chsdbacks Chapter 217 Liquidity Depletion
Chapter 217 Liquidity Depletion
(Two chapters released in quick succession!)
Mid-January 1990.
Nikkei Average: 30,120 points
Tokyo, Shinbashi Station West Exit Plaza.
The cold winter rain has been falling on and off for a whole week.
The cold wind whipped up old newspapers and puddles on the ground, slapping against the green public phone booth on the street corner.
Kudo squeezed his 170-pound body tightly into this cramped space.
The section chief of a mid-sized trading company looked utterly disheveled. His dark blue trench coat, which cost him half a month's salary to make, was stained at the hem. His forehead was covered in a fine layer of cold sweat, which slid down his cheeks and gathered on his stubble-covered chin.
Kudo's left hand gripped the black plastic receiver tightly, while his right hand's fingers anxiously dug into the metal gaps along the edge of the coin-operated machine.
"Hello! Hello! Is this Daiwa Securities? This is Kudo! My account number ends in 7392!"
Kudo screamed into the microphone, which was covered in saliva droplets, his voice trembling with extreme fear.
On the other end of the phone, the brokerage clerk spoke rapidly, his breath coming in short gasps. From the background, the frantic shouts and shouting matches of other traders in the trading hall could be heard intermittently. There were even a few loud crashes of keyboards being smashed.
"Mr. Kudo, your account has been located. The Nikkei index continued to fall by 230 points this morning. The unrealized losses on your margin purchases of Mitsubishi Estate and Nippon Steel stocks continue to widen. System monitoring shows that your account's margin maintenance ratio has fallen below the 130% warning line, currently standing at 118%."
"Please replenish your margin account with 5 million yen by 3 PM today." The salesperson's breathing was clearly audible through the receiver, revealing extreme exhaustion. "If the funds are not received by the deadline, the system will force liquidation."
Kudo's legs suddenly gave way, and his back slammed heavily against the cold glass wall of the phone booth.
The glass made a dull thud when it was hit.
"Five million? Are you kidding me!" Kudo's eyes were bloodshot, and spittle flew onto the microphone. "On the day of the Dafabet meeting, your analyst was still guaranteeing on TV that this was just a technical shakeout before the institutions took off! The market would rebound and break 40,000 points soon! I even mortgaged my house back home! And now you want to liquidate my position?!"
"Mr. Kudo, analysts' predictions do not constitute investment guarantees. Article 4 of the margin trading agreement clearly stipulates the obligation to provide additional margin." The salesperson's tone remained flat; dealing with hundreds or even thousands of such calls daily, their empathy had long been worn away by the market's relentless decline. "Please raise the funds as soon as possible. 3 PM is the deadline."
"Damn it! You bunch of bloodsuckers! You colluded with institutions to dump shares and steal our chips!"
Kudo cursed loudly and even kicked the iron door of the phone booth hard.
"Beep—beep—beep—"
The clerk immediately ended the call. A dial tone echoed in the cramped phone booth.
Kudo gasped for breath, his chest heaving. Through the fogged-up glass, he looked desperately at the hurried crowds on the street outside.
Two weeks have passed since the New Year's Eve rally, and the market has not seen the retaliatory rebound that everyone was hoping for.
Every day at the opening bell, the index drops like a dull saw, sliding down by 200 or 300 points at a time. Occasionally, a slight upward movement is accompanied by a small positive candle, only to be followed by an even more sluggish decline the next day.
Cutting meat with a dull knife.
This kind of painful yet relentlessly draining style of gambling is driving all the heavily leveraged gamblers in Tokyo to the brink of despair.
Kudo wiped the cold sweat from his forehead with trembling hands.
He cannot be forced to liquidate his positions. If he is forced to liquidate, the stocks he bought at high prices will be sold at a bargain price, and he will not only lose all his principal and be burdened with heavy debts, but the scandal of embezzling public funds intended for the company to settle accounts will also be completely exposed.
What awaits him is disgrace and imprisonment.
Kudo took a deep breath, his eyes flashing with an intense, almost self-deceptive fervor. He pulled a worn-out phone book from his trench coat pocket, his fingers trembling as he searched for the numbers of his relatives in the countryside.
He grabbed a handful of hundred-yuan coins and roughly shoved them into the coin slot.
Speed dial.
"Hello, Uncle? It's me, Kudo! Happy New Year!"
Kudo forced a bright smile onto his face, his tone becoming incredibly enthusiastic and confident.
"Yes, yes, everything is going smoothly at work. Uncle, it's like this, there's an excellent pre-sale property in the port area, and I'm about to sign the contract. I'm just short five million yen in cash for the down payment."
"Interest? Don't worry! I'll pay you twice the highest bank fixed deposit rate! This is a once-in-a-lifetime investment opportunity. Once the formalities are completed next month, I'll transfer the principal and interest to you!"
"Please! The money must be transferred to my account before 2 PM! Please!"
