Tom Clancy - Debt of Honor

"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 Moscow and not yet briefed on the magnitude of the situation, declined to comment 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 accustomed 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 another 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 understand.

"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 frightening 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 sailors 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 problem 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 Authority 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 be out of range for the carriers, which couldn't launch strikes anyway. USS Gary had concluded her search for survivors, mainly out of fear of lingering Japanese submarines out there, but for all the world looking as though she'd been chased off the site by a Coast Guard cutter. The intelligence they did have was based on satellite information because it hadn't been thought prudent even to send a P-3C out to shadow the surface force, much less prosecute the submarine contacts. "First out of harm's way, eh?"