'Every deal says the same thing when you just want to fuck over the client,' Nikolas protested when he stopped at my desk that afternoon.

  'Not if you look at the scenario analysis,' I replied. This was a term that was to become a favourite with credit bankers. It involved taking scenarios of extreme events and looking at the impact on whatever structure was being sold.

  'OK. But again, in any extreme scenario, we would all be fired from our jobs anyway, and be fucked.' Nikolas made a good point. But, determined not to lose the argument, I fought back.

  'Which is why it's a great investment. If it only goes bad when the world is fucked, then why wait for the world to be fucked and not profit from it in the mean-time?' Nikolas shrugged his shoulders and walked off, half-convinced by an argument that would be used time and time again.

  The presentation was easy enough but time-consuming. So I was happy when Dipster stopped by my desk and started massaging my shoulders as if he was looking for a friend to talk to.

  'Bastard presentation?' he asked.

  'Not really. It's the balance sheet CDO.'

  Dipster's hands stopped moving and he stayed quiet, which suggested he had forgotten everything I had told him about the deal a couple of weeks earlier. 'I need you to meet a new client of mine,' he said, changing the subject.

  'Who?'

  'A bunch of friends I've known for years. They keep on telling me about their companies being involved with sieves, so I imagine it's some credit analysis, filtering company.'

  'Or perhaps just a spaghetti company!' Dipster was too kind not to laugh.

  'If I had a clue about any of this, I'd be a damn sight richer,' he said.

  Dipster's edge was his personal relationships, and over the years he had become friends with all the guys now heading this new wave of sieve – actually SIV – companies. But even with his ignorance, his clients were true friends who wanted the best for him and had therefore asked for his sales coverage. Howard Watson was one of them.

  'Dipster – great seeing you, mate,' Howard greeted him as we met up for a quick pint at the Blue Post, a pub in Soho which Howard had always enjoyed for attracting a non-banking crowd. 'It's been a while.'

  Howard Watson had spent fifteen years rising through the ranks at a UK bank to become the head of their investment portfolio. But his rise spectacularly crumbled when he fell foul of their code of conduct. His crime was not disclosing his sexual relationships with not just one but two female interns half his age, which he thought was unreasonable but accepted nonetheless. However, his dismissal became acrimonious when disagreements broke out as to whether he was entitled to a severance compensation.

  While he was a rich man, a lot of it was tied up in investments, and he had been relying on his salary to cover any unexpected costs arising from the final stages of constructing the four-bedroom house in Wentworth which he had designed. But when the severance compensation was not forthcoming and a minor issue of having to build an additional drainage system cropped up, he found himself unusually strapped for cash. After the builders amazingly refused to accept a deferred payment, his only option was to borrow from his private bank.

  His private bank were more than happy to oblige, given his overall wealth, and so Howard received a three-month loan, which by virtue of being short-term had a much lower interest charge than a long-term loan. This helped get the work going, but when the drainage system turned out to be considerably cheaper than expected, Howard decided to invest the leftover money instead of returning it. In fact, his investments were more long-term than the three months of the loan, so at the end of this period, he asked his bank if he could roll over the loan for another three months. They obliged happily, and with this came the realisation that if he borrowed money in the short term which he kept rolling over, his funding rate would be much cheaper than taking out, say, a five-year loan, allowing him to make a much bigger profit on any investments he made.

  Convinced he was on to something, he approached a large American commercial bank, Carter Bank, with the idea. Drawing parallels with an MBS or a CDO, he wanted to attract investors to invest in a company he would set up for Carter Bank which in turn would invest their capital in long-term investments. And like an MBS or a CDO, the investors would have a claim on the company's assets – its MBS and CDO investments – if things ever went bad.

  But unlike an MBS or a CDO where investors put their capital in the company by buying long-term bonds, he envisioned his investors buying short-term loans that were constantly being rolled over, like his private bank had effectively done with him. For that, the commercial paper market was perfect. One of the oldest and largest in the history of the financial markets, commercial paper is a short-term loan ranging from one month to six months, invested in by conservative investors who are reluctant to tie their money up in longer-term investments. Banks are always issuing commercial paper which they roll over with the same investors, much like Howard had done with the short-term loan from his bank.

