Federal Reserve Board Building in Washington, D.C.
Since it was Saturday, most of the staff weren't at work.
But outside the building, dozens of vans were standing by, and numerous security personnel were guarding the premises.
To enter the building, I had to go through dozens of body checks.
Only after that was I allowed into the most heavily secured area of the building.
"Vice Chairman Kim, welcome. You must've had a hard time coming all this way."
"It's truly an honor to be invited to such a meeting."
All the attendees were already present.
To think I could see the people who controlled the world economy all gathered in one place.
First, there was the President of the United States, followed by the Chairman of the Federal
Reserve and its Board of Governors, the Secretary of the Treasury, and various top officials.
Around 20 people were present.
I was assigned a seat directly opposite the Fed Chairman, all while receiving piercing stares from those around me.
Even before I sat down, President Bush began the meeting.
"Now that Vice Chairman Kim is here, let's continue. Vice Chairman Kim believes the subprime mortgage situation is serious. Then let's hear why the Fed and Treasury Department believe there's nothing wrong."
"The Federal Reserve's stance is clear. The U.S. financial system is more credible than any other in the world. Interest rate hikes have indeed shaken real estate prices, but things are still moving within expected parameters. This is merely a phase of correction."
The Fed's official stance hadn't changed at all.
Even in my previous life, just months before Lehman Brothers collapsed, the Fed had said similar things, so it was no surprise that they were still sticking to that view.
"This can't be considered a mere correction. Instances of default are erupting all across the
country, and numerous banks and mortgage companies are seizing homes."
"And what's the problem with that? If borrowers can't repay their loans, it's natural for banks to seize the homes. From the banks' perspective, they're recovering assets in place of the loans, so there's no significant loss, right?"
"Banks need liquidity right now. Just because they're holding a lot of houses doesn't mean they have cash. And with real estate prices continuing to drop, who would be willing to spend big money on buying homes?"
Even as I spoke, I felt exhausted.
To think I had to say such basic things in front of the people who supposedly ran the global
economy.
"We acknowledge that the real estate market is struggling. But this is strictly a real estate issue. There's absolutely no possibility of it spreading to other sectors. There's no need to overreact."
"You're being far too optimistic. I believe this real estate crisis will drive most of Wall Street's investment firms into bankruptcy. This isn't just about the housing market—it will clearly have a negative impact on the broader U.S. economy."
The meeting room erupted into chaos almost instantly.
People started chiming in from all sides—some supporting the Fed's view, others not.
But the majority still sided with the Fed, and President Bush seemed to be leaning toward their position as well.
"Hmm, after hearing the arguments, the Fed's position seems reasonable. There's no need to
make a fuss."
"Exactly! Even if the real estate market deteriorates, the U.S. financial system is functioning properly and will bounce back soon."
"I disagree with the idea that the U.S. system is functioning properly."
Had I just touched a nerve?
Shouts erupted from those supporting the Fed.
"Are you saying you don't trust the United States?"
"It's not the United States I distrust—it's the financial system. Mortgage firms are collapsing one after another, and defaults are climbing daily. Can anyone here explain why subprime mortgage bonds still hold AAA ratings?"
The room went quiet.
Everyone here knew the risks of subprime bonds had risen—no one could deny that.
"Credit ratings aren't determined overnight. Rating agencies take time to make cautious
decisions."
"How long do we have to wait? Are we going to wait until a few investment banks go bankrupt before the ratings are adjusted? If so, what's the point of credit ratings at all?"
"We can't interfere in the internal policies of rating agencies."
"Is it that we can't , or that we won't ? Anyone can see something's wrong. Shouldn't the Fed step in and investigate what's happening behind the scenes? Isn't that what the Fed exists for?"
Had I gone too far?
The people from the Fed clenched their fists and stared at me like they were ready to devour me.
"We are conducting our own internal investigation. The results will be released soon, so just sit tight and wait."
"Now, everyone, let's calm down. Shouldn't our priority be to contain the current situation as best we can?"
It was the Deputy Secretary of the Treasury who stepped in.
Unlike the Fed, he spoke in a gentler tone, easing the tension in the room as he continued.
"Vice Chairman Kim, we invited you here not only to hear your thoughts but also to make you a proposal."
"What kind of proposal are we talking about?"
"Would you consider acquiring New Century Mortgage? It's the second-largest mortgage
company in the U.S., and taking it over could significantly boost your influence on Wall Street."
Did they think I was a fool?
They were asking me to acquire a company that was on the verge of filing for bankruptcy.
No matter how much money I had to burn, I had absolutely no interest in picking up a sinking ship like that.
More precisely, I hadn't started this game just to catch small fry.
"I'm not particularly interested in acquiring a mortgage company. I'm sorry."
"If it's the debt you're concerned about, you needn't worry. We're willing to write off a portion of the debt. And we can also offer various policy-level support."
So they were trying to toss the bomb onto my lap.
To be honest, I could have taken it.
