Black Fridays

by Michael Sears

“I’m pretty sure those trips to the casino have something to do with it. I need to talk with some of the junior traders. I’ve tried, but it’s been a crazy week.”

  “Amen,” Barilla said.

  Stockman nodded agreement.

  “I’m also concerned that this Arrowhead account might be involved.”

  Stockman looked at the other two. “Do either of you know these people?”

  Avery looked blank.

  “Not really,” Barilla said. “I know that most of the traders don’t like them. They’re pickoff artists, constantly trying to catch somebody offsides. Every young guy has gotten his pants pulled down by those slimeballs once or twice—and even some of the senior guys who should know better.”

  “Slimy, then. But illegal?” Stockman asked.

  “I have no reason to think so. I mean, I can’t even prove they’re slimy. Maybe all their inquiry is legit. Traders make mistakes, but don’t like to admit it.” He nodded to me.

  I agreed. “It’s always the client’s fault. I think they teach that in Trading 101.”

  “So all I have is an opinion. I wouldn’t bet the farm on it,” Barilla finished.

  Stockman turned back to me.

  “So, where are we? Maybe we should just invite the SEC in right away. Brave it out.”

  I wanted that second week’s check.

  “There is one thing.” I turned to Barilla. “Did you know that Sanders was doing unauthorized trades?”

  His face turned to stone.

  “Not illegal trades,” I explained to Stockman. “Just trades that were not his normal bread and butter.”

  “What is this, Gene?”

  Avery smelled the blood in the water. He leaned forward on the couch as though he might leap forward at any moment and slap the cuffs on Barilla.

  “I don’t know,” Barilla said carefully. “I’d bet there’s some good explanation, though. What do the senior guys in that group say?”

  “They can’t seem to find the time to talk with me.” I turned to Stockman. “They keep putting me off.”

  The steam coming off Barilla could have powered a small city.

  Stockman turned to Avery. “Jack? Your opinion? I’m inclined to give this another week.”

  Avery looked for a moment as though he were unsure how to play it. Then he became animated. “I disagree. Let’s stick to the issues—this is some sideshow. Stafford and I have both been over all of Sanders’ trades. There’s nothing there.”

  Stockman nodded distractedly, as though he was only half listening. “No, there’s too much at stake here. If there’s anything at all irregular, I want to see it first. We can afford the few bucks we’re paying Mr. Stafford. Gene? I want you to look into this business of the unauthorized trades. And tell your people to make some time for this. Now. Today. Understood?”

  I didn’t look at Barilla. I was afraid that if I met his eye, I’d turn to stone.

  “Meantime I will have a word with the sales manager. I’ll see if he has any better read on the client.”

  Avery broke in. “Would it help if I spoke with the account direct?”

  Stockman answered very politely, as though correcting a favored, but flawed child. “A call from the head of compliance might be considered a bit over the top, Jack. It could be construed in all the wrong ways. Let’s not rush ahead of ourselves.”

  The meeting was over. I had another good-sized check coming, but I had the feeling I was going to pay for it.

  Avery brushed past us on the way out and disappeared. Barilla and I were alone facing the elevators.

  “You ever pull that on me again, I will have your ass. I don’t like getting blindsided on my own turf.”

  “I have tried to talk with those guys. They blew me off.”

  “Why didn’t you come to me?”

  He was right.

  “And what the fuck is this with the ‘unauthorized trades’? Where did that bullshit come from?”

  “I didn’t make it up. Supposedly, your senior team knew all about it.”

  “Fine. Then how about you, me, and the three of them all meet up in my office in ten minutes?” It was not a request.

  I had an appointment to start interviewing the other junior traders. “I’ll be there.”

  Barilla was seriously pissed, and if he was clean, he had every right to be. But the bitch of it was, a guilty man would have played it just the same way.

  —

  IN MY DAYS back at Case, the mortgage department was so huge they had their own trading floor. They had people who did nothing but work with originating banks—the small, local banks who actually made the loans and who then sold them upstream to Case, Fannie Mae, or one of the other mega-banks. There were salesmen who serviced only a single client and yet produced millions in commissions each year. Traders specialized in ARMs, dwarfs, IOs, POs, balloons, private label, and Z-bonds. All of which were meaningless to me and to most of the employees outside the gated community of mortgage securitization.

  At Weld, the mortgage department would have fit in a good-sized walk-in closet. There were six very stressed traders in one corner of the floor, huddled together like the last standing survivors at the Little Big Horn.

  “I’m looking for Sudhir,” I said. “Sudhir Patel?”

  One of the two women traders looked up from her computer and gestured to the other side of the aisle.

  Sudhir looked like a dusky-colored rabbit. He was thin, almost to the point of emaciation, and was a week or two overdue for a haircut. I judged him to be in his mid-twenties, but he looked years younger. Almost prepubescent. Except for the area around his eyes. The stress lines were those of a fifty-year-old bond trader, not the junior guy on the desk.

  “Sudhir?”

  He nodded, not quite meeting my eye.

  “I’m Stafford. We’re supposed to have an eleven-thirty, but I have to push it back. Is that a problem?”

  I thought he was going to start crying.

