The Samurai Strategy

  CHAPTER TWELVE

  Over the last three weeks I'd spent long hours on the phone handlingMatsuo Noda's new hedging in the currency markets. The play started outmodestly, but as his Eight Hundred Year funds became bloated with cash,it grew into an avalanche of speculative positions.

  His guiding principle was to keep a low profile in order not to spookthe markets, same as any good trader would do. Whenever the FOREX deskof one market-maker bank on his list would start getting nervous, I'djust hit the next place in line. Finally after everybody on this sideof the ocean began backing away, he went international. Zurich, inparticular, loved the action and took everything he threw in itsdirection. I guess the Swiss are used to high rollers, since theirfinancial casino never got cold feet and invented a house limit.

  Somewhere along the way I also came to realize I couldn't possibly bethe only agent in his employ; there was far too much money to move.Also my list of contracts eventually got pared to manageable levels, sosomebody else had to be picking up the slack. It appeared that just asI was spreading the action he'd assigned to me all over the globe, hewas spreading his own assignments worldwide. The man had to be coveringa major chunk of the world market in interest-rate futures and currencyforwards, but not a penny of it was traceable to Japan. Or to MatsuoNoda.

  How, I kept marveling, could this be happening right under the nose ofall our supposed geniuses of world finance? One thing, Noda had all hismoves down pat. My hunch was he'd started routing a lot of shortselling through Sydney and Hong Kong, and also was hitting the off-exchange "third market," anyplace he could find somebody to take hisbets. If you remember how the dollar plunged in the mid-eighties,you'll also recall that anybody who'd had the foresight to dump it inadvance would have been sitting pretty. Plenty of traders did, but noneof them received any particular attention, since the pond is so huge.In cumulative totals the currency exchanges worldwide easily handle asmuch as two hundred billion dollars a day. Although DNI's massive shortposition clearly signaled that somebody major was anticipating a crashof the dollar, Noda realized that all he had to do was keep moving andnobody would put it together.

  Need I add that my own little dollar hedge for Amy was peanuts comparedto what was going on now. Dai Nippon through its anonymous agents wasdumping American currency in the multi-billions worldwide, but sinceNoda kept the action spread out, nobody bothered to notice the pattern.Ditto his awesome "naked" shorting of Treasury futures. I mean, anybodywho'd troubled to assemble the numbers could have predicted somebody upon the bridge must have sighted a reef dead ahead. I kept trying towarn traders I knew, both on and off the exchanges, but nobody wantedto hear downbeat speculation from some Cassandra. They were all toobusy pocketing commissions and ordering more champagne.

  And then it happened. In broad daylight. I'll explain the operativedetails shortly, but if you were there, that could be a little likereviewing the theory underlying nuclear fission for somebody standingat ground zero when the bomb hit. So first let me recollect how it feltdown in the trenches.

  I was breakfasting at the dining room table downstairs that particularMonday morning--November 7, as we all remember so vividly--when MatsuoNoda dropped the first shoe, or maybe it's more accurate to say hebegan loosening the laces. I'd just finished squeezing some orangejuice when I punched in the number of a financial update service on mytrusty cordless phone, mainly to hear the (recorded) sound of a humanvoice. I'd totally forgotten the U.S. Treasury was holding itsquarterly refunding that day.

  Newsbreak. Dealer banks were reporting that demand for the long bond,the thirty-year, was extremely soft to nonexistent. Equally unnerving,there wasn't any noticeable interest in Treasury's ten-year noteseither. The reason seemed to be that the usual heavy participation bymajor Japanese investment houses (typically twenty to forty percent ofthe total) had inexplicably evaporated. In fact, a rumor currentlyflying across

  the floor of the Chicago Board of Trade said a number of Japanesesecurities houses and banks in New York had begun what appeared to be aprogram to divest their current Treasury holdings massively. Sincespokespersons at Japanese outfits like Nomura and Daiwa Securities hadclammed up, refusing to deny that rumor, the usual institutional buyerslike Oppenheimer and Goldman, Sachs were holding back, nervous.

  Hang on, I said to myself. Can this mean we're about to test outHenderson's "worst case" scenario, that Japanese pullout all theanalysts say could never happen? But there's no reason. No suddenicebergs out ahead. . . .

