Ghosts of Manhattan: A Novel(12)

“How are they?” There doesn’t seem to be much interest behind this question as she moves into the kitchen to get a bottle of water from the refrigerator. Last night must have been worse than I thought. I’m sure I didn’t piss the bed, though. I ruffle her hair to try to break through. This is a thoughtless and desperate reflex as I know she hates when I do that, and I jerk my hand back awkwardly.

“Fred Cook called again,” she says.

“Did he leave a message?”

“No, he just said to call him. He’s very rude.”

“He’s not rude, he just doesn’t have any social graces. He doesn’t know anything but math and software programming. Not a lot of gals. Even on the phone with a woman, he gets the way a little kid who’s never had a pet will get around a dog. He doesn’t know what to do, so everything gets tight.”

“Well, why does he keep calling you at home?”

“He’s a conspiracy theorist. His job is to analyze the overall risk of the firm and he thinks what we’re doing is too risky. He thinks he’s Deep Throat.”

“Why does he want to talk to you?”

“I think he wants to speak with someone in trading. We’re the ones making the risky bets. Plus I’ve known him for years.”

“Can you get in trouble for talking to him?”

“No, the company pays him for this.”

“Then why does he have to call you at home?”

Good question. “I don’t know. He’s just paranoid, I guess.”

“Paranoid about what?”

“Freddie thinks we’re taking on too much leverage, making bets with cash we don’t actually have.” Julia has an aptitude for numbers and she seems genuinely interested. Maybe she thinks the more she knows about my career, the better she’ll be able to convince me to leave it. “It’s like you want to buy a house for a million dollars. You put down two hundred thousand and the bank loans you eight hundred thousand. You pay the bank eight percent on the loan.”

She nods. Along with the rest of America, she understands this much already. I go on. “So the bank holds that loan as an asset making eight percent. We’re trading in products called derivatives, sort of like insurance, that basically allow us to sell that asset over again. Maybe we sell it four more times, so now it’s the equivalent of five people paying that eight percent for a total of a forty percent return. All of this with just the initial two hundred thousand you put down. That’s the leverage.” She nods again, allowing that five times eight is forty. “As long as the economy is good and people are making their payments, it works. If the payments are missed, then everything fails, not just the original eight-hundred-thousand-dollar loan, but all five million.”

It feels good to be having an actual conversation, even if it is work crap. Her mood feels like it’s lightening and we’re getting past last night. I’m thankful we’re in the kitchen and not by the coffee table. “And what’s the chance that happens?”

“Freddie’s point is that it will happen. It’s just a matter of time.”

“What do you think?”

“There are always cycles. Eventually it’ll cycle down. I don’t know if it’ll be the apocalypse for Bear that he’s talking about. But Freddie’s a brilliant guy. He went to Harvard and has a PhD in math from Princeton.”

“What’s he doing at Bear?”

“Most of the big firms poach these quant guys to do market risk analysis of the firm’s positions. Bear pays better than academia. Not every CEO wants to listen to it, but they all have this kind of department in place now. These guys don’t fit into the culture very well, though. They’re treated like internal affairs.”

“That’s why he’s acting like it’s a big secret?”

“We’re a public company. If he publishes this report, even internally, it’s on the record and someone has to do something about it or they’re on the record as ignoring it. Right now nobody wants to hear about it because we’re making too much money. Nobody wants to be on the record for something that might bite them in the ass later, but they don’t want to change what they’re doing either. Freddie’s forcing the issue. People might have to choose.”

She nods again and seems finished with this, like she’s closing a book and putting it down. She turns her head then. “We should call Oliver and Sybil Bennett and set our dinner date.”

Crap. We had been seated next to Oliver and Sybil at a wedding in Long Island a couple weeks earlier and managed to have a civil conversation. Oliver’s an investment banker at Bear and I know him in passing. He’s a blue-blood little snob, someone I’d expect to be a natural son to my mother. He also reminds me of Julia’s father. “Babe, I don’t want to go to dinner with those two.” I can feel the whine in my voice.

“They seem like nice people. He’s one of the few people we’ve met lately who doesn’t have to talk about himself the entire time and spent some percentage of the time, greater than zero, asking questions of me and listening.”

“I don’t think they seem like nice people at all.”

“Well, we’ve said we’d make a dinner plan in the city with them.”

“No one actually meant that, did they?” I truly believed that no one did.