Shell Game (Stand Alone 2) (6 page)

“What’s the Resolution Trust Corporation?” Edward asked.

“An organization formed by the Feds to dispose of the assets of banks appropriated by the federal government. A vast number of banks and savings and loans were taken over by the federal government. In so doing, the Feds then not only had these financial institutions on their hands, but they had all of their assets: Billions and billions of dollars in loans backed by even more billions in collateral behind those loans. They started dumping those loans on the market and selling the collateral at deep discounts. I knew a fellow who bought a pool of $100 million in unsecured notes from the Feds for $5 million. He wound up collecting $58 million from the borrowers on those notes. Not a bad return on $5 million. Most borrowers were perfectly willing to repay their loans. But, once the RTC took over banks, the borrowers often couldn’t find anyone to talk to about how to make their payments.

“Dumping real estate properties on the market at deep discounts only exacerbated the drop in value in the commercial real estate market that began with the passage of the Tax Reform Act of 1986. It took ten years for the real estate market to return to any sort of normality.”

“Sounds insane,” Edward said.

“Or corrupt,” Nick added.

“Could be both,” Paul said. “Frank didn’t live to see the worst of the effects of the tax act, but in 1988, he was already predicting a disaster, and a federal conspiracy. Whether he was correct or not about the conspiracy, the results were the same. The beneficiaries of the Tax Reform Act of 1986 were the super wealthy of the world, the only ones with the cash resources to buy up the discounted assets the RTC put up for sale. The losers were the middle class who couldn’t refinance their properties because of reduced property values or who lost their buildings, for example, when the real estate recession infected the rest of the economy and businesses failed and the property owners lost their tenants.”

In the funereal lull now overhanging the office, Paul added, “And history is repeating itself. Bear with me, because this is a bit technical, but it’s vital you understand why the banks are acting irrationally. The politicians in Washington, D.C., encouraged Fannie Mae and Freddie Mac to buy subprime loans because those politicans wanted to encourage universal home ownership, regardless of whether homebuyers could actually afford to buy. Then the Federal Reserve flooded the market with cheap money, keeping interest rates low to encourage borrowing on a monumental scale. Banks joined the party, making loans on the ridiculous assumption that property values would keep rising forever. Consumers were also part of the feeding frenzy, buying houses they couldn’t afford because they, too, thought property values would go up and up. But then property values stopped going up. Some of those subprime borrowers stopped paying their mortgage payments. When loan delinquencies started to rise and property values dropped, the capital markets froze.”

Paul sighed and took another drink of water, fiddling with the plastic cap. “The same thing is happening to you that happened to a lot of those borrowers. The quality of your, or anyone’s, credit is apparently irrelevant to the Federal regulators because the financial markets are so damaged. Then, the same federal government that started the problem in the first place now rides in and
solves
the problem. It creates TARP, TALF, stimulus programs, and myriad other programs, funneling money into the big banks and securities firms. Then they impose new lending and capital rules on banks, all banks, whether they took TARP funds or not. I can’t speak intelligently about how the rules have impacted the banks, or Broad Street National Bank specifically, but I can tell you, whether you call it the Resolution Trust Corporation, or the Federal Reserve, or the U.S. Treasury, the Feds are ultimately behind your problem today. They’ve disrupted the normal workings of the capital markets. And I will not be surprised to learn Gerald Folsom acquired Broad Street National Bank at a price much lower than the real value of the bank.”

“If armed people invaded a bank and stole all of the bank’s assets, you’d call that bank robbery,” Nick said. “What do you call it when your own government takes over a bank and hands the bank’s assets over to a guy like Folsom?”

Paul spread his hands in a frustrated gesture, saying nothing.

“Nick and I are going to meet with several bankers next week,” Edward said. “With our financial situation, we should be able to refinance our loans somewhere.”

“You should meet with whoever’s now calling the shots at Broad Street Bank, as well,” Paul suggested. “At least you might be able to learn something about what’s going on down there.”

Gerald Folsom knew the transition from Broad Street National Bank to the FDIC and then to Folsom Financial Corporation would effectively take place over the weekend. Folsom had already ordered his people to begin the process of “problem” loan disposition as soon as possible. That included getting rid of loans, even if they were paying as agreed, especially those with short-term maturity dates. The Feds had made it clear they wanted the bank to reduce its exposure to commercial real estate loans. Folsom rubbed his hands together. Disposing of those loans was where the big bucks would be made.

He was absolutely gleeful. Money had that effect on him. It had only cost him $1 million in a “gift” to Donald Matson to take over Broad Street National Bank. $1 million to make hundreds of millions of dollars. Folsom knew Matson could have recommended any of a hundred different investors, including other banks, interested in buying Broad Street from the Feds. The “gift” had assured Folsom of being the winning bidder. He wasn’t just gleeful, he was horny. Money did that to him, as well. He glanced at the photograph on the credenza in his office. It was taken on his third honeymoon. Three marriages over twenty years, with five-year-gaps between them. It crossed his mind that each of his wives was a replica of the others. They were all about the same age when he married them. All blonde and blue-eyed, all daughters of blue-blood Philadelphia families that had fallen on tough times. They were all more than happy to marry their daughters off to someone with real wealth and Folsom was excited to marry women who reminded him of the girls he used to wait on in the Chestnut Hill restaurant.

He rubbed his crotch as he looked at the photograph. Wendy looked so innocent. As had all his wives. Folsom knew it was his fault his previous two marriages had ended in divorces involving large financial settlements. But the money he gave his wives was mutually understood to be hush money. If the word got out he was a serial abuser, no woman would have anything to do with him and his business reputation would be damaged. No more deals from the FDIC. He shivered involuntarily at the thought of what he did to his wives. He enjoyed what he did to women. He just hated what it cost him when the women had had enough and came to the conclusion he would never stop.

