chapter 4
From inside the blooming lilac, Charlotte whispers, Come. You're missing it. Come and see. The pleasure, somehow, always hers. Mother and father with their drinks on the veranda in wicker chairs watching; traffic whirring in the distance on the post road. You're missing it, his sister whispers. The air is soft in the first spring heat. Henry tries to walk toward his sister but his legs are fixed to the ground. Her whispers fill his ears from behind those coned purple flowers, the sunlight on the arced branches a brilliant diffusion. Here, what you've been looking for, here it is, she says, as the siren begins to sound.
Swallowing dryly, turning his head on the pillow, Henry half opened his eyes. The room was pitch-dark, only one edge of it discernible from a strip of light under the door. A hotel, certainly: the familiar hush of conditioned air falling into the padded gloom of rug and curtains and armchair, the tiny red signals of the television and the motion detector. But where? What city? For a moment, the yearning for a world saturated with meaning pulled him back toward sleep, but he caught himself and reached for the bleating phone, the grid of the present regaining administration of his mind, leveling in an instant the fading kingdom of dreams.
He was in a suite on the Atlantic coast of Florida and it was one fifteen in the morning.
"Mr. Graves? Is this Mr. Henry Graves?"
"Yes. Who is this?"
"Sir, my name is Vincent Cannistro. I'm vice president of market operations at Taconic Bank."
"Hold on a moment."
He reached up to switch on the light.
"This better be serious," he said. "In which case, why am I talking to you?"
"That's a perfectly fair question, sir. Fred Premley, our CEO, is currently in Idaho and we have been trying to reach him by cell phone for a number of hours now. I have a car headed to his location at this time and we expect to be in contact with him shortly."
"And your chairman?"
"Our chairman, sir, he's in that same location."
Henry sat upright and reached for his glasses, bringing the room into focus. Briefing books for the conference were piled on the desk opposite.
"So you're in a bind and your management's gone fishing. Have I got it right so far?"
"Sir, I would have to say that is more or less correct, yes."
"All right, then, Mr. Cannistro. What's your situation?"
There was a pause on the line. Even in his groggy state, Henry could sense the fellow's unease. He'd heard men's voices like this before, taut as a drum, overly formal, restraining with effort the profanity they'd been hurling at their subordinates for hours or even days. This man was making a call well above his pay grade. If things didn't turn out right, he could lose his job.
"We've got a liquidity problem," he said.
"Well, you don't call at this hour if you're unhappy with the examiners. What's your position?"
"We're on the short end of an interest-rate swap. We owe a hundred and seventy million. Payment was due nine hours ago."
"A hundred and seventy? Whose rates were you betting?"
"Venezuelan to rise."
"Jesus. That was stupid. I assume you hedged it. You covered it with something, right?"
"Sir, that's the problem. The model had us covering the position with oil futures. They were supposed to drop if Chavez trimmed his rates. They didn't drop."
Henry rested his head back against the wall. For a moment he'd thought maybe his caller had jumped the gun and done nothing more than further damage his bank's reputation with the Federal Reserve, in which case he could go back to sleep. Pulling the covers aside, he rose, took a pad of paper and pen from the coffee table, and settled himself into an armchair.
"Mr. Graves, are you there?"
"I'm here. That's the most inane hedge I've ever heard of. And you're telling me you can't raise the money for the payment?"
"As of this hour, no."
"I see," Henry said, nodding to himself. Under normal circumstances even a small retail operation like Taconic would have credit enough with the market to cover such incompetent trading. But they had been carrying a lot of bad tech loans for a year or more now and their retail base was being squeezed on one end by Chase and on the other by the national discounters. In the last few weeks they'd begun borrowing heavily to cover their own trading positions.
As president of the Federal Reserve Bank of New York, Henry Graves had oversight responsibility for all the banks in his district, including Taconic. He also regulated the large bank holding companies that had come to dominate the industry. But the New York Fed, unlike the other regional Federal Reserve banks, was more than simply a supervisory institution. It was the operational hub of the whole Fed System. It acted as the Treasury's agent in the market, buying and selling T-bills. Nearly every country in the world held some portion of their sovereign assets in accounts at the New York Fed. The wire service the bank ran cleared a trillion dollars in transactions each day. Simply put, Henry Graves was in charge of the biggest pumping station in the plumbing of global finance. His most vital function was to keep money moving. To do it quickly. And, above all, to do it quietly.
