“All right, put him through. But that’s all. No other press for the rest of the day.”
Almost as soon as he had settled behind his desk, the phone rang. He lifted the receiver carefully, as he always did.
“Hofer speaking.”
“Dr. Hofer, this is Fred Hastings from the Times. I guess you know why I’m calling.”
“I’ve a fairly good idea, yes.”
“Well, I know that you hardly want to make any statement under the circumstances, but I would very much appreciate your thoughts on what might happen today. There are very strong rumours that you people are going to suspend foreign exchange trading this morning. Is that correct?”
“No, sir. That is incorrect. Frankly, I think you are talking to the wrong bank in the wrong country. The current problem is a dollar problem, not one of the Swiss franc. The issue is one facing the United States, not Switzerland. If trading is suspended, it will have to be the New York fellows who do it. We are open for business. All day.”
“Is it true that you people, along with those in Eastern Europe, have been as responsible as anyone for this sudden run against the dollar?”
“Hastings, you ought to know better than to ask a thing like that. Every time a currency gets into trouble, we in Zurich get accused by every boulevard paper on earth. You at the Times know that is simply preposterous. We are a very small fish in a huge pond. My position on the dollar is quite well known. I have said for years that it must be made convertible into gold. But I have always stated that this must be done in an orderly fashion, in cooperation with all the major countries in the world. These waves of speculation help no one.”
“But it is true that you would stand to make huge profits, on gold, for example, if such a decision were taken?”
“That is also not true. We maintain a stock of gold, just like our partner banks, because we make a market in gold. It’s quite logical that you can’t make a market in anything if you don’t have something on the shelf. But we have our risk in both directions as a result—as you yourself have pointed out in more than one article, Mr. Hastings.”
The Times man knew better than to press too much on this subject.
“Well, let me ask something else. If I walked into your bank right now and asked you to short a million dollars for me, would you do it?”
“It would depend upon the reason. We are not here to promote speculation. If you could show us a good commercial reason, or could demonstrate that you needed to hedge your private holdings, and if you were a client of our bank of long and good standing, we certainly would try to do our best for you. So would any other bank in the world. Whether we would advise you to do it at this time is another thing. The statement out of Washington yesterday was quite clear. If you short the dollar right now, it could turn out to be a very expensive bit of insurance, you know.”
“I deduce that you are quite sceptical concerning a dollar devaluation at this time?” asked the Times man.
“I am always sceptical about any devaluation rumours. Especially where the dollar is concerned.”
“May I quote you on that, Dr. Hofer?”
“You may. Now, Mr. Hastings, I’m afraid that I must go.”
“I understand. Thank you very much, sir. I appreciate your talking to me.”
As he hung up, Dr. Hofer’s secretary again entered the room.
“There’s one thing which I feel I should bring to your attention,” he said. “A certain Dr. George Bernoulli called very early this morning and left a message. He would like to see you, very urgently, on a private matter this morning. He suggested that he would be here shortly after nine and would appreciate it if you could receive him for just a few minutes.”
“That must be the young Bernoulli boy. All right, I think I can fit it in. Just send him right in when he arrives. I’ll be spending the next half hour or so getting up to date from the market reports stacked on my desk. Remember that at ten I expect the people from South Africa. After that I don’t want to be disturbed by anyone. Lunch should be sent into my office for all of us. And there must be absolutely no mention of this conference and the people involved to anyone in the bank. The only executive who will be involved is Kellermann. He will be here shortly before ten. Just have him come right in also.”
He turned his attention back to his desk.
Three stories down, in the foreign exchange department, the phones had just begun to light up. At eight forty-five twenty traders went into action simultaneously. The Deutsche Bank in Frankfurt was offering $25 million spot. The General Bank agreed to take them at the rate of 3.3015, the absolute floor price for the dollar, a level that had never been reached before. The Deutsche Bank accepted. The Crédit Lyonaise in Paris offered $50 million. They did not like the price. They would come back in ten or fifteen minutes. The Banque de Bruxelles wanted to sell $35 million three months forward. The trader consulted Zimmerer. They decided to put a 5 percent discount on the forward dollar: they offered Brussels the corresponding rate of 3.136. They did not even hesitate but accepted immediately. Two minutes later the Banca Nazionale de Lavoro was offered the same rate on $40 million. They also accepted. The traders huddled with Zimmerer. They decided to drop the three months forward rate another full percent. Then came the break.
“Zimmerer, come quick. It’s the Foreign Trade Bank, Moscow. They want to buy—buy!—$100 million spot and another $100 million three months forward. What should I do?”
“Gimme the call.”
He argued for a full five minutes before settling on a rate. He looked completely puzzled as he hung up the phone.
“Zimmerer, it’s Budapest. They want to buy $50 million spot. But they want a better rate.”
“Offer them 3.31.”
A pause.
“They want 3.3050.”
“Done.”
“For Christ’s sake,” came a scream from across the room. “It’s the goddamned Deutsche Bank in Frankfurt again. Now they want to buy $50 million. I offered them 3.33 and they took it. What the bejesus is going on?”
During the next fifteen minutes the dollar rose steadily in strength, minute after minute. After starting at 3.3015 on the first trade, by a few minutes after nine it was up to 3.3645. At five minutes after nine a girl brought Zimmerer a flash from the Telex. He stopped all trading to read it to the room. UPI reported that the German-Russian pipeline deal was to be signed and that the Russians agreed to switch from dollars to German marks as the basis for payment. Within the next five minutes the dollar was up to 3.38. It had become obvious that all the professionals in the business were covering their short positions; the only sellers of dollars left in the market were the suckers, still way behind on news, still believing that the events of the previous day would continue. Zimmerer was in a bind. The General Bank was $2 billion short. During the past twenty minutes, the book value of this position had gone down in value by a full 90 million Swiss francs. He picked up the phone and asked for Dr. Hofer. He accepted the call immediately.
“Zimmerer here. Look, Dr. Hofer, I think it would be good if you came down here. The market has completely reversed itself. The dollar is up to 3.38 and gaining. We’re down a good 90 million francs on our position and it’s getting worse every minute. I think we should cover before we have a real catastrophe.”
He listened for ten seconds, and hung up.
“I sure hope he knows what he’s doing,” Zimmerer muttered, and then stood up to put on his jacket. He had to prepare for the gold fixing at ten. That was forty-five minutes off.
At nine-fifteen on the dot Dr. George Bernoulli entered the immense office of Walter Hofer. Hofer rose to greet him. Bernoulli was a full eight inches taller than Hofer, who had to look well up to meet the younger man’s eyes. Which he did, for Hofer was known as an eye-to-eye man.