by Bobby Akart
“The rise in interest rates is unprecedented,” said Lawrence Lowell, a wealthy philanthropist and direct descendant of John Lowell, a federal judge in the first United States Continental Congress. “I’m told the Federal Reserve will raise rates to five percent on Thursday.”
“It is untenable,” said Morgan. “As you know, we turned off the lending spigot to our European interests several months ago. As these rates rise, they will not be able to afford the payments. I am not in the business of collections, are you?”
Lowell’s stout frame shook as he laughed. “No, our borrowers do not appreciate our collection efforts, do they?” Lowell asked rhetorically. “My concern is for the American economy. The nation’s debt is unsustainable. Logically, as rates rise, the deficit will grow exponentially. This takes money out of the hands of businesses and squanders it down the drain of interest payments to Japan, China and others. A government that borrows a lot will have to pay the piper—or hope for some form of a reset.”
“A day of reckoning is coming, Lawrence,” said Morgan. “Rest assured we will be well positioned when the time comes.” Morgan slapped his old friend on the back as Walter Cabot approached them. Cabot, heir to the Cabot shipping fortune, was a direct descendant of Captain John Cabot, a Revolutionary War hero.
“I sense a conspiracy is brewing over here.” Cabot laughed as he shook hands with his fellow Boston Brahmin. “You two are either solving the world’s problems or creating a few—for someone else, of course.”
“Walter, our astute friend Lawrence and I were simply envisioning a world without water,” said Morgan. “What would all those Cabot ships do if they were high and dry?”
“Blasphemy, gentlemen,” replied Cabot. “We would simply turn them into high-dollar condos with great ocean-front potential!” The powerful men shared a laugh and a clink of the glass. Morgan knew their resources would always enable them to prosper—in good times and bad.
“John, we love what you’ve done with the place,” said Cabot as he turned to survey the grand entry. Morgan’s home was a fifteen-thousand-square-foot, 1929 Georgian Revival manor located in the heart of prestigious Brookline. The nine-bedroom, fourteen-bath mansion was adorned with gold-leaf ceilings and intricate architectural millwork. After recent renovations, Morgan added a billiards room, a state-of-the-art home theater and even an elaborate tree house in the event Abigail rewarded him with grandchildren.
Morgan thought often of Abigail and her lack of serious relationships in the past—except for Henry Sargent years ago. Morgan clearly discouraged the relationship with Sarge because of the plan he had for both of their lives. As his only child, Abigail had many shoes to fill. As the Sargent boys’ godfather, Morgan had a special bond with Henry and Steven, but he also needed them for important roles that Morgan knew were inevitable. With every passing week, Morgan knew the time was near for the Sargent brothers to prove their mettle. He had seen it coming for many decades.
“Thank you, Walter,” said Morgan. “I must say the tree house in the woods is my favorite addition. Hopefully, I will be a grandfather someday. Abigail’s career takes precedence at this time.”
“I’ve seen the polls,” said Lowell. “Her path to victory looks strong. I’ve also seen her rise to national prominence. She seems to be spending a lot of time with Senator Paul.” Morgan perceived Lowell was making a point about her association with the GOP frontrunner.
“If you are referring to their marathon session on the Senate floor, I am aware,” said Morgan. “She and Senator Paul have shared this opinion of so-called governmental intrusion into people’s lives since they both ran for the Senate six years ago. Senator Paul may have been politically motivated by Friday’s grandstanding, but I believe Abigail was principled in her rhetoric. In any event, her actions have benefitted us tremendously, as you will soon learn.”
One of Morgan’s butlers approached them without intruding. Morgan, acknowledging his presence, spoke first. “Yes, Robert.”
“As you requested, sir. Abigail is here.”
“Excuse me, gentlemen,” said Morgan as he went to find Abbie. She deserved an explanation about the mysterious change of events in the Senate chamber Friday. As Morgan passed through the ornate columns guarded by large Chinese fan palm trees, he paused to admire his daughter. Abigail never failed him. She shared a passion for the law and followed his educational path through Harvard. She gradually gained an inclination for politics. His wealth and power allowed her to avoid the normal path of local politics to the national stage. She enjoyed the benefit of his prominence and powerful friends, enabling her to become a powerful junior senator with even greater ambitions. There were times decisions would be made on her behalf. Friday’s wrangling with the Senate Majority Leader was one of those times. He did not like to shut her out, but as a sitting senator, plausible deniability was necessary.
“May I borrow my lovely daughter?” asked Morgan to a handful of well-wishers surrounding Abigail. “This will only take a moment.” Morgan leaned down to kiss her cheek, which was slightly out of character for him. Her cold response told him she was still unhappy. He led her into the billiards room and shut the door behind them.
“Abigail, I need to explain,” said Morgan, but she interrupted him.
“Father, you know I don’t like to sell my vote,” said Abbie. “We agreed I would always look after your interest, and theirs.” Abbie gestured through the door, obviously making reference to the Boston Brahmin.
“Yes, dear, we did agree,” said Morgan. “You have always performed admirably.”
