Chapter 64: Uncanny

May 15, 1984, Chicago, Illinois

Tuesday was a normal day until 10:45am when my direct line rang.

"Research; Kane," I said after picking up the handset.

"Jonathan Edward Kane?" a woman's voice inquired.

"Yes. Who's calling?"

"My name is Marjorie Meecham with Clermont County Family Services. Do you have a few minutes to speak to me? If there's a better time, I could call back."

"Now is fine. I assume you're calling about Heather Newton?"

"Yes. I read your affidavit, and I'd like to ask a few questions."

"Go ahead."

"First, who do you believe should have custody of Heather?"

"Is that actually relevant?"

"Did Bev Newton terminate your guardianship in writing?"

"No, and I'm actually surprised she hasn't."

"Then you are, from everything we can tell, Heather's legal guardian until we make a final determination as to custody."

"It's my opinion that Heather should stay with Jim and Julie — her grandparents — until Bev undergoes counseling for whatever it is that's causing her to behave irrationally and erratically."

"I'd like to hear your view on that irrational or erratic behavior, please."

"It started immediately after Bev revealed that Glen Rodgers was Heather's father. Bev felt she needed to get away from home, and I suggested she come to Chicago so I could help her and take care of her and Heather. Bev refused and instead dropped out of college and moved to St. Louis. She did accept monetary assistance from me, but at the same time, demanded I not initiate contact with her.

"When she was informed that a private investigator had been hired by her parents, she abandoned her job and drove to Overland Park, Kansas, with no plan as to what to do. There, she was hospitalized, and because of the guardianship document, the local authorities called me. A friend and I went to Overland Park to help Bev and Heather, and we brought them back to Chicago. I helped Bev find an apartment, helped her find a job, and helped her with expenses. Not long after she was settled, she and Glen reconciled, and he moved here. Everything seemed fine until the two of them tried to flee to Canada."

"One thing I haven't been able to find is any record of why she was hospitalized in Kansas."

"You didn't find anything because the police chose not to write a report of the incident. The motel manager had called them because he said Bev was acting strangely. The police did a health and safety check, and she apparently resisted their attempts to talk to her or check on Heather. Instead of arresting her, they called for an ambulance and had her transported to the hospital for a psychological evaluation."

"The hospital records simply say she was dehydrated and had not been sleeping well."

"I'm positive that's true. They performed a physical and a psychological evaluation and recommended she receive counseling for postpartum depression. Once the symptoms were described, I felt they fit Bev to a T, though she was also paranoid and suspicious."

"Do you think she is able to care for Heather?"

"No, I don't. Heather needs a stable, safe, loving environment, and that is what Jim and Julie are providing. I've told Bev so many times that I've lost count that she could solve the whole problem by simply talking to her parents. She flat-out refused, and while I understand she's unhappy with them, reconciling would literally make all her problems go away, right?"

"Yes, though we'd still check on Heather on a regular basis, and Bev would need to see a counselor."

"That's the solution I proposed. If Bev would speak to me, I'd propose it again, but I think I'm on her permanent shit list for giving Heather to Jim and Julie. Oh, sorry about swearing."

Mrs. Meecham laughed, "Don't worry about it. I work with young people all the time, so I've heard it all. Do you get along with Mr. and Mrs. Newton?"

"About as well as any guy who slept with a man's teenage daughter when they were in High School together could."

Mrs. Meecham laughed again, "Fathers tend to frown on that! How long were you and Bev lovers?"

"From her sixteenth birthday until I moved to Chicago in June 1981, and then again after Heather was born until she started speaking to Glen."

"What do you know about that relationship? There was nothing in your affidavit."

"Not much, other than it happened, and she was at least sixteen because she and I were both virgins when we were first together on her sixteenth birthday."

"You're positive?"

"I trust Bev didn't lie to me about that. I had wondered, at one point, but I've come back to a belief she was telling me the truth."

"And Bob Leahy?"

"She began seeing him about the time I told her I was moving to Chicago. Bev, rightly in my view, thought he was Heather's father."

