Fixers (14 page)

Bottom line: Orteig’s convinced that the infrastructure he’s building with our money will shortly start to pay off. The machine’s beginning to hum. The mission now is to use the remaining commitment to put boots on the ground, as it were. Pollers, canvassers, voter-facilitation teams. There’s plenty of time to do this before the Iowa primaries: four months is an eternity, given the shape-shifting speed at which modern life moves.

Lunch with Lucia again today. A new problem: it seems that one Allen Sloan, a very sharp writer at
Fortune
and
The Washington Post
, has figured out Protractor and its two-faced ilk. Here’s an excerpt: “
Struthers Strauss said it made money in the third quarter by shorting an index of mortgage-backed securities. That prompted
Fortune
to ask the firm to explain to us how it had managed to come out ahead while so many of its mortgage-backed customers were getting stomped … The firm’s profits came from hedging the mortgage securities it keeps in inventory in order to make trading markets. It said in a recent SEC filing, ‘Although we recognized significant losses on our non-prime mortgage loans and securities, those losses were more than offset by gains on short mortgage positions.
’ ”

When she first read Sloan’s piece, Lucia told me, she knew there would be trouble. And there was. Rosenweis got wind of it and naturally blamed Lucia as if she’d written it herself. She finally calmed him down with assurances that Sloan’s article wouldn’t cause a ripple—no one outside of business reads
Fortune
—and so far it hasn’t.

From what I’m picking up on the Rialto, Mankoff isn’t the only big hitter with misgivings about what’s gone down in the credit markets and what will likely happen. The difference is that Mankoff is doing something about it at STST, while his opposite numbers elsewhere are praying that the cancer will just go into remission all by itself, the way cancers sometimes will. I’m no financial oncologist, but instinct and experience tell me this one isn’t going to.

Here’s what I mean: Lucia tells me that according to her most reliable Citibank mole, a guy quite high up in the mortgage department over there sent a memo to the bank’s top executives, from ex–Treasury Secretary Rubin on down, warning about all sorts of shit going down in his bailiwick and even threatening to run to the Feds unless it stops. The Citibank policy in such matters is modeled on STST: “If you won’t go down with the ship, we’ll throw you overboard,” and the guy has walked the plank: isolation ward, removal of supervisory authority, and, most dire of all, elimination of bonus. The key PR move will be to discredit the guy, and Lucia’s willing to wager that Rubin’s called his cronies in D.C. to make sure he doesn’t get a hearing even if he turns up with reams of incriminating stuff. These days it’s hard to tell where the Street ends and Washington begins.

The media are wetting their pants over OG’s trip yesterday to Silicon Valley, where he gave a campaign speech at Google—“Man of the future surfs wave of the future”: that sort of BS. He avowed himself a “techie,” which if I was your ordinary voter would make me wary: speaking solely as a voter, I’d prefer a president who goes with his gut, rather than the data sets provided by the squadrons of technocrats whom Orteig has deployed (using Mankoff’s money; we’re up to $35 million) to build into as efficient a campaign machine as this country has ever seen. It’s not just data, however; there’s no doubt that OG has touched a nerve. You can sense this just talking to people. They’re worried; people they know are in foreclosure, getting laid off; no one feels safe. Fear is out there.

Personally, I find it paradoxical (and a bit guilt-making) to observe the electorate’s emotions being reduced to unfeeling data points by cold-blooded cadres of geeks and nerds, but that’s the way it is today. I recently went to the Bay Area in connection with an Oakland arts program for poor local kids, and took a day off to stop in Silicon Valley to pitch a bunch of prospective high-tech multimillionaire donors, and I regret to report that when it comes to the common rub of humanity and the general good of mankind, these people are every bit as indifferent and conscienceless as anyone I’ve run into on Wall Street.

Thanksgiving Day: and on the political front at least, much to be thankful for. At long last, OG’s presidential candidacy finally seems to be taking off.

If he gets the nomination, the turning point will probably have been the debate three weeks ago at Drexel University in Philadelphia. OG did well, was his usual fluid, fluent self, but the key was Hillary’s bad showing, the kind of scratchy, ill-tempered performance that reminds many centrist voters why they never liked or trusted the Clintons to begin with, and certainly makes one think twice about giving her one’s unconditional love.

