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Chapter 611 The Unexpected Wall Street

Ernst Asset Management was prepared for the Russian debt default, but Wall Street, which was well-informed, was caught off guard and taken aback.

Let's rewind to 0 p.m., Goldman Sachs, CEO's office.

Henry Paulson is currently troubled by the situation at Jump Games, and he knows it won't last much longer.

If mainland China Telecom cannot successfully obtain its operating license and begin operations by the end of the year, Ernst will not give Wall Street any face and will definitely fight to the death.

The strategic value of online payments is self-evident, and relinquishing control of online payments is something Henry Paulson absolutely does not want to see.

So he thought of the Federal Reserve and planned to make a deal with Ernst using his primary dealer status at the Federal Reserve.

He believed that Ernst would absolutely be willing to use this spot to help Goldman Sachs liquidate its positions.

Not only will Goldman Sachs be forced to liquidate its positions, but it will also receive a large number of shares in Leap Games, which it can use to blackmail other Wall Street institutions that need to liquidate their positions and make huge profits.

"Will he agree?" the secretary asked after learning of Paulson's thoughts.

If it were anyone else, the answer would be without hesitation.

But that was Ernst; no one could fathom his thoughts.

Upon hearing this, Paulson's eyes flashed with certainty, and he said firmly, "He will definitely agree."

"Because this primary dealer spot will be a key stepping stone for Ernst Asset Management to become a top global financial institution."

"Once they obtain this qualification, they can follow the rhythm of the dollar tide and carry out round after round of wealth harvesting and asset acquisitions around the world. This is an irresistible temptation for any ambitious financial institution."

What is a primary dealer?

This concept may be quite unfamiliar to the general public, but it is of paramount importance in the global financial world.

The term "Federal Reserve Primary Dealer" refers to a core financial institution that has undergone rigorous certification by the Federal Reserve and is qualified to conduct open market operations directly with the Federal Reserve and participate in the issuance and trading of U.S. Treasury bonds.

From the perspective of the operational logic of the financial system, they are key hubs in the transmission of the Federal Reserve's monetary policy and undertake extremely important functions.

The Federal Reserve's expansion of its balance sheet and printing money does not involve direct injection into the market. Instead, it purchases U.S. Treasury bonds and mortgage-backed securities held by primary dealers to inject currency into the market.

The Federal Reserve does not pay in cash, but it credits a reserve to the Federal Reserve reserve account of the primary dealer's bank, which is equivalent to the funds entering the banking system.

As banks' lending capacity increases, credit issuance and the purchase of financial products channel reserves into the accounts of businesses and individuals.

Simply put, becoming a primary dealer allows you to issue U.S. Treasury bonds in the future.

Moreover, the money from the Federal Reserve will circulate through primary dealers, who do not need to bear too much risk and can earn interest on the difference without any effort.

This doesn't harm Goldman Sachs; its share will remain the same regardless of whether Ernst Asset Management exists or not.

But for Ernst Asset Management, it was a fatal temptation, especially since it was a financial institution primarily focused on asset management.

Once a primary dealer becomes a primary dealer, it can bypass numerous intermediaries and directly access the Federal Reserve's core business. This will greatly enhance its competitiveness and influence in the global financial market, laying a solid foundation for future global expansion.

But before he and Ernst could even propose the deal, a black swan event occurred.

The phone on the desk rang shrilly. When it was answered, the hoarse voice of David Komansky, the head of the trading department, came through the phone, accompanied by the sounds of keyboard typing and shouts in the background.

"Henry, Moscow has just issued a statement." Komansky's breathing trembled noticeably. "They've announced a suspension of domestic debt repayments and a 90-day extension for foreign debt. They've defaulted."

"What?!" Upon hearing this news, Paulson was struck as if by lightning. He jumped up from his chair, so violently that the coffee cup on the table in front of him was knocked over.

After the initial shock, a surge of rage quickly overwhelmed Paulson's reason. He roared into the phone, "Why? Why didn't we get any advance warning? Are the intelligence agencies a bunch of pigs?"

"And what about the staff in Moscow? They're paid high salaries, yet they couldn't even get such important information in advance. Are they all idiots?" His tone was so agitated and angry that it almost tore the phone receiver apart.

