Jack Ryan 8 - Debt of Honor (46 page)

By this time, the panic within the entire financial community was quite real, reflected in a tenseness and a low buzz of conversation in every trading room of every one of the large institutions. Now CNN issued a live special report from its own perch over the floor of the former NYSE garage. The stock ticker on their “Headline News” service told the tale to investors who also liked to keep track of more human events. For others, there was now a real human being to say that the Dow Jones Industrial Average had dropped fifty points in the blink of an eye, and was now down twenty more points, and the downward spiral was not reversing itself. There followed questions from the anchorperson in
Atlanta
, and resulting speculation on the cause of the event, and the reporter who hadn't had time to check her sources for information, winged it on her own, and said that there was a worldwide run on the dollar that the Fed had failed to stop. She couldn't have picked a worse thing to say. Now everyone knew what was happening, after a fashion, and the public got involved in the stampede.

Although investment professionals looked upon the public's lack of understanding for the investment process with contempt, they failed to recognize the crucial element of similarity they shared with them. The public merely accepted the fact that the Dow going up was good and its going down was bad. It was exactly the same for the traders, who thought they really understood the system. The investment professionals knew far more about the mechanics of the market but had lost track of the foundation of its value. For them, as for the public, reality had become trends, and they often expressed their bets by use of derivatives, which were moving numerical indicators that over the years had become increasingly disconnected from what the individual stock designations truly represented. Stock certificates were not, after all, theoretical expressions, but individual segments of ownership in corporations that had a physical reality. Over time the “rocket scientists” on the floor of this room had forgotten that, and even schooled as they were in mathematical models and trend analysis, the underlying value of that which they traded was foreign to them—the facts had become more theoretical than the theory that was now breaking down before their eyes. Denied a foundation in what they were doing, lacking an anchor on which to hold fast in the storm sweeping across the room and the whole financial system, they simply did not know what to do, and the few supervisory personnel who did lacked the numbers and the time with which to settle their young traders down.

None of this really made sense at all. The dollar should have been strong and should grow stronger after a few minor rumbles. Citibank had just turned in a good if not spectacular earnings statement, and Chemical Bank was fundamentally healthy as well after some management restructuring, but the stocks on both issues had dropped hard and fast. The computer programs said that the combination of factors meant something very bad, and the expert systems were never wrong, were they? Their foundation was historically precise, and they saw into the future better than people could. The technical traders believed the models despite the fact that they did not see the reasoning that had led the models to make the recommendations displayed on their computer terminals; in exactly the same way, ordinary citizens now saw the news and knew that something bad was happening without understanding why it was bad, and wondered what the hell to do about it.

The “professionals” were as badly off as the ordinary citizens catching news flashes on TV or radio, or so it seemed. In fact, it was far worse for them. Understanding the mathematical models as well as they did became not an asset, but a liability. To the average citizen what he saw was incomprehensible at first, and as a result, few took any action at all. They watched and waited, or in many cases just shrugged since they had no stocks of their own. In fact they did, but didn't know it. The banks, insurance companies, and pension funds that managed the citizens' money had huge positions in all manner of public issues. Those institutions were all managed by “professionals”—whose education and experience told them that they had to panic. And panic they did, beginning a process that the man in the street soon recognized for what it was. That was when the telephone calls from individuals began, and the downslope became steeper for everyone.

What was already frightening became worse. The first calls came from the elderly, people who watched TV during the day and chatted back and forth on the phone, sharing their fears and their shock at what they saw. Many of them had invested their savings in mutual funds because they gave higher yields than bank accounts—which was why banks had gotten into the business as well, to protect their own profits. The mutual funds were taking huge hits now, and though the hits were limited mainly to the blue chips at the moment, when the calls came in from individual clients to cash in their money and get out, the institutions had to sell off as yet untroubled issues to make up for the losses in others that should have been safe but were not. Essentially, they were throwing away equities that had held their value to this point, for which procedure the timeless aphorism was “to throw good money after bad.” It was almost an exact description for what they had to do.

The necessary result was a general run, the drop of every stock issue on every exchange. By three that afternoon, the Dow was down a hundred seventy points. The Standard and Poor's Five Hundred was actually showing worse results, but the NASDAQ Composite Index was the worst of all, as individual investors across
America
dialed their 1-800 numbers to their mutual funds.

