Martinez looked at his cold cup of coffee, with its oily sheen, then withdrew his hand. “Oh, I know I can’t short a privately held entity,” he said, “but I might be able to bet against them in other ways—at a gambling club, for example. After all, the Corona Club runs its own tote. I’d just have to find someone willing to take my bet.”
Roland sighed. “I realize that you’re a Fleet officer, and you’re used to pouncing on an enemy at the decisive moment, but you need to stay away from this. Making a side bet on the price of a stock, or on interest rates or market indexes, is called ‘nonmarket derivative trading’ and it’s completely illegal. The Lai-own traders who invented those methods centuries ago made a packet at first, then lost their firms a colossal amount of money. As a consequence they were executed, and their methods outlawed.”
Martinez frowned. “That just means I’ll have to think a little harder about what I need to do,” he said.
“Perhaps this brandy will aid your thoughts.”
Martinez took the glass, brought it to his nose, and inhaled the sharp, spicy odor. Roland passed out the other glasses, and then raised his own.
“To an unexpected windfall,” he said. He directed his toast to his brother. “Thank you, Gareth.”
“My pleasure, I’m sure,” said Martinez, and drank. The brandy burned down his throat.
Roland seated himself. “As interesting as the last hour has been, it’s been a distraction from the issues I planned to raise at this meeting. The first explains why I’ve invited Mister Braga to join us—it involves Lady Tu-hon, and her reluctance to cooperate with us despite our having offered . . . inducements.”
Martinez straightened in his chair, suddenly interested. It was very unusual for one of Roland’s purchases to rebel, and it spoke to either unusual firmness of character or unbounded recklessness.
“What’s she done?” Vipsania asked.
“Voted against our interest most of the time. I’ve spoken to her on occasion and reminded her that I had hoped she’d be more of a friend to us, but she just says that she is voting in accordance with her long-held principles.”
“Can any more pressure be applied?”
Roland looked skeptical. “I loaned her eighty-three thousand zeniths for her to acquire Rol-mar bonds. I paid less than that for this palace. But the terms were that she would pay me back when she was in funds, and though I’ve spoken to her about it, she is still claiming to be cash-poor.”
Vipsania gave a little sniff. “There’s no record of this loan, is there?”
“No, it’s all . . . off the books.”
“Well,” Vipsania said, “it appears you’ve given Lady Tu-hon a new palace, with nothing to show for it.”
Hector Braga plucked at the knees of his braided trousers. “We could arrange for her to suffer a disappointment in the Convocation.”
“Has she got a legislative program of some sort?” Walpurga said. “How do we defeat it?”
“Lady Sula is with Tu-hon on one of the committees,” Braga said. “She says that all Lady Tu-hon cares about is money, and that she’s one of the convocates planning to repeal the income tax and restore tariffs on interplanetary trade.”
“We’d oppose that anyway,” Roland said.
Walpurga looked at Vipsania. “I don’t suppose Empire Broadcasting’s news unit could do a piece on the Convocation? Mention that—I don’t know—Lady Tu-hon is infamous for not repaying her debts.”
Vipsania was skeptical. “The censors are very careful about what we say about the Convocation. And I don’t know if you want to mention Lady Tu-hon and debt in the same breath—someone might accuse us of trying to bribe her.”
Hector Braga grinned. “Can’t have that,” he said.
Martinez took a slow sip of his brandy and let it roll across his palate. He was carefully examining an idea that had floated up in his mind, examining it with careful mental fingers as he might examine a newborn child, testing it for soundness. It seemed sound enough.
“Let’s just take a lot of her money,” he said. “And Lord Minno’s, too.”
Roland looked at him. “You have a plan? A legal plan?”
“Yes. But first, let’s thwart Minno on another level by stabilizing the price on Chee Company stock—our cash reserves are up to it, yes?”
“Possibly. But why? The price will return to normal in any case.”