  Noda. I said the word out loud. Noda's kicked off his play.

  I almost laughed at the thought of his naivete. Was this going to behis game? Who was he planning to fool? For once you've got a littlesurprise in store, chum. Treasury may have to sweeten the pot, butthere's a lot of money in the world. The United States of America can'tbe blackmailed.

  Then I glanced out at the blue morning sky, empty except for a singleswooping sparrow, and had a strange premonition, one of those mysticalmoments when everything sparkles with crystalline clarity. I had thisfeeling I can't explain. Still in a reverie I carefully set down myorange-juice glass, walked upstairs to the "office," and dialed one ofthe computers into Reuters's Wall Street service. How were thesecurities markets taking the news? It was already ten-thirty, timeenough for some initial response.

  Dear God. For a second or so I just stared at the numbers in disbelief.What was happening? Noda hadn't gone near the stock market.

  I quickly switched on the TV and located CNN, which was alreadycarrying a special report live from the floor of the New York StockExchange. There stood a badly shaken Lou Dobbs, minus his tie. Minus,in fact, his jacket. The scene around him was pandemonium.

  ". . . and the Dow Jones Average . . ."--he glanced down at a monitor--".. . has dropped six hundred and eighty points in the last twentyminutes. . . ." At that moment somebody jostled against the cameraman,giving us a momentary view of the ocean of paper buy-and-sell slipslittering the floor. "A hundred and ninety million shares have alreadychanged hands in the first half hour of trading this morning. ..."

  My God, I thought, the market is in free-fall. Was Meltdown Monday in'87 just the warm-up?

  "As yet unconfirmed rumors concerning a slow foreign response totoday's Treasury auction . . ."--although he was weighing his wordscarefully to give the appearance of calm, the hasty makeup on hisforehead was already beginning to bubble with perspiration-- ". . . seemto be responsible for what most analysts are describing as an entirelyinappropriate overreaction in securities prices here this morning. ..."

  What else could he say? It was as though everybody's gnawing, primalfear had just been confirmed. There really was a hairy beast lurking inthe bedroom closet, waiting to jump out and eat us in our sleep. Themarket was running to mommy: safe and soothing cash.

  Next he made the tactical error of buttonholing a couple of floortraders and specialists for comments. They didn't bother to mincewords. Their one, terrified question: Had Japan finally decided to letthe U.S. and its towering debt just twist slowly in the wind? If thathappened, U.S. capital would simply dry up, sucked in by Treasury'smassive money-sponge: interest rates would soar, murdering the U.S.economy. The Great Depression of the nineties.

  As I watched, a bulletin started running across the bottom of thescreen: bids on the new issue of thirty-year bonds had now dropped anamount equivalent to raising their return almost two full interestpoints. I zeroed in as the text continued. Worse news. The "coverageratio," which measures how many more bidders there are than necessary,had plummeted from 2.7 to 1.3. And still dropping. More and morepotential buyers were running for cover.

  Lou, who was now surrounded by traders in blue jackets and couldn't seehis own monitor, was assuring his viewers that experienced marketanalysts were all saying the slowdown in Treasury action did notaccurately reflect worldwide demand, that deutsche marks and poundssterling undoubtedly were already winging westward to take advantage ofthe new higher rates.

  Sweating there in his melting pancake, the
poor guy had no inkling thepatient was slipping into a coma just as he'd forecast full recovery.

  Well, I thought, there's always prayer. Anything's possible. But . . .as Henderson used to say, if frogs had wings, they wouldn't bump theirass.

  I got up to go downstairs and pour another cup of coffee. Coming back,I decided to forget about the stock market for a moment and just focuson Treasury, so I clicked on my Telerate service and scrolled throughthe financial quotes.

  Friends, by that time there was no, repeat no, market out there forTreasury paper. Now that the Japanese dealers appeared to be dumpingeverything, European banks had hit the sidelines, waiting to see whattranspired. Would rates continue to move up? Would Treasury be forcedto withdraw the issue? Should everybody be bailing out now before bondprices went through the deck and demolished years of interest earnings?Looming over it all was that standing terror of the bond markets: noliquidity.

