in this business was wrong?’
Three days had passed since Lehman Brothers Bank filed for Chapter 11 bankruptcy, its share price evaporating – from a high of eighty-two dollars – to just three cents in a little over a year. After a weekend of desperate negotiations involving the heads of all the major Wall Street banks, US Treasury Secretary Hank Paulson, UK Chancellor Alistair Darling and senior executives from Bank of America (BoA) and Barclays, both of which had shown interest in buying the stricken bank, the Chief Executive Officer of Lehman’s, Richard Fuld, and his board had been forced to admit defeat. Fuld’s reputation as one of the masters of the financial universe now lay in tatters, just like the institution for which he had been responsible. He was pleading poverty, too, but his critics weren’t convinced. They pointed to the estimated half a billion dollars Fuld had received from Lehman’s between 2000 and 2007, none of which he was asked to return.
But by betting against Lehman Brothers Malachi Zorn had done even better. He had walked away with a little over $10.7 billion.
Now he looked around the table at the Penthouse Executive Club, which he was currently sharing with his broker, Donny Trimble, two of Trimble’s hottest dealers, and the three strippers they had showered with fifty-dollar bills and the promise of unlimited Cristal.
‘Because Wall Street is filled with guys like you,’ Zorn thought to himself, in answer to Trimble’s question. He was not in any way a prude, but he neither liked nor needed the business of paying for female company. Still, the club’s steaks were among the best in the city, and he did not want to deny his brokers the chance to celebrate a coup that had made them all millions, too. So he had come along for the ride and done his best to be civil.
‘You know, Don, what I find unbelievable isn’t the fact that I could see the whole damn system was bust,’ Zorn said. ‘It’s that so many other people couldn’t. I mean, three years ago the FBI was reporting that mortgage-related frauds had gone up by a factor of five. Record numbers of people were falling behind on their mortgage payments or flat-out defaulting, and there were just two things keeping the whole thing going. The first was all the suckers who thought that their house price could only go up. And the second was all the lenders who gave money to anyone, absolutely anyone, who asked for it. And even if you didn’t ask, they shoved it down your throat anyway. I mean, did you ever hear of an interest-only negative-amortizing adjustable-rate subprime mortgage?’
‘Uh, no, can’t say I did,’ said Trimble, who was evidently less interested in obscure forms of mortgage than in his companion’s fine young breasts.
‘Well, I’ll tell you then, Don. It was a mortgage that didn’t require the borrower to repay any of the capital, and if they fell behind with their payments, that was OK because the value of any missed payments just got added on to the mortgage debt. So some poor dumb bastard who probably didn’t have a job, let alone enough income to buy a home, just kept getting deeper and deeper in the hole till he said, “The hell with this,” and walked right away from the property, the mortgage, the whole damn shebang. And all he left behind was a pile of debt secured on a worthless property.’
One of the strippers, who called herself Misti, was paying her way through Columbia University Business School by giving private dances at a hundred and twenty-five bucks a time. She could make more money in one night than her more conventional waitressing girlfriends would see in a month. Now she looked at Zorn thoughtfully. If she could just keep the drunken sleazebag who had bought her company for the evening quiet for a few minutes, she might actually learn something here.
‘But what about the management of Lehman’s?’ she asked. ‘I mean, couldn’t they have done something about the situation earlier, like, before it got totally critical? And if they’d done that, wouldn’t you have lost all your premium?’
Zorn smiled, appreciating the sharp intelligence that the girl had until now kept hidden beneath her professional bimbo mask. ‘Good questions, Misti,’ he said, saying the name in a way that let her know he was well aware that both it and her persona were fake.
‘If those guys had ever been honest about their situation – starting