Debt Of Honor by Clancy, Tom

Each transaction had also held a monetary value, real money that had

changed electronic hands, moving from one account to another, and though

electronic, the complex flow of money had to be accounted for. Until all of

the transactions were resolved, the amount of money in the account of every

trading house, every institution, every bank, and ultimately every private cit-

izen in America-even those who did not play the market-could not be

known. In addition to paralyzing Wall Street, the entire American banking

system was now frozen in place, a conclusion that had been reached about

the time that Air Force One had touched down at Andrews Air Force Base.

“Oh, shit,” commented the Deputy Director in Charge of the New York

Field Division of the Federal Bureau of Investigation. In this he was more

articulate than investigators from other federal agencies who were using his

northwest-corner office as a conference room. The others mainly just looked

at the cheap carpet on the floor and gulped.

The situation had to get worse, and it did. One of the DTC employees told

the tale to a neighbor, an attorney, who told someone else, a reporter, who

made a few phone calls and drafted a story for The New York Times. That

flagship paper called the Secretary of the Treasury who, just back from Mos-

cow and not yet briefed on the magnitude of the situation, declined to com-

ment but forgot to ask the Times to demur. Before he could correct that

mistake, the story was set up to run.

Secretary of the Treasury Bosley Fiedler practically ran through the tunnel

connecting the Treasury Building with the White House. Not a man accus-

tomed to strenuous exercise, he was puffing hard when he made it into the

Roosevelt Room, just missing the departure of the Japanese Ambassador.

“What is it, Buzz?” President Durling asked.

Fiedler caught his breath and gave a five-minute summary of what he’d

just learned via teleconference with New York. “We can’t let the markets

open,” he concluded. “I mean, they can’t open. Nobody can trade. Nobody

knows how much money they have. Nobody knows who owns what. And

the banks . . . Mr. President, we have a major problem here. Nothing even

remotely like this has ever happened before.”

“Buzz, it’s just money, right?” Arnie van Damm asked, wondering why

it all had to happen in one day after what had been a rather pleasant few

months.

“No, it’s not just money.” Heads turned because Ryan was the one who

answered the question. “It’s confidence. Buzz here wrote a book about that

back when I was working for Merrill Lynch.” Perhaps a friendly reference

would steady the man down some, he thought.

“Thank you, Jack.” Fiedler sat down and sipped a glass of water. “Use

the 1929 crash as an example. What was really lost? The answer in monetary

terms is, nothing. A lot of investors lost their shirts, and margin calls made it

all worse, but what people don’t often grasp is that the money they lost was

money already given to others.”

“I don’t understand,” Arnie said.

“Nobody really does. It’s one of those things that’s too simple. In the

market people expect complexity, and they forget the forest is made up of

individual trees. Every investor who lost money first gave his money to an-

other trader, in return for which he received a stock certificate. He traded

money for something of value, but that something of value fell, and that’s

what the crash was. But the first guy, the guy who gave the certificate and

got the money before the crash-notionally he did the smart thing, he didn’t

lose anything, did he? Therefore the amount of money out in the economy in

1929 did not change at all.”

“Money doesn’t just evaporate, Arnie,” Ryan explained. “It goes from

one place to another place. It doesn’t just go away. The Federal Reserve

Bank controls that.” It was clear, however, that van Damm didn’t under-

stand.

“But then, why the hell did the Great Depression happen?”

“Confidence,” Fiedler replied. “A huge number of people really got

slammed in ’29 because of margin calls. They bought stock while putting up

an amount less than the value of the transaction. Today we call that sort of

thing leveraging. Then they were unable to cover their exposure when they

had to sell off. The banks and other institutions took a huge beating because

they had to cover the margins. You ended up with a lot of little people who

were left with nothing but debts they couldn’t begin to pay back, and banks

who were cash-short. Under those circumstances people stop doing things.

They’re afraid to risk what they have left. The people who got out in time

and still have money-the ones who have not actually been hurt-they see

what the rest of the economy is like and do nothing also, they just sit tight

because it simply looks scary out there. That’s the problem, Arnie.

‘ ‘You see, what makes an economy isn’t wealth, but the use of wealth, all

the transactions that occur every day, from the kid who cuts your grass for a

buck to a major corporate acquisition. If that stops, everything stops.” Ryan

nodded approval to Fiedler. It was a superb little lecture.

“I’m still not sure I get it,” the chief of staff said. The President was still

listening.

My turn. Ryan shook his head. “Not many people get it. Like Buzz said,

it’s too simple. You look for activity, not inactivity, as an indication of a

trend, but inactivity is the real danger here. If I decide to sit still and do

nothing, then my money doesn’t circulate. I don’t buy things, and the people

who make the things I would have bought are out of work. That’s a frighten-

ing thing to them, and to their neighbors. The neighbors get so scared that

they hold on to their money-why spend it when they might need it to eat

when they lose their jobs, right? And on, and on, and on. We have a real

problem here, guys,” Jack concluded. “Monday morning the bankers are

going to find out that they don’t know what they have, either. The banking

crisis didn’t really start until 1932, well after the stock market came unglued.

Not this time.”

“How bad?” The President asked this question.

“I don’t know,” Fiedler replied. “It’s never happened before.”

” ‘I don’t know’ doesn’t cut it, Buzz,” Durling said.

“Would you prefer a lie?” the Secretary of the Treasury asked. “We

need the chairman of the Fed in here. We’re facing a lot of problems. The

first big one is a liquidity crisis of unprecedented proportions.”

“Not to mention a shooting war,” Ryan pointed out for those who might

have forgotten.

“Which is the more serious?” President Durling asked.

Ryan thought about it for a second. “In terms of real net harm to our

country? We have two submarines sunk, figure about two hundred fifty sail-

ors dead. Two carriers crippled. They can be fixed. The Marianas are under

new ownership. Those are all bad things,” Jack said in a measured voice,

thinking as he spoke.’ ‘But they do not genuinely affect our national security

because they do not pertain to the real strength of our country. America is a

shared idea. We’re people who think in a certain way, who believe that they

can do the things they want to do. Everything else follows from that. It’s

confidence, optimism, the one thing that other countries find so strange

about us. If you take that away, hell, we’re no different from anybody else.

The short answer to your question, Mr. President, is that the economic prob-

lem is far more dangerous to us than what the Japs just did.”

“You surprise me, Jack,” Durling said.

“Sir, like Buzz said, would you prefer a lie?”

“What the hell is the problem?” Ron Jones asked. The sun was already up,

and USS Pasadena was visible, still tied to her pier, the national ensign

hanging forlornly in the still air. A fighting ship of the United States Navy

was doing nothing at all, and the son of his mentor was dead at the hands of

an enemy. Why wasn’t anyone doing something about it?

“She doesn’t have orders,” Mancuso said, “because I don’t have orders,

because CINCPAC doesn’t have orders, because National Command Au-

thority hasn’t issued any orders.”

“They awake there?”

“SecDef’s supposed to be in the White House now. The President’s been

briefed in by now, probably,” ComSubPac thought.

“But he can’t gel his thumb out,” Jones observed.

“He’s the President, Ron. We do what he says.”

“Yeah, like Johnson sent my dad to Vietnam.” Jones turned to look at the

wall chart. By the end of the day the Japanese surface ships would Ix- out ot

range for the carriers, which couldn’t launch strikes anyway. USS (lni\ had