[283]Pandemonium, Wall Street 4
Will Emerson, Goldman Sachs’ Executive Vice President of Risk Management, was staring at the contract signed last Friday for a long time.
The red-haired man who was standing next to him and waiting for the vice president to open his mouth finally couldn’t hold back and spoke first.
“Shall we contact Miracle Investment first?”
“Wait a minute. “The first thing to do is to accurately figure out the total amount.”
Vice President Will Emerson rested his chin and still did not take his eyes off the contract.
He said as if he had been waiting for his cell phone to ring.
“Call me.”
Holding a pen, he quickly wrote down the numbers he heard through his cell phone.
“Are you sure about this?”
He tapped the paper with the numbers on it with a pen, checked it again, and ended the call. Will Emerson has already become thoughtful.
He spoke to the red-haired man next to him.
“Everyone to the conference room. Right Now!”
The red-haired man ran outside as soon as the vice president spoke.
Will Emerson checked the numbers again.
The number 70 billion circled with a pen weighed heavily on my heart.
As Vice President Emerson entered the conference room, the eyes of about a dozen people turned to him.
Without another word, Emerson started by asking a question to one man.
“Michael, what is the current default status?”
“yes?”
“Subprime mortgage loan! “The debt repayment status after applying the variable interest rate!”
“It will be around 3%.”
Vice President Emerson frowned at Michael’s unsure answer.
“On the edge? Is it right? Don’t guess, just tell me the exact number. “Give me 5 minutes.”
Michael started tapping the laptop keyboard like crazy.
“Last Friday, Miracle bet $2.8 billion that mortgage-backed securities would go bankrupt. Their plan was $3.5 billion, but a few places lowered their bets. We can guess that the terms of the contract are no different from ours, so if they win… “They’re taking almost $56 billion.”
Everyone in the conference room could not keep their mouths shut.
Miracle’s whereabouts had been the topic of drinking parties all weekend, so no one knew about it, but this was the first time I had heard of the total bet amount.
There was a possibility that an exclamation that started with the letter F would burst out, but everyone managed to suppress it because of the vice president’s stern expression.
They wondered why the vice president was so angry because Miracle poured in $2.8 billion, but Goldman Sachs only collected $48 million.
“There were people who had the same thoughts as Miracle before. But the amount wasn’t that big, was it?”
Some people nodded their heads at the vice president’s words, while others just stared as if they were unfamiliar with it.
“Miracle is a place that prioritizes stability. “Isn’t it strange that they invested $2.8 billion in a company that is extremely reluctant to lose its principal?”
“Emerson. Every year, $500 billion is earned from mortgage loan securities products. Although $2.8 billion is a lot of money, it is relatively penny.”
When someone raised a counterargument, another person who gained courage expressed optimism.
“At the Las Vegas Securitization Forum, it was announced that the loss rate for subprime mortgage-related securities was only 5%.”
“who?”
“In the keynote speech by Bear Stearns CEO Bruce Miller… .”
Vice President Emerson interrupted him and asked.
“What is the basis for 5%? “Have you checked?”
When the optimistic person was unable to answer and was procrastinating, Michael, who was checking the status of default, saved him.
But the numbers he identified made everyone in the room guilty.
“Emerson, starting this year… .”
“How much is it? Just tell me the numbers!”
“8%… … .”
A person named Michael began to feel the sense of crisis most clearly. This is because he saw the graph of repayment defaults rising steeply.
“If this trend continues, it will be over 9% next month. “The 10% line is right in front of us.”
Michael also revealed important facts that should not be hidden.
“The floating interest rate is already more than four times the fixed interest rate. If things continue like this, all the mortgaged houses will be taken over… .”
Vice President Will Emerson’s eyebrows trembled.
It is safe to say that the numbers presented in the keynote speech at the Securitization Forum are unfounded. The forum is just a gathering of merchants who set up a stall to sell more derivatives.
A rosy future, safe investment, money feast… . Aren’t they busy spouting rhetoric like this?
The reason Will Emerson rose to vice president solely through risk management work is because of his meticulous insight. He was such a meticulous and meticulous person that he was able to find tiny ant holes in a huge dam and prevent the dam from collapsing.
But he felt like he should write his resignation today.
It’s not an ant hole, but a big crack has already formed and water is leaking out. It seemed like the dam was about to break.
It is already too late to blame yourself for not doing anything because you were blinded by the flashy money feast.
He knew exactly what he had to do from now on.
Although the risk could not be detected in advance, the risk that has already occurred must be minimized.
Now it’s time to pack your bags and take refuge before the dam collapses.
Vice President Will Emerson picked up the phone on the conference room table.
“Send five guards up immediately.”
The people gathered in the conference room were puzzled by his sudden behavior, but could not open their mouths. This is because the vice president’s stern expression was unusual.
Emerson said as the guard arrived.
“Everyone, stay here while I come back. “Put your phone on the table.”
As soon as they looked at each other, he screamed.
“hurry. Otherwise, you will be fired from this position!”
People quickly took out their cell phones and placed them on the table.
The vice president spoke to the security guard.
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“Turn off all cell phones and don’t allow them to be used. The same goes for laptops. Then unplug the phone line and prevent these people from leaving the conference room. “It’ll be over in a moment.”
