Black Market

28

“What's happening, Arch, I think, is a disorderly, almost a riotous market condition. Everybody desperately wants to sell. Except there's a corresponding lack of buyers,” Caitlin said.

“What exactly does that mean?” Carroll asked. “What happens now?”

“It means the bottom-line price of stocks and bonds has to plummet dramatically… The crash that's apparently coming could last a few hours, days, or drag on for years.”

“Years?”

“Back in sixty-three, on the day Kennedy was assassinated, the market collapsed and was shut down early. The next day it recovered. But it wasn't until after the Second World War that the market recovered from the crash of 1929. There's never been a situation to match this one against, though. This panic is happening all over the world. All at the same time.”

Carroll and Caitlin Dillon were hurrying across the immense marble lobby of the World Trade Center. It was here, on the ground floor and mezzanine, that the fiduciary nerve center of the banks and trust companies had been established after the bombing on Wall Street.

The escalator stairs to the mezzanine were frozen to a stop. An impromptu sign over a red arrow read FINANCIAL SECTION and pointed straight up.

Carroll and Caitlin started to jog up the motionless metal stairs. It was just past 4:00 A.M.

“This looks a little more organized than number Thirteen. Not much, though,” Carroll observed.

Red and blue intercom wires were strung up everywhere, hanging like Christmas decorations over the escalators and fire exit stairways. Open radio channels connecting uptown offices with the financial center squawked and chattered endlessly. Even at that time in the morning, the hum and buzz of electronic noise was unrelenting.

From a row of high-vaulted windows, Carroll and Caitlin could see a black Bell army helicopter landing. Limos and official cars were discharging somber-looking men carrying briefcases.

“What's causing the worldwide panic?” Carroll wanted to know as he and Caitlin entered a cavernous marble hallway with no visible exit.

Caitlin rubbed her arms warm as she walked. The glass doors to the outside were opening constantly, and the building was as cold as a meat freezer.

“None of the usual safeguards in the systems are working Not enough fail-safe devices were ever built in for a situation like this. Academic economists have been warning the New York Stock Exchange for years. Every MBA candidate in the country knows that something like this could conceivably happen.”

Carroll pushed open heavy pine doors into a huge, frantic conference room, almost a miniature stock exchange. Brokers on complex NYNEX telephone consoles, analysts with IBM desktop computers, were talking all at once.

The room was jammed with frenetic shadowy figures many of whom were shouting into phone receivers they managed to cradle, in a practiced defiance of gravity, between jaw and shoulder. It was bedlam. It reminded Carroll of, give or take some modern accoutrements, a print he'd once seen of a Massachusetts insane asylum in the late 1800s.

Unconditional orders were being issued to sell, at the very best price possible. Jobs and business relationships were being routinely threatened over the long-distance telephones.

Jay Fairchild, tall, jowly, bald as an infant, lumbered out of a clique of gray suits to meet Caitlin and Carroll. Fairchild was the undersecretary of the Treasury, a man who'd come to rely regularly on Caitlin's judgments, her usually astute, almost uncanny hunches about the market.

“Jay, what the hell has happened tonight?”

Fairchild's eyes had all the animation of glass beads. There was a standing joke that all undersecretaries were illegitimate children of past congressmen and presidents. They definitely had a rare, collective ability to look completely out of place.

“Just about every nightmare scenario you or I could ever have imagined has come true tonight,” Fairchild said. His voice held a tiny, whistling sibilance. “At the end of the day yesterday, out in Chicago, metal skyrocketed. A ton of futures, coffee, and sugar flopped badly. Bank of America and First National began calling in their loans.”

Caitlin couldn't hold back her anger at that news. “Those unbelievable shits! Morons! The commodity people out of Chicago won't listen to anybody, Arch. There have been all sorts of speculative excesses on the options market long before this. For years and years. That's one more reason we were ripe for this panic.”

