‘NO, I DON’T understand!’ said Knowles. ‘You told me you could do it overnight. Then you told me you were going to get a deal done today at the outside.’
Jerry Rabin, speaking from New York, had just given a rundown of his conversation with Bill Custler. Susan Opitz and Ron Strickland were patched in. The president’s senior aides were with him in the Oval Office.
‘This isn’t seriously going to happen, is it?’ said Knowles. ‘You’re not telling me there’s any serious risk this bank is going down?’
There was another silence on the line before Opitz responded. ‘They know we need a deal done by the end of the weekend, Mr President.’
Tom Knowles closed his eyes. He had a bad, bad feeling about this. Rabin and Opitz had had all week to cut a deal. Now they were hoping to get it done over the weekend. Even if they did, announcing something like this the day before the election would be a horrendously risky thing to do.
‘Can we push it out past Tuesday?’ he asked.
‘The market’s demanding something. Custler’s under incredible pressure to announce. We risk a total bloodbath.’
‘Didn’t their share price rise a little?’ Knowles glanced for confirmation at Marty Perez, who nodded.
‘Sir, that’s because of the rumors,’ said Rabin. ‘People think there must be political pressure to get a deal ahead of the election so they’re buying shares in hopes that pressure forces the price higher.’
Knowles shook his head in disbelief. He didn’t know much about the financial markets but the more he saw of them the sicker they made him. Rumors building on rumors, and everyone trying to make money on the back of them, like vultures hovering over a carcass.
‘No one’s trading with Fidelian. No one’s lending them money, no one’s doing business with them. Right now this is a zombie bank and it’s only the Fed that’s keeping it alive.’
‘What if we continue to negotiate through Tuesday?’ said Ed Abrahams.
‘We’ll have the mother of all sell-offs on Monday. If Custler doesn’t say anything, the markets will think he’s under political pressure to stay quiet because of the election. They’ll know the news is bad. They can put two and two together.’
There was silence.
‘This is a mess,’ said the president. ‘This is just one hell of a mess.’
No one said anything. That was an understatement.
‘Susan, how bad is this if it happens? Let’s forget about the election. If there was no election, would we be trying to do anything about this? How bad is it economically?’
‘Bad. This has pretty much come out of nowhere. A month ago, this wasn’t even on the horizon. So the first thing the market’s going to do is look at this and say, okay, who else? Who’s next? Even if there isn’t one, they’re going to be looking.’
‘We don’t think there is a next one, by the way,’ said Strickland.
‘But you can’t be sure,’ said Abrahams. ‘You didn’t see this one, right?’
‘That’s exactly the problem right there,’ said Opitz. ‘That’s what everyone’s going to be saying, including other banks. Fidelian goes down, there’s going to be a scramble for safety. First up, anything to do with Fidelian – any loan, any asset, anything – gets sold, for whatever anyone can get for it. That hits other banks who are holding Fidelian assets. That puts those other banks in danger. That makes other banks want to stop trading with them. When the effects start to ripple out then other institutions that are sound but don’t have … let’s say they don’t have a lot of slack to play with, suddenly they’re in trouble as well.’
‘This sounds like 2008.’
‘It’s not 2008,’ said Strickland. ‘With a little short-term support, other banks aren’t going to fall over. The system is fundamentally sound.’
‘I agree with that,’ said Opitz. ‘But the shock will be huge. There’s going to be overreaction. Mr President, everyone’s going to say exactly what you said, this is 2008, even though it isn’t. It’s going to take time for them to realize that. And in that time, things are going to look very ugly.’
‘Can’t we force this bank to do something?’ said the president. ‘What about … can we take them over?’
‘You mean nationalize it?’
‘I don’t know. Is that what I mean?’
‘We have the powers to wind them up,’ said Opitz, ‘but that doesn’t solve the problem of the impact on the market.’
‘Well, can we force them to sell?’
‘No, sir.’
‘Are we sure about that? Have we checked all this stuff?’
‘We’ve explored all the options.’
‘I don’t think we ever conceived of a situation where someone would knock back a reasonable offer when they were staring at bankruptcy,’ said Ron Strickland.
‘Not for commercial reasons,’ murmured Ed Abrahams.
Knowles looked at him.
‘Mr President,’ said Rabin, ‘they could be bluffing us. It may be this is a way of trying to push up the price. They may be taking us to the wire.’
‘But it’s possible they’re not.’
‘Yes, sir. My suggestion is, the only thing we can do here is exert maximum pressure. I’ll be meeting with the heads of other banks I think I can get to come to the party. Will you speak to them if necessary?’
‘Do I need to do that?’
‘I think that may be needed, sir.’
‘I’ll check with counsel to see if that’s okay,’ said Roberta Devlin.
The president nodded.
‘The other thing,’ said Opitz, ‘is we need pressure on the other side. We need pressure on the PIC. They’ve either got to put up a good portion of the twenty-three billion or sell this company for a realistic price.’
‘We already tried putting pressure on them,’ said Abrahams.
‘Then we need to do it better.’
‘How do you suggest we do that?’
‘They’re an arm of the Chinese government.’
‘We spoke to their ambassador.’
‘Then we need to go higher.’
All eyes were on the president. He knew exactly what Opitz meant.
Knowles frowned for a moment. He turned to the Treasury secretary. ‘I’m not talking to anyone until I have something to say.’