Moral Hazard (6 page)

Mike laughed. At me and at hedging. “The only perfect hedge is in a Japanese garden.” This piece of humor wasn’t original. “Look, Scholes and Merton are no different from the little guy with the big sunglasses and flashy belt buckle that catches the bus to Atlantic City or Saratoga Springs. He’s betting on cards or horses. Scholes and Merton bet on swings and spreads, on volatility. The punter has a system. And so do they. That’s all their formula is—a system to beat the odds. Not that they see it that way. They think they’ve beaten the odds, vanquished them. But these systems are never infallible. At some point, they
always
blow up.”

“Taking risks is hardly new to Wall Street.” I was beginning to bridle.

“The problem is size. They’re not just muddier than the Mississippi—they could fill it. There are twenty-five trillion dollars of them out there—eighty trillion dollars by 2000, easy.
Bets,
not investments.
Gaming
contracts.” Now he was hectoring me. Well, not just me but an invisible audience that no doubt included the SEC, the Fed, Robert Rubin,
everyone.
“Someone has to pay the piper. In the best of all possible worlds, everybody doing well, everybody flush with cash, no problem. But, to state the blindingly obvious, this is not the best of all possible worlds.” More as an aside, he added, “Scholes and Merton are Panglossian. Incurably, irredeemably.”

He ruminated for a bit—Mike was the only person I’d ever met who could truly be said to ruminate—and then said, “Which is a long way of saying there is no provision for illiquidity.” Risk-management-speak for money tied up, coffers empty. “That river—in point of fact, it’s a pyramid—will be the end of us. That, and global warming.” His voice was regaining its normal, half-jesting tone.

“You exaggerate.” I wanted to care but couldn’t summon the energy. I wanted to be home, to be with Bailey, the nightmare to stop. And I wanted the voice—the indignant voice—next to me to shut up. To get angry at Scholes and Merton, at myopic quants, at derivatives, was as useless as getting angry at amyloid-beta protein. Things are always sundering, shifting, settling; this is the way of the world. It came to me that I was no longer even a vestigial radical, just a garden-variety fatalist.

“No. I’m not exaggerating. You know what they say?” He had fully recovered his droll detachment. “Only the
goyim
sell volatility. Jews are too smart to go near it.” He flicked his cigarette stub into a planter. “Gotta go, kid.” He was off at a fast amble.

Bailey’s birthday. He loved jazz and had known many of the greats: Sidney Bechet, Jack Teagarden, J. C. Higginbotham, Miles, Coltrane, Gil Evans. I took him in a taxi to the basement of the HMV music store at Eighty-sixth Street. Buy anything you like, I said. He walked down the aisles of jazz CDs. These were my friends, he said, his voice soft and wondering.

Instead of listening to the CDs, he squirreled them away at the back of a closet. I puzzled over this, then realized that he could no longer operate the CD player. I tried to show him. He flew at me, grabbing me around the throat, pressing his fingers into my windpipe. I pushed him away. Thwarted, still possessed, he ran shrieking into the bedroom. Obscurely ashamed, I delayed for days reporting this incident to the doctor. An anti-psychotic medication was ordered up.

Hanny had somehow found his way to the Roundabout Theatre for a performance of Strindberg’s
The Father.

“You must see it,” he urged, leaning back in his chair, stroking his belly.

“I read a review. Sounds good.” Mustering enthusiasm.

“It’s about a woman who drives her husband insane.” Sitting up straight now, elbows on his desk, massaging his hands. Insinuating. Sly.

“Really? How interesting.”

Oh, for Pete’s sake. I made my excuses to get out of his office. Buggerlugs had gone too far. There was only one thing for it: I had to develop my own “portfolio.” A senior woman in the firm—one of two—had given me this advice. By “portfolio,” she meant work that was clearly defined and could be defended when bonds fell out of bed or stocks nose-dived. When the blood flowed, as she put it.

I looked around for a corner of Niedecker I could colonize. The boys in my department were nothing if not assiduous in offering their services to anyone that mattered, with one notable exception: the head of Investment Banking, an Englishman named Horace. High risk for writers, they muttered, and steered a wide berth.