Being the second-largest mortgage company, it surely carried a mountain of debt, but with SAVE
Investment's financial power, it was manageable.
"I appreciate the offer to forgive part of the debt, but I really don't have much interest in
mortgage firms. If an investment bank or insurance company on Wall Street were up for sale, I'd be more interested. But not a mortgage company."
"Hmm. That's quite the ambition. You know what happens to those who bite off more than they can chew."
"Well, I've got a pretty strong stomach. I can digest even rotten meat. But a company like a
mortgage firm? That's hardly a mouthful. I'll pass."
I made it clear that I was after much bigger prey.
To them, my ambition probably seemed excessive.
But they'd realize within a year or two that it wasn't ambition—it was foresight.
"Ahem. Let's discuss the acquisition again later. For now, how about considering a rate cut?"
"Absolutely not! Even if the real estate market is struggling, if the government steps in and
lowers interest rates now, everything we've worked for will be for nothing. It'll only have the
opposite effect—prolonging this difficult situation!"
It seemed even President Bush was starting to feel the pressure.
He subtly brought up the possibility of cutting interest rates, and the Fed immediately and
vehemently pushed back.
Still, I couldn't help but be amazed.
Here I was, attending a meeting that was practically a gathering for running the country.
Should an outsider like me really be present in such a room?
Just because I held honorary U.S. citizenship—did they really consider me an American?
"Vice Chairman Kim, what are your thoughts?"
"If I may speak candidly, whether the interest rate is lowered or maintained, the golden time has already passed. Unless the entire financial system is overhauled, a rate cut will have no
meaningful effect."
"This man! Why do you keep casting doubt on the U.S. financial system? The Fed will take full responsibility for the matter!"
The Fed raised its voice.
Exactly as I had intended.
I had persistently struck where it hurt, provoking them until they finally blurted out that the Fed would take responsibility for everything.
"Then I have nothing more to say. If the Fed is willing to take responsibility, what more can I
add?"
"Hmph. Vice Chairman Kim, you may leave now. We've heard your views, and we'll try to reflect them in our policy decisions."
President Bush issued a thinly veiled dismissal.
His expression clearly showed displeasure—he probably regretted inviting me in the first place.
But it wouldn't be long before they called me back.
And next time, it would be with far more urgency.
I returned to Wall Street from Washington.
As soon as I got back, Team Leader Han rushed toward me, looking flustered—something had clearly happened at SAVE Investment while I was gone.
"How did things go in Washington?"
"I steered it exactly the way I wanted. I created an atmosphere where the Fed is now seen as
responsible for the entire situation. But something happened here?"
"The head of Quantum Fund came to see you. I believe he's acting as a representative for the
major investment firms on Wall Street."
"You mean George came to see me? When did he arrive?"
"He got here last night and has been waiting for you ever since."
It seemed he intended to haunt the place like a ghost until he saw me.
I had received a lot of help from George up until now, so I had no reason not to meet him.
"Where is he waiting?"
"He's waiting in the reception room."
Dragging my exhausted body along, I headed to the reception room.
As soon as I opened the door, George sprang to his feet and greeted me with great enthusiasm.
"Isn't it been way too long? Weren't we once comrades-in-arms? Why is it so hard to see your face these days?"
"Strangely, a lot of people want to see me lately. It's been hard to find the time. But what brings you here, that you've been waiting for me like this?"
George paused to catch his breath.
Then, with an expression that did its best to look apologetic, he got straight to the point.
"The investment firms on Wall Street are asking for funding support. And isn't SAVE the firm with the most liquid assets right now? Would you be able to provide enough capital to at least put out the immediate fire?"
"There are dozens of firms on Wall Street. Who exactly is asking for help? And why are you the one speaking on their behalf? Don't tell me Quantum Fund is in need of funding too?"
I had no intention of bailing out just any Wall Street investment firm.
But if Quantum Fund asked for help, I was willing to offer enough to prevent them from going under.
"No, no—Quantum Fund doesn't need any help. Once we saw you were keeping your distance from subprime mortgage derivatives, we made sure not to touch them either."
"Then who exactly is making the request?"
"To be frank, it's pretty much most of the investment firms on Wall Street."
George really was something else.
Sure, I had spread plenty of information, but he was practically the only one who had actually
made good use of it.
In a way, he trusted me even more than Team Leader Han did.
With his uncanny instinct for the scent of money, he must've smelled the opportunity coming from me.
"Tell them I don't have any funds available at the moment. By the way, did Quantum happen to purchase any of the derivative insurance products?"
"To be honest, just a little—barely a hundred million dollars."
"Then you're going to make a killing. At this rate, SAVE and Quantum might be the only investment firms left standing on Wall Street."
"Wouldn't that be ideal for us? I'll make sure to put in a good word with the others. Just don't forget to call me when the real fun begins."
George hadn't come just to pass along a message from the others.
Using them as an excuse, he had come to signal that he wanted to work together again.
And that was fine.
We would obviously claim the lion's share of the feast. As for the scraps—we could toss a few his way anytime.