A Week in December (5 page)

When she'd finished her tour of inspection, she left the gated community on which the house had been built and went for a walk through some ruins on the edge of the encroaching and still gorgeously untouched rainforest.

She had not gone far before she encountered a man. He had cargo pants to the knee, bare torso and multiple piercings. His skin was light brown, though most of it was covered in tattoos; he carried a Uranium credit card (the highest rating) and a submachine gun in his right hand.

Jenni sighed. This was not the kind of man she would have chosen, but she had learned that it was pretty much standard dress for men in Parallax. Most of the maquettes were scary and you just had to remind yourself that they might in reality be women or children - you absolutely could not rely on appearances; you had to disbelieve your eyes.

She knew the man had seen her because she found herself being messaged.

'What your name?'

'Miranda Star.'

An answering legend appeared automatically (you couldn't message and withhold your own identity) above his maquette's head: 'Jason Dogg. Age 35. Pisces. Adventurer/ Prospecter.'

'What you doing?'

'Looking at my new house.'

'That your's? Then we are neighbours!'

Jenni noticed his English spelling. Most of the gamers were American.

'Great,' she wrote, feeling a twinge of exhilaration.

'Can I visit your house?'

'Not til I know u better.'

'Lets go clubbing tmw. I know a good place.'

'Is it expensive? Only 15 vajos left,' typed Jenni.

'Not if you do'nt drink. How long you in Parallax?'

'Two years.'

'You'r so cool.'

'Why u have machine gun?'

'Tell you when we know eachother more. Clubbing tmw?'

'Maybe. Must crash now. Am tired,' Jenni wrote. 'In TL, do you live in England?'

'Yes. London. Wot time u come on?'

'Working late tmw. Maybe Tuesday night?'

'See ya then.'

Jenni felt excited at the thought that someone was going to take Miranda clubbing. She'd have to get some new clothes tomorrow - a dress at least - and she wondered what the stores were like in Caracas. In what the gamers called 'TL' or True Life, she was on the second shift on the Circle Line, so she'd have time.

* * *

John Veals's wife Vanessa at that instant poured herself a large gin and lime. She was dreading her husband's return because he had said he'd take her out to dinner. Although half American herself, Vanessa retained an English deference towards waiters and restaurants, with their snooty manner and demi-French menus. She always asked politely for something listed and was quick to accept that her request had been unreasonable if told that it was no longer available.

John and his colleagues, with whom she was occasionally obliged to dine, didn't even look at the menu. They'd summon the waiter and tell him what they wanted.

'Right, we'll start with a plate of ribs in the middle of the table here. Then I want carpaccio of beef with a thin mustard sauce. What? No, I'm not interested in that. I want it very thin, with Dijon mustard in the sauce and a few green leaves, maybe rocket. Then I want roast chicken. No, I don't want coq au vin. I want plain roast chicken, lots of salt on the skin, roast potatoes, not small ones, proper size and cauliflower cheese. That's it. OK? And some gravy. No, not fucking
jus
. Gravy. And my friend will have a cheeseburger.'

'Sir, we do not have--'

'Yes, you do. You have filet mignon. Mince it up. Get a bun. You have a cheeseboard here. Look. It says here, PS5 supplement! Get a slice off it. You can do it. It's what you do.'

It was worse when the heads of American banks were with him. Even when one of them had been persuaded to try something that was actually on the menu he would change his mind after it had been delivered and send it away again. 'Just bring me some clams.' 'Sorry, sir, we have no--' 'Here's PS50. Go and buy some.'

John Veals hated holidays, but once, in the burning summer of 2003, Vanessa had told him that if he didn't come with her to an Italian villa for a fortnight she would leave him. It was an immense palazzo, the last cool building in the European heatwave, with a mosaic-tiled swimming pool, a small olive grove, eight bedrooms, silent icy air conditioning, a live-in couple and a view of poplared hills that might have brought a spasm of joy to Giorgione. Veals left three days early for an unmissable appointment in New York and discovered on his arrival at his Manhattan hotel that Vanessa had bought the villa for PS2.5 million.

