Money to Burn

10

I COULD HAVE BEEN KILLED.

The thought was sinking in as I stood outside the closed door to Eric Volke’s office. The president had the largest corner office on a highly secured floor that was reserved for nine of Saxton Silvers’ most senior executives. Visitors knew they were in the right place as soon as the elevator doors opened: They could smell the flowers. Roses, calla lilies, crepe myrtle, and other assortments were abundant and fresh every day, a two-hundred-thousand-dollar line item in the firm’s annual operating budget. An extravagance, to be sure, particularly since no more than two or three executives were actually in the office on a typical day. Today obviously wasn’t typical. It wasn’t even nine o’clock and the place was buzzing.

“He’s on the phone,” said Nancy, Eric’s assistant.

Of course he was. Eric Volke off the phone was like Tiger Woods off the golf course. “I’ll wait,” I said.

I took a seat on the leather sofa, and suddenly I had to catch my breath.

Damn, I really could have been killed.

Things were moving so fast. I hadn’t really processed how close I’d come to burning alive inside an elevator. My hand was still stinging and red. I had decided not to go to the emergency room, even though that flaming package had probably given me a second-degree burn. I had bigger problems.

As I waited, I wondered how much more harm the anonymous sender had intended.

My cell rang, reminding me that the wheels of commerce were still turning. I had to cancel today’s trip to Chicago, where I was supposed to consult with a group of real estate lawyers, bankers, and architects to make sure their multiuse building qualified as green. It was a nine-figure deal put together by our Investment Banking Division, and by missing a key meeting I ran the risk of some engineer making a decision that would throw the whole thing out of LEED compliance-no more green stamp of approval for the socially responsible class of investors I was trying to make richer. One successful green project had a way of blossoming into more, so it would hurt to lose this one, but not nearly as much as losing my entire personal portfolio.

I checked the call, let it go to voice mail, and peered through the beveled glass door. Eric was pacing from one end of his silk Sarouk rug to the other, speaking into the headset of his hands-free phone. The signs of stress were all over his face.

Eric was my mentor, the man who had hired me out of business school. Two years ago, when ditching Wall Street and changing careers had seemed like a good idea, it was Eric who’d convinced the firm to let me split my time between production and management. It sounded like two jobs, but it was more like twenty. In theory, putting Saxton Silvers’ Green Division on the map meant training investment advisors across the country to “think green,” but all the training in the world wasn’t going to convince them to make less money for the pension funds, retirees, and other investors who counted on the brilliant minds at Saxton Silvers to maximize their returns. Expanding “green” beyond charitable trusts and other special investor groups that were either required or predisposed to go green meant assembling and supervising an investment strategy team like no other, and then traveling across the globe to identify and nail down socially responsible opportunities that would actually make money-lots of money. “Show them-don’t tell them-that green belongs in their portfolio,” was Eric’s charge to me. His own career had soared since then, and for the past thirteen months he’d served as president of Saxton Silvers. Subprime fallout had made the last three hell.

“Does he know I’m here?” I asked his assistant.

“Yes. It’ll be just a few minutes more. Mr. Volke wants to see you as soon as he hangs up.”

I returned to my seat, and my phone buzzed again. It was Mallory, who was still at the Pierre Hotel. This was the third time she’d speed-dialed me since I’d called to tell her about “a little mishap” in the elevator.

“Why is there a security guard outside my door?” she asked.

I could hear the strain in her voice, and I tried to reassure her. “Honey, it’s like I explained earlier: The lawyer thinks somebody might be trying to even an old score with me. It’s better to be safe than sorry, so I asked the firm to arrange for a bodyguard.”

“Michael, you’re not telling me everything. Juan called over here from the front desk to see if I needed a ride home. According to him, everyone in our building is talking about the package that burst into flames and almost burned you alive in the elevator. The FBI was even there.”

It had been a mistake not to tell Mallory the whole story, but my intentions had been good. “I’m sorry. I didn’t want to freak you out. I’ve already talked with the FBI, and the security guard outside your door is just a precaution. This is going to be okay.”

“How can you say that? Somebody tried to kill you!”

“Nobody was trying to kill me. Even the FBI said so.”

“What?”

“It was just a stunt. The only reason it was dangerous was because I happened to open the package inside the elevator, where the smoke got to me. There was no way the sender knew where I was going to open it.”

“Well, I suppose that’s true. But it could have killed you. And whatever it was, it sure wasn’t a love note.”

“You’re right. Someone is definitely trying to scare us.”

“And doing a damn fine job of it. This is all too crazy. Why is this happening?”

“We don’t know yet. But we have the best of the best working on it. I’m meeting with Eric as soon as-wait. He just got off the phone. I have to go, okay?”

