a tremendous rain last night," she said. "This all came down in the wind. Sounded like a shotgun being fired. Woke me right up. You used to climb this tree, do you remember?"
"Charlotte. We're supposed to be there in twenty minutes. Wouldn't you like to change first?"
She set her clippers down. Crushed and rotting apples lay all about her on the grass.
"This was the tree you wanted to build your fort in, but Mommy thought it would be an eyesore. Which is why you built it down by the river. Did I tell you there were still planks of it left when they cut down the woods? The dogs and I went by it every morning."
"No, you didn't mention it," he said. "We really should be going. I've got the car here waiting."
"I have an idea. Why don't we go for a walk? There's something I want to show you."
"We don't have time."
"It'll only take a minute."
Closing his eyes momentarily, he tried to marshal his patience. Every hour counted at this stage of the crisis. The markets were relentless, the system more fragile than most people imagined. Duty called now more than ever. But Charlotte ... she had something to show him.
And so he followed her, around the far corner of the house, past the woodshed and into the garden. For years, she'd maintained the bushes and flower beds and small trees that their grandparents had planted. Recently, however, her attention had wandered. Thistle had taken root along the foot of the evergreen hedge and the beds were covered in ground ivy. A bench where his father used to sit and read the paper on August evenings rotted at the edge of the path down which they walked now toward the rear of the garden.
Henry wanted to be gone from here, once and for all. To be done, at long last, with the decay of this place. How Charlotte could stand living here all these years, he'd never understood.
When they reached the field at the back, Charlotte led him down the far side of the hedge, through the dead grass, and came to a stop in front of a skeletal bush six or seven feet high and quite wide, a collection of upright, arching branches, its leaves and flowers long since gone.
"What is it?"
"It's a lilac," she said. "The funny thing is, after all this time, I only discovered it a few years ago. It had been hiding here behind the hedge. It's the same shape as the one we had at home in the yard. In the springtime, don't you remember? You used to love to play inside it. To chase me. To listen to me sing."
How insupportable, he thought, to remember in the way she did. The present didn't stand a chance against such a perfectly recollected world.
Just then, to his shock, Charlotte stepped toward him and taking his face in her chapped hands touched her lips to his. Smiling, her watery gray eyes impossibly close, she said, "I'm not going to visit that place, Henry."
He tried to speak but she put a finger to his lips. "Listen. My life here, it's not your fault. And I want you to know, I don't regret it. None of it. I want you to understand that. I know I haven't made it easy on you. That I've been a burden at times. But I'm all right. And listen ... Daddy, he would have been proud of you. Strange to say that after all this time, but it's true. He would have been proud."
"There's no need to be maudlin," he said, stilling a tremble in his throat.
"You sound like me ... We've done all right, the two of us," she said, squeezing his arm. "We have."
His phone rang in his jacket pocket.
"It's okay," she said. "These people - they need you. Go ahead."
"This is not the end of this. You can't stay here."
"I know," she said, turning them back toward the garden. "I know."
AT JUST AFTER six o'clock that evening, Henry stepped from his cab onto Liberty Street and passed through the black gates of the New York Fed. Upstairs, in a conference room, his team had assembled and were already well into discussions with the exchange authorities in Hong Kong and Osaka. On Henry's instructions, the Bank of Japan and the Japanese Ministry of Finance had been notified of the likely sell-off of Atlantic Securities' massive position in Nikkei futures. Meanwhile, the head of open-market operations in New York was reviewing plans for the coordinated provision of domestic and international liquidity in the event it was needed in the days ahead.
"You decided yet what you're going to recommend?" Sid Brenner asked, as Henry took a seat at the back of the room and pulled out the notes he'd written on the flight into LaGuardia. At his imploring, the assistant U.S. attorney assigned to the case had seen to it that Fanning and McTeague had been taken into custody as quietly as possible, but news of the arrests had begun to get out, shortening his time for maneuver.
"Treasury's views are clear," Henry said. "They want Union Atlantic saved."
"And you're thinking otherwise?"
"They took the mandatory reserves of the third-largest institution in the country and essentially walked them into a casino."
"You don't have to convince me. You could lock these people in solitary and they'd find a way around the regs."
"So what would letting them go look like?" Henry said.
"A bloodbath. They've got business in a hundred countries. Counterparties up and down the food chain. They're ten percent of the municipal bond market. They've got more credit cards than Chase. And they're overweighted in mortgage securities. They're the definition of systemic risk. And we're barely out of a recession. It'd be malpractice to let them fail. You know it as well as I do."
