Spencer Nast was waiting in the Roosevelt Room when Sam Kohlberg brought Bob Nichols and Joe Miller in, and the three of them sat down at the long conference table across from him.
Miller just nodded, but Nichols smiled. “Good afternoon, Spence,” he said.
“It’s Spencer.”
The only people who got away with calling Nast Spence were his superiors plus Don Pennington, whose campaign contributions had landed Pennington the New York Fed presidency, and who would keep the pols away when BP emerged on top from the rubble.
“Good to know,” the Treasury secretary said.
It was a wonder in Nast’s mind how the idiot ever managed to write a Pulitzer Prize–winning book. “What were the two of you doing on the Hill?”
“Taking Holland’s temperature, because we’re going to need her help getting our rescue plan through Congress.”
“You mean the one I worked out?”
“Actually, no,” Miller said. “Bob and I have come up with a program that’s a lot more practical than yours. Your idea about turning the Federal Reserve into a cornucopia of newly created money is … what can I say? A recipe for disaster? The dollar would become next to worthless in the international trade market. Our exports would suffer for sure, and our role in international finance would evaporate.”
“How do you expect to bail out the banks and just about everyone else who’ll go down the tubes if the market crashes? Where’s the money coming from? More borrowing? The auction failure today sent us a clear message that investors are getting sick of our sky-high debt. The only possible resource at this point is the Federal Reserve.”
“Over my dead body,” Miller said dramatically.
Nast wanted to say that Butch Hardy could arrange an accident. Problem solved.
“Holland isn’t particularly impressed by your plan,” Nichols said.
“She’s a politician and doesn’t understand it. What do you expect?”
“You got a beef with politicians, Spence?” President Farmer asked as he came through the door.
“No, sir,” Nast said as he and the others got to their feet.
“Take a load off,” Farmer said and sat down at the head of the table.
The others followed suit.
“I was talking about the Speaker, Mr. President,” Nast said. “She’s never been known as a deep economic thinker.”
“You’re right, but she’s a shrewd woman who gets things done. We don’t see eye to eye, never have. But I respect her, and I advise that you do the same.”
“Yes, sir, I will,” Nast said. “But for the moment I’d like to go over some of the finer details of my plan with you.”
“You’ve already briefed me, and I’ve read the thing,” Farmer said, and turned to Nichols and Miller. “Now, I’d like to know why you pulled an end run on me by talking with Stephanie before we hashed things out. I expected you to stick around until Spence got here, and between us we could figure our way out of this mess—if a mess is actually coming our way, as you all seem to agree it is.”
“It is, Mr. President,” Nichols said.
“Bob, I could fire your ass in a New York minute if you refuse to play fair with me,” Farmer said, and he turned to Miller. “You’re an independent over at the Federal Reserve, but with not too much trouble I could pry you loose as well.” He paused for effect. “Do we understand each other, gentlemen?”
Nichols nodded, but Miller started to object until the president cut him off.
“You’ll get your chance, Mr. Chairman, because I truly want to hear what you have to say. I want every idea on the table here, even Spence’s wild plan.”
Nast had to keep from smiling; his wild plan?
Farmer swept his large hands across the tabletop as if he were smoothing a wrinkled map. “Here’s the lay of the land,” he said. “Back in ’08, when the world financial system was going to hell, the Federal Reserve chairman and the Treasury secretary worked together to save it, with the New York Fed chief putting the program into effect. But I get that Ben Bernanke and Hank Paulson had advantages we don’t have. Like a debt load that was way lower than the one we’re faced with, and an unflagging demand for our T-bonds.
“I want to know what we can do this time. Pay through the nose in higher interest rates to take on even more debt than we’re already choking on, like Joe and Bob want? But that’d just be kicking the can down the road, to my way of thinking. Or raid the Federal Reserve to pull new money out of the clear blue sky, which among other things would put twenty large in the pockets of the bottom half of the American public? What Spence wants.”
“Mr. President, if I may have the floor for a moment—” Nast began, but again Farmer cut him off.
“Here’s the problem, Spence. My original idea was that you would quarterback our rescue operation from behind the scenes, and the Fed and Treasury would carry the ball. Especially Bob, because old Miller is about as unloved in Congress as you are. But I’m having a whole lot of trouble seeing how you’re all going to work together. As a team.”
Nast tried to speak up, but Farmer continued, “Now, Joe, how about you give me your grand vision, and try not to bore the living bejesus out of me.”
“My pleasure, Mr. President,” Miller said. “And I’ll try not to bore you.”