“Call me just as soon as you know anything more.”

I promised I would and hung up.

Nancy opened the glass doors and escorted me into the president’s office. Eric was a handsome man with a touch of gray hair at the temples, the strong handshake of a former Olympic rower (Munich ’72), and impeccable taste in custom-tailored suits from Hong Kong. Decorating the walls of his spacious office were a dozen large underwater photographs that he had taken while scuba diving the most spectacular reefs in the world. He was the one senior manager who consistently took the time to talk one-on-one with up-and-comers like me to make sure we weren’t getting too wound up and heading toward burnout-which was amazing, given the constant pressure he worked under. He was president of an institution that derived 40 percent of its annual revenue and 70 percent of its profit from its most risky and volatile line of business: trading and investing. Even in bull markets, the firm’s trading desk spent forty days a year operating in the red. In other words, Saxton Silvers’ Investment Banking Division could arrange the biggest deals in town, its Asset Management Division could manage client portfolios with precision, and one boneheaded call by a single group of traders could still land the entire firm in the toilet.

This morning, the stress had tightened its grip on Eric’s facial muscles beyond normal. Before he could even try to flash a semblance of a smile and greet me, he was on another phone call and speaking into the headset. He motioned for me to sit on the couch by the window. Listening to Eric, I quickly realized that he was talking to our CEO, who, as usual for this time of year, was in Palm Beach. It was the first time I’d witnessed Eric in what appeared to be the financial equivalent of code blue. He spoke clipped, rapid-fire sentences into his headset.

“As of this morning cash reserves were at twenty-nine billion,” Eric said. “I’ve checked with the finance desk, the repo desk, the treasurer and asked each of them point-blank-has anyone heard of any margin calls from our major lenders? No. A trade gone bad? No. Anything out of the normal course? Across the board the answer was absolutely not. No problems.”

The call lasted another two or three minutes, and it was abundantly clear that my identity theft and personal financial problems were not on the president’s radar. Eric ended the call by ripping off his headset and throwing it on the floor. He was seething, apparently in desperate need of a punching bag. But he was the ultimate multitasker, never missing anything out of the ordinary.

“What the hell happened to your hand?”

I looked down and saw it was turning lobster red. I told him quickly about the package.

“Shit like that happens when people lose money. We’ve had nuts walk into branch offices and start shooting. Be careful. Did you call the police?”

“Sonya’s got the FBI on it,” I said. “But this is just the latest in a much larger problem.”

“No shit,” he said, and suddenly we were no longer talking about me. “Biggest financial crisis Saxton Silvers has faced in its hundred-fifty-seven-year history, and I can’t get our CEO to cancel his tee time and deal with it.”

I said nothing. I knew by now when to shut up and let him process his anger. Finally he looked at me and said, “It’s going to hit the fan today-huge.”

“What’s wrong?”

Eric went to the window and looked off into the distance. The morning sun gave a warm glow to the new leaves and blossoms in Central Park, confirming that April showers really do bring May flowers. Eric seemed oblivious to the spectacular view, still stuck in the icy grip of winter.

He said, “The plan had been to hold the bad news until after the close of trading today. But it leaked. Nothing we can do now but watch the big board and hold on to our asses.”

“How bad is it?” I asked.

He shook his head and said, “Another subprime write down.”

I swallowed hard. At the start of the housing slump last autumn, Eric had been forced to confirm a leak to the media that Saxton Silvers would burn $1.6 billion of its cash reserves to bail out two of its wholly owned hedge funds that were on the brink of bankruptcy from subprime losses. The firm still managed to report a profit of $9.3 billion for the year, even after payment of $16.5 billion in compensation and benefits.

“How big is this one?” I asked.

Eric turned and looked at me. “Twenty-two.”

The number hit me like a five iron to the forehead. “I assume you don’t mean million.”

“If only,” he said with a mirthless chuckle.

It was a staggering sum, but it was what happened when mortgage originators linked up with an unregulated Wall Street-two wires you really don’t want to cross. The irony was that since 9/11, most of the federal dollars that had gone toward regulation of financial institutions had been redirected to Homeland Security. Now, in the absence of that regulation, Saxton Silvers was writing down another $22 billion in losses-nearly half the entire annual budget for Homeland Security.

“Is it all subprime?” I asked.

“Every penny.”

Eric turned away again and looked out the window. His gaze swept across Midtown from Madison to Seventh Avenue, where in turn he could literally see the shining world headquarters of Bear Stearns and then Lehman Brothers. Sandwiched between the two, painted on the side of a building, was a big blue-and-white ad for AIG.

“And who the hell knows where it really ends?” he said.