In the Light of What We Know: A Novel
Page 58
* The synthetic securities we wanted to sell had to be fashioned in such a way that it was relatively certain that investors would receive payments. Here came the clever idea: Create a type of security, A, which would be the first to draw down from the aggregate of mortgage repayments received and pay investors who had bought that security. The point of this was that although the pool of mortgages is supposed to receive a total of, say, $10 million every month in repayments by homeowners, all securities of type A will pay investors a total of, say, $2 million (assuming an appropriate number of type A securities are sold). That way, even if a large number of homeowners default on payments, so that the pool only receives, say, $7 million, the type A securities, being the first to draw from the pool, will nevertheless still be able to pay out $2 million to investors (with $5 million left over).
But there’s no reason to stop there—at least there didn’t seem to be then. Why not create security B, which pays out but only after payments under A have been made? You could sell another $2 million of those securities. The idea is that payments are owed first to investors in A and thereafter to investors in B. The special company would have to pay out a total of $4 million every month to investors in A and B. The risk to investors in B was the risk of so many homeowners defaulting that the pool of mortgages held by the special company brought in not the $10 million (that would come in if no homeowner defaulted) but less even than $4 million, say, $3 million. The first $2 million would go to investors in security A. But after that there would be just $1 million left in the pool to pay investors in security B. Security B is therefore a little riskier than A but not a whole lot riskier. After all, payments to investors in security B are threatened only if more than 60 percent of households fail in a given month to make their mortgage repayments. Nevertheless, because B was theoretically riskier than A, it would fetch a lower price than would A.
Bankers have names for all these things, of course. For instance, the offshore companies created to receive the mortgage repayments are called special purpose vehicles or special investment vehicles. Securities like A and B are known as collateralized debt obligations, or CDOs, and A and B are referred to as different tranches of the security, A the senior tranche and B the mezzanine (there might be yet another tranche lower down and riskier, and therefore cheaper, which would be called the junior tranche). But the language is unimportant, as is even much of the detail, except perhaps in preserving the mystique of the priesthood.
* “I’ve seen things you people wouldn’t believe. Attack ships on fire off the shoulder of Orion. I watched C-Beams glitter in the dark near the Tannhauser Gate. All those moments will be lost in time, like tears in rain. Time to die.”
* Zafar’s notebooks record several passages from Daniel Deronda, including:
How trace the why and wherefore in a mind reduced to the barrenness of a fastidious egoism, in which all direct desires are dulled, and have dwindled from motives into a vacillating expectation of motives: a mind made up of moods, where a fitful impulse springs here and there conspicuously rank amid the general weediness? ’Tis a condition apt to befall a life too much at large, unmoulded by the pressure of obligation.
* Inter-Services Intelligence, whose senior officers are drawn from the military.
* I don’t claim to be an authority on the Urdu language—far from it—but I do know that in Urdu, as in other South Asian languages, there is yet another informal second person, one that connotes an even greater degree of informality, in the main reserved for addressing children and servants, but also used by people who’ve known each other for a great length of time. This is what Zafar is referring to, I’m sure.
* Nawaz Sharif was the democratically elected prime minister of Pakistan, 1990–93 and 1997–99.
* Mohajir is an Arabic word commonly used by Pakistanis to describe Muslim immigrants from other areas of South Asia who migrated to the new state of Pakistan (mainly to the Western half) on partition. In the early days of the new nation, there was in some parts of the established native population an ambivalence toward these newcomers.
† Abdul Sattar, foreign minister of Pakistan, 1999–2002.
‡ I have not been able to identify this person. It’s possible that Zafar has the wrong name.
* I expect you’ll remember, he’d said. I wasn’t even sure how many o’s there were in Woolf until I looked her up. Zafar’s recollection (of his own notes, if not the original, as it transpired) was close but not exactly right. The exact words are from Night and Day by Woolf:
But love—don’t we all talk a great deal of nonsense about it? What does one mean?… It’s only a story one makes up in one’s mind about another person, and one knows all the time it isn’t true. Of course one knows; why, one’s always taking care not to destroy the illusion.
* Zafar is wrong on key points: Indonesia is not and was never an officially Muslim state; furthermore, while India’s Muslim population is vast, it is Indonesia’s that is the largest. What makes the exchange between Zafar and Tomaso intriguing, however, is that my friend must have known that what he was saying was not true. Of course, I don’t mean that Zafar was infallible, but given the subject matter of the specific statements he made, asserting them so confidently, I cannot accept that he didn’t know the facts. Yet why lie? My friend was a slippery son of a gun. Looking over the dialogue, I wonder if he was testing the shallowness of Tomaso’s knowledge, as well as setting a trap. When Zafar “corrected” him, Tomaso responded with Right, when my friend must have known his correction was wrong. This is a side of Zafar I never liked: If he was pulling a fast one, you wouldn’t see it coming and, worse still, not even see it when it was right there.
* I don’t think I had ever grasped it before, but I saw it then. Zafar’s eyes seemed to withdraw as if he were reading off a mental page on which those words were written. I found them, of course, later, in one of his notebooks.
* Zafar did not say if he had taken the Pakistani military flight that day or the UN flight on the following, but from his subsequent exposition, it can be concluded that he flew the same day.