“It is the Imperial Bank’s view that the real estate market has grown overheated,” said the banker, “and as a result too much capital is involved in investments offering no immediate return.” The banker, Lord Tchai Ridur, was a Torminel with exquisite diction, careful not to lisp around his fangs, and he dressed in a sober gray suit that matched the color of his fur. “We feel that a contractionary policy will be necessary in order to provide a correction.”
“My lord,” said Sula. “May I ask what form this contractionary policy will take?”
The banker stared at Sula through the opaque bubble-glasses that encased his eyes. “Lady Convocate?” he asked.
Sula repeated her question. The banker looked at Lord Ngeni, the committee chair, for clarification.
“The witness is at liberty to answer the question,” said Lord Ngeni. He was an elderly Terran with a large round black cannonball head set firmly on his shoulders. Crisp white hair and a deep bass voice added to an impression of effortless dignity and authority. He was the chief of the ancient and widespread Ngeni clan, and during the war one of his grandnephews had joined the Secret Army under Sula and died a hero’s death. Possibly as a result of this, he had welcomed Sula to the committee and now tolerated her questions at a hearing that was expected to be nothing more than pro forma.
Lord Tchai paused a moment to consider his words. The hearing room was small, with the Banking and Exchange Committee brightly lit under spotlights and sitting behind a long slablike gray table, with a tall white wall behind. The wall could show video at need, but at the moment it looked very much like a wall. Lord Tchai and his aides sat at a somewhat less imposing desk set before the head table, also brightly lit, with a very few spectators in chairs in the comparative shadows behind.
One of those in the shadows was Ming Lin, Sula’s economics adviser. Ming had apprenticed hurling bombs for the Secret Army and had prepared a few bombs for just this occasion. Her research into Cosgrove had borne explosive fruit. It would be Sula’s pleasure and privilege to make a few prominent, privileged people look stupid, venal, and ridiculous.
The Lord Senior might in the end regret appointing her to the Committee on Banking and Exchange.
“Lady Convocate,” said Lord Tchai, “there are a number of counterinflationary instruments available to us. We could cease to repurchase war bond debt at our current rate, which would have the effect of reducing the amount of money in circulation. We could increase the rate on discounts or overdrafts, which would have the end result of restricting the money supply. If this fails in its intended effect, we could increase the reserve requirements at our banks.”
“Not simply at the Imperial Bank, but at all banks?”
“That is correct, Lady Convocate.”
The banker looked down at his hand comm and prepared to continue his address. Sula interrupted him.
“May I ask, Lord Tchai, if this overheated real estate market is an empirewide phenomenon, or localized at Zanshaa?”
The banker licked his lips. “Inflation is a problem throughout the empire, Lady Convocate,” he said. “It is particularly concentrated in the housing market, and most especially in the capital.”
“You will be able to send the committee the statistics on which you base your analysis?”
“They are included in an appendix to my report, Lady Convocate.”
“Thank you, Lord Tchai.”
The banker gave a little huff of breath, perhaps to add an audible period to the interruption that had taken him from his narrative. His bubble-cased eyes returned to the text on his hand comm.
“I wonder, Lord Tchai,” said Sula, “if you think the recent failure of the Cosgrove enterprise is symptomatic of a larger problem in the economy.”
The banker was startled by the question, but responded firmly. “We have no reason to believe that.”
“I am relieved to hear it,” Sula said smoothly. In her mind, she lit Ming Lin’s first bomb and prepared to hurl it. “Can you assure me, then, that the Imperial Bank’s purchase from Cosgrove, eight days ago, of the entity called ‘Render Six’ was in the normal line of business, and not an extraordinary action on the part of the bank?”
Lord Tchai was frozen for a moment, then looked to the aides on either side of him. “I am not familiar with this entity, Lady Convocate,” he said.
“I am informed that it is something called a ‘Special Purpose Asset Vehicle, Class II,’” Sula added helpfully.
Tchai’s aides were murmuring commands into their hand comms. “I am not a specialist in these vehicles,” the banker said, “but I know that they are entities for the pooling of assets or to securitize asset-backed securities.”
Sula grinned. “They securitize securities? Aren’t securities securitized already? Isn’t that why they’re called securities?”
Tchai made an attempt to look stern. “Your ladyship is being facetious.”