I’m one of those disillusioned centrists. Bill Clinton broke my political heart. I thought he had what it took to be among the greatest presidents ever, but he turned out to be just another peckerwood led around by his dick—and that opened the door for Bush and Cheney and all that they’ve brought with them, from Iraq to the mortgage mess. No Monica, no Bush, is the way I see it.

Anyway, on October 30 at Drexel, OG broke clear of the pack. Clinton has led in Iowa from day one; now, overnight, that lead is no more.

Mankoff’s breathing easier, although there’s still a ways to go to the finish line. Then, yesterday, it was deus ex machina time: Orteig’s fondest prayers were answered when Oprah endorsed our candidate!

This is huge!

How huge, you ask? Well, Orteig called a couple of hours ago to report a twenty-point straw-poll swing OG’s way in the early-primary states (Iowa, New Hampshire, South Carolina) and to ask for a quick $20 million to seize the day. The money’s on its way
as I write, via a dummy fast-food chain in Dubai, a yacht charter service in Miami, and the phone listings of seven U.S. cities.

And it gets better: Oprah will be personally campaigning for OG.

I don’t want to get in front of myself, but I can’t help thinking “game over!” When one candidate garners the endorsement and in-person support of perhaps the most admired person in American public life, a bet on anyone else is foolish.

As predicted, the Oprah-OG combo is just killing them. Huge turnouts in Iowa and the other two states. Tens of thousands showing up to see their heroine in the flesh. This is one occasion where OG doesn’t mind being second banana.

Many think Oprah should be running for president herself. One pundit described her as “more cogent, more effective, more convincing” than any of the declared candidates. Hell, if Oprah were a candidate, I’d probably vote for her. There’s something about her that harmonizes with what this country’s supposed to be about. Unlike Wall Street, where you have to wonder whether people deserve the kind of money they make for the kind of work they do, Oprah has earned the vast wealth she’s accumulated.

Not that people on the Street are paying that much attention to politics. Most are focused on Citi, about which ever more dire rumors swirl. The general view is that Citi is already in full zombie mode but is trying to hide the fact in hopes that divine providence will come to their rescue. Back in mid-October, their CFO did a conference call during which he asserted that Citi’s exposure to subprime was $13 billion. What he left out, one of Lucia’s agents-in-place reported right afterward, is that the bank is actually on the hook for another $40 billion of those “liquidity puts.” Whatever—or whoever—induced their accountants to let them get away with that without putting adequate loss reserves on their balance sheet is a matter for conjecture—or the U.S. Attorney.

Someone at Accenture passed along a choice bit of gossip currently circulating in high-level accounting circles: namely, that if Citi were to undo its current bookkeeping evasions, and restored to its balance sheet the stuff for which it has real liability in the form of contingent guarantees and “put backs,” its leverage ratio would
shoot up from around 25 to 1 to closer to 50 to 1! At that level, writing off a roll of paper towels would render Citi technically insolvent. One big hitter went on TV the other day to proclaim that he shorted Citi stock at $55 a year ago and expected to cover the short at $5. He’s already looking good.

Can it get worse? You bet it can.

Last night Rich Rosenweis gave a big Christmas dinner at the Weir, the upscale uptown men’s club he bought his way into a few years ago. I have no idea why I was invited. Lucia says he’s envious of my “special relationship” with Mankoff. It’s the Skull & Bones connection that particularly galls him, apparently, although why that would bother someone who didn’t even go to Yale makes no sense to me.

In the interest of keeping the peace, my Rosenweis policy has been to make nice. I’ve gotten him choice opera tickets, wangled him onto the Met Museum’s business committee, arranged for his wife to be featured in a couple of benefit group photographs in the
Times
Styles section and on a blog, widely read on Park Avenue, called
New York Social Diary
. If something happens to Mankoff and Rosenweis takes over at STST, I’d probably kiss his butt to keep the account because I like my lease deal and I’d hate to be parted from my chums across the hall at San Calisto. But the main reason I accepted his invitation is because the Weir is famous for its cooking and its wine cellar.

