I threw down a twenty for the lunch and literally raced around the corner to look for a pay phone on MacDougal. When I finally found one that worked, I shoved in a quarter and dialed the FOREX desk at Citibank for a dollar quote.
Henderson was right. Paper money is predicated on trust. It seems that when the second largest industrial nation in the world apparently doesn't think enough of the credit rating of the first largest industrial nation in the world to loan it two cents, then talk about the full faith and credit of said first largest, etc., doesn't cut much ice. The Fed was out there buying dollars and dumping marks and yen and pounds in the billions to try and keep the dollar afloat, but nobody else in the Group of Five—those countries supposed to step in and buy each other's faltering currencies to prop them up—was lifting a finger. In spite of our treasury secretary yelling fire and damnation, all they'd done was announce an evening meeting in Paris. Period. What, they inquired, had the U.S. done lately to help out France, West Germany, Britain, or Japan?
Behind our allies' diplomatic and not-so-diplomatic posturing lay a simple, rhetorical question: Who needed passage on a sinking ship? At the moment the only thing governments around the world wanted less than U.S. Treasury debt was U.S. greenbacks. I'd contracted to swap ten million of them for other currencies back when they were worth a dollar. That afternoon I settled with bills worth eighty cents and sinking. That's right. Amy's college-fund hedge cleared two mil.
And if you think Miss Amy Walton survived the dollar's crash intact, what about Matsuo Noda, now holding tens and tens of billions in world currency forwards?
What didn't prosper that Monday was a state of mind called Wall Street. By mid-afternoon all the market indexes were down by half; exchange trading had been halted in a good two- thirds of the Dow stocks; a major brokerage house had frozen accounts and announced Chapter 11; and gold futures were soaring. The October crash of '87 was now a nostalgia item, remembered as a few sessions of light trading with a hint of downside bias.
A lot of investors went to cash, but most switched into money funds (what else could they do?). While sophisticated players were shorting the stock indexes and futures, the newsletter gurus—who charged two hundred dollars a year for hot tips about equal in worth to those of a New York cabbie—were calling their major clients. A big sell signal was emblazoned in the streets of lower Manhattan. Everybody assumed the situation was temporary, but nobody needed to ride the ship down. By the closing bell the Dow had sunk over eleven hundred and fifty points. And don't forget, the DJ Average represents blue chips; prices for over-the-counter outfits like Widget-tronics Inc. just packed up and headed south for the winter.
The way I figured it, Noda was probably more or less on schedule. By nightfall the stock exchanges had blood on the floor, a dollar was worth roughly two-thirds what it had been at sunup, and the U.S. Treasury couldn't have panhandled a nickel anywhere in the Free World.
I've mentioned Jack O'Donnell a time or so previously, the Columbia University professor turned politico. Jack was the junior senator from New York: Irish idealism goes to Washington. I'd gotten to know him reasonably well, thanks mainly to a series of rubber-chicken dinners I'd pitched in to help him with.
Needless to say, O'Donnell's well-known attitude toward fiscal sleight-of-hand in the corporate sector had made raising money on Wall Street a decidedly uphill endeavor. His Insider of the Month award was especially unpopular. That was a large gold-plated screw, suitable for mounting, which he regularly bestowed on any corporate board members who'd just happened to dump big blocks of their personal holdings about a week before a disappointing quarterly report sent their company's stock price through the floor. For some reason Jack never seemed to buy their collective "Gee, we had no idea" explanation.
Jack always assumed that corporate managements would walk off with anything not securely riveted to the floor. He also believed most of the corporate takeovers these days were about as helpful to America's competitiveness as masturbation was to population growth, a viewpoint I tended to share—which is one reason why I helped him raise money from time to time. More than that, though, I admired him immensely. The man was a real samurai. Unfortunately, however, he was his own worst enemy half the time when it came to soliciting campaign checks; he could never understand why executive dining rooms weren't necessarily the optimum terrain to start raising hell about shareholders' rights. I once sent him a dog muzzle for Christmas after he pulled just that trick at a CEO fundraiser I'd carefully set up in one of those private suites atop the World Trade Center.