The heads of all the exchanges staged a conference call with the assembled commissioners of the Securities and Exchange Commission in
Washington
, and for the first confused ten minutes all the voices demanded answers to the same questions that the others were simultaneously asking. Nothing at all was accomplished. The government officials requested information and updates, essentially asking how close the herd was to the edge of the canyon, and how fast it was approaching the abyss, but not contributing a dot to the effort to turn the cattle to safety. The head of the NYSE resisted his instinct to shut down or somehow slow down the trading. In the time they talked—a bare twenty minutes—the Dow dropped another ninety points, having blown through two hundred points of free-fall and now approaching three. After the SEC commissioners broke off to hold their own in-house conference, the exchange heads violated federal guidelines and talked together about taking remedial action, but for all their collective expertise, there was nothing to be done now.

Now individual investors were blinking on “hold” buttons across
America
. Those whose funds were managed through banks learned something especially disquieting. Yes, their funds were in banks. Yes, those banks were federally insured. But, no, the mutual funds the banks managed in order to serve the needs of their depositors were not protected by the FDIC. It wasn't merely the interest income that was at risk, but the principal as well. The response to that was generally ten or so seconds of silence, and, in not a few cases, people got into their cars and drove to banks to get cash for what other deposits they did have.

The NYSE ticker was now running fourteen minutes late despite the high-speed computers that recorded the changing values of issues. A handful of stocks actually managed to increase, but those were mainly precious metals. Everything else fell. Now all the major networks were running live feeds from the Street. Now everyone knew. Cummings, Cantor, and Carter, a firm that had been in business for one hundred twenty years, ran out of cash reserves, forcing its chairman to make a frantic call to Merrill Lynch. That placed the chairman of the largest house in a delicate position. The oldest and smartest pro around, he had nearly broken his hand half an hour earlier by pounding on his desk and demanding answers that no one had. Thousands of people bought stock not just through, but also in, his corporation because of its savvy and integrity. The chairman could make a strategic move to protect a fellow bulwark of the entire system against a panic with no foundation to it, or he could refuse, guarding the money of his stockholders. There was no right answer to this one. Failure to help CC&C would—could—take the panic to the next stage and so damage the market that the money he saved by not helping the rival firm would just as soon be lost anyway. Extending help to CC&C might turn into nothing more than a gesture, without stopping anything, and again losing money that belonged to others.

“Holy shit,” the chairman breathed, turning to look out the windows. One of the nicknames for the house was “the Thundering Herd.” Well, the herd was sure as hell thundering now…He measured his responsibility to his stockholders against his responsibility to the whole system upon which they and everyone else depended. The former had to come first. Had to. There was no choice. Thus one of the system's most important players flung the entire financial network over a cliff and into the waiting abyss.

•     •     •

Trading on the floor of the exchange stopped at
3:23 P.M.
, when the Dow achieved its maximum allowable fall of five hundred points. That figure merely reflected the value of thirty stock issues, and the fall in others well exceeded the benchmark loss of the biggest of the blue chips. The ticker look another thirty minutes to catch up, offering the illusion of Further activity while the people on the floor looked at one another, mostly in silence, standing on a wood floor so covered with paper slips as to give the appearance of snow. It was a Friday, they all told themselves. Tomorrow was Saturday. Everyone would be at home. Everyone would have a chance to take a few deep breaths and think. That's all that had to happen, really, just a little thought. None of it made sense. A whole lot of people had been badly hurt, but the market would bounce back, and over time those with the wit and the courage to stand fast would get it all back. If, they told themselves, if everyone used the time intelligently, and if nothing else crazy happened.

They were almost right.

At the Depository Trust Company, people sat about with ties loose in their collars, and made frequent trips to the restrooms because of all the coffee and soda they'd drunk on this most frantic of afternoons, but there was some blessing to be had. The market had closed early, and so they could start their work early. With the inputs from the major trading centers concluded, the computers switched from one mode of operation to another. The taped recordings of the day's transactions were run through the machines for collation and transmission. It was close to six in the evening when a bell sounded on one of the workstations.

“Rick, I've got a problem here!”

Rick Bernard, the senior system controller, came over and looked at the screen to see the reason for the alert bell.

The last trade they could identify, at exactly
noon
of that day, was for Atlas Milacron, a machine-tool company flying high with orders from the auto companies, six thousand shares at 48 1/4. Since Atlas was listed on the New York Stock Exchange, its stock was identified by a three-letter acronym, AMN in this case. NASDAQ issues used four-letter groups.