  Howard's vision unsurprisingly received a very warm welcome from Carter Bank. Within a few months, this new company had been set up by Howard for Carter Bank and called a Structured Investment Vehicle, or SIV for short. Immediately, Carter SIV issued commercial paper in the market under the name Asset Backed Commercial Papers (ABCPs), which traditional commercial paper investors loved because they had first claim on the Asset Backed Securities that this company invested in. And because most of these Asset Backed Securities were in fact mortgage securitisations that were historically the most stable asset class in the world, it was consistent with their inherently conservative investment approach.

  With money coming in to the Carter SIV from the ABCP market, Howard started investing primarily in AAA tranches of MBS and CDO deals, and the business model proved to be instantly profitable. In fact, demand for ABCP grew so spectacularly that Carter SIV became much bigger than it had ever planned to be, and Carter quickly created two more SIVs while other banks copied the business model and started getting involved. Suddenly there were a half-dozen SIVs with more to come, and with the amount of capital these SIVs had, they were competing aggressively for a considerably smaller amount of MBS and CDO deals. Hence, our balance sheet CDO was massively attractive to Howard.

  'We could buy 200m to 500m of the AAAs here,' Howard responded to my pitch.

  'Demand has been strong,' I replied. This was something I would have said even if it wasn't the case. 'It may be hard to allocate you that much.'

  'Our biggest issue is that we're so big we just cannot manage positions smaller than 200m because we don't have the resources. So for now, we're prioritising deals where we know we can get 500m,' Howard explained.

  Given that this was our first CDO deal, locking an investor in was a safe way to make sure the trade happened. The downside was that some investors might be upset by us not giving them the chance to invest early in the process. But this was the biggest and most established SIV, one that Vandebor had not done any business with before.

  Determined to make sure we had options without committing to anything so as not to piss off Mike, I bought myself some time. 'Let me check what I can do,' I said, as if the decision was mine. 'If you give us a firm order by the end of next week, then I'm sure we can commit a decent size to you early on.'

  'I'll prioritise this deal if you can guarantee me 500m.'

  'Done. You'll have an answer by tomorrow lunchtime.'

  Dipster was impressed. If I could pull this off, then he'd have a 500m trade from his client that he could boast about.

  When I got back to the office, I explained to Mike the meeting I had just had. He was pleased. It meant we now had half a day to decide if we would use Howard's demand or not. If we chose not to use him, though, at least I knew Howard would not be offended. After all, it was a fair negotiation.

  But my hunch was right. Mike wanted to lock him in. So with that, I called Howard back and guaranteed 500m if he gave us an order within the week. Howard promptly prioritised the deal, did his analysis and gave us a firm order well before the deadline.

  With him in the bag, we were now very confident announcing the deal to the market. Sales hit the phones, ringing all their clients knowing that there was already a 500m lead order in the book. And very quickly, we started getting feedback. Some were negative but most were initially positive. However, not everyone moved as quickly as Howard and the process began to take its time as investors came back with numerous questions and requests for further information. Day after day, week after week, we were bombarded with more and more questions, until it was looking dangerously like this deal was going to stretch into the New Year. Even Howard began to suspect that my talk of strong investor demand was nothing more than just that – talk. But then the orders started coming in, and by the second week of December the deal was looking in good shape.

  For the 2.6bn of AAAs, Howard's 500m was joined by another two SIVs that Dipster pursued, inspired by our trade with Howard, which combined gave us 1.4bn of orders for SIVs. With another 2.1bn of orders from non-SIVs, we were comfortably oversubscribed for the AAA tranche. Our AA, A and BBB tranches were also all oversubscribed, mainly from asset managers with funds that targeted higher returns, and again one hedge fund that wanted to buy all 50m of the equity.