Lucia was going, too, so I picked her up en route. Our plan was to have a drink at the Saint Regis, exchange Christmas gifts (she’s off to England to see her family in Shropshire or Hampshire or wherever and won’t be back until after New Year’s), then walk over to the Weir.

“This could very well be an evening right out of Juvenal,” I muttered to her as we got out of the taxi.

“Indeed,” she said. Lucia knows who Juvenal was—she did go to Oxford—but it was odds-on that we would be the only two people at Rich’s dinner who would.

“Incidentally,” she added, “I heard something interesting today
from a chum in the Justice Department. Apparently the FBI’s looking into possible fraud in the mortgage market.”

“That’s serious. On the sell or the buy side?”

“Both, I gather.”

“Any names in particular?”

“The usual.” She didn’t need to spell out that any list would include the Wall Street crème de la crème, including STST. These days, no one’s skirts are clean.

We split a pint of Pol Roger and exchanged gifts: a very fine bottle of 1956 Armagnac for me, a silver-gilt Edwardian pin for her that I’d spotted in the crowded window of a vintage jewelry store up on Lexington Ave. She seemed pleased.

The party venue was the top floor of the Weir. It’s a club I’ve visited since I was at Yale and my godfather used to take me for lunch. The place certainly isn’t as I first remembered: standard-issue WASP beaten-up leather and furniture. A well-worn look to everything, including the members. It’s clear that new money has taken over—a bulletin board inside the front door lists Rosenweis as a member of the house committee—and converted it into today’s idea of swank and posh and what is considered “exclusive.” The place looks like a Ralph Lauren showroom.

Still, it could be worse. The Weir’s museum-grade, eighteenth-century English silver—ewers, chargers, candelabra and such—is still there to be admired (it’s been catalogued by a curator at the Victoria and Albert), and the British portraits and racing scenes are of ducal quality and provenance. As the hymn says: every prospect pleases, and only man is vile.

Rosenweis pulled out all the stops at dinner: private-stock Bollinger to go with the clams and oysters; limited-edition vodka for caviar smuggled out of Iran; a great
Beerenauslese
Moselle to mate with the foie gras, which the menu noted had been purveyed by Daguin, the famous restaurant in the heart of Armagnac
country. Then there was rib-eye steak—Rich made sure his guests understood that “I had Peter Luger’s guy choose it personally”—accompanied by a ’61 La Tache, and so on and so on, ending with a cheese board also “personally” selected by Eric Ripert at Le Bernardin that was paired with a flight of ’82 Bordeaux—Château Pétrus, Château Cheval Blanc, Château Haut-Bailly—and to end the parade, an espresso soufflé, served with a Château d’Yquem, followed by Cognacs and Armagnacs that may have passed under the nose of Dumas
père
.

Apart from the menu there was a minimum of ostentation—the Weir does that to lesser mortals—and I must say the mood during cocktails was pretty jolly. And why not? It wasn’t all that long ago that people at STST were hitting the panic button because the stock had dropped below $170. Well, STST closed a bit over $210 yesterday, which means it’s up about 5 percent for the year 2007 even as great swathes of the Street are tanking. According to Lucia, the gospel on the Street is that Mankoff and Rosenweis have navigated the gathering storm better than anyone else: what balance-sheet markdowns they haven’t taken are pretty much offset by short positions and money-good swaps.

When we sat down, at the Weir’s famous “long table,” with the club’s famous silver ranged down the middle, end to end, I found myself seated next to the wife of Arnold Braum, STST’s senior outside counsel. I know her from some work I do with NYU’s Institute of Fine Arts, where she’s going for a late-in-life PhD, and we had a nice chat about Caravaggio until, with the arrival of a second course, she turned to her other side and I swiveled my attention to the diner on my left, a ruddy-faced older man whose white hair was flattened into a pretty drastic comb-over. He sported a Weir club tie. His place card identified him as Walter Hardcastle.

We’d never actually met until then, but I knew who he was.
A big deal in the social and institutional circles I work with: high up if not at the very peak of the alumni and financial councils of Princeton, trustee of the New York Public Library and the Museum of Modern Art, importantly connected to museums in Houston and Portland. He’s also on the board of STST, and one of the firm’s largest outside stockholders.