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

Tuesday afternoon. New York.

If you stand on the streets of Wall Street, or go to Times Square and look at those scrolling screens, you might get the illusion that the worst is over.

Last Friday, the revised $700 billion TARP bill finally passed Congress with great difficulty.

Over the weekend, from Treasury Secretary Paulson to the CEOs of major investment banks, and even Lance Walker, who sparked a global war of words, various statements were issued emphasizing the spirit of contracts and market order.

Today, things seem to have calmed down in Europe as well—the German Finance Minister stepped in to take sides, steer the agenda back to the "firefighting" aspect, and Deutsche Bank followed with an extremely low-key technical statement acknowledging the contract's validity. Sarkozy's "European counterattack" deflated silently, like a punctured balloon.

Everything seems to be moving in a direction of "stability".

However, in the trading hall of Farstar Capital on the 27th floor of 270 Park Avenue, every screen flashing red is puncturing this illusion with cold numbers.

"The VIX (fear index) hasn't gone down." Lin Tao stared at the six screens in front of him, his brow furrowed. "The S&P 500 is still falling. In commodities, copper and crude oil have also started to decline noticeably."

Ben Kahn walked over with his coffee, glanced at the screen, and shrugged: "Retail investors might think that the bill has passed, the presidential candidate and the Treasury Secretary have spoken out, and the problem is solved. But those institutions that manage tens or hundreds of billions of dollars won't think that way."

He was right.

In the eyes of truly professional institutional investors, neither the passage of the TARP bill nor the lively cross-border media war of the past few days has addressed the core issues of this crisis.

The $700 billion bailout plan sounds like an astronomical figure. But in practice, it injects liquidity by "buying toxic assets from banks."

The problem is that these toxic assets (such as CDOs and MBS) are impossible to price. Moreover, fundamentally, the government's purchase of a bank's toxic assets raises serious doubts about the effectiveness and rationale behind such a bailout.

After all, if the government doesn't actually invest money, the bank might still go bankrupt. But in the context of the United States, it's a major political taboo for the government to directly invest in a bank.

This creates an absurd vicious cycle: the bill is passed, the money is approved, but there's no idea how to spend it.

The money needed to save their lives was stuck in a blocked pipe.

Institutional investors quickly did the math. They soon realized that the TARP Act could not solve the fatal problem of insufficient bank capital in the short term.

And so, a deeper fear began to spread.

Banks still do not believe that other banks' balance sheets are clean, so the LIBOR-OIS spread in the interbank lending market continues to soar; banks are afraid to lend money to businesses, so the commercial paper market is frozen; real economy enterprises cannot borrow money and can only begin large-scale layoffs and cost-cutting.

The situation in Europe is even worse than in the United States.

The series of defaults at Fortis, Hypo Real Estate, and Dexia have left the European Central Bank and national finance ministries in a state of utter chaos.

Sarkozy's political performance over the weekend on "financial sovereignty" not only failed to provide any substantial help, but also exposed deep divisions within Europe.

Capital is fleeing European assets at any cost, rushing frantically to safe havens—such as the US dollar and US Treasury bonds.

Even though American banks are terrible, what is the safest asset right now?

Without a doubt, it still comes down to the US dollar and US Treasury bonds.

The strengthening of the US dollar further squeezed the prices of other assets, causing the situation to worsen.

The panic didn't stop. It merely took a brief respite before entering a deeper, more desperate, and systemic phase.

……

On this Tuesday afternoon filled with lamentations, Morgan Stanley CEO John Mack experienced his most relaxed and exhilarating moment of the past month.

At 3:30 p.m., Mike sat in his CEO office in the Times Square building and dialed Lu Ze's direct line.

"Lance, we just signed a binding agreement with Mitsubishi UFJ."

Mike's voice was hoarse, as if he had finally been relieved of a heavy burden after a long battle, but his tone was exhilarating. "Seven billion dollars. Twenty-five billion common shares, plus forty-five billion convertible preferred shares, with a conversion price of thirty-one and twenty-five dollars, much better than before. Eight percent annual interest."

He recited the numbers with an undisguised pride.