“I’d like to demonstrate to the syndicate that’s manipulating our stock that we’re willing to spoil their party. And also, I want Lord Minno to be just a little hungry for money.”
Roland nodded. “Tell me what you’re planning,” he said, “and then I’ll know whether or not I need to consult a lawyer.”
The Bank of the High City was built of the same granite that made up the High City’s acropolis and meant to suggest the same sort of permanence. The polished brass central door was flanked by bulbous eggplant-shaped towers that loomed over the mortals on the street below, as if to intimidate them with the bank’s sheer power.
Martinez, who was not intimidated, passed through the brass doors with confidence. The interior featured beige paneling and more bright brass, and the air carried the scent of polished leather. Martinez asked for Lord Minno and was shown directly to Minno’s office on one of the upper floors. The office was decorated in dark tile with patterns of bright golden starbursts, which probably featured enough contrast so that Minno could perceive them with his optical patches—the tiles would also reflect sound well, which would aid his echolocation.
“Lord Minno,” he said as he entered.
Lord Minno was not at his desk but disposed on a sofa at one end of the room. “Welcome, Captain Martinez,” he said. “I was about to take my wives out for our spa treatment.”
The wives in question shared the couch with him, and at the sound of Martinez’s voice they turned toward him with their large bat ears spread wide.
“I won’t keep you for long,” Martinez said. “I have only a question.”
Both Lord Minno’s wives got to their feet and loped toward Martinez to investigate him. Pointed faces sniffed at his legs and crotch. He patted each of them on her purple, hairless head.
“This one is Vetso,” Lord Minno said, pointing. “The other is Desto.”
“They’re beautiful,” Martinez lied. Minno’s wives cavorted about his feet.
Blind and living in a world of sound and scent, Cree spent the first few years of existence as quadrupeds, gamboling about like puppies, and with about as much intelligence. The males later developed human-scale intelligence and upright posture, but the females remained four-legged and simpleminded. Martinez had to admit that the females’ nearly hairless purple bodies, with their big ears, eyeless pointed faces, and dark optical patches, should have been repellent to the average Terran; but in fact the Cree females had such strong, cheerful personalities, and were so endearingly clumsy, that he found them strangely winsome.
Even though biologically speaking the females were little more than mobile wombs, they and the males formed strong bonds with one another. The males lavished affection on the females, and Minno had given his wives jeweled collars, anklets, and clothing as elaborately purfled and ruched as the outfit he wore himself. Which was all the more generous, because the eyeless Minno couldn’t even properly see or appreciate his wives’ outfits.
Lord Minno rose to his feet and called his wives to him. They joined him happily, and he issued a set of clicks and gobbles that Martinez presumed were terms of affection. Then the sounds ceased, and Minno’s ears focused on Martinez.
“You had a question, Captain?”
“It involves a retired petty officer of my acquaintance,” Martinez said, “a man named Alikhan. I was at the Metropolitan Club this morning, and I saw that he was registering a bet with the tote.”
“That is hardly unusual,” said Minno. “I myself am a member, and I place bets there all the time.”
“You normally don’t see petty officers in a place like
the Metropolitan Club, but it seems he’s inherited some money and can afford a membership. But it was the subject of his bet that really raised a question in my mind.”
“Yes?”
“He’s offering a bet that Lady Kannitha Seang will lose her job within two months.”
“The head of the Imperial Bank?” Minno was clearly puzzled. “Why does he think Lady Kannitha will be dismissed? Or does he think she’ll resign for some reason?”
“He happened to see a picture of her somewhere eating a bowl of stew made with hominy and potatoes. He says that anyone who eats hominy and potatoes in the same dish can’t possibly prosper. He thinks she’s doomed.”
Lord Minno paused for a moment. “You are not joking?”
“I can assure you that he wasn’t joking. And he’s backing his bet with his entire savings—four thousand zeniths. Anyone who takes that bet and has the patience to wait two months will just be able to walk off with the money.”
“It sounds as if your petty officer is disturbed in his mental processes. But you had a question, did you not?”
