“Thanks. And try not to worry. We have our best men in the Federal Bureau of Investigation working on it.”
______
Pete Ferrari hung up the phone, then instantly lifted the receiver again. He had to get through to his friend, Morgan Stone, in New York—immediately.
Chapter 13
GETTING IN DEEP
The first person Mike saw as he walked through the gates at New York’s La Guardia Airport was his father, standing in the waiting area. As Morgan Stone moved toward him, Mike could hardly believe his eyes. What would prompt Dad to come all the way out to the airport in the middle of the night? Mike’s chest suddenly felt cold with apprehension. Something must have happened to Mom.
He hurried toward his father. “Dad, what—”
“Son, I received a call from Mr. Ferrari. He’s as confused as I am… but he said Cecelia’s been kidnapped.”
Mike halted in his tracks, staring at his father. “What? Cecelia’s been… is she okay?” Jacques, who had just caught up with Mike, quickly put a supporting arm around him.
“Try to take it easy, Mike,” Mr. Stone said. “No one’s heard anything yet. The San Francisco Police Department got a report from a neighbor who saw two men escorting her out of her apartment and into an elevator. That’s all that Pete knows. But he thinks it might be connected to something big. He couldn’t say.”
Images from Carmel suddenly sprang into Mike’s mind: Cecelia at the phone booth, all that talk about smuggling money through Asia, how hard she said it was to get free from government work… It was something big, all right.
Reaching into the inside pocket of his overcoat, Mr. Stone pulled out an envelope and a folded sheet of paper. “I made arrangements for your flight and registered you at the Clift Hotel. Here’s a list of contacts and phone numbers you’ll need when you get there. I’m sure you’ll want to do everything you can.”
Mike felt numb. He took the ticket, stepped toward the gate, then turned around. He hugged his father for the first time in a long while.
______
The next morning, in New York, as Jacques sat behind the stack of mail piled atop his desk, his secretary barged into his office unannounced, with a rather perturbed expression on her face.
“Mr. Stone requests your presence immediately. I can’t think what you’ve done to warrant his concern this time. You’ve only been back in the office for half an hour. That would be quick work, even for the likes of you.”
Grabbing his notes on his trip to Geneva, he headed down the hall to the elevators. He rode up to the top floor and quickly walked down the long hallway to the desk of the chairman’s personal receptionist. He had rarely met with Mr. Stone without Mike being there, and Jacques was actually feeling a bit nervous.
“Mr. Stone is expecting you. Please come with me,” the receptionist said, leading Jacques into the chairman’s palatial office.
“Jacques!” Morgan said, smiling. “Come in. I am sorry about all that business Mike is involved with, but I wanted to find out how things went in Switzerland.”
“Well, as I’m sure Mike told you…” Jacques began hesitantly. What had Mike told him, exactly? “We met with Henri Demaureux to discuss the issuance of a sizable sum of bonds for gold from the Swiss banks.”
“Yes, Mike mentioned that, and it sounds very promising,” said Morgan. “But in order for this transaction to take place, we need to discuss what you’re going to present to the United States Federal Reserve tomorrow.”
“I’m going to present? Sorry, I don’t understand.”
“Well, I’m telling you now. They have just made a new ruling requiring special approval of any Allied bank issuing gold bearer bonds in excess of a hundred million dollars. A transaction like the two of you are proposing is going to require a lot of explaining.”
Before Jacques could speak, Morgan continued. “Let me fill you in. The Fed has become convinced that certain limitations need to be placed on the withdrawal privileges of large new gold deposits. The governors are particularly sensitive about what effect premature withdrawal of large deposits could have on the country’s money supply. They need to know how long they can count on having that money there for credit purposes. Although the Fed hasn’t quite come out and said so, I think its willingness to allow gold bearer bonds to be used for liquidity and portability purposes is dependent upon the long-term contribution they make to the money supply of our economy. They may be looking for precedent-setting terms tomorrow, ones that they can apply to all future transactions.”
“Mr. Stone, as you know, I have absolutely no experience in dealing with the Federal Reserve,” Jacques said. “Especially when it comes to a transaction of this magnitude.”
“Then tomorrow could be a day of many firsts.”
Jacques knew there was nothing more he could say; it was time to prepare. After receiving his itinerary, he took his leave of the chairman and headed to a place with which he had become intimately familiar during his dissertation days—the library.
______
After hours of poring over financial documents in one of the loneliest sections of the New York Public Library, Jacques went back to Stone City Bank to sift through its archives. He was searching for a similar case with standards stringent enough to make the industrialists’ money less accessible to them, yet attractive enough for everyone involved to go through with the deal. In short, it was like looking for a needle in a haystack—or a postage stamp among a stack of dusty old financial documents.
By two o’clock, his tired eyes signaled he needed to take a break. Looking at his watch, he thought, It’s only eleven in the morning in California; maybe I should give Mike a call. Jacques dialed the number for the Clift Hotel. Mike answered on the second ring.
“Cecelia?” Mike’s voice was thick with fatigue.
“No, Mike, it’s Jacques. Sorry I woke you.”
“It’s okay,” Mike said. “You got me out of a bad dream.”
