The Takeover

by Stephen W. Frey

  Because of his tremendous clout, financial analysts and investors worldwide attempted to interpret Filipelli’s every move. An utterance, an offhand remark, a sneeze, for Christ’s sake, could set off panic buying or selling in markets around the globe. He laughed again. It was an incredible country where a poor Italian family, only two generations removed from the heart of Brooklyn, now hailing from a backwoods Alabama town, could produce a son able to rise to such a position of influence without the use of military force. Perhaps it really did matter who you went to kindergarten with.

  Typically, the chairman of the Federal Reserve and the President worked at arm’s length. But President Buford J. Warren, former Democratic Senator from Alabama and a self-proclaimed Washington outsider, had proven to be an atypical President, a man unwilling to abide by tradition simply for tradition’s sake. He had deemed that the country, mired in an economic malaise brought on by the huge federal budget deficit, needed action when he took over the executive branch.

  So when the existing Fed chairman’s term expired three months after Warren’s election, he bucked the system and kicked the man out, calling on his old friend, Carter Filipelli, who, at the time, was chief executive of Alabama’s largest savings and loan, Great Southeastern Savings, to run the Federal Reserve. The President needed Filipelli to take firm control of the country’s central bank and assist him in implementing his domestic and foreign policies. Now, after three years at the helm, after all the financial pundits had initially predicted doom for the country as a result of the President selecting such an inexperienced man for such a terribly important job, and after Wall Street had initially crushed the New York Stock Exchange and the government bond market upon the announcement of Filipelli as chairman, he was one of the most respected men in Washington. Not liked, but respected. And he had the President to thank. Filipelli would be loyal to the man until the day he died.

  In twos and threes the other members of the FOMC began to trickle into the boardroom, their conversations ending immediately at the large oak door. They moved silently toward their assigned seats. The room was intimidating even to these people of importance, so they did not converse once they entered it. Finally, all but one representative had taken his or her seat in the stiff, straight-backed chairs.

  The FOMC met eight times a year on a regularly scheduled basis in the Washington boardroom, and on an ad hoc basis if market conditions warranted. The primary job of the committee members was to decide what action, if any, was needed to stimulate or retard the growth of the United States economy. They were also responsible for the health of the member banks of the national banking system and for calming jittery financial markets in times of turmoil. The committee was composed of Filipelli and the six Federal Reserve governors, the twelve bank presidents of the United States Federal Reserve districts, and the assistant secretary to the board. Only eight of the members—Filipelli, the six governors, and the New York Fed president, Wendell Smith—had permanent votes on the committee. And only twelve members voted at any meeting—the other four votes were filled on a rotating basis by the eleven non-New York bank presidents.

  Filipelli looked around the room, making eye contact with each person individually, and the man or woman formally nodded back at the chairman before he would relieve them of his fierce glare. Each member’s vote theoretically carried the same weight, but Filipelli so dominated the proceedings that any vote had become little more than a formality. Filipelli ruled the twenty-member committee with an iron fist, leaving little room for negotiation. His manner was gruff, and he wasn’t afraid of ruffling a few feathers. Though not overtly advertised, Filipelli had a promise from the President to undermine the authority of any FOMC member who was not loyal to the chairman, and each member knew it.

  When an FOMC member made a statement he did not care for, Filipelli’s reaction was immediate and forceful. He would bang the table with his huge black gavel and then sneer or simply interrupt the speaker and inform him that his time had elapsed. Filipelli did not care if he was perceived as a rube. He was in Washington to do a job, and so far it was going pretty damn well.

  The large grandfather clock next to the door chimed nine times. As the ninth chime faded, Filipelli rose quickly, removed his plain suit coat, hung it over the back of his chair, and rolled up the sleeves of his blue dress shirt as he sat down again. The other members watched carefully. No one else would even consider removing his suit coat, much less rolling up his sleeves.

  Filipelli would not have been a physically imposing man—he was just five feet nine inches tall and of medium build—except that his features were sharp and well defined. This definition intimidated people. The raven-colored hair lay perfectly flat on the top of his head, slicked straight backward with styling gel to reveal a wide and sloping forehead. But in the back it stuck out, like porcupine quills. Brown eyes darted beneath thin, razor-straight eyebrows. His nose was long and pointed, and his mouth was set in a permanent scowl matching that of the huge eagle over the fireplace behind where he now sat. He rarely smiled in this room.

  The black gavel, trimmed with gold paint, smashed onto the table. “The meeting will come to order.” Despite his southern upbringing, Filipelli’s nasal accent still reflected his Brooklyn roots.

  The eighteen other members in attendance straightened in their chairs and attempted to match Filipelli’s scowl. None was able to do so.

  “It is nine o’clock and the meeting will begin as scheduled.” Filipelli spoke with purpose. “President Smith of the New York Federal Reserve district has chosen not to join us today.” Filipelli pointed at the empty chair at the end of one side of the table. “He did not bother to inform me of his absence. However, we will continue with our agenda anyway. I thank the rest of you for being punctual. President Obrecht of the Minneapolis Fed. You will vote for President Smi—”

  “I’m here, Chairman Filipelli.” Wendell Smith sarcastically emphasized the word “Chairman.” He moved smoothly into the room, smiling suavely at the other FOMC members. He stopped to shake hands with Obrecht, whispering an apology to the man, who was obviously relieved at Smith’s last-minute appearance. Finally, he sauntered to his seat.