“None of that is the real problem right now, though,” Jay Fairchild said. “The crash is being precipitated by the goddamn banks!… The banks are almost completely responsible. Let's wander back to the lobby. You'll see what I mean. It's worse than it looks up here.”

FBI agents and hard-nosed-looking New York City police officers were conscientiously screening the credentials of everyone trying to get into the conference room on the ground floor. Carroll knew the FBI men. They had no problem getting in.

Once inside, the thundering noise and activity were easily double what Carroll and Caitlin had witnessed and heard upstairs. It was still only 4:30 A.M., but a nightmarish fear had taken firm hold-you could see it on every face inside the overcrowded room.

The business investigators who squeezed into the conference room included some of the more sophisticated new breed of bankers. In the not-so-distant past, most banks had wanted to be viewed as impregnable places for their depositors' money, secure fortresses of capital. So bankers tended to be characterized by physical and emotional restraint, by almost compulsive neatness, by conservatism in their behavior and their thinking.

That was hardly the case with the men and women packed into this room. These were glossy, well-tailored globe-trotters, most of them as comfortable in Geneva, in Paris, or in Beirut as they were in New York. The spiritual leader of this cosmopolitan group was Walter Wriston, the now retired head of Citicorp. In Caitlin's opinion, Wriston had been little more than a glorified traveling salesman, but some thought him a genius.

“There's another factor contributing to the current disaster,” Jay Fairchild said. “The very real possibility of a worldwide crash, rather than an isolated one in the United States. This time, the whole bloody world really could go down. It's been that volatile a situation, potentially, for at least the last four years.”

Everyone they passed in the formal conference room appeared hopelessly grave and, once again, battle weary to Carroll. The scene was something like a general alarm on a warship.

Caitlin said, “Seven days of brokerage transactions are now unresolved. The bankers are competing, they're actually competing to see who can take the most clear-cut, amoral advantage of the chaos!” Her face was flushed, and there was an anger in her voice that Carroll hadn't heard before.

Carroll didn't technically understand some of what was being said, but he grasped enough. When you misappropriate people's money, a lot of small investors' money given to you on trust, he figured you were a common criminal.

Call him naive and old-fashioned, but that was how he felt.

“It sounds to me like nobody's protecting the ordinary investor right now.”

Jay Fairchild nodded. “Nobody is. The big banks are all busy maneuvering for the oil billions. They couldn't give a damn about the poor bastard out there with a hundred shares of Polaroid or A T and T.”

“Arch, Arab oil money is the name of the game. Arab money is almost always conservatively managed. Since last Friday they've been trying to move out of the U.S. Treasury bills. Into gold. Into other precious metals. The banks are all shamelessly scrambling for the huge Arab fees. They're like rats on a sinking ship, bailing out of the dollar-rushed into sterling, the yen, the Swiss franc, all the more stable currencies…Chase, Manufacturers, Bank of America, they're making small fortunes right now.” Caitlin's lips were tight as she spoke.

“Do the two of you really know what you're talking about?” Carroll finally asked in desperation.

Caitlin and Jay Fairchild looked at each other. They answered almost simultaneously:

“Right now, no.”

“Nobody knows exactly what this is about. But what we've just told you is generally true.”

The three of them stood by helplessly watching the potential stock market crash gain a frightening momentum of its own.

Reports from London, Paris, Bonn, and Geneva came rushing in. The news was as depressing as that of a natural calamity.

Men in white shirtsleeves and loosened neckties took turns calling out the more substantial telex quotes for the benefit of beleaguered clerks who reported them into a massive central computer.

Phibro-Salomon-bought at-121/2-down 22

General Electric-bought at-35-down 31

IBM-bought at-801/2-down 40

By eleven-thirty on the morning of December 15, most U.S. banks, including every savings and loan, had been closed. The Chicago, Philadelphia, Boston, Pacific, and mid-west exchanges had all been officially shut down. The emotional panic for investors was in full force; it was virtually unstoppable in every city, every small town, across the United States.