"Do you know if she had any other relationships?"

"I don't. She claims not to have, but I have no way to independently evaluate that claim, especially in light of her hiding her relationship with Glen until she was basically forced to reveal it. And, frankly, who Bev might have slept with is none of my business; once she turned sixteen, it was no longer your business."

"Promiscuity is something we take into account, as it can affect the welfare of a child."

"We'll have to agree to disagree on that unless you apply the same standards to guys when determining custody and visitation."

"It's different for custodial parents than non-custodial ones, but there are other differences. I won't go into the rationale because it's not relevant. Is there anything you want to say in Bev's defense?"

"That she loves Heather and that if she does receive counseling, she ought to have custody of Heather."

"Thank you, Mr. Kane."

"You're welcome."

We said 'goodbye' and ended the call. I suspected Bev was going to lose custody, at least for the foreseeable future; longer if she failed to get the counseling she so obviously needed. I returned to my work, and at noon, Violet and I ate lunch in the break room. After eating, I returned to my desk and completed my workday, then headed to the condo.

Alexa arrived as planned and had dinner with us. She and I hung out with Bianca and Sofía until 8:30pm when we went up to my room.

"What are the rules?" Alexa asked as we undressed.

"Rules?"

"Sophie and Ivy have a bunch of rules; I was wondering if you had any."

"Only one, really — no cheating. That's a line I won't cross. Otherwise, everyone is pretty much free to do what they want so long as it's consensual. If you're asking if it's OK to sleep with other guys, that's your business, not mine. The same is true about me and other girls.

"Obviously, sleepovers are OK, and I don't feel that either the girl or the guy has to make the first move or that asking for anything is off-limits. You just have to accept that sometimes the answer will be 'no'. And, as I made clear, I am not interested in a committed relationship at this point. Is there a concern?"

"No. We agreed to keep it casual but never discussed what that meant. As usual, your answer was succinct and clear."

"Thanks. What about you? Any rules?"

"None except demanding orgasms!" she declared as we got into bed.

"I shall endeavor to fulfill that request with alacrity!"

May 17, 1984, Chicago, Illinois

"As I said, a girl could get used to this," Natasha said when we got out of bed on Thursday morning.

"I certainly enjoyed it," I agreed as we went into the bathroom for our joint shower.

"I should have told you last night that I received my evaluation," she said as I began lathering her body. "My professor had some good critiques, but overall, she liked what I'd done."

"That's good. I'm curious about the critiques."

"Her big one was the white sectional furniture. She felt I could have gone with a bolder color to be more modern; white was too traditional in her mind. She also wasn't big on the chairs for the projection TV, thinking I could once again have gone more modern, even avant-garde. She's right, but I'm fairly certain I met your design specs."

"You did."

"And in the end, that's what counts. I didn't lose any credit because it's Credit/No Credit, and she's not wrong in general. She made the point that I followed your design ideas but also encouraged me to be more aggressive in pushing the limits the client sets if I think they're too confining."

"In the end, though, it's the guy who pays who decides."

"Yes, of course, but it's also the case I didn't challenge anything you said. Probably because this was my first 'professional' work, even if I wasn't paid for it. It was really good feedback, and she says I have a lot of promise. Her key point was that the best interior designers have a style, and people seek them out for that style. It's not all that different from what Deanna does — mainly, she paints abstract, but she does other things, too.

"That makes sense," I said as Natasha rinsed the suds from her body.

I handed her the soap, and she began washing me.

"I'd say it's also similar to investing," I continued. "Different fund managers have different styles, so to speak, and investors sign up with a fund manager who fits their style."

"Or sex, for that matter," Natasha said. "If you aren't on the same page with your bedmate, it's not nearly as good, and you probably won't repeat it."

"I'm going to assume I meet your minimum standards?" I asked with a grin.

Natasha laughed, "I have no complaints, and if anyone were to ask, you'll receive a glowing review!"

"Thanks!"