"You're usually the skeptic."
"Just 'cause a body's got lung cancer doesn't mean you can take out the lungs."
Henry called Helen and told her to contact the CEOs of the major commercial and investment banks and inform them that their presence would be required at a meeting in the boardroom the following morning.
The last time Henry had orchestrated a private-sector rescue was when Long-Term Capital Management, a Greenwich hedge fund, had blown up during the currency crisis in the late nineties. At the time, the chairman of the Fed had publicly distanced himself from Henry's actions, suggesting the market ought to have been left to settle the matter.
Tonight, however, when Henry phoned down to Washington, he received no such objection. Before Henry even made the request, the chairman granted him the board's authority to employ loan guarantees should they be needed to cement a deal.
"Everything I'm seeing suggests it's isolated," the chairman offered. "A rogue-trader situation. The worst I've seen, certainly. But it's important to remember the specifics. There'll be some posturing on the Hill. They'll want to score points with the press, but it'll die down, eventually. We just don't want to give anyone too much of a platform on this." He paused, wheezing slightly. "You think Holland knew?"
"Yes."
"Well," he said, passing over the answer, "you've got whatever backing you need."
By the time Henry had finished his calls and spoken with his counterparts in London and Tokyo it was after midnight. Helen had reserved a room in case he didn't want to make the trip to Rye and back and he decided to use it. He walked the short distance up lower Broadway to the Millenium Hotel through emptied streets, past the shuttered shoe stores and fast-food restaurants. The air was unusually muggy for October and full of dust kicked up by a wind off the Hudson. Plastic grocery bags and the pages of tabloids rolled along the sidewalk and into the intersection, where the cross draft lifted them into the air like tattered kites, yanked and spooled by invisible hands.
Realizing he had eaten no dinner, he ordered a sandwich from room service and ate it sitting at the desk that looked down over the pit where the twin towers had stood, the ramps and retaining walls and construction-company trailers floodlit the whole night through.
The last city of the Renaissance. That's what Charlotte had called New York on the evening of September 11, when he'd phoned her from Basel to let her know that he was all right, that he was out of harm's way. "Banking and art. They've been growing up together in cities for five hundred years. And they're bombing the pair of them."
He'd thought it generous, that she should link their worlds up like that, as if in peril, at least, they might stand side by side.
A few weeks ago, speaking to Helen about his sister, she'd suggested he consider bringing Charlotte to live with him in Rye. Rather than paying a facility, he could hire someone to help. It was the town they had grown up in together, after all. She would say no, he imagined, but still, he would offer. Tomorrow, after his meeting, he would call her and suggest it.
EARLY THE NEXT MORNING, he returned to the office. Despite the secretaries' protests that their bosses' jets couldn't possibly take off on such short notice, by midmorning the heads of the nation's eight largest banks had collected in the boardroom on the tenth floor of the Fed, just as Henry had requested. There he let them wait, these men who waited for nothing and for no one.
"They're not a patient bunch," Helen said, returning to Henry's office from her walk down the hall to tell the captains of finance it would be a little while longer before the meeting began.
"Best to keep them nervous. Is Holland downstairs?"
She nodded.
"And our friend, is he here yet?"
"He's right outside."
"All right, then. Show him in."
Henry stood to welcome his guest. Prince Abdul-Aziz Hafar wore a double-vented tweed jacket of a fine English cut, along with a dark-red silk tie and a red paisley pocket square, giving him the appearance of a dapper country gentleman, more likely in the market for a yearling than a bank. He greeted Henry with a handshake and a slight bow.
"You've timed your troubles well," he said in his lilting British accent. "I'm here to see my son for his fall break. That's what you call it, no?"
"Indeed," Henry said, showing him to the couch.
"My cousin tells me Citibank's the one to buy into, but then he would say that, given how much of the damn thing he already owns. We're not as freewheeling as we used to be, you know. Now that we've set up our sovereign funds. We have all sorts of advisers. So I do hope you haven't invited me to a charity event."
"No," Henry said. "I think you'll find there are still things of value here."
He had just handed the prince an outline of the arrangement he envisioned and that he would soon lay out for the men gathered at the far end of the hall, when he heard the phone ringing on Helen's desk. A moment later, she knocked on the door.
All color had left her face. "You have to take this," she said. "It's about Charlotte."