Sula’s grin broadened. “I’m afraid so.”
The banker made the huffing noise again. “Lady Convocate, I shall endeavor to respond more clearly. The purpose of an asset vehicle is to bundle assets into a single package, usually for a very specific purpose.” The Lai-own aide on his right side directed his attention to his hand comm display. Lord Tchai took a moment to view the screen, then he gave that huff of air again.
“Your ladyship’s information is correct,” he said. “Render Six was purchased by the bank eight days ago.”
“For what sum?”
Lord Tchai peered again at the screen. “A hundred and six million zeniths.”
Sula was silent for a long moment, letting that vast sum sink in. “Was the bank in the habit of purchasing such vehicles from Cosgrove? Were there any more such purchases?”
She already knew the answer, but waited to see what the banker said. The fact was, Cosgrove’s business was privately owned by Cosgrove himself, or by his immediate family, and much of its workings were opaque until the bankruptcy forced his creditors into the open. Now creditors were filing their claims in court, and there were a lot of them. Ming Lin had carefully looked at such filings, and she’d found a number of investment vehicles similar to Render Six that Cosgrove had sold, all in the last few months. Then she had looked more closely at how long these vehicles had been in existence, and some of them had been created years ago, and held by Cosgrove himself.
“There’s no reason for Cosgrove to create these sorts of vehicles,” Ming had told Sula that morning, over coffee and brioche in Sula’s office, “no reason, unless it’s to hide unprofitable investments. He controlled dozens of companies, and some of them had to be underperforming, or unprofitable. So he shifts them all into Render One through Six, which takes them off his own books. He then looks far more profitable than he is and is able to borrow more money. As long as the money keeps flowing from the profitable elements of his business, he’s fine.”
Sula had inhaled the fragrance of her tea. “So why would he sell Render Six? Wouldn’t that give away his scheme?”
Ming Lin had laughed. “The money must have stopped flowing. Bills were coming due, and he dumped the parts of his empire that weren’t making money.”
“The Imperial Bank must have already had a ton of Cosgrove’s debt,” Sula had said. “Why would they buy his losing businesses?”
Lin had considered this, and then a wicked glimmer kindled in her eyes. “It’s possible they didn’t know what was in these vehicles,” she had said. “Cosgrove may have hidden his losses somehow, or misrepresented the profitability of the Render vehicle. But it’s also possible they bought it to hide their own exposure—Cosgrove created Render Six to hide his own losses, and then the bank bought it to hide how much Cosgrove owed them. It would give them time to sell Cosgrove’s debt on to investors and to other institutions.”
“Other banks?”
Lin had nodded eagerly. “Yes!”
“So they were likely selling Cosgrove’s obligations to other banks knowing that they would soon be worthless?”
Lin had grinned and shaken her pale rose-colored hair. “It’s certainly worth looking into.”
Sula inhaled again the fragrance of her tea. “I believe I shall,” she had said.
The memory of that fragrance tingled through Sula’s senses as she listened to Lord Tchai’s answer.
“According to what I’ve just learned,” he said, “we purchased another vehicle called Render Two a little over two months ago.”
Sula lit another one of Lin’s bombs and hurled it. “Was the bank aware that the Render vehicles seem to consist of Cosgrove’s losing businesses and investments?” Which was something that was far from proved, but Ming Lin had made it seem likely.
Lord Tchai stared in surprise, then conferred with his aides. “I cannot speak to that,” he said. “I don’t have the necessary information at hand.”
“Can you provide this committee with that information?”
“I will, Lady Convocate.”
“Thank you, Lord Tchai. In the meantime, can you also inform us if the Imperial Bank has sold amounts of Cosgrove debt in the last few months?”
Sula had to admire Tchai’s sangfroid. Even after she’d thrown Lin’s third bomb, his immaculate diction didn’t waver.
“I’m afraid I do not have that information available, Lady Convocate.”
“But you’ll share once you do?”
“Yes, Lady Convocate. Of course.”
“Why are you watching that?” Martinez asked. The video in Roland’s lounge was turned to a hearing at the Convocation, at a well-dressed Torminel, in the glare of spotlights, being asked questions by a panel of convocates, all of them wavering shadows in the strong light.
Roland gave a wave of his hand. “It’s very entertaining. I’m watching the Imperial Bank going down in flames.”
