Chapter 22: The Power Move
The clock in the Continental's main office said 10:00 AM. It was a clear, sunny morning in early June 1940, but the mood inside the bank was dark and electric.
Elias Thorne stood in the doorway of his office, watching. He was still the President of Continental, the respectable lawyer, but today he felt like a soldier waiting for a bomb to explode.
Arthur Vance was not in his simple desk area. He was in the new, hastily created area for the Sales & Trading (S&T) Division. This "division" was currently just three desks, a few extra telephones, and one new employee: Mr. Wallace.
Wallace was everything Arthur was not. He was loud, fast, and constantly moving. He wore a suit that was a bit too tight and talked with the speed of a machine gun. Elias had hired him a week ago, after Arthur had simply pointed at him in a downtown brokerage house and said, "He has the hands for it." Wallace had spent the last week learning exactly what Arthur needed.
"Alright, Wallace," Arthur said. He sat calmly at the edge of Wallace's desk. He held the one piece of paper that mattered: the research report detailing Boeing's debt to National Metropolitan Bank. "The target is one thing: the loan. Not a share, not a bond. The entire, large, secured debt. Do you understand the terms?"
Wallace was already dialing the phone, a cigarette hanging from his lips. "Secured debt, 1947 maturity. We want the whole piece. I know it, boss. They think it's a time bomb. We're going to tell them we want to buy their time bomb."
Elias stepped closer, worry etched into his face. "Arthur, are you certain about this? We are talking about millions of dollars. If we buy that loan, we are inheriting all the risk. If Boeing goes bankrupt, we lose that money. The whole trust!"
Arthur didn't even look at Elias. He spoke in a low voice, but it cut through the room. "Elias, look at the other side. National Metropolitan Bank just threatened to destroy one of the largest aircraft manufacturers in the country. They did this publicly, or at least, publicly enough for the market to hear. They did it because they think the loan is too risky and they want to clean it off their books before the market collapses."
He tapped the paper. "They have announced they have a problem. When a bank announces a problem, they become desperate to fix it. We are not a buyer. We are their solution."
Wallace's voice broke in. He had the phone pressed to his ear. "National Metropolitan Bank. Ask for Mr. Higgins. He runs the distressed assets desk."
He waited, tapping his pen. Elias wrung his hands.
"Hello, Mr. Higgins? Wallace, from Continental. Continental Investment Bank. Yes, the new one. Listen, I have a client who is very interested in taking an asset off your hands. We understand you're holding a secured note from... The Boeing Company."
Wallace listened for a moment, then winked at Arthur. "Yes, yes. The risky one. The one everyone is talking about. Look, my client is feeling generous today. How about we take the entire thing off your books? Face value. We pay you in full. Today. Cash wire transfer."
Elias gasped. Paying face value for a loan the market saw as worthless was an unbelievable offer. It meant Continental was absorbing all the perceived risk for zero discount. But it achieved one goal instantly: speed. National Metropolitan wouldn't have to negotiate, argue, or get committee approval. It was a clean exit.
On the other end, Mr. Higgins was clearly shocked. The loan was an open wound for his bank. Being able to dump the entire risk for full price was a miracle.
Wallace didn't give Higgins time to think. "Listen, Higgins, my client needs this done by 3:00 PM today. If you can move the paper, the money is yours. If not, we walk. We know other banks are sniffing around."
The lie worked. In the world of high finance, fear of missing a good deal is the strongest motivator. Higgins, eager to close the door on the Boeing disaster before his superiors found out how bad the internal risk was, agreed to the terms.
"Excellent," Wallace said, hanging up the phone with a flourish. He turned to Arthur. "Done. Documentation sent to their legal team. They're setting up the transfer. We have until 3:00 PM to wire the money."
Arthur nodded, calm. "Elias, wire the five million. All of it. Every cent of the principal. We need to be empty on cash by 3:00 PM."
Elias, pale but obedient, walked back to his office to start the biggest, fastest wire transfer of his life. The five million dollars, the entire trust principal, was about to leave Continental's account.
By 2:45 PM, the confirmation came. A simple telex machine printed out a few lines of code. The transfer was complete.
The money was gone. But what they had in exchange was priceless.
Arthur stood next to the telex machine and picked up the paper. Elias watched him, waiting.
"Well?" Elias asked, his voice shaking.
"Well," Arthur said, a deep satisfaction in his voice. "Continental is now the legal owner of Boeing's entire corporate debt. They no longer owe National Metropolitan Bank a single dime."
Elias leaned against the wall, lightheaded. "But now they owe us! We just paid five million dollars to make ourselves their banker! We are back where we started, only now we are holding the hot potato!"
Arthur smiled, the cold, hungry smile of a man who sees two moves ahead.
"No, Elias," Arthur said. "We are not back where we started. Before, we were a new, unknown bank asking Boeing for a partnership. They said no."
He tapped the telex paper. "Now, we are their supplier, because we own Ohio Gear. And we are their lender, because we own their loan. And we are the only people in the world who know that loan will not be called tomorrow."
He handed the paper to Elias. "We have moved from a business partner to a savior. We didn't buy a risky asset. We bought control. And we bought it in one day, before Boeing even knew they were in trouble."
Elias stared at the paper. It was true. The immediate threat of bankruptcy was gone, replaced by a deep debt to a new bank. His bank. Arthur's bank.
"National Metropolitan," Arthur continued, "thought they were being clever. They thought they could scare Boeing into doing what they wanted, or failing that, seize their assets. They saw the loan as a weapon of destruction. They never saw it as an asset of leverage."
He walked over to Elias and lowered his voice. "The beauty of this move, Elias, is that we have done the impossible. We bought a massive position in a major American company without ever buying a single share of stock. The $5 million is now completely safe. It is secured by Boeing's factories and designs—a much safer position than it was as an unsecured loan in the hands of a fearful rival."
Elias finally looked up, a slow understanding replacing the terror in his eyes. "My God... the trust. The $5 million is gone, but it is replaced by an asset—the secured loan—that I can legally deem 'safe' because it is backed by physical property. The trust principal is still preserved."
"Perfectly preserved," Arthur confirmed. "And in less than an hour, Boeing's CEO is going to get a very polite, very confusing letter from us, introducing ourselves as his new, sole lender."
Elias straightened his tie. The fear was replaced by a kind of thrilling shock. He looked at Arthur, the boy who looked 18 but moved like an invisible giant.
"Arthur," Elias said, a flicker of awe in his voice. "The lawyer is proud of you. That was… magnificent."
Arthur did not smile. He simply nodded toward the phone. "Call the CEO. It's time for the final meeting. But this time, we are not asking for a deal. We are granting a favor."