“No news, huh?” Jacques asked.
“No leads. No demands. Nothing. The agents and I all suspect this has something to do with Cecelia’s ‘other job’ I told you about, but I haven’t been able to be much help. Everyone here just thinks of me as the pain in the ass from the East who asks a lot of questions.”
“Listen, buddy, I’ll be there soon,” Jacques said, feeling sorry for his friend. “Right after I finish my meeting in Washington, I’ll head to the West Coast.”
“What do you mean Washington?”
“Your father wants me to meet with the Federal Reserve. Turns out we’ve got to get their approval for a transfer of this size.”
“Wow! Looks like you’ve got enough to think about. Don’t worry about me. There’s nothing I can do but wait. But Jacques,” Mike’s voice was almost a whisper now, “whatever happens tomorrow, keep in mind that these money transfers—especially the ones we’re talking about—could be a very messy business. You’ve got to be careful, buddy.”
______
Jacques took the overnight train to Washington. Arriving early in the morning, he checked into the Hay-Adams Hotel and made arrangements for them to store his suitcase. There was still time before the meeting, so he decided to take advantage of the beautiful spring weather and take a leisurely walk to the Federal Reserve building to help clear his mind, the way he used to do at Berkeley.
Forty minutes later, he found himself being escorted into the offices of the chairman.
“Jacques, welcome to Washington,” said the chairman, shaking the young man’s hand. “I’m Roger Malone.”
“Nice to meet you, Mr. Malone. I must say it’s an honor.”
“I’ve wanted to meet you for a long time. Your father and I are old friends, and I’ve heard a lot of nice things about you from him and, more recently, from Morgan. This should be a very interesting meeting. The governors have already arrived and are waiting to hear what you’ve got to say.”
Roger guided Jacques into the very private boardroom of the Fe
deral Reserve and introduced him to the five governors, who represented each of the different banking districts of the United States.
Here I am in the same room as some of the most influential bankers in the United States. Okay, Captain, if you take things one step at a time, it’s easier to control the ball.
After the introductions, Chairman Malone brought the meeting to order. “Gentlemen, we have a very important issue before us today. Mr. Roth, if you please, share with us your proposal.”
Jacques spoke as directly as he knew how. “Gentlemen, we have been approached by a consortium of Swiss banks that want to convert two billion dollars into gold bearer bonds. We’ve been led to believe that the size of this transaction requires your approval. Since there is an elevated sense of urgency, I have taken the liberty of doing some research. Based on the results, I am here to present our recommendation for your approval. In essence, we would respectfully suggest that you consider terms and conditions that, among other things, call for a minimum term deposit of no fewer than ten years, with the proviso that not more than ten percent of the gross deposit can be withdrawn in any year. This proposed ten-percent, ten-year limit would effectively shift the long-term investment capacity of the transferred funds to the Allied banking system. We believe that such a deposit can be classified as a preferred debt transaction for credit purposes and, although the funds must be repaid like any other debt deposits, the limitations placed on withdrawals and the non–interest bearing terms effectively convert the debt into equity for lending consideration.”
The men exchanged looks, then focused their attention back on Jacques. One of them raised a hand, and Jacques nodded at him.
“Your suggested terms would be considered quite demanding by some. Do you mind telling us how you came up with that particular recommendation?”
“Not at all, sir. Extensive research uncovered a transaction with similar terms that the Federal Reserve considered awhile ago, but never with such large sums. Should this transaction be allowed to occur, by our calculations the two-billion-dollar deposit would translate into a decrease in German credit capacity of fourteen billion dollars and a corresponding increase in Allied banking capacity.”
There was some murmuring around the room. The next gentleman to speak was a governor from the west. “We’ve been debating minimum standards for several months. If we were to approve the terms you suggest, how do we know that we would not be adopting standards that are too difficult for the Swiss to enforce?”
“We don’t, definitively. Before approaching the gold center banks, I would need to obtain the consent of the individual depositors and the Swiss banks. This may be a good opportunity to take advantage of an unusual situation. Without the cooperation of the American banking community, I doubt if there is sufficient financial capacity in the gold center bank system to complete this transfer. We are, in effect, the only game in town.”
This got a good response from the governors all around.
Jacques continued. “As for the Swiss bankers enforcing the terms, I have done considerable research on that question and am not aware of any instance wherein they have failed to honor the stipulations of a major transaction.”
A governor from one of the southern states spoke up. “I’m sure you understand that we can’t provide you with any approvals at this point, conditional or otherwise, but let me just say that if this situation is as workable as you make it seem, I am prepared to give it my prompt and careful consideration.”
Realizing that he had achieved what he’d come for, Jacques knew it was time to stop. “On behalf of Stone City Bank, I thank you very much for the opportunity to present our plan.”
As the governors rose to shake hands with Jacques and exit the meeting room, Roger Malone put his hand on Jacques’ shoulder and asked, “Would you mind remaining behind for just a minute? There’s something I want to show you.”
He led Jacques into his office, to a photograph hanging on the wall. “Have you seen this picture before?”
