Modern finance being the marvel it is, you could even sell bonds you didn't own, just like the farmer's nonexistent grain. The Wall Street crowd called this a "naked" contract, since you were obligated to go out and acquire that bond in the open market on the day you'd agreed to deliver it, even if the price had skyrocketed in the meantime. Or you had to try and buy back the contract. Of course, you were betting that price would go down, letting you pocket the difference.
Pious spirits on the futures exchanges called these deals high finance and risk hedging. They operated, however, remarkably like legalized gambling. Dabbling in interest-rate futures was not for those with a dicey heart.
"Our objective," Noda went on, "is to cushion Japan's exposure somewhat."
"With futures contracts?"
"Precisely. U.S. Treasury obligations are held by a variety of investors in Japan, but up until now we have made very little use of the protection possible in your futures markets. Nippon, Inc. will concern itself with that."
I listened thoughtfully. "So you're saying you want to create an insurance program for Japanese investors in case the price of Treasuries weakens?"
It made sense. If interest rates went up here, reducing the value of their government paper, then the price of his futures contracts would rise to offset the loss.
I glanced over at Japan's monetary guru, Akira Mori, who
was carefully examining her bronze fingernails. Was she the one behind all this sudden nervousness about America's financial health? What could these two know that we didn't, I wondered. It was all a bit mysterious.
One thing was no mystery, though. Whatever was going on with Matsuo Noda and Akira Mori gave me a very unsettled feeling.
"I'm flattered." I looked him over. "But afraid I'll have to pass. This fall I plan to take off for a while and . . . catch up on some personal matters that--"
"Mr. Walton," he cut in. "I would urge you not to lightly dismiss my proposal." He was staring back at me intensely. "I can only say for now that issues are involved . . . well, they encompass matters of grave international consequence." Another pause, followed by a noticeable hardening of tone. "Your other obligations cannot possibly be as important. It would be in your best interest to hear me out."
Want the truth? At that moment all my negative vibes about Matsuo Noda crystallized. He wasn't threatening me exactly. Or maybe he was. The large viewing room was all but empty now. Maybe he'd deliberately waited before getting down to his real agenda.
"My other 'obligations' happen to be very important to me just now."
"Then please consider rearranging them."
"Besides, my fees can be substantial." They weren't all that substantial, but I was looking to slow him down.
"Your fees do not present a problem." He continued, "This afternoon a retainer of one hundred thousand dollars was deposited in your personal account at Chase."
"What in hell . . .!"
"Money is of no consequence in this matter, Mr. Walton. Time is."
"You seem awfully sure I'll agree."
"We expect your involvement to begin immediately. I cannot stress too strongly the urgency of what you will undertake." He smiled thinly. "I also feel confident a man who enjoys a challenge as much as you do will find our undertaking . . . intellectually rewarding."
Seems I was hired and I hadn't even said yes.
This guy had another think coming. Besides, he could get anybody to do what he wanted. He didn't need me. As I stood
there, I started trying to guess the dimensions of Matsuo Noda's financial hedge. Taken all together, Japan probably had roughly a hundred billion and change tied up in U.S. government paper. No way could he be thinking of covering more than a fraction of that. I knew plenty of law clerks who could do it, for godsake. A few phone calls to a couple of floor traders in Chicago . . .
"Look, the most I can do for you is recommend some very competent brokers I know to help you out. There shouldn't be too much to it. You'll just have to go easy. You can't hit the market makers in Chicago with too much action all at once. Prices get out of kilter. Then, too, there are exchange limits. . . ."
"That is why we will be trading worldwide." Noda withdrew a folded sheet of paper from his breast pocket. "Perhaps you'd like to glance over our program. These are cumulative totals, which include our activity to date, but we will begin moving much more rapidly as soon as I've completed all the financial arrangements with our institutional managers at home. Perhaps you will see why we need a monetary professional."
I was still chewing on the "financial arrangements" part as I took the paper, opened it, and scanned the schedule of contracts. While I stood there, the room around us sort of blurred out. I had to sit down again. All his talk about samurai and nerves of steel was for real.
Matsuo Noda had a program underway to sell futures on a pile of U.S. Treasury bills, notes, and bonds he didn't own, "naked," in an amount I had trouble grasping. I knew one thing, though: if interest rates headed down, raising the value of those presold obligations, he'd be forced to cover awesome losses. He'd be in a financial pickle that would make Brazil look flush. On the other hand, if some disaster occurred and U.S. interest rates suddenly shot sky high . . .
Numbers? The CBOT's long-interest contracts, notes and bonds, are in denominations of a hundred thousand each; the Merc's short paper, bills and CDs, are in units of a million per. Finally I did some quick arithmetic and toted up the zeros. Something had to be wrong here. Nobody had balls that big. I decided to run through the figures again, just to be sure.
It was along about then that I realized all Noda's pious talk about sheltering Japanese widows and orphans had been purest bullshit. Resting there in my hand was the biggest wager slip in world history. Assuming enough players could be found worldwide to take his action, he was planning to advance-sell U.S. Treasury IOUs in the amount of five hundred billion dollars. A full quarter of our national debt.
His bet: something or somebody was about to push America over the brink.
CHAPTER TWO
"Yo, counselor. Get thy butt over here and buy me a drink."
I was standing in the smoky entry of Martell's, on the way back downtown from Sotheby's, when I heard the voice, a Georgia drawl known from Wall Street to Washington. And sure enough, leaning against the long mahogany bar, the usual Glenfiddich on the rocks in hand, was none other than Bill Henderson.
Long time, no see. I'd actually stopped by for a little ninety proof nerve medicine myself, not to pass the time with America's foremost cowboy market-player. But the idea of bringing in a Wall Street pro was most welcome. If anybody could dissect Noda's game, Bill was the man.
What was I going to do? I'd stalled on giving Matsuo Noda a final answer, telling him I needed time to think. Then just to make sure the whole thing hadn't been some sort of macabre hoax, I'd checked at a Chase bank machine on Lex. He hadn't been kidding. A retainer had been deposited all right, presumably by certified check, since it had already cleared. I was on the payroll, ready or not.
Noda was right about one thing. What he planned to do had grave international consequences. The problem was, his game had just one payoff. The way I figured it, he won if, and only if, the U.S. suddenly went broke. As international consequences go, that seemed reasonably grave.
Henderson was the perfect guru to take apart the scenario. Assuming he was sober. Tell the truth, at first glance I wasn't entirely sure. The guy looked a mess. I assumed he was holding some sort of private celebration, or maybe it was a wake. What was the occasion?
"William H., welcome back to town. Thought you'd decamped permanently down to D.C."
"Packed it in. Back to start making a living again. Could be I've just set some kind of new world record for the briefest tenure ever seen on the Council." He eased over to make room, while the jukebox began some Bobby Short standard about incomparable NY. "So where's your TV star tonight? Sure love that gal." He toasted Donna's memory. "If tits were brains, she'd be a genius."
Sexist? Tasteless? That was merely Henderson warming up.
I hadn't actually set eyes on Bill since an ill-fated birthday dinner Donna had thrown for him in midsummer, a favor to a producer friend of hers at the station who'd wanted to try vamping a real live millionaire. That evening he'd arrived with a serious head start on the whiskey, his meditation on the concept of birthdays, and then proceeded to regale those assembled with his encyclopedic repertoire of farmer's- daughter and traveling-salesman vignettes. In the aftermath, Donna swore she'd kill him if he ever set foot in her place again. When I made the mistake of speaking in his defense, she critiqued a few of my character defects as well, then added me to the list.
"Friend, no small thanks to you and that sordid evening, I haven't seen Donna since."