  The other committee members glanced at one another and leaned back in their chairs. Obrecht was not the only one who was relieved. Smith was the second most powerful member of the FOMC, and without his attendance, Filipelli would have run through the meeting like a freight train.

  Filipelli watched Smith open his leather attaché case and arrange several papers before him on the grandiose table. He despised Smith. He was part of the Yankee Establishment and flaunted it. A distant relative of John D. Rockefeller, Smith lived in a gorgeous Darien, Connecticut, mansion with his wife, Traci. Smith was worth at least forty million dollars—more than the rest of the committee combined—and he wasn’t bashful about informing others of his wealth. More than once Filipelli had overheard Smith at an official Fed function telling someone about his chalet in Switzerland, the yacht in West Palm, or the Rolls. He was blond, blue-eyed, six feet two inches tall, permanently tanned, and without any outstanding physical features. His clothing was expensive but conservative, except for his neckties and suspenders, which were loud and provocative. His suits were cuffed and never double-breasted. He wore no jewelry save for a plain watch and a plainer, thick gold wedding band. Wendell Smith was a walking WASP billboard.

  Filipelli tapped his fingernails on the waxed tabletop as Smith eased back in his seat near the chairman. “Are you ready to begin?” Filipelli asked insincerely.

  Smith nodded politely, revealing no emotion whatsoever. His dislike for Filipelli matched Filipelli’s dislike for him. But Smith didn’t overtly express his hatred the way Filipelli did. That would have been undignified.

  Smith’s lips curled slightly as he stared at the little Italian. To him, Filipelli was nothing more than a hood. He wore cheap suits, hair gel, cologne, a bracelet, and even a goddamn
pinky ring. Smith grimaced. And he was chairman of the Federal Reserve. America had gone too far. Much too far.

  “Thank you so much for your cooperation, President Smith.” Filipelli rolled his eyes. “The first order of business this morning will be Transtar Savings Bank in Boston. As you all know, Transtar has taken a bath on New England real estate. For all intents and purposes it is insolvent. We need to take control of it before the situation gets worse. Do you agree with this assessment, President Flynn?” Filipelli glared at Mary Flynn, president of the Boston Federal Reserve district. Clearly he wanted no discussion on this point.

  Flynn cleared her throat. “I don’t disagree. It will be a small bailout. Three or four hundred million at most.”

  “Is it wise to go in so quickly?” Smith interposed, unwilling to concede quite so fast. “My sources tell me that Transtar may, in fact, be able to raise some fresh outside capital. Maybe we could save the taxpayers the three or four hundred million by waiting a couple of extra weeks.” He spoke in a tight-jawed, aristocratic voice.

  The rest of the committee gazed at Smith. As president of the New York Federal Reserve, he was much closer to the investment bankers and the markets than any other member of the FOMC—including Filipelli. And because of his wealth, the other members assumed he knew a good investment when he saw one.

  Filipelli strummed the table again. He wanted this to go no further. “And I suppose you will be one of these new investors in Transtar.”

  Harold Butler, president of the Atlanta Fed, snickered. He was the only obvious Filipelli supporter on the FOMC, and the others had nicknamed him the “Lieutenant.” Filipelli and Butler were longtime friends.

  Smith inhaled slowly and pursed his lips. It was a Filipelli tactic to hurl insinuating missiles. None of the members was allowed to invest for his or her own account because of the possibility of a conflict of interest, and Filipelli knew this. He was simply trying to break the Smith calm. He tried to do so at every meeting. “I resent that, Chairman Filipelli.”

  Filipelli laughed. “Well, you resent everything about me anyway, so this doesn’t surprise me.”

  “You’re right. I do,” Smith said. He didn’t mind playing the game with this little rube. He didn’t mind telling him the truth either.

  The other committee members glanced down. Never had a meeting become so personal so quickly. It was well known among the members that Filipelli and Smith did not like each other, but usually they were able to keep their emotions in check.

  “Do we have to have further discussion on the matter?” Filipelli pounded the table. He was impatient to move on.

  “I don’t think so,” Butler said. “Open-and-shut case as far as I’m concerned.”

  “I’ll withdraw my objection,” said Smith. There was no reason for him to burn powder on this issue. He glanced at Butler, who was smiling at him. What a jackass.

  “Good. All in favor of taking over Transtar Bank. All opposed.” Filipelli did not even bother to look up from his notebook as he took the vote. “Mr. Secretary, please let the record reflect an eleven-to-one vote in the affirmative on the issue. Next issue.” Filipelli glanced up. “Interest rates. Let’s get some discussion going.”

  No one spoke immediately. Smith glanced around, hoping he would not have to lead off. It would be better to be reactive today rather than proactive. He would have a better chance at garnering votes that way.