Horace was wreathed with gossip, like mist on a mountain. There was talk of an intern. That he’d had affairs with both men and women on his staff. That he was gay and the young women he squired were beards. This was retailed with moralistic glee by some; others indulged just to brighten their days. Horace, you see, had committed the corporate crime of remaining unmarried. For this breach, he was considered fair game.

The next time I saw Mike I asked about Horace.

“He’s okay,” Mike said.

“Why do Chuck and his boys tiptoe around him?”

“He doesn’t suffer fools gladly. I once saw him turn on Bart like an anaconda sizing up its dinner. Bart left the room
fast
.”

I amused myself imagining Bart as a bulge in an anaconda. “They seem worried that he’ll be the next CEO. It’s a big topic of conversation.”

“I bet they are. You’ll like him. He’s an oxymoron—a smart conservative.” As was Mike’s habit, he laughed at his own joke. “No, really. The last time I saw him he was carrying a volume of Trollope. But be prepared: He’s a free-market fundamentalist. It’s not ideological with him. It’s
theological
.” Mike deepened his voice, made the vowels plummy, and declaimed, “You cannot fight the markets! There will be blips. There will be pain. But the markets are virtuous!”

“Horace, I presume?”

“Yup. You gotta like the guy. He’s probably never experienced pain—the economic kind—in his entire life.”

I had nothing to lose. I volunteered to do some research for Horace, which went well, although I had no actual contact with him, only his secretaries. Then another project came up—a speech on the changing roles of banks in international capital flows—and I was summoned for an audience.

The route to Horace’s office skirted the trading floor. I always paused on the balcony overlooking the vast, high gray space with its electronic tickertape snaking around the walls and terraced rows of traders and salespeople at their turrets, on the phone, drinking coffee, yelping, hollering, huddling. The floor was like the engine room of a battleship: thrumming with energy, giving off heat. Even the knowledge that what I was viewing was a bunch of fear-driven, foulmouthed, sweating, no-neck alpha males in overdrive didn’t make the floor any less seductive—the tangible heart of a place that dealt in intangibles. (There was a smattering of women, whom one could only admire, as one admires women Marines.)

Horace came from behind his desk to greet me. He shook my hand warmly, giving me the kind of conspiratorial grin that acknowledged what a farce this all was. Play-acting! He gestured to an armchair, folded his frame into another. He had spindly shanks and wore the kind of thin hose that requires garters. Graying hair clubbed back, emphasizing small, neat ears. Cleft chin. Unfolding himself to fetch something relevant to the discussion, he revealed a storklike walk. I later learned this was from a back injury—too much tennis and golf, too many airplanes. Every inch the deal-maker, the money man, the plutocrat, the princeling.

Most of the executives with whom I dealt bludgeoned you with their power. Horace didn’t. He was like a fat man who eats two steaks at a sitting but does it with such delicacy that you don’t notice, and later you wonder, how’d he get so fat? Horace charmed and flattered and amused, and before I knew it I was doing my utmost to charm and flatter and amuse back. With other executives, I felt like a tugboat guiding a listing liner into port. With Horace, there was, if not a partnership, an illusion of one. He was generous with his praise, his gratitude, the small gestures. Before I knew it, I wanted to walk on water for him.

We got down to tin-tacks: Margaret Thatcher and Ronald Reagan. “We owe everything to them,” he said in his sonorous, brook-no-doubt, Oxbridge-accented voice. I demurred. Muttered something about bankrupt savings-and-loans societies and suffocating deficits.

A winning smile. An
indulgent
smile. The phone rang. He raised a finger, indicating that I should excuse him for a minute. I tried to guess his age, which I put at the other side of fifty, although it’s hard to tell with people who are embalmed in authority, whose last spontaneous moment was in the cradle.

I glanced around his office. A grouping of Dorothea Rockburne paintings, mathematical in conception. A magnificent vanda orchid. On the coffee table, one of Trollope’s Palliser novels, along with
Against the Gods: The Remarkable Story of Risk
and
Market Unbound: Unleashing Global Capitalism.
A couple of Lucite tombstones, no family photographs.

“Why is it that you nearly always find the biggest brains, the
really
smart people, on the Left?” he asked, tangentially, when he hung up. I refrained from lobbing the question back: “Why do
you
think?”

“What’s your background?” he continued. As if he—and Mother Niedecker—didn’t know. When I finished my recitation, he said, “We need people like you at Niedecker. People who are different. Who will bring us fresh ideas.” I hope I didn’t simper.

