Reid Treadwell spotted Betty Ladd sitting at her usual table in 1792. Motioning the maître d’ away, he went across to her, curious but not particularly concerned why she wanted to see him so urgently.
She was texting someone, and she looked up, a neutral expression on her face. Despite himself, Reid still thought that she was a fine-looking woman, and he almost regretted dumping her. Almost. And he smiled thinking about how she had reacted.
She put her phone down. “What are you all smiley about, Treadwell?” she demanded, the famous Ladd frown lowering the corners of her mouth. “Isn’t the world economic order on the highway to hell?”
Treadwell sat down across from her. “That’s what Seymour thinks.”
“He’s hardly ever wrong.”
The headwaiter came over, and Treadwell ordered coffee.
“Well, if he’s right this time, Burnham Pike will do what it can like we did in ’08.”
“The word is that your people are expecting the Chinese to implode over a brouhaha between the government and the PBOC.”
“Who told you that?” Treadwell asked, masking his surprise.
She smiled faintly. “Manhattan is a small town after all. Especially this end of it.” She drank some still-steaming coffee. “I’ve also heard that you people have been converting your in-house capital into cash and have sprinkled it around to FDIC-insured banks. Of course by law, you’d need to publicly disclose such a big move.”
Treadwell shrugged nonchalantly. It was his signature gesture in tense situations. “If such a thing were true—and I’m not saying it is or it isn’t—we’d be within our rights not to disclose it until we filed our quarterly with the SEC. And that’s two months from now.”
“Sounds like some more of Hank Serling’s doublespeak,” Ladd said. She leaned across the table, venom in her narrowed eyes. “Just for the sake of argument, let’s say you were pulling a stunt like that. You have clients who’ve invested billions with you. If you were making a move to protect the bank’s assets, you’d be required to offer the same protection to your clients.”
Treadwell’s coffee came, and he took his time stirring four packets of Splenda in the cup.
“Quit stalling, Treadwell. I want some answers that make sense, or I swear to Christ I’ll nail your fucking hide to the front door downstairs as a warning to other pricks like you.”
Treadwell continued stirring. “Sorry, Betts, but I like my coffee sweet, just like my women.” It was a riff on Ladd’s old saying that she liked her coffee hot, just like her men.
She didn’t rise to the bait. “Treating clients’ money differently than your proprietary capital is against securities law, as you damned well know. We could kick you off the exchange, the SEC could put BP out of business, and you would end up in jail.”
Treadwell grinned. “I hope it won’t come to that,” he said. “I’m told that prison coffee isn’t very good.” He looked around at the nearly empty room. “I’d miss this, you know.” He looked directly at her. “Especially you.”
She ignored his flirting. “I remember the stunt BP pulled in ’08. I wasn’t in charge of the exchange then, but if I had been, you assholes would have been swinging on the gallows.”
“Just like you, I wasn’t the boss then either.”
“But you were part of the inner circle. I’d guess one of the engineers behind the slippery short sales.”
In 2008, the subprime mortgage market was burning down. Amid the housing boom leading up to the crisis, banks had issued truckloads of mortgages to people who couldn’t afford them, called “liar’s loans.” The banks didn’t bother insisting that borrowers document their ability to pay even the interest, because the surge of subprime mortgages was jacking up home prices right through the roof. Everyone was getting rich.
Treadwell’s favorite story about those days was of the Las Vegas stripper who had no savings but had financed five houses, which she planned to flip at a higher price to avid buyers on the hot real estate scene. It was like playing at the slots, only this was a sure bet, she—like just about everyone else—thought.
Her plan was to pay off the loans and pocket the difference. But she was too late. The housing market collapsed, and she was out in the cold.
The smaller banks didn’t care that the loans were as rotten as last week’s fruit basket. They made their money by selling them to the big firms on Wall Street, such as Burnham Pike, which packaged hundreds of the loans into bonds, called mortgage-backed securities, and sold them to investors with no savvy.