  Back to Cable News Network. An officer from one of the dealer banks(which bid on big chunks of Treasury paper, then retail it) had rushedover to CNN's midtown studios and was explaining to us all it wasclearly nothing more than some minor trans-Pacific communicationssnarl. The problem, obviously, was simple: Japanese securities firmshere just hadn't received authorization from their head offices inTokyo, where it was after business hours. A clarification would beforthcoming any minute now.

  Well, if you've ever been turned down for a mortgage and you fantasizeda day when you'd see that high-and-mighty clerk behind the desk have toask _you _for a loan, I hope you caught that one. This paper-shufflerwhose secretary had a secretary had agreed a week earlier to take onthree billion dollars of Treasury's new debt issues--paper he nowcouldn't give away, let alone resell--and he was practically on hisknees begging America to save his bank.

  What the hell was going on? My mild-mannered friend Matsuo Noda hadinadvertently (I assumed) kicked off a major financial panic.

  I clicked the dial over to Financial News Network, FNN, which hadmomentarily interrupted its heavy midday fare of California snake-oil-and-options hucksters. Now a decidedly pale investment banker, this onean unindicted employee of Drexel Burnham, was declaring it was allmerely a little "tempest in a teapot." His precise words. The Japanesesecurities houses wouldn't dare pull out their funds and kill themarket, he explained. It was absurd. If they did that, their investorswould lose a fortune, since any big sell-off would automatically drivedown the value of their own massive portfolio. Ergo, Japan's funds hadno choice but to stay invested. No problem.

  My friend, I thought, where have America's bankers been? Outrepossessing some widow's Chevy? As a matter of fact the Japaneseoutfits here don't give a flying fig what happens to our debt market.If you'd been doing your job, you'd know that Matsuo Noda had alreadysold Treasury futures far in excess of Japan's portfolio back whenvalues were still high. Now he can go out and pick up all the notes andbonds he wants, cost approximately nothing, and turn around and deliverthem at yesterday's full price. The man must feel like a riverboatcardsharp who's lucked into a saloon full of Huck Finns on payday.Don't you realize he's just cleaned you out, right down to the fillingsin your teeth? And now he's got his team on the bus ready to roll.

  Over to CBS, a Special Report underway. It featured a stream of well-meaning and incoherent Treasury officials, none of whom had theslightest inkling what to say. Then Jack O'Donnell came on from theSenate pressroom, breathing fire. The administration's "light at theend of the deficit tunnel" had turned out to be a freight train headingour way, just as he'd predicted. America's debt chickens were cominghome to roost. He was demanding that the Speaker call a joint sessionof Congress this very day and by God do something.

  Right, Jack. What? Looks like our pal Matsuo Noda is about to have theU.S. of A. exactly where he wants us. By the balls.

  I guess I must have been operating solely on instinct by then, becausea phone number popped into my head that I hadn't recalled in years. SamKline, my old broker at Merrill Lynch. I hadn't talked to Sam in ages,but his number used to come to my fingers whenever the market startedacting up. Maybe he was sort of a father figure. Truth is, I'd firstlearned what little I know about the market watching that giant tickerML had up at one end of the office just above Sam's desk--and long gonein this age of computers. I remembered how heavy trades--over tenthousand shares--were marked with stars, always fun to watch.

  Forget the "financial experts." They were reduced to spouting puregibberish. Time to check in at the real front line. Sam Kline.

  Maybe I just wanted to have Sam to soothe me like in the old days, poursome of that dreadful coffee he had in his Thermos, tug down the cuffsof his trousers, and say not to worry, there's always tomorrow, thedisaster in my portfolio merely reflected a long-overdue and healthy"correction" in the market. (Only years later did I finally realizethat "correction" was a special Wall Street expression meaning all thestocks you own just tanked.)

  When Sam finally got around to my call, he was barely coherent butstill trying.

  "Matt, what's new?" There was turmoil and yelling behind him, as thoughthe office was about to go under a wrecking ball.

  "You tell me."

  "Well, at the moment it's something of a downside morning, but--"

  "Sam," I snapped, "this is me, Matt, save the Pollyanna."