'How did you manage that?' he asked by phone from his room.

'I contacted the agent and they put me in touch with the owner. And I asked him how much he wanted for it.'

'You did what?'

'You know you gave me access to the Bermuda accounts. You remember, last year when--'

'Yeah, yeah, it's not that. It's how you did it. Did you say you asked him how much he wanted?'

'Yes, I asked him how much he--'

'That's no fucking way to trade.'

'Do you think it's too much, John?'

'I've no idea. It's just the principle of the thing. Asking him what he wants! For Christ's sake, Vanessa.'

As the clock showed six, John Veals went to the bookcase in the corner of his office, removed a few volumes and opened a small safe behind them. He took out a brown envelope that contained three sheets of photocopied A4 paper. He sat down, tilted the back of his chair and put his feet up on the desk again while he examined the papers. It was not the first time he'd read them.

For more than two years, he had been watching Allied Royal Bank. It was a fine institution in many ways. Its roots were in the empire and its branches were in the high street. It looked after more institutional pensions than any other bank and it was laughingly said that the future happiness of one in three Britons over sixty-five years old depended on it. People joked that the four-legged runner of its logo, intended by a management consultant to represent 'diverse synergy', looked like a walking frame. It was associated in the public mind with low-risk, traditional banking; one of its small branches had been in Edgware, and it was here that the eighteen-year-old John Veals had opened his own first bank account with PS25 he'd earned in his uncle's betting shop. He had been with ARB in various ways ever since, and High Level used the Victoria branch for some of its day-to-day needs.

Allied Royal, however, wasn't altogether happy with the idea of itself as the old person's friend, the knitted cardigan of the banking world. It had therefore developed an aggressive investment banking arm which had generated most of its profits over the last two decades. Largely through its business in derivatives (many relating to commodities it had traded for real in empire days) the management had been able to deliver an average of twenty per cent a year to the shareholders.

Veals had sensed, however, from the way the share price moved from day to day, that all might not be what it seemed at Allied Royal. He noted that when bank stocks fell, Allied Royal fell a fraction more than its competitors; when the other big banks returned to where they'd been, Allied Royal never quite clawed back all it had lost. These were only fractions, barely visible to the unfocussed eye. Daily calls to the trading desks of large investment banks told Veals that to buy credit protection on ARB would cost a little more than those on any of its big British rivals. These insurance policies against a bank failing to meet its debt obligations were always cheap, because the chance of default was so slight; but to insure against an Allied Royal debt failure over the standard five-year period of the insurance, or 'credit default swap', was just a whisper more expensive than it was for any comparable bank. This was what piqued Veals's interest. And then ARB's balance sheet publicly revealed how much money it had taken from the wholesale markets (or borrowed, in other words, from other banks): too much, in Veals's view.

In March 2006, Allied Royal surprised the world by buying a large Spanish bank. Veals's analysts looked hard at the deal and concluded that it was 'testosterone-driven'. The figures did add up, but everything was stretched. ARB had raised large quantities of debt secured both on the anticipated future cash flows and on the expectation that there would be cost savings in merging the two banks into one big new structure. Veals knew people always underestimated how much it cost in mainland Europe to achieve such savings and was surprised that ARB had managed to prevent the analysts from pointing this out. By now, however, he was definitely interested.

In April 2006, he fired his head of Compliance, a Scot called William Murray. In theory, such a person was meant to ensure that every deal made by the fund 'complied' strictly with the rules laid down by the regulators. The word, however, lent itself to jokes; Steve Godley suggested that Murray had been fired for not being 'compliant' enough. In the push-pull of dealings with Veals, Murray had pulled too hard: he seemed to have forgotten that it was Veals and not the FSA who paid his salary. The purpose of a compliance officer, in Veals's view, was to facilitate and to warn, in that order. If necessary, the third duty was to look the other way.

'I suggest you apply for a job with Shields DeWitt,' Veals told Murray as he cut up his credit cards. This was an investment house of legendary rectitude, known to Veals as the Vatican. Its directors were often seen at Covent Garden, in black tie, or at dinners for charities to which they were willing and hefty donors.