“Now that you mention it, I recall seeing that same picture on my father’s desk in his Paris office, and, if memory serves, hanging on the wall in Mr. Stone’s office.” Moving in for a closer look, Jacques said, “That’s my father on the left. Next to him is Morgan Stone, you, Henri Demaureux, and a man I don’t recognize.”
“That’s Pete Ferrari, chairman and president of American West National Bank.”
Cecelia’s boss. Jacques turned to face Roger. “Is there some significance to all this?”
“There is indeed. It’s the story behind the picture that I want to explain to you. It was taken in 1932, thirteen years after the end of the First World War. The Bolsheviks had secured their control over Russia, and the economies of Great Britain and the rest of Europe were in complete disarray. The United States was just entering the Great Depression. Banks were being closed, and unemployment had reached record highs. Both domestic and international bankers knew they faced some very serious problems.”
He paused, looking at the faces of his friends. “The five of us in the photograph began to meet informally, in an effort to improve international banking communications and coordinate our respective efforts. At first, we met on informal fishing trips, well away from the press and other prying eyes.”
Roger motioned to Jacques to have a seat on the sofa under the photo. “We believed ourselves to be the ‘young tigers’ of the banking industry, just like, I suspect, you and your friends do. Even then, we could see the possibility that private and commercial self-interests might conflict with public interests in resolving postwar problems.”
Just like our research. Mr. Malone is definitely trying to tell me something. Does he know more than he is at liberty to say?
“Anyway, it wasn’t long before our unofficial organization became the nucleus of the Allied Bankers Association, the ABA. Even though we’re not an officially sanctioned body, our collective influence makes it possible for us to speak authoritatively in resolving many international banking problems.”
Roger paced about his office, then turned to meet Jacques’ gaze. “As time passed, we tried to maintain a low profile and keep our activities as private as possible. But increasing public scrutiny and wartime conditions have made it impossible for us to get involved with certain… issues.”
The chairman sat next to Jacques on the sofa. “Jacques, as with all holders of gold bearer bonds, these depositors are technically unknown, but it’s not too difficult to guess what is really happening. Not only are we talking about a lot of money and the possible shortening of the war, but we may also alter future world history. An awful lot depends on what happens to that money.
“If you are able to coordinate the gold center banks and produce the deal you have proposed, it will set an important precedent in wartime wealth transfer and international banking cooperation. I can help open doors to make it easier, but I can’t be ‘officially’ associated with what you’re trying to do.”
______
Following the meeting, Jacques decided to walk back to the Hay-Adams Hotel, hoping the cool spring weather would help him sort out what had just happened.
In less than a week, the Swiss banking community, the Federal Reserve, and the Allied Bankers Association have asked my friends and me to undertake missions of enormous importance. What is this world coming to when a few people like us are asked to undertake such an important mission?
It was seven o’clock in the evening in Washington and New York, already one the next morning in Geneva, and four o’clock in the afternoon in San Francisco by the time Jacques got back to his room.
The first call he placed was to Morgan Stone, who, Jacques knew, frequently worked late in his office.
Stone answered his own phone. “Jacques, I was hoping you’d call. Roger rang me just after you left. Apparently, you made quite an impression on the board of governors. So, what happens next?”
“Mr. Stone, it seems to me that I need to return to Geneva and work out the d
etails of our proposal with the Swiss and their depositors. If it’s all right with you, I’ll make arrangements to pass through New York tomorrow, pack a suitcase, and catch the next flight out.”
Jacques’ next call was to Claudine.
“Jacques, have you any idea what time it is here?”
“Claudine, are you awake?”
“I am now. What’s so important that you would call me at one in the morning?”
“I’ve negotiated a tentative acceptance with the Fed to act on our transfer. Step one is almost complete. But before we can proceed, we need the approval of the Swiss banking community and that of Karl’s ‘cousins.’ Would it be convenient to have your plane meet me where you left me last time?”
“Of course.” He could hear her sleepy chuckle. “That news was definitely worth waking up for.”
Chapter 14
CLAUDINE AND JACQUES
The spring morning slowly warmed as Jacques, Claudine, and Henri enjoyed breakfast on the balcony of the Demaureux Bank’s private suite in the Hotel du Lac. “Jacques, before we get started, tell us the latest news regarding Cecelia,” Henri said.
“What’s really weird is that it has been more than a week and there has been no ransom note and no communication,” Jacques said. “All we can hope for is that she is still alive and that her kidnapping is some kind of government-to-government thing.”
After a long silence, Claudine said, “Knowing Cecelia, she has found a way of proving to her captors that she can really be a handful.”
Over coffee, Henri broached the real subject of Jacques’ return. “I have just heard that the U.S. Fed is holding up its approval of all new gold bearer bond issues above a hundred million dollars. A substantial delay like this could kill our deal. I’m afraid my clients will panic and change their minds.”
“Henri, as usual, your information is correct,” Jacques said as he set down his coffee cup. “But as I’m sure Claudine explained, I met with Roger Malone, who, I gather, is an old friend of yours, and without committing himself, he was generally supportive of my ten-year/ten-percent terms.”
The Sentinels: Fortunes of War Page 9
