Martinez blinked. “We’re not connected with Cosgrove in any way.” He sensed a glimmer of skepticism in Altasz’s dark eyes, and so he added, “Cosgrove was a speculator. The Chee Company are contractors. He’s never employed us in any of his projects.” He frowned as another thought occurred to him. “Are you an investor in the Chee Company?”
Once Roland had outmaneuvered and outblackmailed Lord Zykov, his former father-in-law, almost all Chee Company shares were held by the Martinez family. Some had been sold to raise capital, but not enough to give anyone else anything like a controlling interest. These were traded openly, and Martinez didn’t want anything to damage their value.
“I’m not in the Chee Company,” said Altasz. “But I bought some of those Rol-mar bonds you were peddling, and if Chee Company goes in the ditch, it takes Rol-mar with it. So—”
“May I ask the source of your information?”
Altasz waved a hand. “The fellow who handles my business.”
“And who is that?”
“Li-paq at Attfrag Associates.”
Martinez had never heard of either Li-paq or Attfrag, but he thought that perhaps he should find out more about them, so he recorded the names on the sleeve display of his uniform tunic. Then, after he offered more reassurances to Altasz that the Chee Company was sound, he made his way out of the club and summoned his car. While waiting at the curb, he sent a message to Roland.
“Call me. I think we may be in trouble.”
Chapter 9
“It is the Imperial Bank’s view that the real estate market has grown overheated,” said the banker, “and as a result too much capital is involved in investments offering no immediate return.” The banker, Lord Tchai Ridur, was a Torminel with exquisite diction, careful not to lisp around his fangs, and he dressed in a sober gray suit that matched the color of his fur. “We feel that a contractionary policy will be necessary in order to provide a correction.”
“My lord,” said Sula. “May I ask what form this contractionary policy will take?”
The banker stared at Sula through the opaque bubble-glasses that encased his eyes. “Lady Convocate?” he asked.
Sula repeated her question. The banker looked at Lord Ngeni, the committee chair, for clarification.
“The witness is at liberty to answer the question,” said Lord Ngeni. He was an elderly Terran with a large round black cannonball head set firmly on his shoulders. Crisp white hair and a deep bass voice added to an impression of effortless dignity and authority. He was the chief of the ancient and widespread Ngeni clan, and during the war one of his grandnephews had joined the Secret Army under Sula and died a hero’s death. Possibly as a result of this, he had welcomed Sula to the committee and now tolerated her questions at a hearing that was expected to be nothing more than pro forma.
Lord Tchai paused a moment to consider his words. The hearing room was small, with the Banking and Exchange Committee brightly lit under spotlights and sitting behind a long slablike gray table, with a tall white wall behind. The wall could show video at need, but at the moment it looked very much like a wall. Lord Tchai and his aides sat at a somewhat less imposing desk set before the head table, also brightly lit, with a very few spectators in chairs in the comparative shadows behind.
One of those in the shadows was Ming Lin, Sula’s economics adviser. Ming had apprenticed hurling bombs for the Secret Army and had prepared a few bombs for just this occasion. Her research into Cosgrove had borne explosive fruit. It would be Sula’s pleasure and privilege to make a few prominent, privileged people look stupid, venal, and ridiculous.
The Lord Senior might in the end regret appointing her to the Committee on Banking and Exchange.
“Lady Convocate,” said Lord Tchai, “there are a number of counterinflationary instruments available to us. We could cease to repurchase war bond debt at our current rate, which would have the effect of reducing the amount of money in circulation. We could increase the rate on discounts or overdrafts, which would have the end result of restricting the money supply. If this fails in its intended effect, we could increase the reserve requirements at our banks.”
“Not simply at the Imperial Bank, but at all banks?”
“That is correct, Lady Convocate.”
The banker looked down at his hand comm and prepared to continue his address. Sula interrupted him.
“May I ask, Lord Tchai, if this overheated real estate market is an empirewide phenomenon, or localized at Zanshaa?”