“I’m a simple country boy. Get to it.”
Miller launched into a complex explanation of what the debt load was doing to the government and to the economy in general, and his opinion that the situation would get worse—much worse—unless something drastic was done immediately. It was something he’d already explained, but when a president asked a question, you answered it.
After nearly ten minutes, Farmer raised a hand, and Miller stopped short.
“That was better than Ambien,” Farmer said. “What you’re saying is that since we’ve already piled on a wagonload of debt, what’s a few tons more? We need to save the economy, right?”
“Yes, sir,” Miller said and he started to say something else, but once again Farmer cut him off.
“There’s an important detail you’re missing.”
“If it’s how much we’d have to shell out, Mr. President, it would be substantial. In the coming auction we’d have to raise the rate on our ten-year Treasury—our benchmark obligation—from three percent to seven. And should the Chinese catastrophe actually occur, well—”
“What’s missing, Mr. Chairman, is Spence’s good idea about giving the bottom half of the American public some much-needed cash. If we assume that China wrecks the world’s economy, it would mean a lot of our folks would be out of work. Spence’s payout would tide them over and put money back into our economy. It’d be like giving a transfusion to a weak patient.”
“You’re talking about socialism, sir,” Miller blurted.
“I was waiting for you to trot out that term,” Nast said. “Anytime Washington gives something to tide people over, you make it seem like the Russian revolution, the Bolsheviks storming the czar’s palace gates. By your logic Medicare and especially Social Security are socialism too. But because they work so well and they’re so popular, no one wants to ax them or even shrink them.”
“They’re bankrupting us already, and everyone knows it,” Miller said. “Their benefits need to be trimmed right now. Cut in half.”
“Not on my watch,” Farmer said.
“And what will you do when the next Treasury auction at seven percent fails as well, Joe?” Nast asked.
“You think that you can just waltz in and convert the Federal Reserve into a direct-revenue source for the government?” Miller demanded. “Only taxes and borrowing can do that by law. And there are a lot of statutes that would get in your way if you tried something like that.”
“We’ll change them,” Nast said in a rush. He knew he was on top.
Farmer rapped his knuckles on the tabletop. “Enough,” he said. “We can work out the details later on. But for now we have a more immediate concern that we have to deal with.”
“What’s that, Mr. President?” Nichols asked.
“A possible scheme by a man we all like and distrust coming down the pike to corrupt high government officials. A man by the name of Reid Treadwell, who is a personal friend of mine.”
Nast had a hard time catching his breath. It was as if all the air had suddenly left the room.
“Reid has greased plenty of palms. My election campaign for one. Your high and mighty university chair, Mr. Chairman, was funded by Burnham Pike. And, Spence, you were his top economist and still are.”
“Sir, you told me to cut off contact with Reid. It’s done. And my dealings with him have been at arm’s length ever since I came to work for you.”
“Son, you’re pissing in my ear and telling me it’s raining outside,” Farmer said. “Don Pennington called me and said you offered him Bob Nichols’s job as Treasury secretary. The only problem is, it’s not yours to give. What’s worse is that Don said that the price was to ‘play ball,’ as he put it. Meaning don’t give Wall Street—Burnham Pike—a hard time if shit goes south. Look out for their interests. I’m thinking that Burnham Pike wants to clean up like they did in ’08. I can smell a Reid Treadwell maneuver rolling down the road at us. And in my book, what you tried to do to poor old Pennington was outright bribery.”
“Mr. President, I never offered Don anything.”
“Nasty, I was born at night, but not last night. Pennington wants Bob’s spot at Treasury, but he doesn’t trust Treadwell to add up two and two to get four. He ratted you out, my boy.”
“With all due respect, Mr. President, it’s his word against mine. He may have misinterpreted what I told him. He’s a part of the bank regulatory process, and I never told him, or even intimated, that he go easy on Wall Street. In fact, I told him the opposite. Vigilance, I said, if any firm oversteps its bounds.”
Farmer laughed. “You’re tap-dancing faster than Fred Astaire,” he said. “Thing is, I got another call about you this afternoon.”
“Sir?”
“Betty Ladd, who’s a straight shooter in my book, said she was sure that Treadwell was up to something no good. Could be whatever it is has something to do with a computer virus or something. This thing apparently could screw up stock exchanges around the world. At that breakfast you had with Treadwell and his crew this morning, you were all toasting it.”
Nast struggled for a response.
“And it had a weird name too,” Farmer said. “Abacus, I think Betty said.”