  “What is this about? I don’t know if I am allowed to talk with you.” He had the bravado of a scared middle-schooler. Delivered in a round, Cambridge-educated accent, it was almost funny.

  “I’m going to be talking to all of Brian Sanders’ friends. It’s not the Inquisition.”

  “I barely knew the man.”

  This was such an obvious lie, so easily disproved, that I snapped in anger. “Enough. I’ll be back in”—I checked my watch—“half an hour. Then I want to hear all about Atlantic City, Arrowhead, and the whole deal. Got it? Don’t waste my fucking time.”

  He went pale and sweat appeared on his upper lip. I thought he might heave right there.

  “Half an hour,” I repeated. I turned and hurried to Barilla’s office. I had the feeling that if I were even seconds late, he would gladly feed me to the sharks.

  —

  WE ALL ARRIVED together. Barilla’s office got crowded quickly—there were only two chairs facing the desk. I rested a hip on the bookcase. The three honchos from the proprietary trading group were all people I recognized.

  Richard Wheeler had joined a start-up hedge fund back in the mid-eighties and retired ten years later after appearing on the cover of Fortune magazine—twice. Weld must have offered him an incredible deal to return to the fray.

  Cornelius “Neil” Wilkinson had been at Case when I was there. He still wore a bow tie and suit every day—I imagined he wore them all weekend as well—and glasses so delicate they looked as though they would disintegrate if he sneezed. In almost any gathering he would have been the smartest guy in the room. He had briefly made himself famous by marrying a Miss Venezuela runner-up with a degree from the London School of Economics. He met her while working in London. But he’d had an odd career, never quite in the right seat at the right time. He had do
ne all right, I supposed, but he hadn’t made one-tenth the money a lot of less smart guys had. Neil was the case in point for the traders’ prayer: “I’d rather be lucky than smart.”

  Kirsten Miller also wore a suit. A men’s-cut suit. She wore no makeup and her hair appeared to have been styled by a misogynist. Like most women on Wall Street, she had been screwed over and passed over any number of times—most egregiously by one of the Street’s oldest, most prestigious firms. But she had fought them in court and won—collecting an eight-figure settlement. Her victory was Pyrrhic, however. She had been virtually unemployable after that. I was surprised that Weld would have taken the chance on her. But she was at least Neil’s equal for pure brainpower, and she had a lust for trading anything that moved.

  It was an intimidating group.

  Barilla started as soon as we were settled. “This is Jason Stafford. Anybody know him?”

  All three nodded. Neil smiled.

  “He’s here looking into this shit about Sanders. He tells me that you aren’t giving him your full cooperation.”

  I wanted to cringe. That wasn’t the way I would have expressed it. All three were staring at me coldly, any positive or even neutral feelings had been tossed aside.

  Wheeler answered for them all. “It’s been a busy week, Gene. We have a lot of balls in the air. I told him we would make time for him this afternoon.” He looked over at me. “We still plan on that.”

  “He just told me—in a meeting upstairs with Bill Stockman and the compliance guy—that Sanders was doing some unauthorized trading. Which leaves me with two questions: Did you people know what he was doing? And why didn’t I know?”

  Neil spoke first. “Yes, we knew. And, excuse me, we didn’t tell you because it just wasn’t that big a deal.”

  “Not a big deal? I just checked his position reports from last spring. The kid was short a hundred million dollars in agency bonds and mortgages. You didn’t think I needed to know that some junior trader was out there spinning the roulette wheel?”

  “A hundred was his limit,” Neil said. “We told him that, and he stuck to it. Really, Gene, it didn’t seem a lot to us.”

  “You three throw around billions and we let you because, all told, you have over seventy years of experience. That’s not the same as letting the new guy just whip ’em around.”

  Wheeler stepped in. “We monitored him closely. Kirsten checked his position three or four times a day.”

  Barilla made to interrupt, but Wheeler held up a hand and continued.

  “Brian came to us in the beginning of the year with the trade idea. He was convinced that the mortgage mess was going to get a lot worse before it got better.”

  Neil took over. “I argued against it, but he persuaded me. He was right.”

  Wheeler continued. “We put the trade on. We sold some mortgage-backs and we bought credit default swaps and T-notes. When the trade started moving in our direction, Brian came back and asked if he could get some credit for the idea.”

  Kirsten spoke for the first time. “He came to me, actually. I told these guys we should let him come along for the ride. I watched him every day. He traded around the position, but basically he just rode the trade for just south of ten mil.” She grinned. “He did a nice job.”

  “What did the three of you clear on the trade?” I asked.

  “Just under a yard.”

  One billion dollars.

  “That’s not public information,” Barilla said.

  “Nice trade.” It is one thing to call the market right—to find a strategy or a trend that will make good money. It requires a whole other skill set to put on the trade in a big enough way, and to ride it long enough, that it turns a flash of insight into that kind of money.

  “Look, Gene, we just didn’t think you needed to be bothered over a hundred-million-dollar position.” Wheeler wasn’t pleading, he sounded bored. Exasperated, maybe. “If we got your dick in the wringer with Stockman, we apologize, but, honestly, it just wasn’t worth talking about.”