Folsom knew Wendy was fast coming to that same conclusion. But he couldn’t help himself. It felt so damned good when he humiliated women like those who used to look down on him. But the women he married weren’t uneducated. They had connections and options. They would only put up with the mistreatment for so long.

He decided to go home to Wendy. He was in the mood to celebrate. Might as well pull out all the stops tonight. He might not get another chance with her. First he’d call Sanford Cunningham at the bank; see how things had progressed since they’d talked earlier. Cunningham would tell him how much money he was going to make and that would just heighten his sexual desire.

After making the call to Cunningham, Folsom packed up his brief case and walked out to his black Mercedes, muttering, “Wendy, I’ve got something for you.”

SUNDAY

JULY 17, 2011

Katherine Winter didn’t sleep well on Saturday night. She’d called Paul Saunders after she made the circuit of restaurant locations. She wanted to know how the meeting with Edward and Nick had gone. Paul gave her a play-by-play.

“Paul, I want to know how Gerald Folsom wound up with Frank’s bank stock twenty-two years ago.”

“Why now, Katherine? After all these years?”

“That should be obvious, Paul. Folsom’s now in a position to ruin my son.”

Paul explained the deals Folsom made with the government to take over Frank’s loans and the collateral against those loans.

“When did you learn about this?” she’d demanded. “About what Folsom did?”

“Shortly after Frank died,” Paul told her.

“And you kept this information to yourself all these years?”

“Listen, Katherine, I—”

Katherine had hung up on Paul before she said something she might regret.

Her thoughts now ranged from concern for Edward’s future to visceral anger at Gerald Folsom.

She knew her children were resilient and could bounce back from even the worst experience – she’d observed that after they’d lost their father. But she suspected that losing a company he’d built from scratch and watching his employees walk away without jobs in a bad economy would be terribly difficult on Edward.

Her anger and hatred toward Folsom radiated off of her. Paul Sanders alluded to Folsom contributing to Frank’s death through the stress his deals had put on Frank. That was an awful thing to contemplate. And she felt even worse about being so unaware of the pressure Frank had been under. She’d lived a privileged existence and never even suspected her husband was in financial difficulty. Now Folsom, the man who had harassed her before she and Frank married, contributed to Frank’s financial ruin, profited from Frank’s death, was now a threat to her son’s business.

Katherine got out of bed at 4 a.m., went to the kitchen, and made herself a cup of tea. A thread of a thought tickled at her brain. She first tried to discard the idea but then embraced it and fleshed it out. She criticized herself for being naïve and stupid for even thinking about something this crazy. But her motherly instincts nurtured the thought.

After ping-ponging the idea in her brain for three hours, she came to the conclusion she had nothing to lose. She showered, put on her make-up, and dressed. Then she called Paul and told him her plan.

“Katherine, are you nuts? This is about the most inappropriate thing you could do. What in God’s name do you think you’re going to accomplish?”

She maintained her calm and said, “Paul, I didn’t call you for your advice or opinion. I figured you could find out where he lives. If you can’t do that, I’ll find it some other way. You know I will. So, why make it difficult for me? Besides, you owe me. You should have told me long ago about Folsom’s role in Frank’s financial troubles. ”

“I’m not trying to create difficulties; I’m trying to protect you.”

Katherine paused and said, “I know that, Paul. But I’ve thought about this and I’m going to do it, with or without your help.”

“Wait until tomorrow. You can talk to him at his office. Then you—”

“Goodbye, Paul,” Katherine said, about to hang up. But before she could replace the receiver, Paul shouted, “Stay there! I don’t have the information you want, but I can probably get it if you give me an hour. Okay?”

“Okay.”

Paul called back in fifty minutes. “I have it, but I’m not going to give it to you unless I go with you. I’ll pick you up in fifteen minutes.” Paul slammed down his phone leaving Katherine gawking at the dead line.

The ride from Katherine’s home to Philadelphia’s Villanova area took fifteen minutes. It took another fifteen minutes to find Gerald Folsom’s home. Paul was quiet during most of the drive, other than periodically muttering under his breath. When he pulled up to the curb in front of Folsom’s address, a multi-acre, wrought-iron-fenced estate with a three-hundred-yard paved driveway bordered by cyprus trees, Paul parked the car and shifted in his seat.

“Now, tell me what you think you’re going to accomplish.”

Katherine was beginning to question that herself. What felt like a good idea at home now, in front of Folsom’s house, seemed ridiculous. “I want to talk to the man. Tell him I know what he did to Frank years ago and that he has the opportunity to make amends by dealing with my children in a fair manner. I—”

Paul blurted a laugh. “Katherine, Gerald Folsom is not a nice man. I doubt you can reason with someone like him. And look at this place. It’s a fortress. How do you propose getting past the gate?”

Katherine threw open her door and said, “I’ll ring the bell.” She got out of the car and began walking across a twenty-foot-wide strip of grass toward a huge stone column anchoring the right side of the fifteen-foot-high entry gate. She was still fifty feet away from the column when the gate suddenly began to open. Moments later a huge black Mercedes with tinted windows roared down the driveway, sped through the gateway and swerved left onto the street in front of the property. In five seconds, the car disappeared around a curve.

Paul got out of his car and shouted at Katherine, “I think that was Folsom.”

“Are you sure?”

He hesitated. “No.”

“We’ve come this far,” Katherine said. “I’m not turning around now. Let’s go up to the house and see if he’s there.”

A smile on his face, Paul pointed at the gate that was now closing. “I think we’re too late. You’ll have to ring the bell.”

Katherine turned and ran toward the diminishing opening, making it in just before the gate clanged shut. Paul walked over and shook his head. “Now what?”