Martinez spread his hands. He found himself trying to make contact by looking for Minno’s eyes, but of course Minno had none.
“Well—now it seems a little absurd even to ask. But I was wondering if you’d heard any disturbing rumors about Lady Kannitha, or any reason why she might be resigning anytime soon. Because if she isn’t, then I’ve got to try to contact Alikhan and convince him to withdraw his bet.”
“I have heard nothing derogatory about Lady Kannitha,” said Minno, “and can conceive of no reason why she would resign. Heading the Imperial Bank puts her at the absolute peak of her profession.”
Martinez sighed. “Alikhan is stubborn,” he said, as if to himself. Then, to Minno, he added, “At least he was intelligent enough to demand high odds. That alone might deter anyone from taking the bet.” He shrugged, then realized Minno probably would not be able to detect the gesture. “But if someone does bite, he’ll have a very pretty payday in a couple of months.”
“I hope the situation resolves itself to your satisfaction,” Lord Minno said.
“Thank you for your counsel,” Martinez said. “I won’t detain you any further. Have a pleasant time at the spa.”
“We shall! Thank you very much, Captain Martinez.”
Martinez watched Lord Minno and his wives recede down the corridor and hoped he had been convincing, and that Minno’s keen hearing had detected no trace of the mendacity in his words.
Martinez had bought Alikhan a membership in the Metropolitan Club and loaned him the money to make his bet. His plan took the chance that Minno might know how much of Cosgrove’s debt Imperial Bank had sold his own firm and been privy to any complaints that High City might intend to lodge against Imperial and Lady Kannitha Seang—but years of working within the vast bureaucracy that was the Fleet had convinced Martinez that, when something went badly wrong, the instinct to cover up the mistake trumped any public airing of grievances. Those who had purchased the bad loans, and their supervisors, might now be sweating through a well-bred panic attack; but they would almost certainly not have shared their plight with Lord Minno, who after all worked in a different department, and whose job was not to purchase and manage debt, but to create and sell bonds.
Now, he thought, much would depend on how greedy Lord Minno was feeling this afternoon. For Alikhan was demanding formidable odds of twenty-three to one on his bet, which might give even Lord Minno pause. But Lord Minno’s credit was good, and from Minno’s point of view, all he had to do to earn four thousand zeniths was to sign a note at his club.
After all, hadn’t Cosgrove said that when you encountered a bet at those sorts of outrageous odds, you took it? Though perhaps, Martinez thought, Cosgrove wasn’t the best example to follow at this point in time . . .
And in any case there were other bets being laid today. One of Hector Braga’s allies in the Convocation would even now be informing Lady Tu-hon of another extraordinary bet placed at the Ion Club, this one based on the future career prospects of the president of the Bank of the High City. And Lady Tu-hon’s greed, as far as Martinez was concerned, was already proven.
The best part was that the bets did not fall under the illegal category of nonmarket trading. He wasn’t betting on stocks or indexes, he was betting on whether a few prominent people kept their jobs. The bets were unusual, but they were hardly against the law.
His intuitions were proved right less than an hour later, when he found out that both bets had been accepted.
Strolling home through the Garden of Scents off the Boulevard of the Praxis, he decided that he should find out if any of his family’s money was held at the Bank of the High City, or any other bank that had bought Render and Reaper, and make sure the cash was shifted to a safer harbor.
Chapter 10
From her position on the Committee for Banking and Exchange, Sula had a front-row seat for the catastrophe, beginning with Lord Tchai Ridur’s return to the Convocation. Dressed in his beautiful gray suit and employing his perfect diction, he provided information about the Render vehicles purchased by the Imperial Bank, as well as details of the Cosgrove instruments that the Imperial Bank had sold to other banks. Sula and the committee asked for more information concerning exactly when the bank had known that Cosgrove would default, and if any of the debt had been sold after that determination was made. Lord Tchai testified that he didn’t know the answer but would try to find out.
