solvent businesses. I’m not saying we’ll never take a loss, but overall, our commercial paper is some of the best in the business—no doubt about it.”
The aggressive Barnes shot up from the desk. “That’s bullshit, Alex! The way this market is heading we could experience tens of millions in commercial losses. This market is going to continue to deteriorate and local businesses will start to fail. Combine that with our bond problem and we’re headed for a disaster. And whether you like it or not, we’re going to need the deep pockets of the Federal Government to stay afloat. If you don’t see that, you’re fooling yourself!”
Red crept up Alex’s face, “Not so, Barnes! We are in trouble today because we got too deep into the Freddie and Fannie stuff, and you led the charge, my friend. That’s why we’re in this mess!”
The hardened trial lawyer, used to emotional confrontations, smiled coolly at the fuming Alex. “The board proposed to get more aggressive in the secondary market last year and you said yes.”
“Yes, I did, Barnes, but only after the board agreed not to do subprime mortgages. I was adamant about it, but somehow those requirements were changed while Nicky and I were vacationing in Europe.”
He paused, his eyes fastened on Barnes. “I just discovered from our auditors that we have been doing subprime mortgages for over a year. I feel like I have been duped. Somehow, the motion to loosen our guidelines was never mentioned in the minutes of that emergency meeting.”
“Are you accusing me of purposely omitting something from the minutes? That’s a very serious accusation, Alex.”
“You were Secretary of the Board at the time. Show me in those minutes where subprime mortgages are mentioned.” Alex was now staring bullets at the hardened lawyer.
Undaunted, Barnes gritted his teeth and continued, “While you were off vacationing, First Financial Securities informed me that we were having problems delivering the required number of Freddie securities to our institutional investors. Our investors were screaming, so I asked Strom, Chairman at the time, to call the emergency meeting. During the meeting, I made a motion that we explore ways to acquire more mortgages so we could adequately fund the bonds. I left the decision on how to do this to the originating department of our subsidiaries. They made they call.”
Alex leaned up and began pacing behind his desk. “You what? You left it up to the subsidiaries and their originators?”
“Why certainly, they’re our front line for making loans.”
“They work on commission, Barnes! They’re going to make any loan they can get their hands on, subprime or whatever. Why in the hell wasn’t I told of this decision?”
“It’s in the minutes of that meeting.”
“The hell it is! I’ve combed over and over those minutes. The only reference in the minutes is a com-ment by you that our investors were getting nervous and that we had to be more aggressive in our originating offices. That is a hell of a long way from allowing street originators to make policy!” Alex turned and glared at his paunchy adversary. Alex seldom swore, the use of profanity several times underscored his contempt for Barnes.
“Strom said he called you and brought you up to date.”
“Barnes, you know that Strom knows very little about the secondary market. You had him call me because you knew he didn’t understand the implications of the actions you had convinced him and the board to take. He doesn’t know a subprime mortgage from a car loan.”
Alex walked to the front of the desk, “But you do Barnes, you know the difference. You also knew that when the green light was given to our originators, they would jump on the chance to make subprime loans. Their commissions would sky rocket. And you also knew that by wording the minutes they way you did, that I wouldn’t know of it until literally hundreds of millions of bad mortgages had been made and then pooled together into bonds. It’s a disgrace Barnes, and you know it. Your actions may have single-handedly put Midwest in financial jeopardy.”
Barnes stoic exterior couldn’t hide his anger. The right side of his broad mouth curled up in a smile, “You were informed of the meeting and I thought surely you would understand the nature of things—you are a very bright man. We had obligations to fill. Vito was getting nervous. We couldn’t wait.”
Eyes wide, Alex continued, “Now I see.” He looked away from Barnes. “It’s all clear now. It’s so damn clear and I’ve been such a fool.”
“What are you talking about?”
“It’s all about the money. Once again, it’s all about the stinking money! You and Vito and money! Isn’t it convenient that you and Vito have offices in all seven of our major markets?”
Barnes stood straight and puffed his chest. “Hell, that’s only good business Alex. We need to have local securities dealers, the regulations are different in every state, and you know that.
Alex’s eyes narrowed. “I can’t imagine the amount of money that you and Vito have made over the past several months. It has to be in the tens of millions.”
“You knew First Financial was one of the dealers we used to package our loans. That was no secret,” Barnes said cautiously.
“Yes I did, but I didn’t know they had opened offices in all of our major cities. The St. Louis manager told me about it the other day; it didn’t smell right then and it still doesn’t.”
Alex shook his head disgustedly. Alex took great pride on always staying on top of things; it was humiliating to admit how Barnes had manipulated him. “I feel like such a fool,” he murmured.
“There’s no law against First Financial opening an office in another city. And as far as that board meeting goes, the minutes clearly direct a change in policy. If those minutes were challenged, you wouldn’t have a leg to stand on. There has been no wrong doing here, Alex.”
“Oh I’m sure a man with your great legal mind has thought this through. I would be a fool to challenge the legalities of this situation, but what you have done is despicable. You have put this institution in financial jeopardy for your own selfish greed and political ambitions.”
Barnes pushed his narrow rimmed glasses up on his nose and tilted his head. “We weren’t the only one that was struggling, there were hundreds of other banking institutions that took that bailout money to help cover their losses.”
“Maybe so, but I’m still running this bank and you and Vito have done enough damage. The money will be paid back if I have any say in it.”
Seething, Barnes forced a smile and turned to leave. “The bottom line is that we can’t afford to pay back that money. It won’t happen because I have the votes to stop you. You better jump on board, Alex, before it’s too late.”
Alex was stunned by the ‘I have the votes’ comment.’ He stood motionless as Barnes exited the room, leaving him alone with his thoughts. As usual, what had started out as a way for Alex to force Barnes into a corner had turned out to be a win for the crafty lawyer.
“He’s done it again,” he whispered. He pushed a line on his desk phone.
“Erica.”
“Yes?”
“Get me Strom on the phone, right away.”
“Right away.”
Alex pushed his chair back, leaned down and opened his lower right desk drawer. He pulled out a file containing the minutes of the past several board meetings. He hurriedly dropped it on his desk and began scanning the contents. A short time later, Erica’s speed dial light began flashing.
“Yes.”
“Strom is on line three.”
“Thank you.” Alex impatiently jabbed the button. “Hello, Strom.”
“Yes, Alex, and to what do I owe the pleasure of this call?”