We finished in the shower, dried off, then dressed. We went down to have breakfast with Bianca, and after we'd eaten, Natasha and I left the condo. We parted in the lobby, and I went up to the office. Bianca would follow in about an hour, but I liked being in at 7:00am to have time to talk to Rich and plenty of time to work on my portion of the daily Analyst Report.

At 9:10am, Pete came into my office.

"The Feds are taking over Continental Illinois with additional capital from big banks," he said. "A massive cash injection today, in exchange for preferred equity."

"Too big to fail?"

"Yes. The C-suite will be wiped out, along with the Board of Directors. If the Feds follow the usual path, the comptroller and treasurer will be replaced, along with other key officers, though that might take some time."

"What's your take on the stock?"

"It'll hit bottom today or tomorrow, then float around a bit waiting to see if the shareholders will be wiped out. I expect they will, but it could be a year or more. It depends on how much the Feds can recoup from packaging loans, especially the non-performing ones. I'd suggest covering at 9½ rather than riding it until sometime next year or even longer. You'll clear over $6 million that way."

"That is exactly what I'm going to do. Thanks. Put out a 'Flash Note' as soon as humanly possible. People with Bloomberg terminals will know, but we want everyone to have the info as soon as possible."

"Will do."

He left, and I called Joel Steinem.

"Joel, it's Kane. I have contingent orders for Continental Illinois. Buy to cover at 9¼, good until 2:00pm tomorrow. Cover unconditionally at 2:00pm tomorrow unless you hear from me."

"Last trade was at 9⅞, down 2¾."

"You know what? Buy at that price. I don't want to be stuck if they halt trading or decide to liquidate. I can't wait for months or even years for them to zero out the stock so I can return the borrow and stop paying interest."

"To confirm, buy immediately at 9⅞ to cover your entire short?"

"Yes."

"Order is in. You should see the confirmation shortly."

"Thanks, Joel."

"How much did we make on this one?"

"Just short of $6.5 mil, including all my shorts."

"Fuckin' A! Keep it up!"

"Thanks."

"I'll return the borrowed shares as soon as the trade clears."

"Much appreciated."

We ended the call, and I let Pete know I'd decided to bail at 9⅞. A few minutes later, I had the confirmation that my order had filled and that all the borrowed shares would be returned. My profit, net of interest costs, was just under $6.5 million. I watched the Continental Illinois share price during the day, and while it briefly dropped to 9⅝, it closed at 10¼. I hadn't timed it perfectly, but close enough, given there was only a single trade at 9⅝, and it was only for 10,000 shares.

Pete came to see me just before quitting time.

"I have more details," he said, holding up his notebook, "all of which will be in tomorrow's report; want a preview?"

"Yes, please."

"There was a meeting at Morgan Guaranty attended by Fed Chairman Volcker; Thomas C. Theobold, Vice Chairman of Citibank; Thomas G. Lebrecque, President of the Chase Manhattan Bank; Thomas S. Johnson, President of the Chemical Bank; John F. McGillicuddy, Chairman of the Manufacturers Hanover Trust Company; Alfred Brittain III, Chairman of the Bankers Trust Company; and Samuel H. Armacost of the Bank of America. Also present were senior staff members of the FDIC, the Comptroller's Office, and the Federal Reserve.

"They discussed a private bailout, a combined bailout, and immediate liquidation. The consensus was that a private bailout was impossible because of the numbers involved, and liquidation would cause catastrophic collateral damage to the banking sector. The FDIC committed to covering all depositors, with no limit, which basically sealed the deal at a total of $7.3 billion in temporary liquidity.

"The FDIC, Federal Reserve, and lawyers for participating banks met at the offices of the New York Fed and hammered out the details. The lawyers almost scuppered the deal around 4:00am this morning, but in the end, they worked out guarantees the lawyers could accept, and they signed the deal. $2 billion was transferred immediately, and they had the press conference at 10:00am New York time, about ten minutes before I came to talk to you."

"What about the rest of the funds?"

"In the next week."

"How bad were their reserves?"

