A $50 million margin call? I'll short Wall Street.

In the garden outside the window, a bird chirped twice on a tree and then flew away.

Goolsby picked up his coffee cup and found it was cold. He still took a sip.

"Paulson's rocket launcher."

Goolsby put down his glass, his voice returning to some of its usual tone, but the underlying tone had changed. "He's trying to use intimidation to prevent this run on both Fannie Mae and Freddie Mac."

"Um."

Do you think he can succeed?

Lu Ze thought for a moment. He was weighing how much to tell Goulsby.

"The logic behind the rocket launcher is: as long as the market believes the government has the ability and willingness to bail out the market, panic won't turn into a bank run. It's about deterrence. You don't need to actually fire a shot; you just need to let the other side know you have a weapon."

"But deterrence has a prerequisite."

Lu Ze said, "The market must believe that you will actually use it. And in an election year, the judgment of 'whether or not it will be used' depends not on Paulson, but on Congress."

Goolsby's eyes changed. This time, the change was more significant than before.

Because Lu Ze's statement just now didn't target the financial aspect, but the political aspect. And politics is Goolsby's home turf.

"You mean Congress might not grant him authorization?"

"I mean, authorization is one thing, but when it really comes down to needing hundreds of billions of dollars, whether people in Congress are willing to cast that vote is another matter entirely."

You know Washington better than I do. It's an election year. Every "yes" vote becomes a November attack from your rivals: "So-and-so voted to use your taxpayer money to clean up the mess for Wall Street bankers."

Goolsby didn't respond immediately. But the way he looked at Lu Ze changed again.

At first, it was curiosity. Then it became seriousness. Now it's taken it to another level.

He was reassessing the young man before him. Not just "a Wall Street trader who does well," but also someone with a keen eye for the logic of political maneuvering. This is rare on Wall Street.

"Lance."

"Your assessment is that Paulson's rocket launcher ultimately couldn't stop it?"

Goolsby's wording has changed. He used to say "you think," but now he says "your judgment is." It's a small change, but it reflects an adjustment in the weighting of information.

Before answering, Lu Ze recalled his earlier assessment: Goolsby was someone who disliked being fed conclusions, but at the same time, he was a political advisor who needed clear answers to take action. In academic settings, he enjoyed open-ended questions, but in political settings, he required actionable judgments.

The identity he is now sitting here belongs to the latter.

"That's my assessment."

Lu Ze spoke a little slower, "Paulson will most likely get authorization from Fannie Mae and Freddie Mac. Congress is hesitant to say no on this issue because Fannie Mae and Freddie Mac are involved in the $5 trillion mortgage market and trillions of dollars in bonds held by China and Japan. The consequences of not bailing them out would be too great, and no one wants to take that responsibility."

"But that's the problem."

Lu Ze looked at Gursby.

"Paulson may not just receive authorization. He may be forced to actually take action. To actually fire shots. To actually take over both Fannie Mae and Freddie Mac. And it may happen sooner than most people expect."

How early?

"I don't know. Nobody can pinpoint a specific day. But the CDS spreads for Fannie Mae and Freddie Mac have doubled in the past two weeks. This speed indicates the market isn't giving him a few months' grace period."

Goolsby tapped his fingers unconsciously twice on his knee.

"If he really does take over both homes this summer—"

Lu Ze watched as Goolsby began to complete the deductive chain himself. The speed at which a political advisor's mind could process information in the political dimension was just as fast as Lu Ze's speed in the financial dimension.

"—He used an extremely expensive political bullet before Congress. In an election year. In an environment where voters were furious about the Wall Street bailout."

Gursby looked at Lu Ze.

"If even larger organizations run into problems..."

He didn't finish his sentence.

Lu Ze didn't finish speaking for him.

A silence of about five seconds fell between them. This heavy feeling perhaps didn't need to be spoken; it could simply be felt in the silence.

"This is my personal judgment."

Lu Ze quickly broke the silence, his tone returning to its relaxed, stress-free everyday state.

"It might be wrong. I've missed it many times."

He looked at Goolsby and said in the tone you'd use when visiting a friend and suggesting, "You could try that new sushi place."

"But if I were on your campaign team, I would spend a day or two having someone prepare an internal contingency plan."

Let's assume Paulson takes over Fannie Mae and Freddie Mac in August, assuming this depletes much of the government's political capital, and assuming one or more large financial institutions run into trouble in the fall. In that scenario, how should senators adjust their economic policy rhetoric? How should the core campaign narrative shift?

He picked up his cup of coffee, which had already cooled down, and took a sip.

"The cost of developing this contingency plan is practically zero. If nothing happens, you've wasted two days of work by several interns. If it does happen—"

Lu Ze did not continue speaking.