Which meant making sure a situation didn't become a crisis. Taconic's problems, small as they were in the scheme of things, couldn't be allowed to spread. The bank's ultimate failure, if that's what it came to, would pose little systemic risk. In receivership, it would be broken up and sold. But in the short run, a nonpayment of this size could cause trouble for Taconic's creditors. A resolution, however temporary, was needed before the morning bell.
"Who do you owe the money to? Who's your counterparty?"
"Union Atlantic."
Henry's thought was one of relief. At least they were dealing with a known quantity, and a bank under his supervision. Union Atlantic meant Jeffrey Holland. A bit glib, a bit of a showman. In it for the sport of the deal. Not Henry's favorite banker, but he could be reasoned with. He and his wife, Glenda, had showed up at the same hotel in Bermuda where Henry had taken Betsy just after she'd gotten sick. The four of them had eaten dinner together out on the terrace one evening. They'd sent a huge arrangement of flowers to the funeral.
The other line started to ring and he told Cannistro to hold.
"Did that jackass get a hold of you yet? What an idiot, huh? An upstate strip-mall bank betting on Chavez! Did you get a load of that? What a goddamn mess."
Sid Brenner, head of payment systems. The master plumber, as they called him, the man with his fingers on the dials. You could count on two hands the number of people capable of programming the network that wired that trillion a day through the market. Most of them worked at IBM. Sid had been with the Fed thirty-five years, starting just a few months before Henry. Born in Crown Heights, he lived there still - three kids, one an officer in the Israeli army, the other two professors. Any day of the week he could have walked down the Street and made five times what the Fed paid him, but he never had.
"We've got time," Henry said, a half-truth they would let pass between them. "I'll get on the phone. We'll work it through."
"None of my business, but if you give these jerks a free ride, I'll wring your neck. They should be lucky to get a loan at eight percent."
"I'll talk to Holland. Did everything else settle?"
"Yeah, just a gaping hole in Taconic's reserve account."
"What's your sense of who else knows at this point?"
"About the swap in particular? Not so many. That they've been scrambling for money for eight hours? Not exactly a secret."
Henry woke his secretary, Helen, at home and asked her to set up the calls with Holland and Taconic's management, as soon as the car reached them.
As they were about to hang up, she asked, "Are you all right?"
He crossed the room and pulled the curtains aside. Through the glass he could see down to the beach, where the lights from the hotel reached the tranquil water's edge. He slid the door open and stepped onto the balcony, the night air heavy with moisture.
Like Sid, Helen had been at the Fed for decades, starting out as Henry's assistant in the counsel's office and moving with him to the presidency. When they were together, priorities sorted themselves in the space between them with little more than a glance or nod. She could interpret the nuance of a bank officer's evasions as readily as the nervous chatter of some freshman analyst. He disliked involving her in personal matters but ever since Betsy had died four years ago, he'd found it impossible to meet his own standard of segregating entirely work and private life.
"Did my sister call?"
"No. There's been no word."
He rested his forearms on the railing, feeling in the thickness of his head the pitched forward slowness of jet lag. The flight from Frankfurt had been ten hours, the drive up from Miami all stop-and-go traffic owing to a jackknifed truck that had torn the roof off one of those Volkswagen bugs, the whole scene bright as day under halogen floods.
A few weeks ago, after listening to one of Charlotte's tirades about the house next door, he'd raised the question of whether it might be time for her to move. She'd practically hung up on him and had replied to none of his phone calls since.
"I'm sorry you've had to deal with this," he said to Helen. "It's unprofessional of me."
"Don't be silly," she replied. "Do you need anything else? It could take awhile to get Holland at this hour."
"No. Just the account positions. And I suppose you better call down to D.C. and find out where the chairman is, just in case. I don't think we'll need him."
"By the way," she said. "Did you speak to the plumber about the leak at the house?" He had happened upon it the other evening in the back hall, a rust-colored sagging in the wallpaper over the side table. "It's not the kind of thing you can just forget about. You could get a burst pipe."
