Every Last Cent
"Empire of Gold—Are you really going to squeeze every last cent out of them?" Al Gore’s voice trembled slightly through Yoo Jae-won’s Android smartphone. The latest model, the Android S6, made the tremor feel even more vivid. True to ID Group tradition, odd-numbered releases brought major spec upgrades while even numbers focused on stabilization, and this model was no exception.
The Android S6’s hardware improvements were modest enough that critical media outlets and netizens had already begun declaring the end of innovation. Yet the software delivered something far more substantial: a full integration of every breakthrough ID Technology had achieved. The touch interface now featured a calmer Material theme, and integration with the AI assistant Gold had become truly seamless. Face Key facial recognition and Finger Key fingerprint authentication combined to raise security to a new level. Pre-installed apps such as the camera, Photo Book, and N Pay also benefited from deeper Gold integration. Still, Yoo Jae-won had not forgotten the phone’s most fundamental purpose—making and receiving calls. The Android S6 offered the clearest call quality of any Android device to date, allowing President Al Gore’s anxiety and tremor to reach him undiminished.
“Of course. In times like these, principles matter most. When those firms signed contracts with me last year, they treated the money as free. They never once considered the risk—not even one percent. Now it’s time to pay the price.”
Yoo Jae-won’s voice remained steady. He sat in his study as usual, the massive monitor adjusted to his eye level displaying countless graphs and real-time financial data. The stock market was down another three percent today. Both the Dow and Nasdaq were falling in tandem. The financial crisis that began with the housing-market collapse had produced Black Monday, bankrupted Lehman Brothers, and, just days earlier, Merrill Lynch. Now America’s largest insurer, AIG, and major bank Citibank stood on the brink. It felt like the IMF crisis in Korea all over again—every time the television came on, another company was collapsing. In this chaos, the greatest pressure fell on President Al Gore. His second term had just passed the midpoint, and only months ago his approval ratings had been the highest in history. He had seemed destined to be remembered as the president who captured both the economy and national security. Now that shining economic legacy looked like cheap gold plating rather than solid 99.9 percent pure gold. The media had already branded the disaster the “subprime financial crisis.”
—So you’re really going to let AIG and Citibank fail?
“Mr. President, no creditor wants a debtor to collapse before the principal can be recovered. You need to look deeper into why Wall Street firms are screaming about imminent bankruptcy.”
The reason was simple: none of them wanted silver bracelets on their wrists. The executives and owners of those financial companies would rather die than go to prison. Most of them also lacked any sense of guilt over the moral hazard that had created the subprime disaster. They believed the best solution was to threaten the government into handing over public funds for a bailout, and they were leading the charge to spread panic. AIG and Citibank stood at the forefront of that campaign.
—Then is there a way to resolve this without using public money?
Al Gore asked hopefully.
“No. Support will be necessary. The housing market is worth four trillion dollars. Even I don’t have that kind of capital. To stop the chain reaction of borrower bankruptcies, we must first inject public funds to break the domino effect. My calculations suggest that one hundred billion dollars should be enough to put out the immediate fire.”
—Damn it.
Yoo Jae-won had casually shattered the president’s expectations, drawing a rare rough curse from the usually gentlemanly Al Gore. One hundred billion dollars—roughly one hundred twenty trillion won. Ten days earlier the figure had been one hundred eight trillion; in just a few days it had risen another twelve trillion because American investors, their own markets in peril, were dumping Korean stocks and bonds to repatriate dollars, driving the exchange rate higher. It was an astronomical sum. Before the regression, even one hundred billion dollars would have been nowhere near enough. Under the pretext of providing public liquidity, the Federal Reserve had cut interest rates to near zero and flooded the system with money to artificially restore cash flow to failing institutions. The justification was always the same: if the financial companies collapsed, modern capitalism itself would fall. Yet a closer look revealed that political leaders had simply surrendered to Wall Street lobbying. The very people who had triggered the subprime crisis received no punishment and remained in their positions. Even the executives of Lehman Brothers, which had produced a five-hundred-billion-dollar bankruptcy, faced no consequences. They continued to live lavishly on the astronomical bonuses they had collected while running the firm. The same was true of Aaron Fuld, Lehman’s CFO who had overseen the mass production of those worthless CDOs.
“However, if that support reaches those who truly need it instead of fattening the pockets of giant financial firms, this crisis can still be turned into an opportunity.”
—Is that possible?
“Of course. I have a plan.”
Turning crisis into opportunity sounded wonderful, but such outcomes were rare in reality.
—I seem to rely on you every time there’s a crisis, but never as desperately as now.
If Al Gore’s conversation partner had been anyone else, he would have been suspicious. Washington, D.C., the capital of world politics, was a vortex of ambition and conspiracy. Blind trust could easily lead to disaster. Yet Yoo Jae-won remained someone the president could believe in. Last year, when Yoo Jae-won had warned that the housing market was overheating, placed massive put-option bets, and even made a movie about it, Al Gore had wondered why he was stirring up trouble when both the economy and national security seemed strong. Now he deeply regretted not having listened more carefully.
—Can you tell me what the plan is?
“Yes. First, we must ensure strict judicial punishment for those who caused this mess through moral hazard. The best way to restore lost market confidence is to punish the lawbreakers decisively. Next, we must separate those who bought homes for actual residence from those who bought for speculation, and minimize the damage to genuine homeowners.”