Murray had been in place for only four years. For the first three years of High Level's life, the compliance officer had been ... Well, there was only one person who knew the company intimately enough and who had done the day-long course required by the FSA; throughout its first prodigious growth spurt, the compliance officer of High Level Capital had been its founder and chief executive, John Veals.

In Murray's place, Veals offered the job - naturally enough - to someone from Allied Royal, a ductile young man called Simon Wetherby. Veals promised to double his salary and bonus package, provided he could stay in 'lock step' with High Level's strategic ambition and not forget who paid him. Wetherby was amazed and delighted by the approach and joined High Level as soon as he could clear his ARB desk. The two men spoke every morning, and in the course of six months of doing little more than shooting the breeze, Veals had debriefed Wetherby on all he knew about ARB. It was natural that they'd want to talk about the most remarkable event of recent months, the purchase of the Spanish bank; rude not to, as Wetherby happily agreed.

Veals took no written notes during these conversations and never let it show if anything that was said was of particular interest to him. Veals was known to be a man obsessed by detail - one or two people had warned Wetherby that he might be driven mad by this - and Wetherby knew that the size of his first annual bonus would shortly be calculated. He told Veals all he knew about the debt covenants relating to the acquisition of the Spanish bank.

John Veals merely nodded; but somewhere in the thicket of Wetherby's detail, he had caught a glimmer of movement, as a sight-hound sees the twitch of a rabbit's ear across a field of grass. Pushed to the last fragment of his recollection by Veals's insistent 'And was there anything unusual?', Wetherby recalled a debt-covenant clause inserted late in the negotiation by a lawyer anxious to protect the group of other banks who had lent Allied Royal much of the cash necessary to make the purchase. The covenant stated that if, following the successful acquisition, the market capitalisation of the enlarged Allied Royal should at any point fall below a certain level (a level viewed as impossible in normal financial weather) the creditors would have the right to call in their loans in full. Such a call would be impossible for ARB to meet without issuing yet more shares.

'Surely the middle office checked all this?' said Veals. 'I mean the regulators are hot on all this, aren't they? You know, tier-one capital ratios and all that crap.'

'Yes,' said Wetherby. 'But it was late. It was in a side letter, I believe. I didn't see it myself, it wasn't my job, but I was told about it by a friend in the leverage finance team. The FSA may never have seen the letter. And of course there was so much momentum for the deal at this point that--'

'Yeah, yeah, they'd all got wood by then.'

'Exactly.'

For some weeks, Veals had reflected on this information, and how to make it work to his advantage. If the market cap or share value (Wetherby was not exactly sure about the triggers) of ARB did fall below the agreed level, those who had lent the money - large investment banks and insurance companies - would not be legally obliged to call in their debts (indeed, they'd be better advised not to); but the mere emergence of the news would cause a panic - and a run on the bank's deposits.

Veals discussed his idea briefly with Stephen Godley.

'Christ, John,' said Godley. 'Talk about working the blind side. All those pensioners. You'll be attacked by an army of zimmer frames. Savaged by--'

'By a toothless fucking army,' said Veals.

The precedent of a failing bank was less than three months old. In September, only three months ago, the British government had nationalised an overextended mortgage lender in north-east England as it was on the verge of going broke. The Prime Minister, like all politicians in Veals's experience, was childishly awed by cash - by the size of the contribution made to the economy by financial services. Though by instinct a state socialist, hot for high tax and interference, he was also a career politician, and he knew that his own life depended on the economy's continuing to grow. He had to protect the City's special interests and yield to the demands of its senior executives; he had no choice.

Veals believed the Government would be loth to interfere with Allied Royal if it began to ail seriously, or plunge; it would show the PM to be a nanny and a fusspot who didn't trust the market. His party had spent many years out of office trying to convince the voter that it loved the market more even than its rival did; he couldn't afford to act like a socialist at this late stage. On the other hand, he would eventually calculate that he needed the combined votes of ARB depositors, creditors and pensioners to keep himself in power. He couldn't let it die; he would have to take it over.