In which case, what? he thought. Water in the living room? A lake beneath the piano? He barely used the downstairs anymore, getting home after ten most nights and heading straight to bed. Even upstairs he'd withdrawn into one of the guest rooms, where he found it easier to sleep surrounded by fewer of Betsy's things. His wife's death had hit him with startling force for a month or two, during which his body ached from the moment he woke to the moment he went to sleep. But his job's demands didn't cease. And soon there were days when he thought of her less often; half a year later there were days he didn't think of her at all. This seemed wrong, inhuman even, that forty years of marriage could fade so easily through a slip in time. Did it mean he was a callous person? Unfeeling? Who was to judge? As for his private life now, the person he thought of, whom in a sense he'd always thought of, was his older sister, Charlotte. A woman Betsy had done little more than tolerate.
"If you give me the plumber's number," Helen said, "I'll call him myself."
"No," Henry replied. "It's all right. I'll see to it when I get back."
DOWNSTAIRS, THE COCKTAIL lounge was deserted save for an elderly Latino man in a vest and bow tie reading a newspaper behind the bar. Basketball from the West Coast played in silence on the television mounted above his head. Henry ordered a ginger ale and walked out onto the terrace, taking a seat at a table by the steps to the lawn. Between the hotel and the ocean stood a row of shaded palms lit from beneath, their fronds perfectly still. Waves barely lapped at the shore. The big investment houses had made a killing on resorts like this, consolidating the industry, securitizing the mortgages, first in line to get paid when a chain went bankrupt, first in line to finance the entity when it reemerged.
The ginger ale had too much sweetener and not enough fizz. Another penny for Archer Daniels Midland and the corn-syrup giants.
Stop, he thought to himself. Enough.
He could never tell if exhaustion bred the automatic thought of production and consequence or whether the habit itself did the tiring. Either way, it had become incessant. As an undergraduate, studying philosophy, his first challenge had been skepticism, how the mind could know with certainty that objects existed. By the time he went to law school, he'd settled happily on a social, pragmatic answer: that to believe otherwise led to absurd results. These days much of the world seemed drained of presence to him, not by his doubt of anything's existence but because objects, even people sometimes, seemed to dissipate into their causes, their own being crowded out by what had made them so.
Over the gentle surf, he heard the hum from the air-conditioning vents high on the roof of the hotel, and his brain, once more, ran the stimulus to ground: the steel smelted from ore mined on some island of the Indonesian archipelago; forged into sheets on the hydraulic presses of a foundry outside Seoul; shipped across the Pacific to sit in a warehouse in Long Beach where it showed up in the Commerce Department's numbers on inventory; ordered, packaged, trucked over the plains to an Atlanta wholesaler; bought by a contractor in Miami, who stood with a foreman directing workers riveting the vents together, operating the crane that raised into place the engine, itself assembled with parts from ten countries or more at a Maytag plant out in Iowa or perhaps Mexico, calibrated to the precise wattage required to pump cooled air into the hundreds of sleeping chambers, where its faintly medicinal scent blanketed the slumbering travelers. And allowing each step from the miner's lowly wage to the construction buy: loans, lines of credit, borrowed money - the vast creationary incentive of compound interest, blind artificer of the modern world.
He wondered how it would be if the humming were just that to him: a sound.
Leaving his glass on the table, he wandered out onto the lawn. He wouldn't be able to sleep before he'd resolved Taconic's troubles but until their CEO and Holland were on the phone there was nothing more he could do.
On the far side of the pool area a footbridge led over the sand and the shallow water to a jetty that formed the outer edge of the marina. He crossed it and walked alongside the yachts and cigarette boats attached to their moorings with chains that glittered dimly beneath the dock lights.