The banker licked his lips. “Inflation is a problem throughout the empire, Lady Convocate,” he said. “It is particularly concentrated in the housing market, and most especially in the capital.”
“You will be able to send the committee the statistics on which you base your analysis?”
“They are included in an appendix to my report, Lady Convocate.”
“Thank you, Lord Tchai.”
The banker gave a little huff of breath, perhaps to add an audible period to the interruption that had taken him from his narrative. His bubble-cased eyes returned to the text on his hand comm.
“I wonder, Lord Tchai,” said Sula, “if you think the recent failure of the Cosgrove enterprise is symptomatic of a larger problem in the economy.”
The banker was startled by the question, but responded firmly. “We have no reason to believe that.”
“I am relieved to hear it,” Sula said smoothly. In her mind, she lit Ming Lin’s first bomb and prepared to hurl it. “Can you assure me, then, that the Imperial Bank’s purchase from Cosgrove, eight days ago, of the entity called ‘Render Six’ was in the normal line of business, and not an extraordinary action on the part of the bank?”
Lord Tchai was frozen for a moment, then looked to the aides on either side of him. “I am not familiar with this entity, Lady Convocate,” he said.
“I am informed that it is something called a ‘Special Purpose Asset Vehicle, Class II,’” Sula added helpfully.
Tchai’s aides were murmuring commands into their hand comms. “I am not a specialist in these vehicles,” the banker said, “but I know that they are entities for the pooling of assets or to securitize asset-backed securities.”
Sula grinned. “They securitize securities? Aren’t securities securitized already? Isn’t that why they’re called securities?”
Tchai made an attempt to look stern. “Your ladyship is being facetious.”
Sula’s grin broadened. “I’m afraid so.”
The banker made the huffing noise again. “Lady Convocate, I shall endeavor to respond more clearly. The purpose of an asset vehicle is to bundle assets into a single package, usually for a very specific purpose.” The Lai-own aide on his right side directed his attention to his hand comm display. Lord Tchai took a moment to view the screen, then he gave that huff of air again.
“Your ladyship’s information is correct,” he said. “Render Six was purchased by the bank eight days ago.”
“For what sum?”
Lord Tchai peered again at the screen. “A hundred and six million zeniths.”
Sula was silent for a long moment, letting that vast sum sink in. “Was the bank in the habit of purchasing such vehicles from Cosgrove? Were there any more such purchases?”
She already knew the answer, but waited to see what the banker said. The fact was, Cosgrove’s business was privately owned by Cosgrove himself, or by his immediate family, and much of its workings were opaque until the bankruptcy forced his creditors into the open. Now creditors were filing their claims in court, and there were a lot of them. Ming Lin had carefully looked at such filings, and she’d found a number of investment vehicles similar to Render Six that Cosgrove had sold, all in the last few months. Then she had looked more closely at how long these vehicles had been in existence, and some of them had been created years ago, and held by Cosgrove himself.
“There’s no reason for Cosgrove to create these sorts of vehicles,” Ming had told Sula that morning, over coffee and brioche in Sula’s office, “no r
eason, unless it’s to hide unprofitable investments. He controlled dozens of companies, and some of them had to be underperforming, or unprofitable. So he shifts them all into Render One through Six, which takes them off his own books. He then looks far more profitable than he is and is able to borrow more money. As long as the money keeps flowing from the profitable elements of his business, he’s fine.”
Sula had inhaled the fragrance of her tea. “So why would he sell Render Six? Wouldn’t that give away his scheme?”
Ming Lin had laughed. “The money must have stopped flowing. Bills were coming due, and he dumped the parts of his empire that weren’t making money.”
“The Imperial Bank must have already had a ton of Cosgrove’s debt,” Sula had said. “Why would they buy his losing businesses?”
Lin had considered this, and then a wicked glimmer kindled in her eyes. “It’s possible they didn’t know what was in these vehicles,” she had said. “Cosgrove may have hidden his losses somehow, or misrepresented the profitability of the Render vehicle. But it’s also possible they bought it to hide their own exposure—Cosgrove created Render Six to hide his own losses, and then the bank bought it to hide how much Cosgrove owed them. It would give them time to sell Cosgrove’s debt on to investors and to other institutions.”
