Pike expected to feel distaste at his father’s attitude. Nothing came. ‘Poor Janet,’ he said.
‘Always was a wayward girl,’ said the other man dismissively. ‘Easy to understand why things didn’t work out between you: glad they didn’t now.’
Jesus! thought Pike. He said, ‘You wanted us to get back together!’
His father gazed up at him without any embarrassment. ‘Would have been a mistake; a great mistake.’
‘Wonder if I could help in any way?’
The IMF managing director frowned. ‘You’re out of it, Tom: best to stay that way.’
It had been an instinctive response; objectively Pike couldn’t think of anything he could do. Maybe his father was right. ‘You got a promise about the Treasury?’ he said.
‘Good enough indications,’ said his father.
‘Congratulations,’ said Pike.
His father smiled. ‘It hasn’t happened yet. But a lot of it due to you, Tom. You haven’t put a foot wrong. Thank you.’
‘Not everyone seems to think as I do.’
‘Who?’
‘I told you about the special monitor put on their clearing banks’ loans, beyond the normal supervisors’ check, by the Bank of England?’
The older man nodded.
‘I met their director; man called Burnham. He says the Bank is getting increasingly concerned. Might even issue a warning.’
‘I don’t like that,’ said the IMF director.
‘Neither do I,’ said Pike. ‘We both agreed the danger.’
‘What did he say?’
‘That the Bank appreciated it too.’
‘What do you think?’
Pike hesitated, conscious of the confidence shown by the question. ‘There’s always been a residual doubt, from the very beginning,’ he said. ‘It’s stronger in England than from anywhere else. Having said that, I’ll agree that set out on paper the calculated figures are pretty frightening.’
‘We’ve always roughly been able to assess the commitment,’ reminded Pike’s father. ‘Were there any positive facts to give grounds for the feeling?’
‘None,’ said Pike. ‘Certainly none that Burnham offered.’ He paused, holding back from disclosing his association with Jane. Instead he said, ‘I think I would know them, if there were.’
‘There’s no repayment difficulty?’
‘That’s always the indicator I look for first, in any analysis,’ disclosed Pike. ‘I’ve managed to establish a pretty efficient checking system through our own resources and those I’ve made in individual central banks.’
‘And?’
‘It’s unprecedented,’ said Pike. ‘There hasn’t been a repayment delay or a rescheduling request from anyone in the last eight months. And that figure is accurate up to last Friday.’
The tenseness seemed to go from the older man and he smiled broadly. ‘So where’s the problem?’
‘There isn’t one,’ admitted Pike.
The Russians spread the gold sale worldwide and once again Malik and Lydia remained late every night in the telex room linked to the metal exchanges, monitoring the movements. It registered first in Paris, then Hong Kong and finally in America, over a period of a week.
‘How much have we sold?’ asked Lydia.
‘Tonnes, not ounces!’ said Malik.
‘That’s enormous.’
‘It has to be, to register,’ said the Finance Minister. ‘People are going to start asking where it’s coming from.’
‘We’ll tell them, in good time,’ said the woman.
Chapter 24
Once the volume became obvious Pike began monitoring the gold disposals, calling for daily reports from the world’s metal markets to maintain an accurate check on the amounts and making a formal enquiry to Pretoria to establish if South Africa was the source. Being IMF debtors, South Africa was obliged to answer truthfully and when their denial came he went back to the markets again, attempting an answer from there and failing, because everywhere the vendors were nominees.
Until then he’d held back from the speculation, unwilling to sound the alarm at the suspicion of a fire, but the size of the sale made the Soviet Union the obvious answer.