In the summers, he and Betsy had always gone up to Maine, to Port Clyde. A night in the mainland cottage, a day getting the boat out of storage, two weeks on the island. The same every year. Just as he rode the same train to work that his father had ridden. His father who'd worked for Roosevelt's SEC, back in its early days, who had been a scourge to penny-stock fraudsters and pyramid schemers, arriving home each night with a briefcase full of pleadings and depositions, rarely back in time for dinner. He'd believed with fervor in the rules he'd enforced, in the idea of the government as the good leveler of the field. In 1944, he'd driven a Sherman tank through the streets of Paris to cheers. Back in the States, he'd spent his whole career going after securities fraud as if it were an insult to the country. How dare anyone think they were above the democratic rule of law that he had fought to defend. Fair procedure meant everything to him. He'd been delighted when Henry chose to go to law school, though he would never have argued for or against it. Of the Federal Reserve, however, he'd always been a bit suspicious, given how badly it had failed in the Depression. And then it wasn't exactly democratic either, with men from the private sector controlling the regional banks, appointing officers like Henry. An essential public function - the conduct of all monetary policy - handled beyond the public eye, by unelected officials. Of that his father had been wary.
"You have to remember," Henry could recall his mother saying, sipping her gin and tonic at the dinner table across from their father's empty chair, "your father is a man of principle."
Henry had followed his father's lead in never interfering with his sister's life, even after the disaster of her affair with Eric. The old man had always hewed to his line about being proud of his daughter's independence. The principled position. But then he wasn't around anymore.
Tires were lashed to the thick wooden posts at the end of the dock, where the dark water sloshed up against them. How was it that after all these decades his sister could still draw him back in? He'd thought once that having his own family would be a barrier of sorts, and for a while it had been, when his daughter, Linda, was a child. But it hadn't lasted long. In her way, Betsy had always resented his sister, and he couldn't entirely blame her. It wasn't that they saw so much of her in any given year. It was something else. Something about the nature of her claim on Henry.
"Your marriage should be donated to the Smithsonian," Charlotte had said to him once.
He should have been insulted, but he'd always enjoyed her wit.
As he turned back up the jetty toward his room, his cell phone began to vibrate.
WHATEVER SUSPICIONS he'd harbored about Taconic's management were quickly confirmed by his conversation with Fred Premley. It turned out the bank had been hemorrhaging cash on the swap for nearly a month. Clearly news had leaked into the overnight market. Which meant the problem was already worse than its notional value. If he'd been doing his job, Premley would have approached Henry's staff two weeks ago and borrowed from the Discount Window. But he was trying to attract a buyer for his company, so he'd avoided that public sign of distress. Instead, he'd just held on, hoping circumstance would save him. They had never met, but from the orotund tone of his voice, Henry could just picture the double chin. This was the kind of Business Roundtable chump who spent his lunchtime decrying government intrusion and now found himself on a cell phone in the middle of the night pleading with the government to save him. In the morning, there would be teams of examiners at the doors of his office, but right now they had to patch something together. After listening to his prevarications for a few minutes, Henry made it clear a specific request would be required.
"Well, then," Premley said, "I guess I'm asking if the Discount Window would loan us the one seventy."
Henry glanced at the fax Helen had sent through. Taconic had forty million in its reserve account.
"You might have got that, Mr. Premley, if you'd approached us in a timely fashion. But you've left it a bit late, wouldn't you say?"
There was a pause on the line.
"You'll get thirty," Henry said, "and that's generous."
"You're serious."
He said nothing.
"What about the rest?" Premley asked.
Henry had reached the limit of his official, public authority. From here on, they entered the informal realm. "The rest will need to be restructured," he said. "Tonight."
"I don't disagree, but my VP he tells me Union Atlantic's been holding out for hours. They don't want to refinance."
"That's hardly surprising under the circumstances."
He let the silence that followed hang there on the line between them. He needed to soften Premley up with fear so that he would accept the harsh terms Union Atlantic would offer once Henry placed his call to Holland. He said nothing for another moment or two, time enough, he figured, for the man to begin wondering about his own liability once the shareholder litigation began.
"Tell Cannistro to set up the transfer for the thirty million and keep this line open, all right, Mr. Premley? We'll see what we can do."
