Chapter 281: The Negotiator

Since you all know I can’t possibly understand why you’re doing this, let’s skip the fundamental questions. Focus on the numbers and accurately calculate the solvency of these financial companies. Understood?

The conference room buzzed with analysts and fund managers, surrounded by accounting data, PCs, and laptops from various financial firms. Their eyes gleamed as they listened intently to my words.

Some of them had taught me about funds and financial derivatives years ago, but they, too, listened in silence.

There’s nothing more frustrating than having to complete a mission you can’t possibly understand.

Everyone was filled with doubt, and some couldn’t help but voice their concerns.

“Howard,” one began, “these companies are the mainstream of Wall Street. They handle dozens of times more money than our Miracle. Isn’t it a bit absurd to try and determine their solvency limits?”

They waved lists of companies that controlled money around the world, seeking confirmation that this wasn’t a pointless exercise.

I don’t expect them to fully grasp it, but I need to explain the basic premise.

“Think of it this way: every single one of Miracle’s clients withdraws their money simultaneously. We good so far?”

“I suppose. If clients are willing to bear the losses from a sudden withdrawal.”

A perfectly reasonable answer. We manage clients’ money, not gamble it.

“Now, imagine someone shows up with a credit default swap contract and demands $100 million. This $100 million isn’t from client funds but must be paid from Miracle’s own money. Is that possible?”

The premise is flawed.

It’s impossible for all clients to withdraw their money at once as if they’d made a pact. But for now, we need to focus on the numbers.

They were hesitant to voice the answer they already knew.

“Miracle can manage it. But you’d have to forgo your bonuses this year, and some of you would have to pack your bags. The $100 million loss is a sum someone has to account for.”

Seeing their discomfort, I continued.

“Imagine the same scenario happening to Goldman Sachs, Deutsche Bank, Morgan Stanley, Merrill Lynch, etc. Except the claim is $10 billion. Can they weather that storm with just forfeited bonuses and downsizing like we can?”

The figure of $10 billion, over 10 trillion won, seemed to shake their confidence, as they remained silent.

“This is what I want to know. How much can these major financial firms pay out using their own funds, not client money? What’s the breaking point where, despite having the means, they’d choose to default and declare bankruptcy?”

One of them, who had been listening quietly, finally spoke.

“So, it’s like a kidnapper calculating ransom.”

All eyes turned to him.

“Oh, it was a study we did in school. A study to calculate the optimal amount to demand from parents when kidnapping their children—an amount they’d pay without involving the police.”

He seemed a little flustered by the attention but shrugged it off as he explained.

“If the ransom is too low compared to the parents’ assets, it doesn’t justify the risk for the kidnapper. Asking for more than they can afford is also foolish. And you have to understand the parents’ personalities too.”

“The parents’ personalities?”

My curiosity was piqued.

“Yes. That’s why most kidnappings are done by someone the family knows. Parents who can’t stand injustice, even if they have the means, will call the police if they feel the demand is even slightly excessive.”

“So, in this case, the parents are the CEOs of these financial firms?”

“That’s one way to look at it, but you also have to consider their management philosophies, reputations, shareholders, and public perception.”

“Meaning you can’t determine the maximum payout solely by looking at the numbers?”

“You can figure out a reasonable payout with just numbers, but it won’t reach the maximum threshold.”

Without further thought, I pointed at him.

“You’re the team leader for this TFT. Deadline is two weeks. Get me the maximum figures, not the reasonable ones.”

Not just the person I pointed at, but everyone looked surprised, but my decision was final.

* * *

While one team worked on determining the financial firms’ solvency, I was drafting swap contracts with another group of experts as assistants.

Mortgage-backed securities weren’t single products but a mishmash of numerous debts, making it crucial to set benchmarks for each security.

I selected the top 50 securities with the highest trading values and assigned them our own AAA rating. To others, AAA symbolized safety, but to me, it was like hitting the lottery with the biggest possible payout.

While I was busy analyzing securities, Rachel Arieff quietly called me out, looking very urgent.

“What’s wrong? You look… pale.”

“I’ve been gathering information on Wall Street… Howard, I’ve found some people who are thinking the same way you are.”

Of course, they exist. I already knew how they made their money and was following the same path.

But I feigned surprise and asked, “Already? Who are they?”

“Greg Lippmann, Steve Eisman, John Paulson, Ben Hockett… some are individuals, others are institutions….”

“When did they start?”

“The earliest started two years ago. The money really started pouring in last year.”

“They must have lost a lot of money. Heh.”

It’s a bet that loses money as the value of mortgage bonds rises. Betting on it for two years straight, especially for institutional investors, would have led to a barrage of client complaints or a significant outflow of investment.

“Goldman Sachs alone manages over $200 billion in mortgage-backed securities. The largest bet against it among them is only $700 million. Just by simple comparison, they must be seeing massive losses right now. Maybe even halved.”