  A short pause, and then he crumbled. "Matthew, want the truth? TheMonday Massacre of '87 was a rally compared to this. That crash wasjust stocks. This time it's U.S. bonds, the dollar, everything. Themarket's falling apart. Right this minute the trust departments atFirst Boston and Morgan are dumping entire sectors like they were somenervous greenhorn in Oshkosh. Pension fund managers I've known foryears are liquidating whole blocks 'at the market,' for whatever theycan get. One specialist downtown just told me he had to eat a hundredthousand shares of, Christ, General Dynamics. You can't give awayNorthrop. And Lockheed, forget it. . . ." Another pause. "God Almighty,Matt, we need a market up here. How about--"

  "Not now, Sam." It was like hanging up on my own father. A knife in myheart. "Look, I'll get back to you. Best to Naomi."

  Good God. I wanted to hire an airplane and skywrite a big sign overdowntown: WAIT. Trouble was, I wasn't sure myself what it was allabout.

  However, there was one thing I could do. I punched in the contactnumber for Dai Nippon, uptown, and told the polite little lady whoanswered the phone to get Tanaka on the line this goddam minute. Aboutten seconds later he was there.

  "Are you guys nuts?" I yelled. "Doesn't anybody up there know what'shappening?"

  "We are well aware of the situation, Mr. Walton."

  "Well, then, do something, for chrissake!"

  "Our securities dealers here are in contact with the appropriateofficials. Nothing is to be done without explicit instructions fromNoda-san. He has not yet been in communication."

  "Well, get him in communication."

  "There is no cause for alarm, Mr. Walton." He continued calmly. "Noda-san has made sure that our dealers' exposure in Treasuries is coveredby the futures contracts DNI has acquired. Japanese investors aresheltered from price fluctuations. Noda-san is most grateful for your--"

  "Listen carefully," I said. "Fuck Noda."

  I hung up.

  The rest of the morning I just sat there and watched the market crater.After bond futures prices on the Chicago exchanges had sunk the dailylimit, as far as they could drop in a single session, the action merelymoved elsewhere. A cash market developed off-exchange worldwide and wasgoing crazy, with spot quotes nose-diving. Prices now were only rumors,but the satellite services were still trying to track them. At exactly12:37 P.M. the President finally got around to issuing an ExecutiveOrder suspending all trading at the exchanges in government bills,notes, and bonds, including futures contracts, until further notice. Itturned out to have been about as effective as Prohibition. Besides, bythat time I figured Noda had already cleared at least fifty billion.

  Enough. I couldn't watch anymore. All of a sudden I felt like a guywho'd bail
ed out of his flaming F-16 only to see it total aschoolhouse. I kicked off the computer, slipped on a suede jacket, andheaded for Bleecker Street to fortify myself with mussels marinara anda stiff Bloody Mary. The early Post at the corner newsstand proclaimedwith characteristic understatement the imminent passing of thecivilized world.

  Over cappuccino I finally started to think rationally. Nothing anybodywas saying added up to a full picture. There had to be more, or less,to the story. . . .

  Then the truth glimmered before my eyes, yet another transcendentalmoment. What Noda was planning was obvious. At last I realized why he'dhired me. Like a great chess player, he could see about ten movesahead. The question now was no longer what his next move would be. Itwas when.

  You want to win World War III with a quick blitzkrieg, knock America toits knees? Simple. Go for the blind side. First you short a piece ofthe debt market, then for fun you dump the currency in advance (sinceit's just naturally gonna go the way of the peso when you make youropening move, and you might as well squeeze the orange if it's justlying there anyway). Next you kick things off by giving everybody theimpression you're divesting all Treasury paper, which causes the dollarto predictably plummet. . . .

  Christ! What about Amy's currency hedge! Three weeks ago I'd contractedto sell the banks of New York ten million dollars she didn't own. Inall the pandemonium, I'd completely forgotten.

  I threw down a twenty for the lunch and literally raced around thecorner to look for a pay phone on MacDougal. When I finally found onethat worked, I shoved in a quarter and dialed the FOREX desk atCitibank for a dollar quote.

  Henderson was right. Paper money is predicated on trust. It seems thatwhen the second largest industrial nation in the world apparentlydoesn't think enough of the credit rating of the first largestindustrial nation in the world to loan it two cents, then talk aboutthe full faith and credit of said first largest, etc., doesn't cut muchice. The Fed was out there buying dollars and dumping marks and yen andpounds in the billions to try and keep the dollar afloat, but nobodyelse in the Group of Five--those countries supposed to step in and buyeach other's faltering currencies to prop them up--was lifting a finger.In spite of our treasury secretary yelling fire and damnation, allthey'd done was announce an evening meeting in Paris. Period. What,they inquired, had the U.S. done lately to help out France, WestGermany, Britain, or Japan?