"As of last night, I estimate they had lost about 30% of their deposits. That was the straw that broke the camel's back and caused the other banks to be amenable to a deal, as some of them had either direct or indirect exposure. I'd say the run will stop, but it'll take ten years to completely resolve this."

"End game?"

"The Fed recoups as much of their equity as possible, then sells their shares to another bank once they fix the balance sheets. But with all the non-performing loans, that's anywhere from five to ten years."

"Price estimate?"

"Call it 12 to 12½ tomorrow, then it'll float around while everyone waits to see how it plays out. I think today's close is the floor. The consensus is that the bank will survive, then be sold. Nobody thinks it'll be liquidated."

"OK. I look forward to your complete report tomorrow. Good work. Thanks."

"You're welcome."

After Pete left my office, I put all my files into my desk drawer and locked it, then headed to the condo for a quiet evening with Bianca and Sofía and reviewed for my exam.

May 18, 1984, Chicago, Illinois

Friday was a fairly normal day in the office, and I was happy to see that Continental Illinois closed at 13⅜, meaning my decision to pull the trigger at 9⅞ had earned $1.6 million over what I would have made had I waited. Pete came in just after the market closed.

"The price firmed more than I expected," he said. "The only group that appears to think the bailout is bad is Congress. There was quite a bit of negative rhetoric about 'too big to fail' in DC and questions about the FDIC having the funds to guarantee deposits over the limit. The big concern seems to be that they've now guaranteed every bank and every depositor, with no limits."

"What do you think?" I inquired

"I think the concerns are warranted. They backed themselves into a corner, and there is no way they can undo it. Imagine the political fallout if little old ladies lose their money in a future bank failure while all the institutional depositors in Continental Illinois were made whole? This time, it would be American citizens who burn the White House and Capitol Building."

"Write that up for Monday because it will affect any investment decisions in the banking sector. We also want to watch to see if the shareholders are wiped out by the deal that rescued Continental Illinois."

"That'll depend on whether the Feds can recoup enough from the non-performing loans and clear the balance sheet. Of course, they could just take all those bad loans and put them in a servicing company and sell off the remaining properly capitalized bank, but I'm not sure there's political will to do that when it might cost the Feds $50 billion when all is said and done."

"There will be hell to pay if they lose $50 billion on this," I observed.

"Agreed."

"Anything more on the S&Ls?"

"Nothing actionable just yet."

"OK. Keep at it and keep up the good work."

He left, and I returned to my computer, working until 5:00pm. As usual, I put all my files into my desk, locked it, then headed to the condo to change. I greeted Bianca, went up to my room to change clothes, then headed to the lobby to meet Jack, Kristy, and Taya.

"We don't have many choices for a movie tonight," Kristy said. "Starting next week, we'll have a motherlode — Indiana Jones, Star Trek, Gremlins, and Ghostbusters — all released in the next three weeks. Tonight, we basically have either Moscow on the Hudson, a comedy starring Robin Williams, or Firestarter, from the Stephen King novel."

"I'd prefer the comedy," Taya said.

"Same," I agreed.

"And me," Jack said.

"Then it's unanimous," Kristy declared. "Italian for dinner?"

We all agreed and took the bus to Italian Village, where we were seated in one of their private booths after a fifteen-minute wait. We had a nice meal and a great conversation, then took the bus back to Water Tower Place to see Moscow on the Hudson, which we all thought was very funny. We made our usual trip to Oberweis for ice cream after the movie, and then Taya and I headed to the condo while Kristy and Jack headed to the house.

When we arrived, I took time to sit with Bianca and Sofía, then Taya and I went up to my room.

"Remember, I need to be out of here by 7:00am tomorrow morning," I said. "I have breakfast with a friend, then have my final exam."

"You don't need to study?"

"I did last night, so I didn't have to worry about it tonight. Did you drive in?"

"No, I took the Burlington line. I can take the train home if you can drop me at Union Station on your way to Circle. There's a 7:20am train, so it'll work perfectly."