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

February 1, 2008, 3 PM.

Goldman Sachs headquarters, 200 Broad Street, Lower Manhattan, 43rd floor.

Richard Kleiman sat in his south-facing corner office, the door already closed.

Through the floor-to-ceiling windows, you can overlook the entire financial district—the New York Stock Exchange, Federal Hall, Trinity Church, and further afield, the Hudson River reflecting the shimmering winter sun.

This is a perspective that only Goldman Sachs vice presidents can enjoy.

He dedicated himself to this office at the company for twelve years.

But he wasn't in the mood to appreciate the river view outside the window.

He stared intently at the two folders on the table.

On the left is a new blue document: the option betting agreement that I just signed with Lu Ze this morning.

On the right are yellowed old documents: the batch of CDO (Collateralized Debt Obligations) he sold to Lu Ze five days ago.

Two transactions. Two sets of books.

Richard opened the blue folder, his gaze greedily landing on the core terms of the agreement:

Royalty: US$512 million.

Underlying asset: Bear Stearns put option (strike price $25).

Expiry date: March 21.

His fingers tapped the "royalties" line twice.

Five million one hundred and twenty thousand US dollars.

The funds have arrived. At 12:23 PM today, the offshore account of Farstar Capital completed the transfer to Goldman Sachs' transaction clearing account.

When the money arrived in his account, his phone vibrated, and the system sent him a confirmation text message.

At that moment, as he sat in the conference room of Farstar Capital, looking at the young Chinese man across from him with bandages and a strangely calm gaze, he felt an almost physiological pleasure—like a hunter seeing his prey walk into a trap and then personally fastening the trap's iron clamp to his own leg.

Richard leaned back in his chair, closed his eyes, and mentally went through the calculations one last time—

Bear Stearns is the fifth largest investment bank on Wall Street, and its closing price yesterday was still $63. Lu Ze actually spent over five million to gamble that it would plummet to below $25 in just twenty days?

That's even less likely than aliens storming the White House this afternoon!

Within Goldman Sachs' system, the risk rating for this bet was virtually zero. If Bear Stearns could survive those twenty days, the $512 million would be pure profit. No costs, no hedging—this was Wall Street's most lucrative, risk-free business.

Richard did some mental calculations and realized that this deal could increase his year-end bonus pool by at least $180,000.

That's enough for him to build a new swimming pool at his villa in the Hamptons Beach and upgrade his Porsche to the latest model.

He closed the blue folder with satisfaction, then his gaze fell on the yellowed old folder.

The smile on his lips vanished instantly.

He took a deep breath and opened the document. It was the compliance report for the batch of CDOs sold to Lu Ze five days ago.

The report states: Expected default rate: 6.8%.

Meanwhile, another set of real internal data hidden under Richard's drawer showed that the actual default rate had soared to 14.2%.

This is not an error; this is outright data fabrication.

Even more critically, in order to get Goldman Sachs to leverage Lu Ze's shell company by 50 times, Richard had Lu Ze's company's asset certificate artificially inflated from over 20 million to 80 million.

His name was signed on the document.

If these two reports are discovered by the compliance department or the FBI, he will lose his title as vice president of Goldman Sachs, his mansion and luxury cars, and will eventually be sent directly to federal prison.

Richard pressed the real data under the folder, as if he were burying a corpse back into the ground.

He told himself: Don't think about it.

As long as Bear Stearns doesn't collapse this month, and as long as the underlying assets of those CDOs aren't subject to large-scale redemptions that trigger a liquidation audit, these documents will remain quietly in Goldman Sachs's archives. No one will look through them, no one will check them, and no one will compare the two reports.

Goldman Sachs handles thousands of structured product transactions every year, and the compliance department is simply overwhelmed with work.

Unless something serious happens, no one will bring up old grievances.

Richard gritted his teeth, cold sweat beading on his forehead.

He quickly picked up his Blackberry and sent a text message to his trusted assistant:

"Sink the underlying files of last month's batch of CDOs to the oldest server at the very edge. No one is allowed to access them without my password."

He breathed a long sigh of relief after receiving a reply from his assistant that it was "done".

He could drag it out as long as possible. As long as he could get through March 21st and get that 512 million profit, he would have enough funds and an excuse to cover up these bad debts.

He picked up the landline phone on his desk and dialed an outside number.

It rang three times before the other end answered:

"Feed?"

It was a male voice, young, with a slight Brooklyn, New York accent.

"Hey Jason, it's Richard."

His voice instantly became relaxed and easygoing, as if he were talking to an old friend on the phone.

"How have you been lately?"

Jason Rodriguez, 31, is the head of institutional client relations at Bear Stearns' asset management division and has worked at Bear Stearns for six years. Richard met him two years ago at a cocktail party at an industry conference, and they have since occasionally played golf together, maintaining that kind of "useful but not deep" social relationship typical of Wall Street.

"Richard? Hey, buddy."

Jason laughed.

"That's great. How about you? What brought you here?"

"It's nothing serious, I just wanted to ask."

Richard's tone was very casual, as if he were just mentioning it offhand.

"How's things going on your end lately? I've seen some chaotic news reports about renewed volatility in the subprime market. Have any of your institutional clients... made any unusual moves?"

There was a moment or two of silence on the other end of the phone.

