Carver - By Tom Cain Page 0,31
paying for these options?’
‘Ah, Sam, that is a very complicated question … But it can be reduced to a pair of very simple elements: time and risk. The greater these are, the more an option costs. Imagine, for example, that you want to buy “put” options on the price of a house, betting that its value will decrease. A six-month option on a house made of straw will cost you much more than a week-long option on a house made of brick.’
‘Unless you know that the big bad wolf has a wrecking ball.’
‘Precisely … in any market, exclusive information is the most valuable commodity of all.’
Carver took a long drink of his beer, using the time to get his head around what he had just learned. ‘You know, what I really don’t get about any of this,’ he said, putting his drink back down on the table, ‘is what’s the point of it all?’
‘It’s business. It makes money. What other point does it need?’
‘But it doesn’t make money, does it?’ Carver pointed out. ‘You said it yourself. Every time there’s a winner on a trade, someone else loses the exact same amount. So nothing new is created. Oh, no … wait … Something tells me that if a trader does a deal to sell one of those swaps, or “put” options, he puts that down as new business and he gets a slice of that business as his bonus. Am I right?’
‘Sure,’ Koenig agreed. ‘Bankers’ pay is based on a percentage of the profits they generate, so yes, in theory …’
Carver was feeling the excitement that comes when you suddenly get an insight into something new. ‘OK … so then a couple of years go by and – uh-oh – turns out that swap was a bad idea. Lehman’s go bust. Now that swap Zorn bought has cost millions, even billions … does the guy who sold the swap, or the option or whatever it was, pay for that loss? No, of course he bloody doesn’t! He probably doesn’t even work at the same place any more. But the bank certainly has to pay.’
‘Of course, it comes off the balance sheet.’
‘Exactly! So the bank’s profits fall, or maybe it makes a loss. Either way its shares lose value, so the shareholders lose money … and those shareholders are mostly pension funds who invest the money for ordinary people who don’t have a clue about any of this. So now those pensions are worth less … and basically what’s happened is that poor people have lost money so that rich idiots can gamble with their cash and never have to take any of the losses themselves.’ Carver shook his head in surprise. ‘Razzaq was right, after all …’
‘I’m sorry, who is Razzaq?’
‘Someone I was talking to. He said Malachi Zorn’s deals ultimately made ordinary people poorer. And he was right. He just forgot to mention that all those other bastards’ deals have exactly the same effect.’
Koenig laughed nervously, trying to defuse the intensity in the air. ‘Calm down, Sam, really … I have never seen you like this before. My God, it’s a good thing you don’t have a gun on you right now. This bar is full of investment bankers. You might try to shoot someone!’
‘Yes,’ said Carver. ‘I just might.’
Custer County, Nebraska: six months earlier
Seen from the air, the valley that stretches to the north-west of the town of Broken Bow looks like the remains of tiles on a crumbling wall. The mottled, dusty-brown and olive-green earth is dotted with perfectly square fields, in which sit circular splashes of emerald caused by the rotating water sprayers that irrigate the cultivated land thereabouts. The dusty, dead-straight roads that bisect the flat valley floor even criss-cross one another like grouting.
Of course, that’s only in the summertime, when the corn is growing. In the middle of winter, the rock-hard earth is as dark as bitter chocolate, dusted with sugar-white snow. Jed Rogers grew corn on land that ran along County Route 92, land that his father and grandfather had farmed before him. He had been a local celebrity for the best part of twenty-five years, ever since his final two years at high school, when he’d quarterbacked the Broken Bow Indians football team and been voted Homecoming King. Maryjane Rogers had been his pretty blonde queen. The eldest of their three children, Jed Jnr, was only in his sophomore year at Broken Bow High, but already folks were saying he’d inherited all