The next notation, immediately after AMN 6000 48 1/4, was AAA 4000 67 3/8, and the one under that AAA 9000 51 1/4. In fact, by scrolling down, all entries made after
12:00:01
showed the same three-letter, meaningless identifier.

“Switch over to Beta,” Bernard said. The storage tape on the first backup computer system was opened. “Scroll down.”

“Shit!”

In five minutes all six systems had been checked. In every case, every single trade had been recorded as gibberish. There was no readily accessible record for any of the trades made after
twelve noon
. No trading house, institution, or private investor could know what it had bought or sold, to or from whom, or for how much, and none could therefore know how much money was available for other trades, or for that matter, to purchase groceries over the weekend.

Strike Three

The party broke up after
midnight
. The official entertainment was a sort of ballet-in-the-round. The Bolshoy hadn't lost its magic, and the configuration of the room allowed the guests to see the dancers at much closer hand than had ever been possible, but finally the last hand had been clapped red and hurt from the encores, and it was time for security personnel to help their charges to the door. Nearly everyone had a roll to his or her walk, and sure enough, Ryan saw, he was the most sober person in the room, including his wife.

“What do you think, Daga?” Ryan asked Special Agent Helen D'Agustino. His own bodyguard was getting coats.

“I think, just once, I'd like to be able to party with the principals.” Then she shook her head like a parent disappointed with her children.

“Oh, Jack, tomorrow I'm going to feel awful,” Cathy reported. The vodka here was just too smooth.

“I told you, honey. Besides,” her husband added nastily, “it's already tomorrow.”

“Excuse me, I have to help with J
UMPER
.” Which was the Secret Service code name for the President, a tribute to his paratrooper days.

Ryan was surprised to see an American in ordinary business attire—the formal dinner had been black-tie, another recent change in the Russian social scene—waiting outside the doors. He led his wife over that way.

“What is it?”

“Dr. Ryan, I need to see the President right away.”

“Cathy, could you stay here for a second.” To the embassy official: “Follow me.”

“Oh, Jack…” his wife griped.

“You have it on paper?” Ryan asked, holding his hand out.

“Here, sir.” Ryan took the fax sheets and read them while walking across the room.

“Holy shit. Come on.” President Durling was still chatting with President Grushavoy when Ryan appeared with the junior man in his wake.

“Some party, Jack,” Roger Durling observed pleasantly. Then his face changed. “Trouble?”

Ryan nodded, adopting his Advisor's face. “We need Brett and Buzz, Mr. President, right now.”

“There they are.” The SPY-1D radar on Mutsu painted the forward edge of the American formation on the raster screen. Rear Admiral—Shoho—Sato looked at his operations officer with an impassive expression that meant nothing to the rest of the bridge crew but quite a bit to the Captain—Issa—who knew what Exercise D
ATELINE
P
ARTNERS
was really all about. Now it was time to discuss the matter with the destroyer's commanding officer. The two formations were 140 nautical miles apart and would rendezvous in the late afternoon, the two officers thought, wondering how Mutsu's CO would react to the news. Not that he had much choice in the matter.

Ten minutes later, a Socho, or chief petty officer, went out on deck to check out the Mark 68 torpedo launcher on the port side. First opening the inspection hatch on the base of the mount, he ran an electronic diagnostic test on all three “fish” in the three-tube launcher. Satisfied, he secured the hatch, and one by one opened the aft hatches on each individual tube, removing the propeller locks from each Mark 50 torpedo. The Socho was a twenty-year veteran of the sea, and completed the task in under ten minutes. Then he lifted his tools and walked over to the starboard side to repeat it for the identical launcher on the other side of his destroyer. He had no idea why he had been ordered to perform the tasks, and hadn't asked.

Another ten minutes and Mutsu went to flight quarters. Modified from her original plans, the destroyer now sported a telescoping hangar that allowed her to embark a single SH-60J antisubmarine helicopter that was also useful for surveillance work. The crew had to be roused from sleep and their aircraft preflighted, which required almost forty minutes, but then it lifted off, first sweeping around the formation, then moving forward, its surface-scanning radar examining the American formation that was still heading west at eighteen knots. The radar picture was downlinked to flagship Mutsu.