When mortgages, by the thousands, defaulted, the bonds became worthless, the investors got screwed, and the financial crisis was in full swing.
Treadwell smiled. “What we did in ’08 was perfectly legal, and even you have to know it.”
“That’s open to interpretation, Treadwell,” she said sharply. “You people conned your investors like old-fashioned carney barkers. You knew damned well that the bonds were going into the pits, so you bet against your own customers. Doesn’t get sleazier than that.”
Burnham Pike had sold the bonds short in ’08, just as Treadwell and Dammerman were doing now with the S&P, waiting for the Abacus-fueled inferno. The company had made billions on those bond-shorting trades, and technically speaking it was legal.
When BP’s CEO and the company’s legal counselor were called before an irate congressional committee the next year, Treadwell’s predecessor claimed the shorting was a “routine hedging tactic” that all smart investors employed as insurance in the unlikely event that a trade went bad.
But Treadwell wasn’t about to tell the president of the New York Stock Exchange, or anyone else, for that matter, that he and his COO were shorting the primary stock market index using secret offshore accounts in an expectation of a Wall Street wipeout.
Nor would he tell her that BP would be the last, or among the last, investment firms able to mint a fortune in the ruins with little or no competition.
Nor that he, Dammerman, and O’Connell would enjoy huge bonuses in addition to the short-selling profits they would make. Nor that Spencer Nast, who’d leaked them CIA secrets about China’s possible troubles, would get his super-bonus once he rejoined the firm after his Washington stint.
Ladd was visibly angry, and it did Treadwell’s heart good to see a woman he considered an ice maiden losing control. “You’re not being very nice this morning, Betts,” he said, goading her.
“My name is not Betts, and no, I’m not nice,” she said loudly enough for the few other pre-lunch customers to overhear. But they looked away, no one wanting to offend two feuding Wall Street gods.
“Well, Ladd, don’t think for one minute that Burnham Pike would fail to give its clients the heads-up on a possible financial catastrophe.”
In fact, this one was covered. To withstand some official inquiry from Congress or the SEC or whoever down the road, Treadwell had personally directed BP’s client services department to warn the wealthy people, the pension programs, the university endowments, the charitable foundations, and all those who entrusted the firm to run their money.
They would start today after the market closed. By then, of course, it would be too late, unless the brighter clients acted immediately in the overnight markets.
By opening bell tomorrow, Abacus would be a done deal; the crash would begin and ripple across the entire planet.
“Knowing you like I do, your clients will get the word, but not until BP’s capital has been safely tucked away.”
She was right about at least that much. BP wasn’t about to let panicky clients rush to sell, disrupting the market while the firm was disposing of its own assets.
“We’re positioning the firm to help our clients and the entire investing community. You know damned well that a strong Burnham Pike is good for Wall Street and good for America. We won’t become another Lehman Brothers. Nor will we hold our hand out for a bailout if things do go south.”
“My ass,” Ladd said, pointing a long-nailed finger at Treadwell. “You smug son of a bitch. Whatever you’re trying to pull, I’m going to find out, and when I do, I’ll cut off your balls and shove them down your throat.”
“As you told Ashley,” Treadwell said. “Crude, but charming as usual.”
“Fuck you, Reid!” Ladd shouted.
Everyone heard her. The headwaiter started to come over from his station but then thought better of it and turned back.
Treadwell worked to keep his voice even. “Sounds like there’s more to this than BP’s business practices. Like maybe that I broke up with you. Get over it, Betts. That was ten years ago. At least have a little self-respect.”
“You told me that you loved me, you prick,” Ladd said, trying to control her voice.
“Ancient history, Betts.”
“I was a fool to believe you, and an even bigger fool to fall in love.”
Treadwell finally had his fill. “How could anyone love you? Even your husband took advantage of our little fling as an excuse to get out of a marriage to you. And I can’t blame him, it just took me a little longer to dump you.”
Ladd shot up. “You fucking bastard,” she said as she headed for the door. “Watch yourself, Reid, because I am.”