There was a brief silence on the other end of the phone, as if Komansky was also calming himself down. After a moment, he explained in a still trembling voice, "Henry, yesterday was the day the second tranche of IMF aid to Russia arrived."

"Ha!" Paulson let out a short, cold laugh, clearly amused by his anger.

"You mean, the Russians have treated us like freeloaders? They knew they were going to default, but they deliberately kept it a secret just to swindle this second tranche of aid?"

Wall Street's financial giants are well aware of Russia's economic situation. Russia's economy has fallen into an irreversible decline, and debt default is only a matter of time; it is an inevitable outcome.

In retrospect, it appears they deliberately concealed the information in order to successfully defraud the IMF of its second tranche of aid funds and pocket it.

"No." Just as anger was about to cloud his judgment, Paulson suddenly calmed down.

"I remember the IMF's aid program to Russia was divided into three phases, right?"

"That's right, Henry, it is indeed the third phase." The affirmative answer came from the phone. "But the third phase of aid will not arrive for another 50 days. According to our current information, the Russian side simply cannot hold out until then."

"How could you not make it?" Paulson's voice rose sharply, filled with disbelief and doubt.

"The first two rounds of aid totaled over $170 billion. According to our previous calculations, this amount should have been enough to sustain them for another three months. How could they not even last 50 days?"

The IMF's aid is a plan jointly formulated by these Wall Street giants, the Federal Reserve, the Treasury Department, and the World Bank. The amount of aid, the timing of the aid, how much time the aid can create for the Federal Reserve's printing press, and how many windows of opportunity it can create for Wall Street to make its moves in emerging markets and global financial markets are all carefully calculated by Wall Street.

According to Wall Street's calculations, with the three phases of aid in place, Russia can sustain itself for at least six months.

"According to the latest information I just received, more than 7% of these aid funds, after arriving in the country, flowed into places outside the Russian fiscal system." Komansky's voice carried a hint of helplessness and shock.

"FXXK!" Paulson's head buzzed, as if struck by a sledgehammer, and he couldn't help but burst out cursing, "Those people are even more greedy than the men in Congress! Wall Street seems so clean compared to them!"

Anger erupted like a volcano: "The country is on the verge of bankruptcy, and they still dare to line their own pockets so brazenly! They're insane!"

Wall Street was well aware of the corruption problems within Russia, and they were aware of this when formulating the aid package.

The corruption factor in Russia has already been taken into account.

But Paulson never imagined that Russia's corruption had reached such an appalling level that they dared to pocket up to 70% of the aid funds, completely disregarding the life and death of the country.

With a loud "smack," Paulson could no longer contain his anger and disappointment and abruptly hung up the phone.

He was afraid that if he continued listening, he would suffer a stroke from excessive anger.

He wasn't the only one who was furious; the entire Wall Street community was in the same boat.

Inside the trading floor of Morgan Stanley's headquarters, the curves on the huge electronic displays that originally represented the prices of various financial products had turned into a glaring scarlet.

The ruble is plummeting against the dollar at an alarming rate; the steep downward curve is like a sharp dagger, piercing everyone's eyes.

At the same time, the price of Russian government bonds plummeted like a kite with a broken string, and every screen refresh was accompanied by gasps of shock.

Morgan Stanley CEO Philip stood on the observation deck above the trading floor, looking down at the anxious trading team below, who were like trapped beasts. His face turned pale and then red, clearly furious.

His hands gripped the railing tightly, his knuckles turning slightly white from the force, and his eyes were filled with disbelief and anger.

"Boss, it's a call from the New York Federal Reserve." The assistant, pale-faced, stepped forward and carefully handed over the phone, speaking softly.

Road.

At the same time, on a top golf course on Long Island, New York, Bear Stearns CEO James Kane was in a fit of rage.

His custom-made golf club, worth tens of thousands of dollars, was slammed hard onto the lush green lawn. The clubhead was even slightly deformed due to the huge impact, and there was a trace of glaring blood on it.

Not far from him, a young caddie was curled up on the grass, covered in blood, his hands covering his head, his body trembling slightly from the pain.

However, in stark contrast to his disheveled state, the caddie's eyes were unusually bright, even carrying a hint of barely perceptible excitement.

Because he knew very well that the harm he had suffered would bring him a huge sum of money as compensation, enough to change his life.

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