Read Online Fixers by Michael M. Thomas - Free Book Online Page B

that friends who really trust one another exchange secrets too good to keep to oneself. I reciprocate with gossip much less titillating, but it’s the best I can do: things like who’s being considered for a Carnegie Hall or Penn trusteeship; which university, on what terms, is pursuing which private-equity mogul to endow what; which museum director is sleeping with his deputy.
    “Ever heard of someone called Eliza Brewer?” I asked her. “A Washington lawyer.”
    “Lizzie Brewer? Everyone’s favorite insiders’ insider? Little Bo Peep in chain-mail armor. Why do you ask, darling?”
    “Someone mentioned her name in a way that sounded like I should recognize it. I didn’t. And you know how I hate to appear less than au courant in the who’s who department.”
    “I do indeed. Ah, sweet Lizzie. She’ll cut your throat for tuppence ha’penny. She’s the tiny iron fist in the velvet glove of C & B.”
    C & B: a name I did recognize. Stands for Coppercoat & Barley, one of the capital’s hardest-charging law firms. Four hundred lawyers and growing. As well known for its lobbying prowess as its jurisprudential skills, and no wonder. Its pride of lawyers already includes four former members of Congress, two ex-Cabinet secretaries, the niece of a recent vice president and God knows how many former Congressional staffers and clerks to Supreme Court justices. It’s a place where the so-called revolving door spins at Mach 5.
    The more Lucia told me about Brewer, the more clearly I could see why Mankoff included her in his triumvirate. Winters and Holloway can be counted on to divert or hold up policy initiatives unfavorable or threatening to Wall Street, but if matters get out of hand, and an investigation or prosecution needs to be shut down or an indictment blocked, Brewer’s the girl for the job. She’ll know which doors to bang shut, what to cram down whose throat to shut them up, how to stifle regulatory actions that would affect a banking house’s public image and possibly even its access to credit, or—worst case—land its higher-ups in the pokey.
    We moved on to the transactions that Lucia calls “our firm’s peculiar arrangements with James Polton,” and how these can be made to appear to jibe with “the client comes first.” STST is presently in the process of buttoning up what is supposed to be the final Polton deal, a structured ziggurat of mortgage debt and derivatives called 2007 Protractor.
    Lucia doesn’t like the Polton deals. She thinks STST is pushing the ethical envelope with these transactions, and that they may in the end come back to bite. She would never say so out loud within the firm, because Polton’s hedge funds are huge revenue generators. He’s one of the top hedge-fund operators in the country, whether your benchmark is Assets Under Management (AUM)—$170 billion—or Internal Rates of Return (IRR)—average of 27 percent over the last five years.
    In the summer of 2006, he came to the conclusion that the securitized credit markets, those great discrete pools of mortgages and consumer debt and the derivatives that can be attached to them, had moved into bubble mode, and sooner or later were going to burst. At that point, he began to short everything in that sector that he could. By the last quarter of 2006, however, others had seen the same opportunity as Polton, and there was little available in the market to sell short on the scale he likes—it was like a trout stream being depleted through overfishing—so he came to STST and Deutsche Bank and a couple of other big players in the mortgage-backed securities market and proposed that they look into creating credit pools specifically for him to bet against. He and his attorneys had figured out how to do this within the letter of the law if not its spirit.
    Polton was willing to pay handsomely. The sugarplum visions he set dancing in the minds of structured-finance people at STST and elsewhere got them all in a tizzy of greed,