The committee jumped over Lord Tchai’s head for the next meeting two days later and called Lady Kannitha Seang, the head of the bank, who brought a squad of assistants, including the account manager who had been assigned to Cosgrove. Lady Kannitha was a diminutive woman with long black hair that featured a pair of dramatic white stripes, colors that were echoed on her glittering beaded gown. Neither she nor the account manager admitted that they knew ahead of time that Cosgrove would default, but they conceded that they believed they were “overexposed” to his debt and decided to sell it.
That was the cue for the Bank of the High City, and several other banks, to file suit against the Imperial Bank for fraudulently selling them Cosgrove’s debt. Then it was discovered that Cosgrove had bundled a special vehicle for the Imperial Bank to sell. Cosgrove had collected a large fee for creating the vehicle, which the bank then sold as its own, making it seem both safe and legitimate. The bundle was filled with Cosgrove’s debt, along with some of Cosgrove’s less successful businesses.
More lawsuits were filed. And right at this point of high drama, the Render and Reaper bombs went off.
But they didn’t go off only at the Imperial Bank. Once they’d realized it was poison, the Bank of the High City and others had sold off much of Cosgrove’s debt as well. The poison had then spread throughout the banking system, from those with more information to those without, and institutions that had never dealt with Cosgrove personally now began to totter.
The structures of Cosgrove’s Special Purpose Asset Vehicles were complex, and it had taken the banks a while to unpack them and understand what it was they had actually bought. Render and Reaper had been worth roughly a hundred million each when purchased, but once Cosgrove defaulted, each of the vehicles turned out to be worth substantially less than zero—for one thing, they held a lot of Cosgrove’s debt, which would never be repaid, and the cost of tracking down each element of the bundle, paying foreclosure costs, bank fees, legal fees, taxes, and the salaries of everyone involved, would in many cases be more than the assets were worth. And this, of course, was in addition to the millions these same banks had given Cosgrove in direct loans, many of which turned out to have been inadequately secured.
In fact, it seemed that toward the end, the banks had just given Cosgrove money, to keep his enterprises afloat and to avoid having to declare the enormous losses that a bankruptcy would entail. It was hard for Sula to imagine how anyone thought that strategy would end well.
Probably, she thought, beca
use no one ever thought it would be questioned.
But someone—Sula herself—had questioned it, and in the aftermath, only the Imperial Bank survived the Render and Reaper crisis, and that was because the bank belonged to the same entity that printed the money. The other banks collapsed beneath the weight of debt, and then the rubble was submerged beneath waves of panicked depositors withdrawing their cash.
The Ministry of Finance, the Treasury, and the Imperial Bank worked overtime to find buyers for the bankrupt institutions, but this proved impossible as long as the banks were engulfed in Cosgrove’s debt; and so the Convocation voted into existence a new entity, the Bureau of Arrears and Obligations, to which all Cosgrove’s debt would be transferred until it could be wound up, thus taking it off the books of the affected banks.
“The government is packing all the bad investments into a special instrument,” Sula said during the debate. “Isn’t this exactly what Cosgrove did with Render and Reaper? And wasn’t it a bad idea then?”
At least shifting the debt to the government facilitated the purchase of the defunct banks and the installation of new management. Lady Kannitha had long ago resigned, as had Lord Tchai, who had probably done nothing wrong but who had become the public face of the scandal. The management teams of the other banks were gone as well. All were being investigated for fraud.
That was the good news.
The bad—or at least part of it—was that once the Bureau of Arrears and Obligations began to examine the vehicles it had acquired, they discovered that toward the end Cosgrove had put the same asset into more than one vehicle. The bureau might now possess 200 percent, sometimes 300 percent, of a single asset that was worth little or nothing.
Another round of lawsuits ensued, as those who had lost money on Cosgrove’s assets now claimed they hadn’t owned those assets at all, that the real assets had been previously sold to someone else, and that someone, preferably the government, should compensate them for their losses.
The Accidental War Page 18