Hector Braga gave a laugh. “Earthgirl’s got them on the run!”
Martinez looked at him. “Who’s Earthgirl?”
Braga seemed a little uncomfortable, as if he’d revealed something he hadn’t intended. “I mean Lady Sula.”
Martinez made an effort to overcome his surprise. “She’s robbing the Imperial Bank? Characteristic.”
“It’s more like she’s pointing out the bank’s been robbed already,” Roland said.
“I’m more worried that it’s us being robbed,” Martinez said. He went to the bar and helped himself to coffee. “Those rumors about the Chee Company are really hurting us.”
“They can’t hurt us,” Roland pointed out. “The family owns a majority of the stock, and we can’t be kicked out. The stock is worth a little less right now, but in time it will bounce back.”
“It’s hurting our good name,” said Martinez.
“Our name is as good as ever it was,” said Roland.
Martinez had been summoned to his brother’s palace for what was described as a strategy session. What strategies were being discussed were unspecified, but Martinez had little enough to do and was pleased enough to be asked.
Roland’s lounge featured the eye-shaped windows of the Tanyl style, golden paneling of chesz wood, and accents of wrought iron. There was a bar, leather armchairs and sofas, and soft carpeting. In one corner, lemon-scented water chimed in a fountain’s scalloped bowl.
“I also wonder if it’s the beginning of a more general attack,” Martinez said. “This could be just the beginning.” He took his coffee to a chair near Roland and sat. Pneumatics sighed and he felt the chair align itself with his lumbar region.
Roland frowned. “I’ve already headed off the likely source of damage,” he said. “Lady Gruum contacted me—she’s heard the rumors, too, and I was able to reassure her that there is no impediment to the Chee Company continuing its work on Rol-mar.”
“Lady Gruum? Did she say where she heard the rumors?”
“From Lord Minno.”
“Minno?” Martinez was outraged. “He’s our banker!”
“He’s not our banker,” Roland said, “he’s Lady Gruum’s banker.”
“So why is he scaring her?”
“It’s his job to report anything that may affect the Rol-mar project,” Roland said. “But my guess is that he’s part of a syndicate deliberately trying to drive our price down. He may be shorting us, or hoping to pick up some of our stock cheap. The next step would be a pump-and-dump, where he spreads counterrumors to drive the stock price up, so that he can sell at a handsome profit.”
“That’s illegal, I hope,” said Martinez.
“Of course,” Roland said. “But it’s very difficult to prove. He can say he was doing his duty to his clients by spreading the rumors.”
“He’s with the Bank of the High City, no?” said Hector Braga. “Pity he’s not Imperial Bank—Earthgirl is going to keep them from thinking about anything but their own necks.”
Martinez turned to him. “Why do you call Lady Sula ‘Earthgirl’?”
Again an uncomfortable look crossed Braga’s face. “She was stationed on Earth, you know, a few years ago.” This seemed an inadequate explanation even though this was true, but Martinez decided not to pursue it.
“And what is this about the Imperial Bank?”
The Cosgrove revelations were explained to Martinez. “So the bank bought all these—what’s the term?”
“Special Purpose Asset Vehicles,” said Roland.
“Class II,” added Braga.
Martinez went to one of the room’s desks and called up its computer. He adjusted the screen and asked it for information about Special Purpose Asset Vehicles and discovered that such funds had to be registered with something called the Imperial Securitization Section of the Ministry of Finance. From their files Martinez was able to call up the necessary information on the Render entities and learned that Cosgrove had created six such vehicles over the past five years and sold them all in recent months. He’d also created and sold two vehicles called Reaper, and another called Restore.
“The Bank of the High City bought one of the Renders, and also a Reaper,” Martinez said. “And the Bank of the High City is publicly traded, is it not?” He laughed. “I believe we may have our vengeance on Lord Minno.”
“Hardly seems worth our while,” Roland muttered.
Martinez tracked the rest of Cosgrove’s entities through the system and discovered that they had ended up in three banks, one of which was publicly traded and the other two of which were privately owned. All these banks had appeared as plaintiffs before the bankruptcy court concerned with the failure of Cosgrove’s enterprises, and all were thus revealed to hold a considerable amount of Cosgrove’s money-losing assets, with a few profitable businesses folded in to make the package seem more attractive. When Martinez looked at the dates on which the debt had been acquired, he whistled.