  Behind our allies' diplomatic and not-so-diplomatic posturing lay asimple, rhetorical question: Who needed passage on a sinking ship? Atthe moment the only thing governments around the world wanted less thanU.S. Treasury debt was U.S. greenbacks. I'd contracted to swap tenmillion of them for other currencies back when they were worth adollar. That afternoon I settled with bills worth eighty cents andsinking. That's right. Amy's college-fund hedge cleared two mil.

  And if you think Miss Amy Walton survived the dollar's crash intact,what about Matsuo Noda, now holding tens and tens of billions in worldcurrency forwards?

  What didn't prosper that Monday was a state of mind called Wall Street.By mid-afternoon all the market indexes were down by half; exchangetrading had been halted in a good two- thirds of the Dow stocks; amajor brokerage house had frozen accounts and announced Chapter 11; andgold futures were soaring. The October crash of '87 was now a nostalgiaitem, remembered as a few sessions of light trading with a hint ofdownside bias.

  A lot of investors went to cash, but most switched into money funds(what else could they do?). While sophisticated players were shortingthe stock indexes and futures, the newsletter gurus--who charged twohundred dollars a year for hot tips about equal in worth to those of aNew York cabbie--were calling their major clients. A big sell signal wasemblazoned in the streets of lower Manhattan. Everybody assumed thesituation was temporary, but nobody needed to ride the ship down. Bythe closing bell the Dow had sunk over eleven hundred and fifty points.And don't forget, the DJ Average represents blue chips; prices forover-the-counter outfits like Widget-tronics Inc. just packed up andheaded south for the winter.

  The way I figured it, Noda was probably more or less on schedule. Bynightfall the stock exchanges had blood on the floor, a dollar wasworth roughly two-thirds what it had been at sunup, and the U.S.Treasury couldn't have panhandled a nickel anywhere in the Free World.

  I've mentioned Jack O'Donnell a time or so previously, the ColumbiaUniversity professor turned politico. Jack was the junior senator fromNew York: Irish idealism goes to Washington. I'd gotten to know himreasonably well, thanks mainly to a series of rubber-chicken dinnersI'd pitched in to help him with.

  Needless to say, O'Donnell's well-known attitude toward fiscal sleight-of-hand in the corporate sector had made raising money on Wall Street adecidedly uphill endeavor. His Insider of the Month award wasespecially unpopular. That was a large gold-plated screw, suitable formounting, which he regularly bestowed on any corporate board memberswho'd just happened to dump big blocks of their personal holdings abouta week before a disappointing quarterly report sent their company'sstock price through the floor. For some reason Jack never seemed to buytheir collective "Gee, we had no idea" explanation.

  Jack always assumed that corporate managements would walk off withanything not securely riveted to the floor. He also believed most ofthe corporate takeovers these days were about as helpful to America'scompetitiveness as masturbation was to population growth, a viewpoint Itended to share--which is one reason why I helped him raise money fromtime to time. More than that, though, I admired him immensely. The manwas a real samurai. Unfortunately, however, he was his own worst enemyhalf the time when it came to soliciting campaign checks; he couldnever understand why executive dining rooms weren't necessarily theoptimum terrain to start raising hell about shareholders' rights. Ionce sent him a dog muzzle for Christmas after he pulled just thattrick at a CEO fundraiser I'd carefully set up in one of those privatesuites atop the World Trade Center.

  He'd been especially busy this session. When he did come to New York,he spent most of his time up at the West Side apartment of a femaleaide of his, where they reportedly were polishing a lot of positionpapers these days. Monday, however, he had only one thing on his mind:how to keep the U.S. monetary system from going belly up. Trouble was,he had no idea what to do. Naturally he immediately canceled hissubcommittee hearings for the day--an inquiry into how charge cards andthe banks touting them (loving those wonderful loan-shark rates) werelofting consumer debt to dizzying heights. That afternoon he beganworking on a speech for the Senate floor, a hellfire preachmentintended to shame the administration into some kind of action.