As security began collecting cell phones, Will Emerson ran toward the Goldman Sachs chairman’s office.
The conference room turned into an isolated island completely blocked from the outside world.
* * *
“zone. “It’s an emergency.”
“Sit down first. “Drink a glass of water.”
Goldman Sachs Chairman John Rogers calmed Vice President Will Emerson, who rushed over.
“Are you doing this because of Miracle?”
“Yes, but the real problem lies elsewhere… .”
President Rogers raised his hand, pointed at the TV, and silenced Emerson.
“Look at that first.”
CNN breaking news was showing on TV.
『New Century Financial, the second-largest subprime company, filed for bankruptcy protection in a court in Willington, Delaware, on the 2nd. On this day, the company also announced restructuring plans, including laying off 3,200 employees, or 54% of its employees, and selling affiliated companies.
Recently, as interest rates on subprime mortgages have risen and housing prices have fallen, it has been struggling with growing insolvency. It provided nearly $60 billion in loans last year, but has suspended lending since last month.
In addition, it was explained that CIT Group and Greenwich Capital had agreed to provide $150 million in funding, but the stock price has already fallen 97% compared to last year.』
Will Amerson closed his eyes tightly.
Oh my!
It has already exploded.
“Do you know who New Century’s biggest creditor is?”
Emerson only nodded his head in response to the chairman’s question. It’s Goldman Sachs. And all of the world’s top 10 financial institutions are also major creditors.
“Miracle signed a $1 billion swap?”
“That’s right.”
“Rachel, does that woman have great intuition? Is she or is she a meticulous mathematician? “She hit and run just a day ago.”
“John, Miracle’s $1 billion is nothing. We need to quickly liquidate our CDOs (collateralized debt obligations).”
Unlike the urgent Vice President, Chairman Rogers still had time to spare.
“What if we start organizing CDOs? Are you just watching from somewhere else? “Do you think all mortgage loan-based securities will pour out in an instant?”
“But isn’t that something we can just watch quietly?”
“Will.”
“yes.”
“Do you know why Miracle only signed a contract worth 1 billion dollars?”
Emerson felt burned by the chairman who leisurely asked random questions.
“One billion dollars is not a small amount.”
“No. “The total amount is $60 billion?”
“It’s $56 billion.”
“Even if it is 56 billion won, it is less than 2% anyway. Miracle accurately identified our ability to pay. “We have already signed quite a few credit default swap contracts.”
“How much… ?”
“$25 billion.”
Vice President Emerson realized that the Chairman’s relaxedness came from giving up, and he also realized that there was nothing he, as Vice President of Risk Management, could do.
Looking at Emerson, who was stunned, Chairman Rogers chuckled.
“Don’t be like that. “Ten billion dollars of that is ours.”
“yes? What is that… ?”
“We also took out insurance just in case. “You know Gary Trust, which was spun off from our company?”
“yes. Isn’t this an investment team with a unique personality? Composed of outstanding talents… .”
“Yes, that company and Goldman Sachs entered into a credit default swap. “The subsidiary earned at least $10 billion, so it gave us some breathing room.”
I was so dumbfounded that nothing came out.
The headquarters boasted that the housing market would prosper, while the subsidiary bet that the housing market would collapse.
What will Goldman Sachs shareholders think if they find out? It is clearly a betrayal of corporate ethics.
If Emerson had known that $10 million of the $10 billion had been contracted by Chairman John Rogers personally, he would have been devastated.
John Rogers sat up and slapped the sofa.
“It’s late, but it’s right for us to play, right? I will instruct you to dispose of any scraps of toilet paper you have as quickly as possible. “Please do your best to prevent this fact from spreading.”
We’ll try to do something about the inside of the company, but the outside is already bad.
Other companies are not stupid either. They will analyze the reason why Miracle swept away, and they will come to the same conclusion as themselves.
A bomb has already exploded on Wall Street.
There is no choice but to let individual investors know this fact as late as possible.
As always, aren’t the biggest victims the general investors?
* * *
“Goldman Sachs is the fastest. “Are you struggling to digest the quantity pouring out?”
Rachel, who had been bothered by phone calls all day, drank coffee and took a breather.
“Tomorrow they’ll be throwing it everywhere. There will also be stupid places that will try to buy it.”
“Now there is only time left until everyone realizes that it is impossible to collect on American home mortgage loans.”
The dark shadow did not disappear from Rachel’s face.
“Howard. From what I understand, mortgage-backed securities are nothing more than pistols.”
“You’re talking about derivatives.”
“huh. Do you know the size of synthetic derivatives that bundle CDOs, such as composite CDO, square CDO, and double CDO?”
“yes. “It’s more than 20 times more.”
Rachel shook her head as she looked at me speaking calmly.
“why? “I can hear the world economy collapsing, so should I make a fuss?”
“no. The world economy was collapsing, but you made a ton of money. “But I don’t seem to feel any particular emotion.”
“The joy and sadness clashed with each other and canceled out each other. America’s wealth, which earned $56 billion, will evaporate, leaving millions of good citizens on the streets. “You can’t be happy forever.”
Actually, making money is not that happy. The really happy thing is that this economic crisis is the bullet that will take down Vice Chairman Jin Jin-gi.
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