“The Imperial Bank has offloaded a good deal of the Cosgrove debt in the last two months,” he said. “That tells me they knew it was worthless. And the Bank of the High City bought into that debt to the tune of—” He ran sums in his head. “Four hundred fifty million. And that’s exclusive of the Render and Reaper, which set them back at least a hundred million each.”
For once Martinez had the feeling that he had Roland’s full attention.
“How many people know this?” Roland’s voice was dreamy, as if he was speaking from somewhere in the interior of a lush fantasy that was scrolling before his eyes.
“We three. And people at the Imperial Bank have to know. Plus, if anyone was watching the hearings and paying attention, they might be able to work it out.”
“I doubt there were many people watching,” said Hector Braga. “It was a quarterly meeting for the Imperial Bank to deliver a routine report. Not even financial reporters turn up for it; they just read the report later. The only reason we knew to watch was because Lady Sula told me she was going to ask some unsettling questions.”
Roland’s eyes seemed still focused on his inner vision. “I think we should get our short positions in place,” he said, “before it becomes a stampede.”
The next half hour was filled with activity. Martinez and his brother placed large bets against the two publicly traded banks, and Hector Braga, caught up in the enthusiasm, made some bets of his own. Martinez’s sisters Vipsania and Walpurga arrived while this was going on, and once the situation was explained, they made their own shorts.
“If only there was a way to short the Imperial Bank,” Martinez said. “Not to mention the two privately held banks that bought Cosgrove’s debt.”
Roland strolled back from the bar carrying a tray with glasses and a bottle of mig brandy. “I think we should celebrate our good fortune,” he said, “and not wish for windfalls that aren’t possible.”
Martinez looked at his cold cup of coffee, with its oily sheen, then withdrew his hand. “Oh, I know I can’t short a privately held entity,” he said, “but I might be able to bet against them in other ways—at a gambling club, for example. After all, the Corona Club runs its own tote. I’d just have to find someone willing to take my bet.”
Roland sighed. “I realize that you’re a Fleet officer, and you’re used to pouncing on an enemy at the decisive moment, but you need to stay away from this. Making a side bet on the price of a stock, or on interest rates or market indexes, is called ‘nonmarket derivative trading’ and it’s completely illegal. The Lai-own traders who invented those methods centuries ago made a packet at first, then lost their firms a colossal amount of money. As a consequence they were executed, and their methods outlawed.”
Martinez frowned. “That just means I’ll have to think a little harder about what I need to do,” he said.
“Perhaps this brandy will aid your thoughts.”
Martinez took the glass, brought it to his nose, and inhaled the sharp, spicy odor. Roland passed out the other glasses, and then raised his own.
“To an unexpected windfall,” he said. He directed his toast to his brother. “Thank you, Gareth.”
“My pleasure, I’m sure,” said Martinez, and drank. The brandy burned down his throat.
Roland seated himself. “As interesting as the last hour has been, it’s been a distraction from the issues I planned to raise at this meeting. The first explains why I’ve invited Mister Braga to join us—it involves Lady Tu-hon, and her reluctance to cooperate with us despite our having offered . . . inducements.”
Martinez straightened in his chair, suddenly interested. It was very unusual for one of Roland’s purchases to rebel, and it spoke to either unusual firmness of character or unbounded recklessness.
“What’s she done?” Vipsania asked.
“Voted against our interest most of the time. I’ve spoken to her on occasion and reminded her that I had hoped she’d be more of a friend to us, but she just says that she is voting in accordance with her long-held principles.”
“Can any more pressure be applied?”
Roland looked skeptical. “I loaned her eighty-three thousand zeniths for her to acquire Rol-mar bonds. I paid less than that for this palace. But the terms were that she would pay me back when she was in funds, and though I’ve spoken to her about it, she is still claiming to be cash-poor.”
Vipsania gave a little sniff. “There’s no record of this loan, is there?”
“No, it’s all . . . off the books.”
“Well,” Vipsania said, “it appears you’ve given Lady Tu-hon a new palace, with nothing to show for it.”
Hector Braga plucked at the knees of his braided trousers. “We could arrange for her to suffer a disappointment in the Convocation.”
“Has she got a legislative program of some sort?” Walpurga said. “How do we defeat it?”