  After thinking about it awhile, he'd decided that, since all thenervousness in the market was traceable to an apparently total Japaneseloss of confidence in U.S. government obligations, he'd have his staffcall around concerning what other Japanese moves were underway. He hadquestions such as: If they're pulling out of Treasuries, are theydumping corporate bonds too? Real estate? Where in blazes is it goingto stop?

  Simple questions, maybe, but tough ones to attack on short notice,given the clampdown at the source. So his people started making calls,and finally one of them got hold of Charlie Mercer, an Executive VP atShearson. Purely chance. Did Charlie happen to know any big Japaneseplayers in town?

  Well, yes and no, replied Charlie. Strictly off the record, one of hisbiggest personal clients lately was an attorney here in New York, whoalways paid with corporate checks bearing the logo of a Japanese-sounding outfit. But it was a purely private arrangement and he wassure . . .

  The staffer immediately told him to please hold while she switched thecall to Senator O'Donnell.

  Actually I'd known Charlie for years, and I also knew the poor guy'swife had some kind of esoteric bone cancer that meant ten thou a monthin radiation therapy. So I'd let him set up an account on the side anddo some full commission churning in the name of one of Dai Nippon'sdummy fronts. Why not?

  Then Jack came on the line. "Mr. Mercer, am I to understand you've beenhandling heavy trades for a Japanese firm?"

&nbs
p; "Nothing illegal about that, is there, Senator?" Charlie was growingnervous, suddenly seeing himself under the hot glare of TV lights inJack's finance committee. "Truthfully, the man I actually deal with isan American attorney here named Walton."

  "Matt Walton?" roared Jack.

  "You know Matthew, Senator?" inquired Charlie, stunned by the sound ofthe august public figure abruptly bellowing in his ear.

  "Know him? I may kill the prick for not talking to me sooner."

  Approximately five seconds after this conversation my phone erupted.

  "Tell me, Judas," he yelled, "is it true you're helping them out? Iwant the goddamn truth and I want it now."

  "Jack?" I finally recognized the voice. "Helping who?"

  "You know who, you fucker. Our good friends the goddam Japs, that'swho. They're--"

  "Jack, calm down a second," I interrupted. "It's just possible thiswhole thing is some kind of scam. Not at all what it seems."

  "Talk to me."

  "Not over the phone. Client confidentiality. But if you're coming upanytime soon, I'm mad enough to give you a full rundown of all I know,strictly off the record."

  "I'm scheduled in on the six o'clock shuttle. Where can we meet?"

  "How about the club? I promise you an earful."

  "The Centurion?" He inquired sourly. I knew how he hated it.

  "Jack, wouldn't kill you to rub elbows now and then with an actualcapitalist. Don't worry. There won't be any photos to sully yourreputation."

  I suggested the place partly to pay my respects to a wounded ward afterthe day's carnage and partly for Jack's convenience. It was a combinedpress hangout and "new money" convocation, located just around thecorner from his New York office in one of those old mansions right offFifth, midtown. They'd just begun allowing the fair sex to cross theirhallowed doorstep (after a lawsuit), a move certain diehards feltsignaled the curtain raiser on the West's Decline. For my own part I'dactually put up Donna for membership as pan of the test case. Weeventually established that the Centurion's unwritten membershipcriteria were actually pretty simple: in addition to being white andmale, you also needed to be either rich or well-known. Being all fourmade you a shoo-in.

  A couple of us fortunate enough to have friends on the circuit benchcalled in a few favors and arranged for a black, female judge to hearthe case. The proceeding was over in time for lunch.

  "Is eight okay?"

  "Done," he said. "I'll be there on the dot."

  He was late as usual, but I managed to pass the time. It was enoughjust to sip a Perrier and observe the shell-shocked faces of golden boybrokers presently mainlining martinis down the bar. Fortunately theplace was on the ground floor so nobody could take a dive out a highwindow, but the crowd had all the insouciance of hookers working aSalvation Army convention. I checked over the room--lots of designersuits topped off by long faces--and wondered how many millions had beendropped that day by those present. Booze was flowing across themahogany bar as if there were no tomorrow. Maybe there wasn't.

  At a quarter to nine Jack O'Donnell marched up the blue marble steps, aman in from the war front.