  Barilla blew out a long stream of air. “No, Rich, you’re right. If you had come to me, I would have thought there was a problem. But while we’re on the subject—are there any other little land mines over there I should know about?”

  The three traders shared looks for a moment. Neil spoke for them. “Not a thing.”

  I believed him. So did Barilla.

  “Satisfied?” he said to me.

  It was time to mend some bridges. “I’m sorry. All of you. It looks like I set off a fire alarm when I smelled cigarette smoke.” I turned to Barilla. “I’ll talk to Stockman. Tell him this was all a touch of hysteria on my part.”

  “Screw him. He’s annoying, that’s all. He’s got much bigger turds than this raining down on him right now. If he ever remembers to ask, I’ll take care of it.” He leaned forward and beat a rapid tattoo on the desk with his index fingers. “Anything else for these people?”

  “I’ll make it quick.”

  He nodded.

  “Arrowhead? A small hedge fund that seems to be unusually active. Sanders did some business with them. Ring any bells?”

  “Never heard of them,” Wheeler said.

  “Kirsten?”

  “We don’t do customer business. We trade direct with the Street. I know Brian dealt with the sales force—a little. But we’re a proprietary desk—we trade for the firm. Legal would rather we stayed away from the clients.”

  Legal would not have wanted to explain how the firm made close to a billion dollars on bets they had sold to clients.

  Neil had not answered.

  “How about you?”

  He put his head back and stared at the ceiling for a moment. “I am quite sure that I would remember.” He looked over the top of his glasses. “And I don’t.”

  I tried not to sigh. I felt like I was in hot pursuit of a wild goose down a dead-end street.

  “Did you know about these casino trips? Atlantic City and so on?”

  “I did,” Kirsten said. “It surprised me.”

  “Why’s that?”

  “Brian did not gamble. He once said he would rather save his money and buy a casino. I suppose he went along for the camaraderie. Networking.”

  I was back to nowhere. Sanders had been a good kid with a great future, right on the cusp of making his mark on Wall Street. The SEC would find nothing. It was all a waste of time and talent. The only one who would benefit was me. I had another $25,000 check waiting.

  “Gene, I’m sorry. Let me get out of your hair. Thanks for all your time. If I come up with anything else, do you mind if I just drop by and run it by you?”

  “Not a problem,” Wheeler said.

  “Then we’re done,” Barilla said. “Back to the trenches.”

  We filed out. Neil Wilkinson stopped me just outside the door.

  “I don’t know if you remember, but we worked together at Case some years ago.”

  “Of course I remember.” It was like asking a nuclear physicist if he remembered working with Oppenheimer. “I thought you were wasted there. They tried to squeeze you into the research department, didn’t they?”

  “It wasn’t a good fit.”

  Understated as always.

  “I wanted to tell you,” he said. “You and your department did brilliantly with the euro conversion. You cleaned up quite nicely.”

  When the euro was first introduced, the EU announced how each of the various party currencies would be converted, following months of speculation. I was the youngest managing director at the firm and running the foreign exchange desk. We had cleaned up.

  “I thought you had left the firm by that time,” I said.

  “Yes. I was with Rothkamp in London—trading sovereign debt—but we heard about your trade. You managed
to nail each currency.”

  It had been one of my biggest coups.

  “Thanks. But we missed Italy by a good margin.”

  “You are modest. Modesty never pays dividends. At any rate, it was good to meet you again. We should have a drink some night. Let us know if there’s anything we can do. Brian Sanders was not always a pleasant person—he was young and aggressive—but I do not believe he was a crook.”

  He walked away, leaving me confused and conflicted. Wilkinson was not only a market genius, but a genuine human being as well. He had ignored the deficits in my past and my transparent manipulations with Stockman and Barilla, and had simply congratulated me on one of the greatest successes of my professional career. His decency humiliated me. I felt a sudden wave of claustrophobia. The ceilings felt too low, even the arena-sized dimensions of the trading floor seemed to be closing in on me. I needed to be outside—outdoors—with a breeze in the air and the sun on my face.

  —

  THE HEBREW NATIONAL hot dog vendor on the sidewalk outside the Weld building already had a line waiting. Wall Street eats lunch early.

  I pushed past the small group of smokers and wove through the crawling traffic on Trinity Place. There was a stretch of sidewalk drenched in late-September sunshine. I leaned up against the building, closed my eyes, and raised my face to the sky.

  I felt my heart rate slow and my throat open up again. It was a beautiful day. How many beautiful days had I missed in my life? My two years in prison were nothing compared to the twenty years of self-imposed incarceration, sitting at a trading desk, staring at a computer monitor—or banks of them, as we had in the early years—not even aware of weather or what season it happened to be. For ten hours a day, or more, I had been able to tune out all aspects of life that did not immediately serve the needs of the great god Mammon, so that a phone call from my beautiful but often very needy wife was an annoyance, a distraction, taking me away from the obsessive clutches of the market.

  I thought about taking the Kid and escaping New York once and for all. With the money from selling the apartment, we could get by for a long time in Vermont, or Idaho. I could study yoga, or become a housepainter, or buy some land and go into organic farming.