$200 billion is 200 trillion won. Korea’s budget for 2007 was 230 trillion won, proving America’s scale. A single financial company wielding the budget of an entire nation.

I turned to Rachel.

“Are you worried because they’ve lost half their value? Is that why you’re telling me this, to stop me?”

“No. I wanted to tell you that maybe your predictions aren’t wrong.”

“So, you’ll bet with me?”

I asked with a smile, but her expression remained stern.

“I want to stick to my principles. Not betting, but investing—making stable and consistent returns. Most of our clients already support my approach and have agreed to withdraw from mortgage-backed security investments. But they don’t want bets.”

She continued, “Going along with our clients’ wishes is my way of doing things.”

Rachel prefers defenders over attackers.

“Understood. I also support Rachel’s management style. So, please continue as Miracle’s CEO.”

This was sincere.

Isn’t New York Miracle primarily a vault for my money? I prefer slow and steady growth over risky investments.

Of course, this bet will make Miracle a hot topic on Wall Street, but the credit can go to the people here.

They get the fame, I get the money.

And I understand the meaning behind Rachel Arieff’s anxious eyes.

She knew the moment I injected a massive sum into the precarious US financial market, it would trigger the collapse.

* * *

“Remember, we execute these credit default swap contracts simultaneously. If we contract one by one sequentially, someone will definitely investigate our contracts. We need to get it done in an instant before information leaks.”

The people holding the contracts looked like they were stifling laughter, finding the whole thing ridiculous.

They probably thought these kinds of foolish contracts were always welcome, and no one would suspect anything.

“New York team, it’s Friday morning there. London team, it’s Friday afternoon. The London team can enjoy the weekend there.”

Silent smiles spread across the faces of those heading to London.

They were taking contracts that were practically handing over free money, the counterparties would welcome them with open arms. It was a business trip that felt like a vacation—sign a simple contract and enjoy the whole weekend.

They suppressed their cheers as they departed.

Having finished all the preparations, I waited for Friday, drinking with Rachel at a small bar.

“What’s the total? The total investment?”

Rachel asked, sipping her cocktail.

“I set the insurance rate a bit high. Some people might be sensing this crisis by now. That unease requires a blinding amount of money.”

“How much?”

“Minimum 4%, maximum 7%.”

“The term?”

“Five years.”

“Well… if your predictions are right, there’s no difference between five or ten years, right? It’ll all happen next year anyway.”

Rachel gave a self-deprecating laugh.

“Exactly. We only need to pay for one year’s premium.”

“The total amount?”

“If we take the average insurance rate of 5%, it’s about $3.5 billion….”

“You’ll make twenty times that with this bet, $70 billion?”

The bartender, refilling glasses, frowned as he turned away.

Probably because of the numbers the middle-aged woman and young Asian man were spouting like nonsense.

To be honest, it sounded like nonsense to me too.

$70 billion, or 70 trillion won.

To me, it was just an unreal number, like a code or digital signal with too many zeros.

“You think Wall Street can handle a $70 billion payout?”

“What do you think, Rachel? Is it too low?”

She pondered for a moment before speaking.

“Right now, it’s low enough to not cause any problems. But next year, wouldn’t you worry it’s too high?”

“We’ve diversified between London and New York, so it should be safe.”

“Next year, you’ll either catch up to or surpass Warren Buffett. You’ll jump to the top of the world’s richest list in one go.”

“Just like I’m not in the spotlight, there are many hidden billionaires in this world. So, next year’s Forbes richest list will still have Warren Buffett at number one and Bill Gates at number two.”

Korean chaebol chairmen are among those hidden figures. Their personal wealth is announced as around 3 or 4 trillion won, but they use companies worth hundreds of trillions as their personal vaults, and who knows how much money they’ve stashed away.

“I’ve lived buried in numbers my whole life, but seeing a number that transcends the boundaries of common sense appear in reality is even confusing.”

Rachel emptied her glass again.

“Do you have plans for all that money?”

Of course, I do.

But I can’t tell this woman.

“My respected grandfather once said this.”

Rachel’s gaze, fixed on her drink, shifted to me.

“The goal of money is to earn it. Don’t think about where to spend it. As you live, the time to spend that money will inevitably come. Worry about spending it then.”

She chuckled softly.

“The wealthy really do think differently. Your grandfather was also incredibly rich, wasn’t he?”

“Yes. But even he would be astounded. He never made $70 billion in a single year.”

“I think you’re the first since the dawn of capitalism?”

Is that so? I’m sure there must have been others.

“Didn’t the Rothschild family make enough money to buy all of England during Napoleon’s Battle of Waterloo?”

Rachel shook her head.

“That’s a story that branched out from conspiracy theories. They made a lot of money from government bond investments, but even at today’s rates, it wouldn’t exceed $1 billion.”

The $1 billion the Rothschilds made was ultimately the people’s taxes, and the money I’ll be making is coming from the pockets of American citizens.

At least they aren’t Korean citizens, which makes me feel a bit better.