  The allocation process turned out to be a similar affair to the UK RMBS deal, given the oversubscription. Nikolas came over again and kicked a few more bins. Keith threw a fit and then calmed down. Robbie moaned. Dipster smiled, although this time with good reason, having sold half the AAAs single-handedly to the SIVs. The only difference was that this time, Mike and Steve asked me to deal with the whole allocation process, so I spoke to all the sales people, including the ones in the regional offices I had met in the previous two months. In fact, Mike's trust in letting me do this was a masterstroke for both of us. It elevated me to a position of visibility and influence, which was important if people were going to take me seriously. And it allowed Mike to focus on more important things. Moreover, by having highly-regarded individuals below him, he was proving to be a good manager, one that could extract as much value from his people as possible. Management were picking up on this.

  Given the high profile of this deal, and with many of the bank's loans being taken off its balance sheet, Kim Reinier called Mike that afternoon to congratulate him just as Mike popped out to buy a quick lunch. I picked up the line.

  'Mike Visher, bitte. Kim Reinier, Frankfurt.' Germans always had a thing of saying their names to let the caller know who was on the other side.

  'Hi Kim, Mike's off the desk. It's Andrew Dover.'

  'Ja! Ja!! Fantastich job.' His excited voice couldn't hide his German accent. 'Congratulations on ze deal. Ve are very happy. Super happy.'

  'Thank you.'

  'And I hear you have been doing many great sings around ze bank also. Credit is a super area for us right now and you're in a super seat.'

  'Thank you.' This time I replied a bit more genuinely surprised at his recognition of me.

  'And I gazzer you do seem to know vhat you're talking about.'

  'Hmm, well, I don't know about that, but …' I said with exaggerated humility before he interrupted.

  'Vell, I hope it's a lot better than your views on golf!'

  To celebrate our deal closing, we unsurprisingly started off at The Traders, where we were very much the toast of the firm. Arthur Grossman had come down to personally congratulate us and, in particular, Mike.

  'You know, he'll be promoted this year to Managing Director,' Steve observed when Arthur and Mike went to a private corner to have a serious conversation about something.

  'How much do you think he'll be paid?' I asked curiously.

  'My guess would be around two dollars,' replied Steve. Although European banks tended to talk bonuses in euros, the industry standard was US dollars, especially as the benchmark was often set by the top US investment banks.

  'Two dollars?' I was confused.

  'Two million dollars,' Steve clarified. 'Comfortably in the "one buck club",' he added. The 'one buck club' were the bankers who were paid over a million dollars.

  'So his performance was worth $2m then,' I said to myself, trying to understand how we got to $2m.

  'It's more to do with the guarantee he might be able to get elsewhere. That's his market value,' Steve explained. 'The idea of a bonus is always to pay just enough to discourage someone from wanting to move. The top syndicate bankers get paid around $2.5m a year total comp (salary and bonus), so $2m for him is about right.'

  I tried getting my head around $2m but all I could think was how happy I would be if I were to be paid that. After all, you could tell just by looking at Mike that he was enjoying life and things were on the up for him. Cornered up with Arthur Grossman, he was moving beyond the realms of average banker to a high-flier in the true sense. And this was to be celebrated.

  Once all the dregs had gone, leaving just the boys, I was fully expecting to head off to Spearmint Rhino again, knowing how much Mike loved that place. So when he ordered a Mercedes people-carrier for us, I resigned myself to the possibility of bumping into Brandi at work. But this never happened. We instead made our way to a trendy but inconspicuous restaurant around the back of Sloane Square. Not having been a regular at smart restaurants during my university days, I was underwhelmed by the intimate ambience and the red carpets that made the place feel more cosy than extravagant – until Steve told me that Restaurant Gordon Ramsay had just won its third Michelin star that year. Suddenly, the six loud-looking bankers that we were, with our 'we own the world' swagger, our business suits, and our shirts opened down to the chest, looked out of place with the rather more sophisticated clientele the restaurant was perhaps renowned for.