A few days ago, when Morgan Stanley's stock price fell to single digits and the entire Wall Street was betting on when they would go bankrupt, representatives of Mitsubishi UFJ changed their minds at the last minute, altering the original terms to: $9 billion, all in convertible preferred stock, with a conversion price of over $20 and an annual interest rate of 10%.

At that time, Mike had almost no leverage to refuse.

It wasn't until Lu Ze's public endorsement helped Morgan Stanley stabilize its position that the company's most powerful bargaining chip became its $3.5 billion investment offer with extremely favorable terms.

When Lu Ze became a trending topic due to his involvement with the fuse date and disputes with European banks and the French president, people's perceptions were once again refreshed. On Monday, many retail investors even bought Morgan Stanley purely out of enthusiasm—because it was a bank that Lance had his eye on, and they were sure it wouldn't collapse!

"You should have seen the expression on that Japanese man's face last night."

Mike laughed on the other end of the phone, the kind of smugness that comes from Wall Street after turning the tables on its opponents at the negotiating table.

"I told the chief representative of Mitsubishi that I was very grateful for their patience during this difficult time, but Morgan Stanley has secured sufficient commitments from the Middle East and is in deep contact with other strategic investors. Our current capital position is very solid."

I said I fully understand your concerns about the risks, and in order not to waste each other's time, I suggested that we end the negotiations amicably and cooperate again in the future.

Mike paused for a moment, as if savoring that instant.

"The Japanese man looked like he'd swallowed a dead fly, and immediately said the terms were open to further discussion. Then, I heard he called those old guys that very night."

"As a result, this morning they had to back out of the framework they had agreed on before the crisis, buy common stock, and even voluntarily reduced the interest rate on preferred stock from 10% to 8%. Seven billion US dollars, wired to their account within 48 hours. Add to that the 3.5 billion from Qatar, and Morgan Stanley finally doesn't have to worry about dying suddenly."

"Congratulations, John." Lu Ze chuckled on the other end of the phone, a smile of relief on his face. "Morgan Stanley survived."

He no longer needs to worry about rubbing his buttocks.

"This isn't just my achievement, Lance."

Mike's tone became serious, "You deserve a lot of credit for Morgan Stanley getting through this weekend and receiving this money. I've already instructed the finance department to prioritize settling the two billion deferred notes for Farstar as soon as the money from Mitsubishi and Qatar arrives."

"That's good," Lu Ze said calmly. "I'll also need Morgan Stanley's support in future transactions."

He paused, his gaze sweeping across the chart on the computer screen that was slowly tilting downwards.

"However, John, I must remind you. It was a very wise decision for you to sign the contract today. If you had waited a few more days, those Japanese might have regretted it."

Mike on the other end of the phone was silent for a moment.

"You'll regret it if you wait a few more days."

This statement wasn't a compliment to Mike's negotiation skills. It meant that the market would continue to fall, and fall drastically.

It's so bad that if the Japanese had waited a few more days, they would have discovered that the $9 billion they bought of Morgan Stanley shares was actually overpriced.

It could be so dire that they might panic and withdraw their takeover bid, just like Bank of America abandoned Lehman Brothers at the last minute a few weeks ago.

Mike looked out the window at the still crowded Times Square and felt a chill run down his spine.

"Lance,"

Mike slowed his speech, carefully choosing each word. "The TARP bill has been passed. The Treasury has $700 billion. If the market continues to fall like this without any bottom, it means that this bill... is flawed from the design."

"Buying toxic assets is a stupid idea. You know it, and I know it too."

Lu Ze's voice was flat and monotone. "That garbage is impossible to price. The Treasury will either be condemned by Congress for offering too high a price, or it will drive the banks to their deaths for offering too low a price. This money is like stagnant water stuck in a pipe."

"Paulson is a smart man. He'll realize sooner or later that this path won't work."

Mike tentatively asked, "The only way out is to change the use of the funds. For example... direct investment."

Mike uttered the word that all CEOs on Wall Street tacitly understood but dared not openly propose.

Direct capital injection.

Instead of buying those worthless MBS that are difficult to calculate, directly invest your money in the core capital of various banks in the form of preferred stock or even common stock.

This is the only way to immediately solve the problem of bank capital adequacy ratios and unfreeze the credit market.