  Finally, Flynn began. She had already been in the fray once and felt slightly more comfortable than the others about jumping in again. “Mr. Chairman, at your strong direction we have followed a rather restrictive course of action over the past three years in order to fight the high inflation that was roiling the markets when you were appointed. But given the inflation data of the past six months—it has been almost nonexistent—perhaps we should inject some reserves into the system to allow for growth. It would certainly benefit my area of the country.” Flynn looked around for support.

  Smith brought a hand to his face to hide a smile. Flynn’s comments would be music to Granville’s ears. If the Fed would only open up the money tap, the investment bankers could get busy and make some real money again. Smith rubbed a finger over his lips. Of course, even if they could override Filipelli on interest rates, the leveraged buyout issue remained. Filipelli wasn’t about to allow that little game to come back. He and the President of the United States had made that quite clear.

  Filipelli shot a glance at Smith, then refocused on Flynn. He sensed the same thing Smith had sensed, that the others might relent and vote for faster growth. “Should I take this to mean, President Flynn, that you are going to quit the Federal Reserve and enroll in an investment banker training course?”

  “That isn’t fair, Chairman,” Smith interjected before Flynn could respond. He could hold back no longer. “Every time we’re here, you put down the investment bankers. But they perform a very necessary function in our economy,” Smith said calmly.

  “They’re money hungry. They don’t care what they do to the economy as long as they pack their pockets with cash,” Filipelli retorted quickly.

  Smith disregarded Filipelli’s criticism. “Let’s open up the spigot and allow this country to grow again, Carter.”

  The others glanced up at Smith. First names were rarely used in this room. In a strange way it had become a more formal way to address another member of the committee than using his or her title. It meant the speaker was extremely serious about his point.

  Filipelli leaned across the gleaming table and pointed a finger at Smith. “The reason this country’s economy is in the position it’s in, one of strength and stability, is because of me. Maybe GDP isn’t growing meteorically, but inflation has gone down to two percent from eight percent since President Warren took office. And do you know why? Because I was willing to take the heat from the press when I kept interest rates high and drove inflation out of the system. When you all were hiding behind me.” He thrust a finger into his chest emphatically. “Now the economy has stabilized, inflation is almost nonexistent, and I’m not letting it come back! I worked too hard to drive it out!” Filipelli straightened in his chair. He could feel himself losing control of his temper, and that would be embarrassing for President Warren. “I’m not going to let you ruin the economy for the common people just so your New York investment-banking buddies can make more money.” He said the words matter-of-factly, then folded his hands on the table.

  Smith hated Filipelli with every fiber of his being, but he wasn’t going to allow the man to get the better of him. Not inside of this room. He began again in a measured tone. “Mr. Chairman, let’s try to put our personal differences aside and do what’s best for the country. Let’s try to work for the good of the—”

  But Filipelli did not allow Smith to finish. “Don’t give me that holier-than-thou crap!” He could control himself no longer. Smith had won the war of nerves. “You’re interested in one thing, Wendell. One thing. And that’s Wendell Smith. You make me sick, you son of a bitch!” The last words echoed in the great room. Immediately Filipelli regretted the outburst. A mistake. He never should have said the words.

  Slowly, Wendell Smith rose from his seat. He nodded politely at everyone but Filipelli, then without a word headed toward the door, his footsteps on the wooden floor following Filipelli’s insult into the recesses of the room.

  The chairman watched Smith leave, then turned back to face the rest of the committee. They were appalled. He could see it in the way they were looking at him now. It would be on the Bloomberg screens in a matter of minutes, and then there would be hell to pay. This time he had gone too far.

  7

  Falcon rose from the seat as the stiff-looking maître d’ led Jenny through Chez Martin, a trendy new French restaurant on Manhattan’s Upper East Side. He watched her carefully as she approached. She looked as pretty as ever in an off-the-shoulder, knee-length dress that revealed her
delicate upper frame and only a slight hint of the cleavage below. Falcon breathed deeply. He needed to maintain control. He wanted her to be his secretary, not his lover.

  “Hi.” She kissed him gently on the cheek as she reached the table.

  He returned the kiss, noticing a subtle trace of tasteful perfume. “Hi, yourself. You look ravishing. Is that a new dress?” He guided her into the booth. She seemed nervous, unsure of herself in these surroundings.

  “What?” Jenny looked around quickly, taking in the sights and sounds of the restaurant.

  Falcon laughed. “I asked if that was a new dress.”

  “What, this old thing?” Jenny touched the material lightly, then gazed directly into his eyes. “Of course it’s a new dress, Andrew. I spent my entire life savings on tonight. It’s not as if I’m asked out to a five-star restaurant by a handsome young investment banker every night.” She paused, then smiled. “I didn’t really spend my life savings.” She touched his hand lightly. “Don’t look so concerned.”

  “I’m not concerned.” He realized that he had been staring at her. She looked more beautiful this evening than he could remember—she had turned several heads as the maître d’ had led her through Chez Martin. He liked the way her mouth curled when she smiled. And he liked that she was impressed by the restaurant. He took a sip of the Scotch and glanced around. He shouldn’t drink too much this evening. Not if he wanted the situation to stay simple.