—The first part is entirely possible. We’re not the only ones grinding our teeth at those people. But the second part—can it really be done?
Al Gore’s question was filled with doubt. Internet media outlets had already exposed how credit-rating agencies and investment firms had colluded to arbitrarily inflate CDO ratings; the handcuffs for those involved were practically guaranteed. President Al Gore himself believed that anything less than real punishment would only encourage future fraudsters, so he could not let the matter slide. Yet distinguishing between subprime borrowers who had taken loans for actual homes and those who had speculated was extremely difficult. Experts said the web of conflicting interests surrounding mortgage-backed securities surpassed even the most carefully chosen Millennium Problems in mathematics. Still, separating the real from the fake was essential. If public funds were poured in without verification simply because everyone was screaming that they were about to die, the money would never reach those who truly needed it—it would be devoured in the middle. That was exactly what had happened before the regression. Trillions of dollars in public funds had been injected, interest rates had been driven to zero, and money had flooded the system. Wall Street firms had revived and resumed their bonus feasts. Outraged citizens had risen up to occupy Wall Street. If the same thing occurred this time, ID Investment would not escape unscathed. Although Yoo Jae-won now controlled a media empire through Time Warner Nextcom and NBC, that influence covered only about forty-five percent of North American media. The other half remained beyond his reach, and outlets closely tied to Wall Street were already claiming that Yoo Jae-won and ID Investment were the true culprits behind the subprime disaster. The accusation was a million light-years from the truth, yet many people believed it because it was easier than examining the facts. Extreme confusion reigned. If public funds flowed the way they had in the past, it was not impossible that enraged protesters would try to occupy the ID Investment Building. That must never happen.
Approximately one hour after the call with President Al Gore ended, the awaited message arrived.
—Chairman, the asset freeze at Lehman Brothers has been completed.
Vincent Greenhill, despite his age, had been reporting to the office every day since Lehman declared bankruptcy. Leading a team of roughly thirty M&A specialists from ID Investment, he had been working tirelessly for Yoo Jae-won and the ID Group. Some remaining Lehman employees had even begun calling them an occupying army. The ID Investment staff found the label absurd. From their perspective, it was the Lehman people who seemed drug-addled. Surprisingly, the remark contained a grain of truth. While the ID Investment employees had spoken half in jest, many Wall Street elites who had once wielded hundreds of millions or billions of dollars routinely used cocaine and similar substances. Without the drugs they could not endure the crushing pressure of their positions or maintain the razor-sharp judgment required to stay ahead of competitors. In contrast, at ID Investment the critical investment decisions rested solely with Yoo Jae-won. The put-option bets that had delivered the fatal blows to Lehman Brothers, AIG, and Citibank were no exception. The movie The Wolf of Wall Street had taken considerable dramatic license, casting a young and handsome Christian Bale as the protagonist who personally uncovered the housing-market rot and assembled investors for the put options. In reality, every strategic decision had come from Yoo Jae-won; Vincent Greenhill and the staff had focused solely on execution. Even realizing the confirmed put options was proving difficult. ID Investment’s put-option accounts still held only the options themselves rather than cash, because Lehman had already collapsed while AIG and Citibank kept asking for more time. Nevertheless, the psychological burden on ID Investment employees remained far lighter than at other Wall Street firms.
“Completely cleaned out?”
—Yes, Chairman. Only thirty-two billion dollars remain in the current account. Even if we liquidate all securities and bonds, the total is still modest.
“Clean as a whistle. What about real estate?”
—The headquarters building and several other valuable properties exist, but most assets are tied up in mortgage-backed securities. On paper they exceed three hundred billion dollars, yet their credit ratings are unreliable and the scale of the bad debt cannot be accurately assessed, so we have deferred valuation. Liabilities are also enormous. There are signs of accounting fraud, so the final bankruptcy figure is likely to be at least one hundred seventy billion dollars higher than what the media has reported.
“Oh? Interesting.”
Yoo Jae-won did not so much as blink at the news that liabilities would grow even larger. Instead he let out an admiring exclamation. He already knew the truth from his previous life. Before the regression, Lehman Brothers had collapsed in 2008 with six hundred seventy billion dollars in assets vanishing into thin air. Viewed another way, Vincent Greenhill had moved with remarkable speed to grasp the true scale of Lehman’s holdings.
—There are still areas we need to examine, but what would you like to do?
Vincent asked. His mission had been to conduct due diligence on Lehman Brothers. Yoo Jae-won would decide the next course of action.
“Acquire all the mortgage-backed securities. Even if it means conceding cash and real estate to other creditors, secure as many of those bonds as possible.”
—Mortgage-backed securities? The home-loan bonds?
Vincent could not hide his surprise. Since Black Monday the default rate on MBS had risen sharply. Mortgage-backed securities were the very instruments crashing in real time on the bond market. Prioritizing their acquisition made no sense by conventional standards.
“I have a plan.”
Yoo Jae-won’s real strategy was only just beginning. The White House would soon make an announcement, and the Federal Reserve would unveil its countermeasures. In coordination with those moves, Yoo Jae-won intended to produce a special broadcast—featuring himself.