“Lady Sula is with Tu-hon on one of the committees,” Braga said. “She says that all Lady Tu-hon cares about is money, and that she’s one of the convocates planning to repeal the income tax and restore tariffs on interplanetary trade.”
“We’d oppose that anyway,” Roland said.
Walpurga looked at Vipsania. “I don’t suppose Empire Broadcasting’s news unit could do a piece on the Convocation? Mention that—I don’t know—Lady Tu-hon is infamous for not repaying her debts.”
Vipsania was skeptical. “The censors are very careful about what we say about the Convocation. And I don’t know if you want to mention Lady Tu-hon and debt in the same breath—someone might accuse us of trying to bribe her.”
Hector Braga grinned. “Can’t have that,” he said.
Martinez took a slow sip of his brandy and let it roll across his palate. He was carefully examining an idea that had floated up in his mind, examining it with careful mental fingers as he might examine a newborn child, testing it for soundness. It seemed sound enough.
“Let’s just take a lot of her money,” he said. “And Lord Minno’s, too.”
Roland looked at him. “You have a plan? A legal plan?”
“Yes. But first, let’s thwart Minno on another level by stabilizing the price on Chee Company stock—our cash reserves are up to it, yes?”
“Possibly. But why? The price will return to normal in any case.”
“I’d like to demonstrate to the syndicate that’s manipulating our stock that we’re willing to spoil their party. And also, I want Lord Minno to be just a little hungry for money.”
Roland nodded. “Tell me what you’re planning,” he said, “and then I’ll know whether or not I need to consult a lawyer.”
The Bank of the High City was built of the same granite that made up the High City’s acropolis and meant to suggest the same sort of permanence. The polished brass central door was flanked by bulbous eggplant-shaped towers that loomed over the mortals on the street below, as if to intimidate them with the bank’s sheer power.
Martinez, who was not intimidated, passed through the brass doors with confidence. The interior featured beige paneling and more bright brass, and the air carried the scent of polished leather. Martinez asked for Lord Minno and was shown directly to Minno’s office on one of the upper floors. The office was decorated in dark tile with patterns of bright golden starbursts, which probably featured enough contrast so that Minno could perceive them with his optical patches—the tiles would also reflect sound well, which would aid his echolocation.
“Lord Minno,” he said as he entered.
Lord Minno was not at his desk but disposed on a sofa at one end of the room. “Welcome, Captain Martinez,” he said. “I was about to take my wives out for our spa treatment.”
The wives in question shared the couch with him, and at the sound of Martinez’s voice they turned toward him with their large bat ears spread wide.
“I won’t keep you for long,” Martinez said. “I have only a question.”
Both Lord Minno’s wives got to their feet and loped toward Martinez to investigate him. Pointed faces sniffed at his legs and crotch. He patted each of them on her purple, hairless head.
“This one is Vetso,” Lord Minno said, pointing. “The other is Desto.”
“They’re beautiful,” Martinez lied. Minno’s wives cavorted about his feet.
Blind and living in a world of sound and scent, Cree spent the first few years of existence as quadrupeds, gamboling about like puppies, and with about as much intelligence. The males later developed human-scale intelligence and upright posture, but the females remained four-legged and simpleminded. Martinez had to admit that the females’ nearly hairless purple bodies, with their big ears, eyeless pointed faces, and dark optical patches, should have been repellent to the average Terran; but in fact the Cree females had such strong, cheerful personalities, and were so endearingly clumsy, that he found them strangely winsome.
Even though biologically speaking the females were little more than mobile wombs, they and the males formed strong bonds with one another. The males lavished affection on the females, and Minno had given his wives jeweled collars, anklets, and clothing as elaborately purfled and ruched as the outfit he wore himself. Which was all the more generous, because the eyeless Minno couldn’t even properly see or appreciate his wives’ outfits.
Lord Minno rose to his feet and called his wives to him. They joined him happily, and he issued a set of clicks and gobbles that Martinez presumed were terms of affection. Then the sounds ceased, and Minno’s ears focused on Martinez.
“You had a question, Captain?”
“It involves a retired petty officer of my acquaintance,” Martinez said, “a man named Alikhan. I was at the Metropolitan Club this morning, and I saw that he was registering a bet with the tote.”
“That is hardly unusual,” said Minno. “I myself am a member, and I place bets there all the time.”