“These will be the two carriers, three thousand meters apart,” the CO said, tapping the display screen.

“You have your orders, Captain,” Sato said.

“Hai,” Mutsu's commander replied, keeping his feelings to himself.

“What the hell happened?” Durling asked. They had assembled in a corner, with Russian and American security personnel to keep others away.

“It looks like there was a major conniption on the Street,” Ryan replied, having had the most time to consider the event. It wasn't exactly a penetrating analysis.

“Cause?” Fiedler asked.

“No reason for it that I know about,” Jack said, looking around for the coffee he'd ordered. He needed some, and the other three men needed it even more.

“Jack, you have the most recent trading experience,” Secretary of the Treasury Fiedler observed.

“Start-ups, IPOs, not really working the Street, Buzz.” The National Security Advisor paused, gesturing to the fax sheets. “It's not as though we have a lot to go on. Somebody got nervous on T-Bills, most likely guess right now is that somebody was cashing in on relative changes between the dollar and the yen, and things got a little out of hand.”

“A little?” Brett Hanson interjected, just to let people know he was here.

“Look, the Dow took a big fall, down to a hard floor, and there are two days for people to regroup. It's happened before. We're flying back tomorrow night, right?”

“We need to do something now,” Fiedler said. “Some sort of statement.”

“Something neutral and reassuring,” Ryan suggested. “The market's like an airplane. It'll pretty much fly itself if you leave it alone. This has happened before, remember?”

Secretary Bosley Fiedler—“Buzz” went back to Little League baseball—was an academic. He'd written books on the American financial system without ever having actually played in it. The good news was that he knew how to take a broad, historical view on economics. His professional reputation was that of an expert on monetary policy. The bad news, Ryan saw now, was that Fiedler had never been a trader, or even thought that much about it, and consequently lacked the confidence that a real player would have had with this situation, which explained why he had immediately asked Ryan for an opinion. Well, that was a good sign, wasn't it? He knew what he didn't know. No wonder everybody said he was smart.

“We put in speed bumps and other safeguards as a result of the last time. This event blew right through them. In less than three hours,” SecTreas added uneasily, wondering, as an academic would, why good theoretical measures had failed to work as expected.

“True. It'll be interesting to see why. Remember, Buzz, it has happened before.”

“Statement,” the President said, giving a one-word order.

Fiedler nodded, thinking for a moment before speaking. “Okay, we say that the system is fundamentally sound. We have all manner of automated safeguards. There is no underlying problem with the market or with the American economy. Hell, we're growing, aren't we? And TRA is going to generate at least half a million manufacturing jobs in the coming year. That's a hard number, Mr. President. That's what I'll say for now.”

“Defer anything else until we get back?” Durling asked.

“That's my advice,” Fiedler confirmed. Ryan nodded agreement.

“Okay, get hold of Tish and put it out right away.”

There was an unusual number of charter flights, but
Saipan
International
Airport
wasn't all that busy an airport despite its long runways, and increased business made for increased fees. Besides, it was a weekend. Probably some sort of association, the tower chief thought as the first of the 747's out of
Tokyo
began its final approach. Of late
Saipan
had become a much more popular place for Japanese businessmen. A recent court decision had struck down the constitutional provision prohibiting foreign ownership of land and now allowed them to buy up parcels. In fact, the island was more than half foreign-owned now, a source of annoyance to many of the native Chamorros people, but not so great an annoyance as to prevent many of them from taking the money and moving off the land. It was bad enough already. On any given weekend, the number of Japanese on
Saipan
outnumbered the citizens, and typically treated the owners of the island like… natives.

“Must be a bunch going to
Guam
, too,” the radar operator noted, examining the line of traffic heading farther south.

“Weekend. Golf and fishing,” the senior tower controller observed, looking forward to the end of his shift. The Japs—he didn't like them very much—were not going to
Thailand
as much for their sex trips. Too many had come home with nasty gifts from that country. Well, they did spend money here—a lot of it—and for the privilege of doing it for this weekend they'd boarded their jumbo-jets at about two in the morning…

The first JAL 747 charter touched down at 0430 local time, slowing and turning at the end of the runway in time for the next one to complete its final approach. Captain Torajiro Sato turned right onto the taxiway and looked around for anything unusual. He didn't expect it, but on a mission like this—Mission? he asked himself. That was a word he hadn't used since his F-86 days in the Air Self-Defense Force. If he'd stayed, he would have been a Sho by now, perhaps even commanding his country's entire Air Force. Wouldn't that have been grand? Instead—instead he'd left that service and started with Japan Air Lines, at the time a place of far greater respect. He'd hated that fact then, and now hoped that it would change for all time. It would be an Air Force now, even if someone lesser than he was actually in command.