“Other banks?”
Lin had nodded eagerly. “Yes!”
“So they were likely selling Cosgrove’s obligations to other banks knowing that they would soon be worthless?”
Lin had grinned and shaken her pale rose-colored hair. “It’s certainly worth looking into.”
Sula inhaled again the fragrance of her tea. “I believe I shall,” she had said.
The memory of that fragrance tingled through Sula’s senses as she listened to Lord Tchai’s answer.
“According to what I’ve just learned,” he said, “we purchased another vehicle called Render Two a little over two months ago.”
Sula lit another one of Lin’s bombs and hurled it. “Was the bank aware that the Render vehicles seem to consist of Cosgrove’s losing businesses and investments?” Which was something that was far from proved, but Ming Lin had made it seem likely.
Lord Tchai stared in surprise, then conferred with his aides. “I cannot speak to that,” he said. “I don’t have the necessary information at hand.”
“Can you provide this committee with that information?”
“I will, Lady Convocate.”
“Thank you, Lord Tchai. In the meantime, can you also inform us if the Imperial Bank has sold amounts of Cosgrove debt in the last few months?”
Sula had to admire Tchai’s sangfroid. Even after she’d thrown Lin’s third bomb, his immaculate diction didn’t waver.
“I’m afraid I do not have that information available, Lady Convocate.”
“But you’ll share once you do?”
“Yes, Lady Convocate. Of course.”
“Why are you watching that?” Martinez asked. The video in Roland’s lounge was turned to a hearing at the Convocation, at a well-dressed Torminel, in the glare of spotlights, being asked questions by a panel of convocates, all of them wavering shadows in the strong light.
Roland gave a wave of his hand. “It’s very entertaining. I’m watching the Imperial Bank going down in flames.”
Hector Braga gave a laugh. “Earthgirl’s got them on the run!”
Martinez looked at him. “Who’s Earthgirl?”
Braga seemed a little uncomfortable, as if he’d revealed something he hadn’t intended. “I mean Lady Sula.”
Martinez made an effort to overcome his surprise. “She’s robbing the Imperial Bank? Characteristic.”
“It’s more like she’s pointing out the bank’s been robbed already,” Roland said.
“I’m more worried that it’s us being robbed,” Martinez said. He went to the bar and helped himself to coffee. “Those rumors about the Chee Company are really hurting us.”
“They can’t hurt us,” Roland pointed out. “The family owns a majority of the stock, and we can’t be kicked out. The stock is worth a little less right now, but in time it will bounce back.”
“It’s hurting our good name,” said Martinez.
“Our name is as good as ever it was,” said Roland.
Martinez had been summoned to his brother’s palace for what was described as a strategy session. What strategies were being discussed were unspecified, but Martinez had little enough to do and was pleased enough to be asked.
Roland’s lounge featured the eye-shaped windows of the Tanyl style, golden paneling of chesz wood, and accents of wrought iron. There was a bar, leather armchairs and sofas, and soft carpeting. In one corner, lemon-scented water chimed in a fountain’s scalloped bowl.
“I also wonder if it’s the beginning of a more general attack,” Martinez said. “This could be just the beginning.” He took his coffee to a chair near Roland and sat. Pneumatics sighed and he felt the chair align itself with his lumbar region.
Roland frowned. “I’ve already headed off the likely source of damage,” he said. “Lady Gruum contacted me—she’s heard the rumors, too, and I was able to reassure her that there is no impediment to the Chee Company continuing its work on Rol-mar.”
“Lady Gruum? Did she say where she heard the rumors?”
“From Lord Minno.”
“Minno?” Martinez was outraged. “He’s our banker!”
“He’s not our banker,” Roland said, “he’s Lady Gruum’s banker.”
“So why is he scaring her?”