“I am not one of your employees who expects a pat on the back,” said Abbie. “Those provisions of the NDAA are onerous and need to be removed.” She walked away from him and mindlessly rolled the cue ball down the red felt of the full-size, modern billiards table. He hoped his explanation would make this right.
“Before I provide you the details of my arrangement with Senator McConnell, please know that I will never put you in a position to compromise your principles, even if they conflict with my own needs,” said Morgan. “I will not be at cross-purposes with my daughter. I would simply find another way.” Morgan discerned his daughter was still raw with emotion.
“The objectionable provisions of the NDAA will be struck from the final draft prior to passage,” said Morgan.
Abigail looked up at him, probing his eyes for subterfuge. She knew him well.
He continued. “Politics is about give and take, as you have learned. We take far more than we give. I have worked with Senators McConnell and Reid their entire careers. I helped Harry rise to his leadership position. The two are interchangeable. The fight between political parties is less about ideology than it is about who controls the purse strings. Republicans and Democrats rotate in and out of political power, but they conduct the same political business while there—control the flow of money to their benefactors. Abigail, we are the benefactors to both sides of the aisle.” He could see her relax. Morgan had taught her over time that his methods might appear objectionable at first, but the results typically improved a given situation.
“What kind of deal did you make? What land was McConnell talking about?”
“Abigail, we have established a charitable trust and will be acquiring Prescott Peninsula,” replied Morgan.
“What part of it—the old town of Prescott? For what purpose?” asked Abigail. She leaned on a barstool next to a mounted eight-point buck.
“No, dear, all of it, including the Quabbin Reservoir.” Morgan allowed this to sink in for a moment. The Quabbin Reservoir was the largest body of water in the State of Massachusetts. Located in the central part of the state, it was formed by the creation of dams and dikes in the 1930s, and became federal government owned and was largely undeveloped. Prescott Peninsula was completely surrounded by the reservoir and was largely unimproved except for an abandoned radio astronomy observatory where the old town of Prescott Center once stood. The entire acquisition encompassed nearly forty sq
uare miles.
“Father, the media will have a field day with this,” objected Abbie. “Every Executive Order the President signs receives heavy scrutiny. If my vote is tied to this, my political career is over.”
“It is for this reason Senator McConnell agreed to drop the provisions of the NDAA you find objectionable. The President has ascertained another way to achieve his goals. You—we, will reap the benefits.”
“How will we benefit?” asked Abbie.
“Politically, you will have a very public ribbon-cutting ceremony on a new facility for abused families,” said Morgan. “The facility, owned by a charitable trust with many layers of anonymity, will be portrayed as a shelter for victims of domestic violence and abuse. For that reason, the media and local residents will be asked to respect the privacy of the developers before and after its completion. It would be unsafe to the families to be exposed to their abusers.”
“On paper, this is a very noble cause,” said Abbie. “I could take credit for bringing this type of facility to our state.” Morgan saw she was warming to the concept.
“Yes, Abigail,” said Morgan. “You will not be required to compromise your vote and you will gain political capital in the process.”
“But this will still be picked apart by the media,” said Abbie.
“We have orchestrated these events to fall on this particular weekend. The media will be preoccupied for days to come.”
“How?” asked Abbie, only to be interrupted by a knock at the door.
“Come in, please,” said Morgan.
Malcolm Lowe, his longtime assistant and former Undersecretary of State, entered the room. He was carrying a phone.
“Sir, an urgent call for you,” said Lowe, handing the phone to Morgan. “Hello, Abbie.”
“Yes,” said Morgan into the receiver.
Chapter 10
May 15, 2016
The White House Situation Room
Washington, D.C.
Katie O’Shea knew something of vital national importance was brewing. Weekend briefings in the White House Situation Room were not completely out of the norm. The world, after all, didn’t take weekends off. What made this particular briefing extraordinary was the presence of Valerie Jarrett, the seniormost advisor to the President. Officially, her title was Assistant to the President for Public Engagement and Intergovernmental Affairs. Unofficially, she was much more.
Born in Iran, Jarrett wielded unprecedented power in the White House. She was rumored to be the closest confidant of the President, surpassing even the voice of his wife. Her presence in today’s emergency briefing told Katie the White House was circling the wagons and had a serious incident on its hands that required the narrative to be closely monitored.
In addition, Secretary of the Treasury Jack Lew was present. To her knowledge, matters of State and National Defense did not ordinarily involve Treasury. Katie was still new in her position as a member of the President’s Intelligence Advisory Board, but she had earned the other members’ respect with her excellent analysis of the Las Vegas cyberattack on the downtown casinos. At first, both David McDill, White House Chief of Staff, and Susan Giles, the National Security Advisor, were skeptical of Katie’s role on the board. They were aware of John Morgan’s influence in placing Katie in her position. NSA Giles instantly warmed to Katie’s blunt manner and candid analysis of intelligence matters while being mindful of the political impact of reports. Most importantly to Katie, however, was pleasing her real boss—John Morgan.
“Let’s get started,” said Lew, breaking the whispered conversations in the room. “We have been contacted via official channels by my counterparts in Spain, Greece and Italy today. The decision by Greece was somewhat expected. They began issuing a form of IOU, which was used as payment to government employees and retirees. In addition, six new drachma banknotes were designed and printed. When their banks reopen, the new drachma will become the country’s official currency.” Secretary Lew sat back in his chair, which prompted Chief of Staff McDill to interject.