My twenty minutes were up. In an instant, Horace switched off the warmth and camaraderie. He was beaming his light elsewhere, and I felt, for a moment, bereft.

Hanny was waiting when I arrived back in my office, loaded for bear. The gist of his rant: Horace was not a leader. He did not have the character to be a leader. He was a lightweight. A Merchant-Ivory investment banker! If he became CEO, Hanny would have no option but to leave Niedecker. His fury was something to behold, his identification with Niedecker seamless. Horace’s stock rose even higher in my estimation.

The disease was much worse. I had been told it would be like this, in abrupt shifts. No sooner had we adjusted to life reduced in yet one more way than the wheel was spun again, to have another skill disappear, more memories eclipsed, setting in motion a new round of adapting.

He wasn’t sad or angry any longer. Eva Truilly, Zora Diamond, and Lulu Lawes had stopped appearing on the top of his mind, fluffing their feathers. His legs had become unstable, tipping him this way and that, and he blamed it on his shoes. Always his shoes. He refused to use a cane, instead propelling himself around the apartment by holding on to furniture and doorjambs.

He slept through the day, waking now and again to say he had work to do, although he was incapable of affixing a postage stamp, much less creating a collage. The journey to his desk began. Once there, he made a show of playing with his pencils and rulers, riffling his drawing pads. After a few minutes of aimlessness, he would declare he’d done enough, and the return journey to the bed began.

Friends visited, and he was cheerful, professing delight at seeing them, talking about future projects, important phone calls he’d received, a book in the works, a show at a gallery, filling in the gaps in his thoughts with orotund repetitions. Confabulating, as neurologists call it. He was careful not to leave his chair to show his infirmity. After they were gone, he invariably asked, “Who was that?”

To my consternation, some of these friends not only believed what he told them but could detect very little wrong with him. They called me to say that he seemed himself, a clear note of accusation in their voice, as if I were exaggerating his condition, making up the illness for some diabolical reason. I didn’t bother to tell them that he had no clue who they were and forgot the visit within minutes of their departure. They probably wouldn’t have believed me; I was learning that not many people can admit to being expunged from someone’s memory, even by disease.

When alone with me, he mostly had on an expression of anxious vacancy. On good days, though, this was replaced by disbelief at his diminishment. That’s what I remember: his startled, panicky disbelief. That, and how tired I was. I closed my eyes whenever I could. On the subway, in elevators, on escalators. I slept like a horse, standing up.

I had moved on from William Tabbert and Alfred Drake to Louis Armstrong:
When we are dancin’ / And you’re dangerously near me / I get ideas, I get ideas…

“Did you know,” said Mike, “that Mussolini admired American corporations?”

I hadn’t known. I had commented on the stifling, autocratic structure of corporations, ironic, at least for me, because I sprinkled speeches with references to a flat hierarchy and a collegiate, consensus-driven, meritocratic culture. Tra-la.

That morning, to illustrate the suppleness of our corporate hierarchy, Niedecker’s CEO had turned to me and said, “Cath, you’re only five removed from me.” The CEO was a pedantic Midwesterner. As people say, to be polite, more a tactician than a visionary. Whenever I was in his company, I thought of Bill Murray taking the mickey out of his drill sergeant in the movie
Stripes
by telling him that he accepted his leadership because “Every foot needs a big toe.” Our bland CEO was the quintessential Big Toe. “That’s right,” I replied, nodding brightly. In reality, a drop-off on the scale of the continental shelf existed between the CEO and me.

“Yeah, you’re lower than whale shit,” said Mike, when I relayed this to him. And then added the bit about Mussolini.

In front of us, water slapped against the hulls of fat fiberglass boats with names such as
Marjorie Morningstar
,
Powerplay
,
Excalibur
,
Momentum.
One of them had a miniature helipad complete with helicopter. Flags fluttered. Behind us, a bridal party with a photographer in tow traipsed across the pink marble paving. Asian and African-American couples treated the Winter Garden and the marina as if it were a giant photographic studio. It wasn’t unusual to see three or four bridal parties waiting their turns at the most coveted spots: shy brides in frothy tulle veils, bridesmaids in low-cut satin, grooms barely of shaving age.