  O'Donnell was a big guy who looked every inch a senator, right down tothe thirty-dollar haircut and the eight-hundred-dollar suit. I think itwas his overcompensation for being Irish and being crapped on by theColumbia University administration most of his days. A so-so academic,he'd blossomed as a politician--firm handshake and steel eye--and hadeasily devastated the smooth-talking Long Island party hack the bigmoney had thrown against him. The man was a straight shooter whobelieved the purpose of capitalism was to make a better place for allAmericans, not merely enrich the unscrupulous or crafty few. As aresult, his Senate harangues were a lonesome cry in thetakeover/arbitrage/leveraging/executive-perk wilderness. His contemptfor overpaid investment bankers was exceeded only by his disdain foroverpaid corporate CEOs.

  Anyway, we settled into the leather chairs of the back room while heordered a medicinal Scotch, double. After his nerves stabilized a bit,I suggested he let me give him an informal rundown of what little Iknew.

  "High goddam time." He grimly extracted a notebook.

  "Jack, here's the _mea culpa_. I now confess before God and you thatI've been a very uneasy point man for an outfit that calls itself DaiNippon, International. They have been playing a little game withinterest-rate futures and currency forwards in quantities that staggerthe mind. Thus far, however, their activity has been strictly legal andright out there for everybody to watch. I also tried to warn anybodywho would listen. Consequently any of our financial analysts who didn'tsee this brouhaha coming a mile away has been suffering a severerectal-cranial inversion."

  He snorted and pulled at his drink. "Okay, since you seem to know somuch about this Dai Nippon outfit, care to clue me in on what's downthe road?"

  "Jack, I think the answer is one nobody's figured." Then I delivered mybrand-new theory.

  He stared at me skeptically, sipping at his drink. "Good God, you'vegone off the deep end, Walton. I always assumed it would happensomeday."

  "Jack, from what I hear, none of the big Japanese securities dealershere will even pick up their phone. What does that tell you? They'resoftening us up using the weapon the market dreads the most.Uncertainty. What better way to terrify the Street? Christ, letsomebody start a rumor the President has a toothache, and theypractically have to shut down trading."

  "Matt, nobody's going to believe your crazy scenario.

  Matter of fact, I don't either. It's too wild. I'll tell you what mostpeople are saying. All the news shows tonight hauled out our doomsdayeconomists, Lester Thurow and his ilk, to declare we had this onecoming. The consensus going around is the Japanese are finally fed uphearing us bellyache about trade barriers; so they've decided to treatus to a pointed demonstration concerning exactly who needs who. That'sall. Japan now controls America's destiny. But since a few people herestill have the idea we won the last war, Tokyo just wants to make surewe get our history straightened out."

  Could be, I answered. But I still thought everybody was missing theforest for the trees. Then I went on to describe Noda's building, hishigh-security computer setup. Nobody would install an elaborateheadquarters like that merely to get your attention.

  He listened in uncharacteristic silence, beginning to appear a littlemore convinced. "Well, let's run with your cockamamie theory a second."He rattled his ice cubes, a habit of his I always found distracting."Say something bigger is coming up, and this is just the pre-game warm-up. What can we do?"

  My suggestion, that the President close down all our financial marketsimmediately to keep Noda's hands off them, was not receivedenthusiastically.

  "You want me to stand up in the Senate and propose that?" His alreadyruddy cheeks were beginning to redden even more as he glared around thepaneled room. "Matt, I'd be tarred and feathered by every stockholderin the country."

  Maybe so, I said. But what about Noda's vast Third Avenue nerve center?His supercomputer? The Uzis? It had ominous portent. "Tell you thetruth, Jack, I'm not even sure I should be talking to you. After whathappened today, that guy scares hell out of me."

  We ran through the known facts a couple of times more, not getting anycloser to agreeing on the big picture. Finally he summed up his ownfears: "In my view, we weathered the October '87 crash because the Fedstill had some control over liquidity. When money started disappearingout of the market, they just printed more. They countered deflationwith inflation, kept the dollar in balance. This time, though, we'velost all three pillars under our financial house--stocks, bonds, and thedollar. There's nothing the government can do to stop this one."

  At that moment there was a tap on my shoulder, and I looked up to seeEduardo, the club's recent attempt at Hispanic affirmative action,handing me a cordless phone. Then I remembered I'd set up thingsdowntown to forward calls to the bar. The next sounds in my ear werethe mellifluous profanities of Dr. William Henderson.