But in the political climate of 2008, this proposal was nothing short of political poison.

This means that the government is directly using taxpayers' money to "invest" in the Wall Street banks that created the crisis.

Paulson dared not mention it. Bernanke dared not mention it. Obama and McCain dared not mention it either.

Wall Street CEOs dared not mention it—they were now public enemy number one, and any proposal they put forward would be seen as an attempt to protect their own bonuses.

"Paulson needs a reason. Or rather, he needs a voice."

Mike's tone became extremely subtle, carrying an almost suggestive expectation.

"Lance, your influence in Washington and the media is different now. You're the one who predicted the crisis, the one who used your own money to bail out the market, and even the one who just did the Treasury a huge favor on the issue of 'contractual spirit'."

"If you—if there were someone like you, not belonging to the traditional Wall Street establishment, but with extremely high market credibility, could publicly point out the infeasibility of buying toxic assets and propose that 'direct capital injection' is the only way to resolve the crisis…"

Mike didn't finish his sentence.

But what he wanted to express was already crystal clear.

He hoped that Lu Ze could use his current rising reputation to speak out on behalf of Wall Street and Paulson, saying what politicians and bankers dared not say.

To push for, or even force, a policy shift.

If Lu Ze did this, he would no longer be just a successful investor; he would become a key figure in reshaping the American financial rescue plan. The entire Wall Street would owe him an enormous favor that would be impossible to repay.

Lu Ze knew exactly what Mike was planning.

He also knew that, in his memories from his previous life, Paulson did indeed, a few weeks later, under immense political pressure, abandon the plan to purchase the toxic assets and instead forcefully inject capital directly into the nine major banks.

That was a painful but correct decision, a crucial step that truly pulled the American financial system back from the brink of collapse.

Lu Ze also knew that if he stepped forward now, given his delicate and detached position between the public and the two parties, he might actually be able to push this process forward, or even accelerate its arrival.

But why would he do that?

For Wall Street's gratitude? To save those investment banks that have been insatiably greedy over the past few years?

Lu Ze gently placed the pen on the table.

"John," Lu Ze's voice carried a self-deprecating, almost joking tone, "you overestimate me."

Mike paused for a moment on the other end of the phone.

"I'm just a market participant."

Lu Ze stated in a tone that presented an objective fact, "My job is to find mispriced assets and then trade them at the right time. Formulating national macroeconomic policies is the responsibility of Secretary Paulson and members of Congress."

"But Lance, if you see an obvious mistake, and you have the ability to correct it..."

Mike still wanted to try.

"I saw a house on fire, John," Lu Ze interrupted him.

He glanced at the commodity and foreign exchange quotes on the screen, which were turning green one after another, and raised an eyebrow.

"My job is to calculate how much value this fire will burn and then place my position before this ruin is revalued."

"As for how to put out the fire, what color hose to use, and which fire truck to send... that's the fire department's job. I never overstep my bounds."

He paused, his tone softening slightly, as if giving advice to his old friend who had just won a life-or-death battle.

"John, make Morgan Stanley's capital cushion thicker. The toughest period is yet to come."

The phone hangs up.

Lu Ze leaned back in his large chair, quietly watching the screen that displayed the trends in the European market.

Mike's suggestion seemed reasonable, but it was a huge trap.

While "direct investment" is the right solution, it's also a poisoned chalice. At this critical juncture, anyone who brings it up will become a target of populism.

He had just managed to whitewash himself from being labeled a "market manipulator" to a "defender of the spirit of contracts" with that perfectly restrained statement. How could he possibly step forward at this time to act as a spokesperson for Wall Street and ask the government for money on behalf of the bankers who created the crisis?

And the most crucial point is that he is now a major shareholder of Goldman Sachs and Morgan Stanley, no longer the "outsider" or "short seller".

If he were to jump out and say, "Let's just inject capital into the banks!", he would almost certainly be immediately branded as a "Wall Street lackey" by the American public.

Of course, he might be exonerated in two years, or at least professionals would say that "Lance's suggestion at the time made a lot of sense." But he would lose a significant amount of "widespread prestige." He has no reason to covet such a small amount of "professional praise."