Jane came to him on two successive weekends and on the second confirmed that the Bank of England had decided upon Moscow too. Pike named Russia in a report to Washington a week before the speculation became public, appearing simultaneously in the Wall Street Journal in America and The Financial Times in England. Concerned that he might have missed something, Pike reviewed everything that had happened since the beginning of the Soviet financial development. And found his answer after three days. Regular telephone contact, beyond their normal telex communication, started between Pike and his father from the moment of his identifying Russia as the possible seller, calls always from Washington. However, when the official confirmation from Moscow came at 5 pm, Pike initiated the call to his father’s Fauquier County home, catching the older man before he left for the IMF’s Washington headquarters.
‘What’s your feeling?’ demanded his father at once.
‘They were due repayments of about $60,000,000,’ said Pike. ‘The gold sales were in tonnes, not ounces. The obvious answer is that they were raising foreign currency.’
‘Does the official announcement say that?’
‘No,’ said Pike. ‘It’s a confirmation of sale, nothing more. They don’t give an amount, either.’
They’re being responsible?’
Pike hesitated. ‘That’s one interpretation,’ he agreed.
From Washington the man discerned the doubt. ‘They had a debt and they met the payment,’ he insisted.
‘They upset the metal markets doing it.’
‘Markets are markets, whether they’re selling vegetables or gold,’ said the IMF chairman. ‘Prices rise and prices fall. The important thing is that the Soviets had assets and they realized them. You were the first to argue responsibility and they’re showing it.’
‘Yes,’ agreed Pike.
‘So there’s no problem?’
‘There might be,’ cautioned Pike.
‘What?’
‘I’ve reviewed everything during the gold sale: gone back beyond the new loan agreements. And found something I’d overlooked.’
From Washington there was a silence. Once, thought Pike, he would have been nervous with a reaction like that: frightened even. Not now.
‘What mistake?’ demanded his father finally.
‘I didn’t say mistake,’ qualified Pike. ‘I said something I’d overlooked. All the immediate Soviet loans are bunched short-term.’
‘So?’
His father should have realized what that meant, without having to ask the question.
‘There’s a maturity next month: $40,000,000 world-wide as far as I can calculate. A similar sum a month later.’
‘I see,’ said his father heavily.
‘The current gold sale might have covered their shortfall,’ said Pike. ‘There were pockets of disposals from other holders: France I know for a fact. And I suspect some of the Gulf States. Because all the Soviet sales were under nominee it’s absolutely impossible to assess how much currency they raised. Or how much they sold.’
‘We know they’ve got a substantial stockpile, because of the error in calculation they admitted a few months back.’
‘They’ve hardly bitten into it, if the figures in that admission were correct,’ said Pike. ‘Price fluctuations make it extremely difficult and, as I say, others joined in the selling, but working backwards from the disposal I guess something like twenty tonnes were sold.’
‘I wish we’d isolated the short-term repayments sooner,’ said the IMF director.
‘I’m sorry.’
‘It’s not your fault,’ said his father at once. ‘The facts were there, for others to see as well.’ There was a moment of silence and then he said. ‘This could go badly for me, Tom.’
‘I know: that’s why I called right a
way.’
‘Bell has me marked as the main challenger. And he mentioned me at the cabinet meeting that agreed to lower the discount rates. He’ll use it, sure as hell, if a problem arises.’
‘Yes,’ said Pike.
‘Do you think I should pass it on: a lot of my friends … people you know as well … are extended on this.’
‘You’d be exposing yourself if you did,’ warned Pike. ‘And maybe causing unnecessary concern. Panic even. I don’t think you should, not yet.’
‘No,’ agreed the older man at once. ‘No panic. But I don’t want the accusation that I held back when I should have been sounding warnings.’
His father was boxed in, either way, thought Pike. He said, ‘That’s not your function, not yet. They’ve all got analysts. They’re capable of reading the signs, just like we are.’
‘They might not have balanced the sales against the short-term settlements,’ pointed out his father. ‘And if they have and I’m asked unofficially for an opinion, what do I say?’
Pike recognized the question as rhetorical but answered it anyway.