  Bill had just gotten off a plane after spending a fe
w days loosening upat the Sandy Lane in Barbados, assaulting its reserves of Sugar CaneBrandy, and he was mad as hell. His "Georgia Mafia" had been caughtflat-footed. Why hadn't I warned him that the Japs had scheduled thismove? Surely I must have had an inkling. He would have shorted themarket and scored a pile.

  I suggested he calm down, that nobody, me included, had seen it coming.What's more, I had a strong feeling it was all--

  "What the hell's next?" Bill continued, oblivious. "What's Nodasaying?"

  "Nothing here but speculation. He's probably getting his beauty sleepat the moment. But take some of your own advice, friend, and standclear. I've got a feeling there's less here, and more, than meets theeye. Don't, repeat, don't get the idea you can outguess Matsuo Noda. Ithink he's pulling a number, but--" "

  Bill interjected something brief and unrepeatable and rang off,undoubtedly headed for consolation.

  "Was that Henderson?" Jack asked, then watched me nod. Bill had pitchedin to help Jack out of a few tight spots on the money front, inappreciation of which O'Donnell had proposed him for the Council ofEconomic Advisers--and shortly thereafter forfeited all credibility withthe administration. These days he couldn't have gotten into the WhiteHouse on a VFW tour. "Well, the man's got no idea when to keep hismouth shut with the press, but he's nobody's idea of a fool. What doeshe think this is all about?"

  "Sounds like he's just studying the tea leaves like everybody else."

  Jack sighed, then rattled his cubes some more. "Well, if Hendersoncan't figure out what's going on, then nobody can. That in itself oughtto tell us there's a patch of slippery ice down the road. My own guessis the Japanese have decided to play a little poker with the Americanmarkets without having the damnedest idea of the consequences."

  "Jack, what if they _do_?"

  After we sat there gazing at the gilded plasterwork ceiling for awhile, we started getting caught up on old times. He inquired what Ithought the press would do to him if he married one of his staffers. Myguess was that a photo of Washington's most eligible divorce veteran atthe altar once more would probably make the cover of People. Everybodyloves a lover. That possibility seemed to cheer him up a bit.

  It was round about then, probably close to ten-thirty P.M., thatanother call came through. This time I already had a feeling who itwas, and I momentarily considered not taking it. But then, why not letO'Donnell have the story straight from the source.

  The caller was, of course, Matsuo Noda. It must have been late morning,Japan time, after a very long night.

  What, he inquired, was my on-the-spot reading of the scene?

  "I don't know." The phone had that same funny whine I remembered, asthough he had a private phone system worldwide. "Maybe you should betelling me."

  Noda-san, no surprise, didn't seem particularly unsettled by thedevelopments.

  "I assure you there is no cause for alarm, Mr. Walton. The situationmay seem temporarily unfortunate, but I have long believed all thingsturn out for the best."

  "Could have fooled me. But while we're all waiting for the silverlining to this cloud, you could do everybody a favor and get yourgoddam securities dealers here to issue a statement clarifying theirintentions."

  "Mr. Walton"---he chuckled--"you ascribe far too much influence to me. Iam merely a banker, one of many in Japan. I have no control over whatour institutions choose to do or not do."

  "I wish I could believe that."

  "Well, I suppose there are many things about Dai Nippon that need to beexplained more fully. I look forward to seeing you next week. We cantalk then."

  Upon which he advised me just to sit tight. All further communicationswould be routed through their office uptown. And with that dictum inplace, he suddenly had better things to do and said thanks for all myhelp. There was the sound of some satellite bleeps, then silence.

  Welcome to the Brave New World, I thought. Again I had this definitefeeling the DNI rodeo had just begun.

  By then Jack was nearing terminal exhaustion. I passed along Noda'scryptic refusal to lift a hand, advised him to make a statementtomorrow that the U.S. financial markets could be dangerous toeverybody's health, and helped him into a cab for his aide's placeuptown. The evening was fizzling out with nobody left at the bar butregulars. Thus I went home alone to check in with Amy and then driftoff into a very unsettling dream.

  My nightmare was over by morning. America's was just beginning.