At noon an elderly man made his way toward the hub of action at the front of the World Trade Center crisis room. Many of the young brokers and bankers didn't recognize Anton Birnbaum. Those who did regarded him with sharp, uneasy glances. It wasn't every day that one encountered a Wall Street legend.

Birnbaum actually looked more like an ancient New York City pawnbroker than one of the world's acknowledged financial geniuses, a man with an unblemished reputation during all of his years in business.

President Justin Kearney had arrived by helicopter from Washington less than thirty minutes before. He was conferring with Philip Berger from the CIA. Both recognized Anton Birnbaum as the old man approached. The president greeted the financier warmly, speaking with great deference and sincere respect.

“It's awfully good to see you again, Anton. Especially right now.” The president spoke formally, as he would to a visiting foreign dignitary. Lately his manner had been more than a little uncertain. For more than a week both the American and the foreign press had been lashing his administration for its failure to deal with the economic crisis. It had had the same effect on Kearney as a shameful public flogging.

Kearney and Anton Birnbaum eventually disappeared into a small private office, the door of which was guarded by beefy protectors from the Secret Service.

“It's good to be seen out in the world, Mr. President. I don't get out so much anymore. Mr. President, if I might be allowed to speak first, I have an idea, a plan you might wish to consider…

“I have just gotten off the phone with two gentlemen you've possibly never heard of. It's worth repeating both conversations. One man is from Milwaukee, a Mr. Clyde Miller. The other man resides in Nashville, Tennessee -Mr. Louis Lavine.”

Anton Birnbaum said this in a slow, very deliberate style that made each word seem vitally important.

“Mr. Miller is the chief executive officer of a large Milwaukee brewing company. Mr. Lavine is currently treasurer for the state of Tennessee… I have just convinced Mr. Miller to buy five hundred thousand shares of General Motors stock, which is right now at forty-seven. He will buy the stock, and keep buying it until the price goes back to sixty-seven. He is prepared to invest up to two hundred million dollars.

“I've asked Mr. Lavine to buy NCR stock, which is now at nineteen, and continue to buy it until the price moves up to thirty. He's prepared to commit up to seventy-five million dollars for the purchase.” Birnbaum then went on to explain to the president why the plan he'd conceived could actually work.

“I only hope that the courage of these two gentlemen will actually turn the direction of this catastrophe. I pray it will restore some necessary optimism. Mr. President, I have a belief that it will… Once the market sniffs a demand for these two bellwether issues, smart money will undoubtedly start moving. The risks arbitrageurs, who can spot an uptrend in an avalanche and who command billions in ready cash, will begin testing the waters.

“I have advised a select few of my associates, who have responsibility for mutual and pension funds around the country, that a dramatic break in the crisis situation is now imminent. I have strongly suggested that they look for opportunities to begin bargain hunting before they lose out on a very fast and favorable profit spiral. A spiral back close to where the market began this morning.”

The news of Anton Birnbaum's recovery plan traveled with appropriate dispatch through the main conference room. Emotional arguments over whether the daring strategy was right, or disastrous, raged immediately.

“Clyde Miller has just bankrupted his own corporation.” One of the harsher detractors laughed with derision at the news.

Two other middle-aged bankers argued their way into a fistfight. Creaking haymakers were thrown and somehow managed to connect with some authority. A loop of bankers and stock analysts surrounded the breathless, wheezing pugilists, and at least a couple of side bets were laid. The fight ended with both bankers leaning against each other as if each were trying to shore up the other's dignity. In a small way they symbolized the shambles of the system that had worked in spite of itself for so long.

As the winter morning passed into steely-gray afternoon, however, it was obvious that the dramatic Birnbaum plan was either too late or too little. There was no significant change in attitude, and therefore the plan was unable to stop the momentum of the declining market.

The largest single-day losses ever had already been recorded on the world's stock markets:

On October 29, 1929, losses had been fourteen billion dollars.

On December 15, the single day's recorded losses around the world exceeded two hundred billion dollars.