‘Your initial reaction was that they are acting responsibly,’ he pointed out. ‘Which they are. And their publicly admitted gold reserves make another sale practicable. There’s a positive as well as a negative way of looking at what’s happening.’ Pike realized as he spoke that he was reluctant to abandon the position that had established his reputation. There was another realization, too. It could mean that Burnham was right. And he was wrong. He didn’t want Burnham to win at anything.
‘No need for undue concern?’
‘Awareness of a possible difficulty,’ advised Pike. ‘But certainly no need for undue concern, not yet. And certainly no reaction on our part that might cause a misinterpretation.’ He hoped to God he wasn’t being too sanguine.
‘I hope you’re right,’ said the older man.
As always the timetable was strictly regimented. A Polish delegation was summoned to Moscow first and once again Lydia confronted Florian Moczar and Zofia Opalko, although it was Malik who formally headed the Russian negotiating team. After the Poles came the Romanians, then the Hungarians, and finally the Czechs, to whom the smallest loans had been advanced. Because the Russians wanted everything to begin again from Buenos Aires, the negotiators who had concluded the Argentinian trade agreement were also invited to the Soviet capital. This time there were no Bolshoi performances or champagne receptions attended by Politburo members. It was a stiff, formal conference, summoned for only one reason, the announcement by Russia that they were suspending the support finance for the aid arrangements reached earlier.
The announcement from Buenos Aires of the Soviet suspension coincided with the request to the IMF from Poland to recycle short-term debts and interest payments on just under three billion dollars. Poland at least showed the necessary finanical propriety.
The following day Romania – a country whose tradition of unilaterally refusing to pay without the formality of negotiations had already resulted in an earlier suspension from the IMF – announced it would neither meet interest nor capital repayments during the forthcoming six months. This time slightly more than three billion was involved.
His father caught Pike at the Paris apartment as he was packing for his weekend in London. ‘I’ve called a meeting of the executive directors,’ said the older man. ‘I don’t like the way it looks.’
‘No,’ agreed Pike. ‘Neither do I.’
‘I think you’d better come home.’
It sounded like the sort of rebuke that his father had made when he failed to get the civil war poetry right during the childhood recitations.
Once the plea of entrapment was rejected, the two men pleaded guilty. To represent Janet, Ambersom employed a battery of counsel who called the two painters as defence witnesses. Both gave evidence that Janet was unaware of the transactions. It wasn’t believed in the light of prosecution evidence of the FBI surveillance of previous purchases: two FBI agents attested Janet was aware of what was going on and an involved party. Both men had previous convictions and were jailed. Janet was placed on probation with the condition of court enforced residence in a rehabilitation sanatorium.
Chapter 25
If Poland, Romania and Argentina were the wash against the sea wall, France was the first that threatened to crack. It was against French financial institutions that the largest proportion of the Polish and Romanian debts were concentrated. From Paris the central bank immediately warned the Bank for International Settlements that the houses for which they were responsible could not withstand an escalation of Eastern bloc requests without substantial borrowings, loans to cover loans. The Bank for International Settlements is the central bankers’ bank, so the French alarm – flickering against the lights already set off by the Soviet gold sale – registered throughout the government banks of Europe and America.
The requirement was to maintain confidence not among the major institutions – able anyway at that stage to withstand repayment difficulties – but as always throughout the smaller banks who had involved themselves in an as yet unknown filigree of separate consortia at the invitation of those larger institutions. Under international banking practice any bank, no matter how small, retained the individual right to declare even a sovereign debtor in default, something the world monetary system had officially managed to avoid during previous crises. The declaration of default gives a bank the right to seize whatever assets it can from the indebted country. One such declaration would automatically have carried its consortium with it. Once one gave, the international bankers knew others would crumble and the financial system of the West would be carried away in the flood pouring over the breached barrier.
Absolute secrecy was imperative.