“It’s his job to report anything that may affect the Rol-mar project,” Roland said. “But my guess is that he’s part of a syndicate deliberately trying to drive our price down. He may be shorting us, or hoping to pick up some of our stock cheap. The next step would be a pump-and-dump, where he spreads counterrumors to drive the stock price up, so that he can sell at a handsome profit.”
“That’s illegal, I hope,” said Martinez.
“Of course,” Roland said. “But it’s very difficult to prove. He can say he was doing his duty to his clients by spreading the rumors.”
“He’s with the Bank of the High City, no?” said Hector Braga. “Pity he’s not Imperial Bank—Earthgirl is going to keep them from thinking about anything but their own necks.”
Martinez turned to him. “Why do you call Lady Sula ‘Earthgirl’?”
Again an uncomfortable look crossed Braga’s face. “She was stationed on Earth, you know, a few years ago.” This seemed an inadequate explanation even though this was true, but Martinez decided not to pursue it.
“And what is this about the Imperial Bank?”
The Cosgrove revelations were explained to Martinez. “So the bank bought all these—what’s the term?”
“Special Purpose Asset Vehicles,” said Roland.
“Class II,” added Braga.
Martinez went to one of the room’s desks and called up its computer. He adjusted the screen and asked it for information about Special Purpose Asset Vehicles and discovered that such funds had to be registered with something called the Imperial Securitization Section of the Ministry of Finance. From their files Martinez was able to call up the necessary information on the Render entities and learned that Cosgrove had created six such vehicles over the past five years and sold them all in recent months. He’d also created and sold two vehicles called Reaper, and another called Restore.
“The Bank of the High City bought one of the Renders, and also a Reaper,” Martinez said. “And the Bank of the High City is publicly traded, is it not?” He laughed. “I believe we may have our vengeance on Lord Minno.”
“Hardly seems worth our while,” Roland muttered.
Martinez tracked the rest of Cosgrove’s entities through the system and discovered that they had ended up in three banks, one of which was publicly traded and the other two of which were privately owned. All these banks had appeared as plaintiffs before the bankruptcy court concerned with the failure of Cosgrove’
s enterprises, and all were thus revealed to hold a considerable amount of Cosgrove’s money-losing assets, with a few profitable businesses folded in to make the package seem more attractive. When Martinez looked at the dates on which the debt had been acquired, he whistled.
“The Imperial Bank has offloaded a good deal of the Cosgrove debt in the last two months,” he said. “That tells me they knew it was worthless. And the Bank of the High City bought into that debt to the tune of—” He ran sums in his head. “Four hundred fifty million. And that’s exclusive of the Render and Reaper, which set them back at least a hundred million each.”
For once Martinez had the feeling that he had Roland’s full attention.
“How many people know this?” Roland’s voice was dreamy, as if he was speaking from somewhere in the interior of a lush fantasy that was scrolling before his eyes.
“We three. And people at the Imperial Bank have to know. Plus, if anyone was watching the hearings and paying attention, they might be able to work it out.”
“I doubt there were many people watching,” said Hector Braga. “It was a quarterly meeting for the Imperial Bank to deliver a routine report. Not even financial reporters turn up for it; they just read the report later. The only reason we knew to watch was because Lady Sula told me she was going to ask some unsettling questions.”
Roland’s eyes seemed still focused on his inner vision. “I think we should get our short positions in place,” he said, “before it becomes a stampede.”
The next half hour was filled with activity. Martinez and his brother placed large bets against the two publicly traded banks, and Hector Braga, caught up in the enthusiasm, made some bets of his own. Martinez’s sisters Vipsania and Walpurga arrived while this was going on, and once the situation was explained, they made their own shorts.
“If only there was a way to short the Imperial Bank,” Martinez said. “Not to mention the two privately held banks that bought Cosgrove’s debt.”
Roland strolled back from the bar carrying a tray with glasses and a bottle of mig brandy. “I think we should celebrate our good fortune,” he said, “and not wish for windfalls that aren’t possible.”
The Accidental War Page 17