Kudo bowed repeatedly into the phone receiver, as if his relative on the other end could see his sincere expression through the airwaves.
The call has ended.
He hung up the receiver and leaned against the telephone, utterly exhausted.
"Averaging down the cost... Yes, as long as I replenish the margin, I can continue buying at the current low price to average down the cost. As long as the market rebounds for even one day, I can not only break even, but also make back all my previous losses."
Kudo muttered to himself, frantically giving himself psychological suggestions.
He haphazardly stuffed the last handful of hundred-yuan coins in his hand into the coin slot of the public phone, trying to dial the next number where he could borrow money.
A coin slipped from his wet, slippery fingertips.
The coin rolled down the metal track.
"Clang!"
……
"Click!"
A flawless, transparent, spherical ice cube struck the inner wall of a Baccarat crystal glass with a crisp, clear sound.
Chiyoda Ward, Otemachi.
The top floor president's office of the Mitsui Bank headquarters building.
The central air conditioning system inside quietly circulated warm air. Outside the floor-to-ceiling bulletproof windows, the early winter rain blurred the Tokyo skyline.
President Yoshino leaned back in a large, deep red leather sofa. He wore an exquisitely tailored Italian suit and held a glass of single malt whisky with an ice ball in his right hand.
Standing in front of his desk was the head of the risk control department at Mitsui Bank.
This financial elite, who usually has the authority to approve loans of hundreds of billions of yuan, was now gripping the edge of a top-secret red report tightly with both hands, the paper slightly wrinkled from the sweat on his palms.
"Manager, the pledged shares of several city banks, including Sumitomo and Fuji, are starting to flash red." The manager took a deep breath and spoke very quickly.
"Due to the market's continuous decline for two weeks, the net value of the collateral used by clients who have used extremely high leverage in stock trading is shrinking. This morning, some aggressive accounts have already fallen below the 130% warning line."
"Although it hasn't turned into a widespread sell-off yet, the risk control departments of those major banks have clearly sensed the danger. They are frantically pressing these high-risk clients for margin calls. If they can't come up with cash to cover their positions, they are prepared to forcibly liquidate them at any time."
He pushed up his glasses, which had slipped slightly off his nose due to sweat.
"The atmosphere in the interbank lending market is very strange right now because of concerns about the possibility of localized bad debts erupting at any time. Everyone is tightening their overnight positions in unison, for fear of inadvertently paying for someone else's high-risk clients. Liquidity in the market... is drying up at a visible rate."
President Yoshino listened quietly to the report.
He turned his head and looked through the floor-to-ceiling window toward the direction of Azabu-juban.
Several weeks ago, in a private room deep inside "The Club", he had a long talk with someone from the Saionji family.
The other party offered a "suggestion" and predicted the current collapse.
He chose to follow the "suggestion".
President Yoshino closed his eyes, and his heart, which had been numbed by financial figures for years, began to beat violently.
His mind was filled with the ecstasy of surviving the ordeal.
A month before the New Year, Mitsui Bank, under immense pressure from its board of directors, took a firm stance and cleared out and physically isolated all high-risk stock pledges within the bank ahead of schedule.
They preemptively severed the toxic lifeline directly linked to the stock market.
Now, I watch as my peers outside the window struggle to cover their positions amidst the continuous decline. I see those financial giants who once mocked Mitsui Bank's conservative and retreating stance now being forced to seek help in the interbank lending market as their pledged positions dwindle to nearing their red lines.
This is yet another life-saving favor; I truly... have no way to repay it.
He opened his eyes and downed the rest of the whiskey in his glass.
"Notify the credit department."
He looked up and stared at the risk control manager.
"Switch off all the remaining high-risk accounts that are still stubbornly holding on."
"Call them now and force them to replenish their funds. Tell them that Mitsui only gives them 24 hours to raise cash."
The risk control manager paused for a moment, his face filled with doubt.
"Manager, if we try to collect the debts now, those highly leveraged clients simply won't have the cash. If we push too hard and cause them to default, even if we work with our legal department to seize the collateral, given the current climate of mutual suspicion, we won't be able to find buyers for those stocks and land in the short term. They'll all become dead debts tied up in Mitsui's accounts..."
"If we don't act now, and the market drops another 2,000 points, those collateral assets will be worthless."
President Yoshino sternly interrupted the manager's doubts.
"They don't have cash in their stock accounts, but their physical companies have project payments to downstream building material suppliers and wages to workers that they are ready to pay."
"Go and pressure them. Drive them to the brink, force them to divert all available funds to fill the hole left by Mitsui."
President Yoshino's gaze was as sharp as a hawk's, and his tone left no room for negotiation.
"Whoever is the first to withdraw loans will be able to snatch the last lifeline cash from the customer. Only banks that are a step behind will be left with unsold bad debts and be driven to despair."
"They went bankrupt, Mitsui survived. Do you understand?"
"Go and carry it out."
The risk control manager dared not utter another word of rebuttal. He bowed deeply.
"Yes! I'll take care of it right away!"