Goolsby was a smart enough man to figure out the profit and loss from that deal himself.

"We'll be in the game two weeks earlier than McCain's team," Goolsby added.

"Perhaps more."

Lu Ze said, "It depends on whether any of McCain's advisors are making the same preparations."

Goolsby let out a short, bitter laugh.

McCain is still saying, "The fundamentals of the U.S. economy are strong."

"Then your lead might be more than two weeks."

Gulsby looked at Lu Ze and remained silent for a while.

Then he did something. He took out an ordinary flip phone from his pocket, scrolled through the contacts, and then turned the screen towards Lu Ze.

"This is my private number. Only a dozen or so people know it."

He looked at Lu Ze.

"If—I mean, if—you see anything in the next few months that you feel I should know."

Goolsby put his phone back in his pocket.

"Call me."

Lu Ze watched as Gulsby put away his phone.

In his plan, this outcome should have occurred after the second or third meeting. During the first meeting, his goal was simply to build trust and a sense of obligation. The exchange of private phone numbers, as he anticipated, required a longer period of relationship building.

But Goolsby's pace was a step faster than he had anticipated.

Perhaps it's because Goolsby is someone who trusts his intuition: he doesn't need three interviews to judge whether someone is worth staying in touch with.

Perhaps it was because the impact of this afternoon's dialogue was greater than Lu Ze himself had anticipated—the divergence between CDS and stock prices, the opaque nature of over-the-counter trading, the run mechanism of overnight repurchase agreements, and the political cost of Paulson's bazooka.

These fragments of information pieced together to paint a picture in Goolsby's mind that he had never seen before and that deeply disturbed him. And the person who provided this picture was the only one he could find who could paint such a picture.

Regardless of the reason, the result is the same.

A private communication line, bypassing any official channels, stretched from that office on the 27th floor of 270 Park Avenue to Chicago.

Lu Ze stood up from the sofa. Gursby also stood up.

The two walked towards the entrance of the side hall. After taking a few steps, Gulsby stopped and turned to look at Lu Ze.

"Lance."

"Um."

"A purely academic question."

Goolsby's tone regained a hint of the playfulness he had at the beginning, as if he was using humor to dispel the heaviness left by the previous conversation.

"After this crisis ends, assuming we're all still alive, what do you think economics needs to learn from this?"

Lu Ze thought for a moment.

This question was outside his preparedness. It was a question Goolsby posed to him as a scholar, not as a political advisor.

"Perhaps a new model is needed."

Lu Ze said,

"A model that can incorporate fear as a variable. Not the kind of fear weighted by probability within a rational expectation framework, but the real, irrational fear that would make a trader refuse to answer the phone at nine in the morning."

Gursby looked at him and slowly nodded.

"If someone actually builds this model,"

"He could probably win the Nobel Prize," Goolsby said.

"Or he might lock the model in a drawer and use it to make money instead of claiming the prize," Lu Ze shrugged.

Goolsby laughed.

"It's a pleasure to meet you, Lance."

"The same goes for Ostan."

Goolsby turned and walked toward the door. He quickened his pace slightly more than when he had come in.

The instinct to quickly find a quiet place to process new information when someone's brain is full of it.

Lu Ze stood in the side hall, listening to Goolsby's footsteps receding down the corridor, followed by the sound of the door opening and closing, then the engine of the Toyota Camry, and then the rustling of tires on the gravel driveway, growing farther and farther away, finally merging into the quiet, sea-salty atmosphere of a summer afternoon in Greenwich.

He sat back down on the sofa.

The half-finished iced coffee from Gulsby was still on the coffee table. The plate of cookies next to it was untouched; Lu Ze picked up two and tasted them—they were surprisingly good.

A moment later, the door to the study next door opened. Greenberg came out, holding a glass of whiskey—clearly not his first glass of the day.

"How is it?" The old man sat down on another sofa and looked at Lu Ze.

"Not bad," Lu Ze said.

"Did he give you his number?"

Lu Ze glanced at the old man.

"The soundproofing isn't as good as you said, Nathaniel."

Greenberg laughed, showing no embarrassment whatsoever.

"I didn't hear the contents. I only heard the last part." He took a sip of whiskey. "He gave you the number, which means you did one thing right today."

"What is it?"

"You didn't try to make him think you were great."

Greenberg looked at Lu Ze with a clarity in his eyes that only someone his age possesses.

"You made him feel like he was amazing. You gave him puzzle pieces and let him put them together himself. A picture that someone puts together on their own will never be forgotten."

Lu Ze remained noncommittal.

"He is indeed very capable."

The old man smiled.

"You're better, Lance. I think you should go to the White House, not Wall Street."

"That's too uncomfortable. By the way, Nathaniel, your cookies are quite good."