In America the Treasury Secretary had a personal meeting with the Federal Reserve chairman and the entire Federal board of governors. Before leaving New York Volger had an hour-long telephone conversation with the chairman of the Bank of England in an effort to establish the size of any total rescheduling throughout Europe. The Bank of England chairman, Sir Herbert Course, said the figures were still being assessed by his special unit and confirmed that he was holding talks with the British Chancellor of the Exchequer, in common with meetings being held throughout Europe between central bank chairman and finance ministers.
The need to establish the world-wide extent of the endangered debts made logical Volger’s approach to the IMF – to whom the Polish and Romanian moves had after all been made – and the World Bank.
The gathering of the IMF executive directors summoned by Pike’s father was the only proper conference and that was inconclusive because despite Pike’s efforts through the preceding months the information available was inadequate due to some of the lenders not being members of the Fund and therefore with no duty to report the size or degree of the loans.
Apart from the IMF conference, all the other liaisons were discreet – usually by telephone to avoid gossip by telex operators – and on a personal level between respective directors. The IMF became the central collation agency for the information, which in cases continued to be divulged reluctantly and sometimes incompletely.
To defeat the possibility of speculation and rumour undermining the confidence they were working to maintain, the IMF publicly announced the Polish and Romanian requests for the rescheduling, with a communiqúe of agreement, with the reassuring comment that spread as it was between two countries and among so many different banking outlets, the amount in international terms was not large. The World Bank declared it would advance funds through its international development system to ease the Argentinian shortfall created by the Russian trade credit withdrawal.
Within a fortnight and still without a complete evaluation of the total debt, there was a general agreement between the Bank of International Settlements, the IMF, the World Bank and the boards of the central banks of Europe, Asia and Australasia that the situation was potentially disastrous.
W
ith one agreement came another: that an international conference should be convened in such a way as to maintain the secrecy that had so far, almost miraculously, been achieved. Once more the IMF made it possible. Scheduled in Washington at the month’s end was a meeting of the Monetary Fund’s Interim Committee, its policy-forming body composed frequently of Finance Ministers, Chancellors of Exchequers and Treasury Secretaries of member countries. Those ministers, chancellors and secretaries were all aware of the possible danger. It was decided that the Interim Committee should be the shield behind which they congregated in an attempt to confront it.
For Pike the period leading up to the special meeting became an existence of snatched sleep in the closest hotel possible and near dawn to late-night occupation of the IMF building in Washington in an effort to create an accurate compilation of the total indebtedness. Not once, since Pike’s return from Europe, had there been an open accusation or criticism from his father. Or from anyone else. Not that there needed to be. Pike recognized it as an exaggeration – conceit even – to imagine himself solely responsible. Men with far more experience and influence had made assessments unaware of his views. So there were many originators. But Pike had come to regard himself as the originator: his early recognition of what was happening in Russia had been the banner he trailed from his lance at Washington meetings and Federal Reserve conferences and later, confidently, with IMF in France. So there were conflicting and interlocked reasons for his apparent dedication. Every enquiry he initiated or analysis he prepared was to create the debt assessment. But equally – perhaps predominantly – it was also to assure Thomas Hamilton Pike jnr. that he had not been responsible for the most catastrophic mistake in banking history. It was an assurance he had not been able to find. And the thought of what he might have done was a constant, unremitting fear, a fear that gnawed at the carefully created impression of confidence: he became irritable and over-demanding, shouting impatient orders instead of making moderate-voiced requests.
The attitude extended to his contact with Jane. Less and less were the telephone calls personal, as he had managed to make them between Paris and London; more and more his principal concern was to discover what was happening within the Bank of England’s special unit. Jane was reluctant to have such conversations routed through the Bank’s switchboard and even more reluctant to conduct them from the casual insecurity of her private telephone. Pike misinterpreted her reluctance as being influenced by Burnham and when he hinted at it she accused him in return of not being interested in her but in the work she was doing.
Kremlin Conspiracy Page 20