“The President will be returning from a fund-raiser in San Francisco this evening,” said McDill. “He will be in contact with Chancellor Merkel and French President Hollande in the next several hours to assess their reactions.”
“The International Monetary Fund is working with national authorities in Europe on contingency plans,” said Secretary Lew. “The Greek banks are big players in some of its neighbors’ financial systems. In Bulgaria, for example, subsidiaries of the National Bank of Greece own a quarter of the country’s banking assets. The situation is similar in Romania, Albania and Serbia.”
Katie followed the collapse of the Eurozone for several years. Before Abbie’s senatorial reelection campaign ramped up, the two would enjoy movie nights at Katie’s apartment. Abbie likened the Eurozone collapse to watching a bad B-movie that you just can’t turn off. Everyone knew Greece would exit the Eurozone—Grexit as the process was termed. What was surprising about today’s news was the complicity of Spain and Italy. While both nations had their financial difficulties, their withdrawal from the Eurozone would catch everyone by surprise. Secretary Lew continued.
“Several scenarios have been advanced regarding the departure of Greece from the Eurozone,” said Secretary Lew. “It was our opinion that the biggest threat to the continuance of the euro is not that Greece might leave, but that it might exit and then thrive with a clean financial slate. The Italians would question whether it made sense for them to continue its financial pain when it could simply bring back the lira. I don’t want to get into the weeds here, but Italy is running a government surplus that is constantly strained by the low growth and deflation caused by the euro. The Grexit is simply an excuse for Italy to advance their already laid plans.”
Katie’s mind raced as she thought about the national-security issues surrounding this train wreck. This would cause substantial unrest throughout Europe and could potentially spill over into the United States. Terrorists never sleep and typically took advantage of distractions to conduct their attacks. NSA Giles was studying her. Has the NSA developed a mind-reading app—which is implanted in Susan Giles brain? Wouldn’t surprise me.
“What happens next?” asked the President’s Chief of Staff.
“The government did not put up a default notice, but it did advise several key officials in the Greek trade unions and a run on the banks began,” said Secretary Lew. “As word spread and the lines at the banks grew, the decision was made over the weekend to close the banks indefinitely. The IMF has requested national banking supervisors to ensure all subsidiaries of Greek banks throughout the Eurozone have enough assets to allow exchanges of emergency financing at their own central banks in case financing from the Greek parent institutions is suddenly cut off.”
“We expect President Pavlopoulos to address the Greek people and ask for calm,” said NSA Giles. “As President, he is a figurehead, but he is respected. Prime Minister Tsipras is the driving force behind the default—together with his allies, Prime Minister Rajoy in Spain and Italian Prime Minister Renzi.”
“We expect Portugal to join their Southern Europe neighbors by the end of today,” added Secretary Lew.
“Europe is America’s largest trading partner,” said McDill. “The most common currency for transactions between the United States and European businesses is the dollar. But the euro is a close second, which will leave American businesses that deal with Europe exposed to devastating losses.”
“The value of the euro had already dropped below the one-to-one ratio with the dollar,” added Secretary Lew. “Many of our businesses began writing their contracts with European companies in dollars, but a few of the larger institutions hedged and used forward contracts—betting on the additional loss of value.”
Katie absorbed as much of this information as possible because she would have to relay these details to Morgan. However, she was hesitant to take notes. Valerie Jarrett continued to study the faces seated around the table in the
Situation Room. What is she looking for? Does the White House suspect a leak?
“How does all of this affect our national security?” asked McDill.
“There are a lot of possible scenarios, none of them are very good,” said NSA Rice.
“Give us the best-case scenario, Jack,” said McDill.
“We expect the breakup to destroy twenty-five percent to sixty percent of the gross domestic product in the stronger countries who choose to remain with the euro—namely France and Germany,” said Lew. “Banks throughout Europe and to some extent elsewhere will suffer catastrophic losses and need to be nationalized. There will be massive wealth destruction in the private sector. European export markets will practically disappear because devaluation will make those products expensive and uncompetitive. On a societal level, unemployment, uncertainty and shortages of basic necessities will result in large-scale unrest across Europe.”
“I asked for the best-case scenario.”
“That is the best-case scenario, Dave,” replied Lew. “The worst-case scenario is a total collapse. Such a collapse would lead to a multiyear depression in Europe and several years of recession here. The collapse of the euro would have a more damaging impact on the American economy than the events of ’07 and ’08.”
“What do you mean?” asked McDill.
“A rush of financial assets out of the Eurozone would wreak havoc with currencies and the price of oil, for starters,” replied Secretary Lew. “Even worse, interbank lending will be destroyed worldwide. Should there be a run on banks worldwide as a result of the Eurozone collapse, credit markets will freeze, making it near impossible to borrow money.”
“We pulled ourselves out of the ’08 debacle through Federal Reserve activity,” said McDill. “Can’t you coordinate with the Fed and the IMF to formulate stopgap measures?”