"Unusual activity?"

Jason repeated the word, a hint of caution in his voice.

"You mean... redemption pressure?"

"It doesn't necessarily have to be a redemption,"

Richard said,

"You know, it's emotional. Has anyone called to ask a bunch of questions, or started reassessing their risk exposure?"

Another brief silence followed.

"There are some."

Jason finally said,

"Last week, several clients did call to ask our opinion on Bear Stearns' own CDO exposure. We replied with standard scripts, saying that liquidity was ample, capital was healthy, blah blah blah."

Do they believe it?

"Most of the beliefs."

Jason said,

"There are one or two particularly difficult cases. They say they need to reassess the allocation ratio, but haven't formally submitted a redemption request yet."

Richard breathed a sigh of relief: "That's good. By the way, if there are any new developments, could you please let me know as soon as possible? You know, we also have some related exposures and want to keep up with the information."

"no problem."

Jason said,

"But Richard, to be honest, what do you guys at Goldman Sachs think of us? I mean... there are a lot of rumors circulating about us."

Richard laughed, a natural laugh: "Jason, you've been at Bear Stearns for six years. How many of those 'rumors' have you actually heard? There are rumors on Wall Street every month, but how many of them actually lead to trouble?"

Jason laughed too: "You're right."

"Don't worry," Richard said, his voice carrying a reassuring, older brother-like quality.

"Bear Stearns is solid. I've looked at your balance sheet, and there are no problems. The market just likes to have periodic panics; it'll be fine in a couple of weeks."

"I hope so."

"That's for sure," Richard said. "Let me know as soon as you have any news."

"Okay, buddy."

He hung up the phone.

The office returned to silence.

As dusk settled, the Manhattan skyline began to light up, skyscrapers standing like upright tombstones, indifferently on the opposite bank of the Hudson River. In the distance, somewhere, he knew that the offices of Farstar Capital were also among those lights.

He remembered Lu Ze sitting in the main seat in that conference room that morning.

He wore a deep blue suit, had a black bandage wrapped around his head, and his eyes were as cold as a stagnant pool.

That's not the look a person on the verge of bankruptcy should have.

Richard frowned.

Those eyes gave him a kind of inexplicable unease.

He told himself: Don't think about it.

That young Chinese man was just putting on an act, using his last shred of dignity to maintain appearances.

He had already lost, and he knew it. That put option was his epitaph—in twenty days, the $5.12 million would be worthless, and he would disappear completely from Wall Street's list.

Richard took a deep breath and refocused his attention on the table.

He turned on his computer, logged into Goldman Sachs' internal system, entered his password, and accessed the trading department's real-time data panel.

The screen displayed summaries of positions, risk exposures, and daily profits and losses for each department. He casually clicked on the latest position report from the proprietary trading department, a page accessible only to vice presidents and above.

Data refresh.

His gaze swept across the rows of numbers, then suddenly stopped on one particular line.

Goldman Sachs' proprietary trading desk added $124 million to its short position in Bear Stearns' CDS this week.

His finger hovered over the mouse for a moment.

Then he casually closed the page.

It was as if I hadn't seen anything at all.

Richard stood up, walked to the window, put his hands in his pockets, and looked at the sky outside, which was gradually darkening.

Goldman Sachs is shorting Bear Stearns.

This is no secret. Starting in late 2007, the company's macro strategy committee judged that the subprime market would run into problems and began to systematically build short positions.

The proprietary trading department, the mortgage lending department, and even some hedge fund consulting departments are all operating in accordance with this general direction.

This is a company-level strategy.

What he just said to Jason on the phone—"Bear Stearns is fine," "The market is just experiencing cyclical panic"—is completely contrary to the company's strategy.

He was using his position as vice president of Goldman Sachs to endorse Bear Stearns.

He was trying to calm Bear Stearns' institutional clients.

He did this in order to protect his naked sell put option.

Richard closed his eyes and clenched his fist in his pocket.

He told himself: It's no big deal.

The company's short selling of Bear Stearns does not mean that Bear Stearns will definitely collapse in March. Short selling is merely a hedging strategy, a form of risk management. Bear Stearns might collapse in May, it might collapse in June, or it might not collapse at all. But it is absolutely impossible—

He called Jason to calm him down, simply making a rational assessment—the market was overreacting and someone needed to speak the truth. This wasn't betraying the company; this was…

What is this?

He opened his eyes and looked at his blurry reflection outside the window.

The glass reflected a middle-aged man in a suit, Hermes tie, and a neatly parted hairstyle. This was the office of a Goldman Sachs vice president on the 43rd floor, earning an annual salary of 1.2 million, just one step away from becoming a partner.

It took him twelve years to climb here.

He can't afford to fall at the last minute.

Richard turned around and sat back down at his desk.

He picked up the two folders, placed them neatly on either side, and then locked them in the safe drawer at the bottom of his desk.

Lock it.

He picked up his coat, turned off the computer screen, and walked towards the door.

As he placed his hand on the doorknob, he turned around and glanced at the empty desk.

"Twenty days."

"Just hold on for twenty days."

He opened the door, went out, and closed it behind him.

The corridor was lit by Goldman Sachs' signature cool white lights, and the carpet made no sound when you stepped on it.

The shadow was stretched long, twisting into a blurry shape on the wall.