“You normally don’t see petty officers in a place like the Metropolitan Club, but it seems he’s inherited some money and can afford a membership. But it was the subject of his bet that really raised a question in my mind.”
“Yes?”
“He’s offering a bet that Lady Kannitha Seang will lose her job within two months.”
“The head of the Imperial Bank?” Minno was clearly puzzled. “Why does he think Lady Kannitha will be dismissed? Or does he think she’ll resign for some reason?”
“He happened to see a picture of her somewhere eating a bowl of stew made with hominy and potatoes. He says that anyone who eats hominy and potatoes in the same dish can’t possibly prosper. He thinks she’s doomed.”
Lord Minno paused for a moment. “You are not joking?”
“I can assure you that he wasn’t joking. And he’s backing his bet with his entire savings—four thousand zeniths. Anyone who takes that bet and has the patience to wait two months will just be able to walk off with the money.”
“It sounds as if your petty officer is disturbed in his mental processes. But you had a question, did you not?”
Martinez spread his hands. He found himself trying to make contact by looking for Minno’s eyes, but of course Minno had none.
“Well—now it seems a little absurd even to ask. But I was wondering if you’d heard any disturbing rumors about Lady Kannitha, or any reason why she might be resigning anytime soon. Because if she isn’t, then I’ve got to try to contact Alikhan and convince him to withdraw his bet.”
“I have heard nothing derogatory about Lady Kannitha,” said Minno, “and can conceive of no reason why she would resign. Heading the Imperial Bank puts her at the absolute peak of her profession.”
Martinez sighed. “Alikhan is stubborn,” he said, as if to himself. Then, to Minno, he added, “At least he was intelligent enough to demand high odds. That alone might deter anyone from taking the bet.” He shrugged, then realized Minno probably would not be able to detect the gesture. “But if someone does bite, he’ll have a very pretty payday in a couple of months.”
“I hope the situation resolves itself to your satisfaction,” Lord Minno said.
“Thank you for your counsel,” Martinez said. “I won’t detain you any further. Have a pleasant time at the spa.”
“We shall! Thank you very much, Captain Martinez.”
Martinez watched Lord Minno and his wives recede down the corridor and hoped he had been convincing, and that Minno’s keen hearing had detected no trace of the mendacity in his words.
Martinez had bought Alikhan a membership in the Metropolitan Club and loaned him the money to make his bet. His plan took the chance that Minno might know how much of Cosgrove’s debt Imperial Bank had sold his own firm and been privy to any complaints that High City might intend to lodge against Imperial and Lady Kannitha Seang—but years of working within the vast bureaucracy that was the Fleet had convinced Martinez that, when something went badly wrong, the instinct to cover up the mistake trumped any public airing of grievances. Those who had purchased the bad loans, and their supervisors, might now be sweating through a well-bred panic attack; but they would almost certainly not have shared their plight with Lord Minno, who after all worked in a different department, and whose job was not to purchase and manage debt, but to create and sell bonds.
Now, he thought, much would depend on how greedy Lord Minno was feeling this afternoon. For Alikhan was demanding formidable odds of twenty-three to one on his bet, which might give even Lord Minno pause. But Lord Minno’s credit was good, and from Minno’s point of view, all he had to do to earn four thousand zeniths was to sign a note at his club.
After all, hadn’t Cosgrove said that when you encountered a bet at those sorts of outrageous odds, you took it? Though perhaps, Martinez thought, Cosgrove wasn’t the best example to follow at this point in time . . .
And in any case there were other bets being laid today. One of Hector Braga’s allies in the Convocation would even now be informing Lady Tu-hon of another extraordinary bet placed at the Ion Club, this one based on the future career prospects of the president of the Bank of the High City. And Lady Tu-hon’s greed, as far as Martinez was concerned, was already proven.
The best part was that the bets did not fall under the illegal category of nonmarket trading. He wasn’t betting on stocks or indexes, he was betting on whether a few prominent people kept their jobs. The bets were unusual, but they were hardly against the law.
His intuitions were proved right less than an hour later, when he found out that both bets had been accepted.
Strolling home through the Garden of Scents off the Boulevard of the Praxis, he decided that he should find out if any of his family’s money was held at the Bank of the High City, or any other bank that had bought Render and Reaper, and make sure the cash was shifted to a safer harbor.