Zia Rahman - In the Light of What We Know

I suppose you know Crane’s talking about the Marines.

I nodded.

What do you think about that? he asked.

I don’t imagine Crane’s short of advice. He’ll make an informed decision.

Forrester smiled at me.

Something you learn pretty damn quick on the Hill, he explained, is that journalists don’t care a dime if you do or don’t answer their question. What they want is for you to kick the other side and, added Forrester, fixing my eye, they only come knocking on your door when they think you’ll deliver that. As a matter of fact, they want you to make it personal.

Sounds unpleasant, I said, but immediately regretting that I might appear to be passing judgment on him for taking part in it.

It’s not about pleasant or unpleasant. Business teaches you that. It doesn’t matter a hoot what you think of what the customers want or what you think of the customers, for that matter. The only thing that counts is delivery. You got to deliver.

The senator leaned forward. I think Crane’s a damn fool.

Has he signed up?

Not yet. I want you to talk to him. He’ll listen to you. He likes you — I like you — we go back a long way.

I’m not sure my advice would count for much.

Forrester glanced at me.

Let’s order lunch, he suggested.

What’s good?

Our focus shifted. Forrester made some recommendations, and, with the waiter dispatched, resumed talking.

I have a great deal of admiration for your grandfather. That man was born for business. And I mean real business, manufacturing, oil refining, shipping, not finance, like mine — you know what I mean. No, he actually made things. He must be getting on?

In his eighties but still works a full day.

I’d have been surprised to hear anything else. Your grandfather made me a lot of money once.

He’s a good businessman.

A great businessman. And he knows a thing or two. BCCI is before your time.

I’ve read about BCCI. The Arab bank that collapsed.

I had money in it. Your grandfather advised me to get out before it fell apart.

And how did he make you money?

Saving money is the same as making money. That piece of sound advice was worth a pretty penny.

I didn’t ask if my grandfather had been paid for it. I did, however, think of Payne and JPMorgan’s reserve capital that was now freed up thanks to EBRD’s credit default swap. To save money is to make money.

Don’t get me wrong. I have no fear for my boy’s safety. Crane can’t think they’ll treat him like the rest. He’s the son of a goddamn United States senator and one who’s on the Senate Armed Services Committee, for Christ’s sake. Do you think we’d ever go to war if the boys we sent out to fight for us were the sons of Wall Street or Capitol Hill? Hell no! No amount of Kuwaiti oil would be enough. Crane’s going to be mollycoddled in some backwater of intelligence or given a military attaché position in Bermuda so that he can drink rum on the beach and hammer the ambassador’s pretty second wife.

What is your concern, if I may ask?

The senator grinned at me.

I want Crane to get on. He’s had a fine education and he’s got a decent head on him. He needs to make a go of things. We’re not put on this earth to fuck around. We have to make something of our lives. Crane’s had all the privileges, and it’s time he used those privileges to good effect.

What do you have in mind? I asked.

He could do anything he wants. He could go to Wall Street, Christ knows there are more than a few bankers who owe me, or he could try his hand in politics. There’s plenty of governorships he could aim for. Heck, the boy’s got an Ivy League degree and a JD; why doesn’t he do something with that head of his? I’d fund his campaign if he wanted to run for office in New York. Attorney general, why not? Or if he wanted to go back to New Jersey, I’ve got enough leverage with both the Democrats and the Republicans to get him appointed AG. He’s got all these options and he wants to throw them away for some half-assed idea of … I don’t know what.

I can talk to Crane, but as you say, he’s not stupid and I can only—

Talk to him about all the options he has. I know the boy respects you. I’ve been following your career, and I think you’re on to something with these collateralized debt obligations. You have a talent. You know, the ratings agencies are still trying to figure out how to rate these things. I believe in you. And if you apply yourself, you can get Crane to hold off signing up and instead spend a couple of years on Wall Street or the Hill. He can get a job as counsel to one of the Senate committees. Just try something first. Jesus wept, he’s fresh out of law school and he’s thinking of going into the Marines. What a waste!

I’ll see what I can do.

That’s all I can ask. Now tell me about these CDOs I keep hearing about.

Forrester’s direct manner gave the impression of a man following items on a mental agenda for the conversation. For my part, when I accepted his invitation to lunch, I did not have in mind to discuss the CDO business. Until then, my team had been focused on getting one of the larger and longer-established ratings agencies on our side. But right there in the Yale Club it hit me that maybe Forrester and his agency had more to gain. Mentioning that my grandfather once helped him out was a nice touch, as if to suggest he was now going to take a hit in order to repay a favor, when the truth was that, if anything, any ratings agency that agreed to rate my CDOs stood to make more than a tidy sum. They’d get their fee, and if there was more business in the pipeline, they’d be milking a new cash cow. It was merely a question of getting them over their initial wariness.

As Forrester and I moved on to coffee, he listened attentively while I described the products we’d developed. From time to time, he interjected with technical questions, testing the limits of my own understanding. The man had done his homework. If it was hard to price these things accurately — which is to say price them relative to other securities — then it was no less difficult to assess their creditworthiness, and to assess the credit rating they should be given by the likes of Forrester’s agency.

You do know I don’t have anything to do with the agency anymore? asked Forrester.

I came here at your invitation, I reminded him.

The business is now at arm’s length from me. I’m in the Senate and a man can’t serve two masters. I got to tell you, I don’t even have a seat on the board. But if the agency has a sense of how you’re pricing these things, I’m sure it’d help them get a handle on the credit.

In the month following my conversation with Forrester, Crane held off joining the military (though only for a year). In the same month, the senior tranche of the new CDOs, my CDOs, received a triple-A investment-grade credit rating from the agency Crane Morton Forrester II had established, as did the tranche of CDOs immediately below that. As simple as that. Business moves fast. So much for conflicts of interest. Let me point out, if it isn’t obvious already, that there’s some irony in the term conflict of interest : In practice there is seldom a conflict but rather a confluence, a mutually rewarding arrangement. I think that to Zafar it might have been the ugliest thing in the world, though I expect he would have added that it’s simply inevitable.