Turning on the television back in his room Henry saw that Frankfurt and Paris were down in early-hours trading. He pressed the Mute button and closed his eyes for a minute. The back offices in London were starting their day now and would begin to notice that Union Atlantic's payments were being held up. A call or two out to the trading desks where the young jocks sipped their coffee, stroking the fantasy of the one-day killing, and the lines would start to hum, bank stocks getting ready to head lower at the bell. He could see the sheen on the hard black plastic of the phones that would start to ring, the five-screen stations at Roth Brothers feeding Reuters and Bloomberg, the digital glide of ticker tape high along the wall, servers linked, nested, and cooled on the floor below, batching for export the first of the day's reports to the redundant facilities in Norfolk or Hampshire, windowless steel barns surrounded by fence and barbed wire.
"Remarkable how total the distraction can become, no?" Charlotte had said a few months ago in one of their loopy conversations. "Just don't forget yourself in the midst of it all."
Lifting his eyelids, he gazed at the figures running along the bottom of the silent screen. On his BlackBerry, he found the number for Mark Darby, his counterpart at the Bank of England, and left him a voice mail telling him there had been a glitch, that Union Atlantic's accounts would settle before the start of business in New York. Darby would get the word out and if all went well, in the next hour London might still open smoothly.
"Isn't there some regulation against men our age being up at this hour?" Jeffrey Holland asked in that warm, charming voice of his, after Helen finally patched him through. He knew perfectly well that Henry had at least ten years on him, and thus, true to form, the question doubled as a compliment. Henry figured it was the poor compensation that had kept Holland out of politics.
"Not to my knowledge, but I'm sure Senator Grassley would introduce a bill if you put a word in his ear."
Holland chuckled. He'd helped nix a reporting provision the Fed had wanted in the latest markup of the finance bill.
"I should mention it to him. No phone calls after nine o'clock."
"So did you have any warning on this Taconic business?" Henry said.
"None at all. I heard about it today. They must have moved around between lenders. They certainly didn't come to us."
Henry found this difficult to believe but chose to let it pass.
"Do you know this fellow Premley?"
"I've dealt with him once or twice. They brought him in to fix the place up and sell it. Not such a good bet, apparently."
"Between us, the Discount Window just extended them thirty of what they owe you."
"And you think we should roll over the rest?"
"Well, you've got an uncovered position yourself. It's two thirty in the morning."
He could hear what sounded like ice being put in a glass. Holland swallowed and cleared his throat. He wouldn't resist now. In the worst case, Union Atlantic would end up writing off the loss for whatever they couldn't recoup. Alerted to its weakness, Holland might even try to buy Taconic, once its stock price fell into the basement. A flap with the shareholders three months hence measured little against his bank being technically illiquid when the markets opened. They both knew this. Besides, Henry regulated Union Atlantic Group. Holland would offer terms now. The call itself was all that had been necessary.
"It must be an odd job," Holland said. "To have to keep imagining the real disaster. The whole leveraged shooting match falling to pieces."
Henry had wandered again onto the balcony, where the breeze had picked up off the water, the waves a bit larger now, boats bobbing against their posts, the fronds of the shaded palms swaying. How could anyone not imagine it these days? After the currency scares, 9/11, the Argentinean default, each of them managed one way or another. The system, in the public eye, still strong, people's faith in the value of the money in their pocket such a basic fact of life they couldn't imagine it otherwise. And yet if you'd been on the calls with the Ministers of Finance or with Treasury on the twelfth and the thirteenth - Henry from Basel, his senior staff some of the only people left in lower Manhattan other than the fire and rescue crews - you knew it could have gone differently. One more piece of bad news and the invisible architecture of confidence might have buckled.
About this Holland was right. Henry was paid to worry so the average citizen didn't have to.
"We do our best," he said.
"I'll have my people talk to Premley."
"I appreciate that," Henry said. "And of course, the less press about this the better. For everyone's sake."
"Naturally."
"Well, I'll let you get back to sleep, then."
"Look after yourself, Henry. The country needs you." And with that he clicked off the line.
Henry gazed down into the pool lit by wasted power, its surface ruffled by the new motion in the air, which had begun to raise the surf along the beach. Once more he heard the humming of the machine on the roof, the engine of the air conditioner whirring away. He thought of the speech he had to give in a few hours downstairs in the ballroom; the plane ride to LaGuardia; the car ride back up to Rye. And soon enough, the trip he'd have to make to Massachusetts, to sort out this business with his sister, to find somewhere for her to go.
His given family, once and again.