He was still a fighter pilot at heart. You didn't have much chance to do anything exciting in a 747. He'd been through one serious inflight emergency eight years before, a partial hydraulic failure,

and handled it so skillfully that he hadn't bothered telling the passengers. No one outside the flight deck had even noticed. His feat was now a routine part of the simulator training for 747 captains. Beyond that frantic but satisfying moment, he strove for precision. He was something of a legend in an airline known worldwide for its excellence. He could read weather charts like a fortune-teller, pick the precise tar-strip on a runway where his main gear would touch, and had never once been more that three minutes off an arrival time.

Even taxiing on the ground, he drove the monstrous aircraft as though it were a sports car. So it was today, as he approached the jetway, adjusted his power settings, nosewheel steering, and finally the brakes, to come to a precise stop.

“Good luck, Nisa,” he told Lieutenant Colonel Seigo Sasaki, who'd ridden the jump seat in the cockpit for the approach, scanning the ground for the unusual and seeing nothing.

The commander of the special-operations group hustled aft. His men were from the First Airborne Brigade, ordinarily based at Narashino. There were two companies aboard the 747, three hundred eighty men. Their first mission was to assume control of the airport. It would not be difficult, he hoped.

The JAL personnel at the gate had not been briefed for the events of the day, and were surprised to see that all the people leaving the charter flight were men, all about the same age, all carrying identical barrel-bags, and that the first fifty or so had the tops unzipped and their hands inside. A few held clipboards on which were diagrams of the terminal, as it had not been possible to perform a proper rehearsal for the mission. While baggage handlers struggled with the cargo containers out of the bottom of the aircraft, other soldiers headed for the baggage area, and simply walked through
EMPLOYEES ONLY
signs to start unpacking the heavy weapons. At another jetway, a second airliner arrived.

Colonel Sasaki stood in the middle of the terminal now, looking left and right, watching his teams of ten or fifteen men fan out and, he saw, doing their job quietly and well.

“Excuse me,” a sergeant said pleasantly to a bored and sleepy security guard. The man looked up to see a smile, and down to see that the barrel bag over the man's shoulder was open, and that the hand in it held a pistol. The guard's mouth gaped comically and the private disarmed him without a struggle. In less than two minutes, the other six guards on terminal duty were similarly taken into custody. A lieutenant led a squad to the security office, where three more men were disarmed and handcuffed. All the while continuous if terse radio messages were flowing in to their colonel.

The tower chief turned when the door opened—a guard had handed over the pass card and punched in the entry code on the keypad without the need for much encouragement—to see three men with automatic rifles.

“What the hell—”

“You will continue your duties as before,” a captain, or ichii, told him. “My English is quite good. Please do not do anything foolish.” Then he lifted his radio microphone and spoke in Japanese. The first phase of Operation K
ABUL
was completed thirty seconds early, and entirely without violence.

The second load of soldiers took over airport security. These men were in uniform to make sure that everyone knew what was going on, and they took their places at all entrances and control points, commandeering official vehicles to set additional security points on the access roads into the airport. This wasn't overly hard, as the airport was on the extreme southern part of the island, and all approaches were from the north. The commander of the second detachment relieved Colonel Sasaki. The former would control the arrival of the remaining First Airborne Brigade elements tasked to Operation K
ABUL
. The latter had other tasks to perform.

Three airport buses pulled up to the terminal, and Colonel Sasaki boarded the last after moving around to make sure that all his men were present and properly organized. They drove immediately north, past the Dan Dan Golf Club, which adjoined the airport, then left on
Cross Island Road
, which took them in sight of
Invasion
Beach
.
Saipan
is by no means a large island, and it was dark—there were very few streetlights—but that didn't lessen the cold feeling in Sasaki's stomach. He had to run this mission on time and on profile or risk catastrophe. The Colonel checked his watch. The first aircraft would now be landing on
Guam
, where the possibility of organized resistance was very real. Well, that was the job of First Division. He had his own, and it had to be done before dawn broke.