  I'm sure Gordon Ramsay would have thrown us out if he'd been there, had it not been for the fact that this was a regular haunt for Mike. He knew the French maître d' well enough that he trusted Mike to keep us in control. And once we all sat down, Mike imitated him in his best French accent, which sounded dangerously Indian: 'We must be'ave in zis restaurant and maintain ze respectable demeanour zat our clientele 'ave. Now, let us begin.'

  Mike took charge of the wine while the rest of us perused the menu. Most of it didn't really make sense to me, but luckily I was sitting next to Dipster. 'Any idea what any of this is?' he leant over to ask me. I shrugged my shoulders and he smiled back. 'Honestly, Mike takes me to these restaurants being the refined man he is. But to me, it's tastes all the bloody same.' I couldn't argue – I had nothing to gauge that against.

  'Hey Mike,' he called across the table. 'Put in the order for us, will you? We'll eat any of these.'

  'It's a tasting menu. You have to eat all of it,' he laughed.

  'Fancy, man, very fancy.' Dipster shrugged his shoulders and gave me a quick wink.

  Once mineral water was served, the first two bottles of wine came. White and labelled 1992, this would be the oldest wine I had ever tasted. And it didn't disappoint. It flowed down very easily, and before long Dipster and I had finished our glasses. The waiter came to serve the second bottle, first to Dipster. But as soon as his glass was a quarter full, which was probably the right level for an upmarket establishment, and the waiter started tilting back the bottle, Dipster grabbed the waiter's wrist and helped him pour some more. 'Here you go, I like generous portions.' And he held it until the rest of the bottle was poured out. With Dipster's glass now filled to the top, the waiter said the only thing he could say. 'Would you care for another bottle, sir?'

  'Hey boys, this is an expensive wine. Take it easy!!' Mike laughed at Dipster and then ordered two more bottles. These went just as quickly, and by the time the first of the dishes had been served, another two bottles had been ordered thanks to Dipster and myself. And we were on a roll. Two more bottles came, then another two, and with each dish seeming less and less memorable, our fine wine consumption didn't slow. By the time dessert came, neither Dipster nor I could tell if we were eating cake or ice cream. And I couldn't remember how many bottles of this we had gone through. That was when I realised I should probably take a break.

  I went to the bathroom, locked myself in and stuffed my head down the toilet to release a waterfall of the 1992 white, mixed in with a bit of bisque and ice cream. And a bit of chicken and carrots. Actually, looking into the toilet, it was like an ingredient list of what the chef had before he started cooking. Gordon Ramsay would probably have fried my balls for breakfast if he saw that. Trying to get myself together, I put my hand under the cold tap and washed my face.

  Walking almost in a straight line back to the table, and with the restaurant now beginning to look empty, I noticed that the boys apart from Mike had stood up and were getting ready to go. They were leaving Mike to look after the wreck that I was.

  Dipster hit me hard on the back and laughed out of drunken affection. 'Look after yourself, son. See you tomorrow. And feel free to put the order in for the bacon butties now!' The maître d' heard this across the restaurant and sniggered loudly enough for us to hear.

  Mike and I ordered another coffee, which sobered me up a bit, and after talking rubbish for a few minutes he went to the bathroom, requesting the bill on the way from his maître d' friend. As I sat there on my own, he came to place the bill at Mike's seat. I wanted to take a peek but resisted the temptation, not sure if Mike was paying for this or if Vandebor were going to be expensed.

  'OK, so, the bill. Oh, that's not too bad. £3,900.' Mike opened the bill before he even sat down.

  Given that I had felt uncomfortable expensing my 200 1994 Rioja in the Villa Magna, I had to ask Mike. 'Can that be expensed?'

  'It's fine. I had a chat with Kim today and he …' He stopped to catch the maître d' walking past the table. 'Jean-Claude,' he said as he passed him the corporate Amex. 'And put £500 for the tip as well.'

  'Merci, monsieur,' he bowed.

  I picked up where we left off. 'He called for you today …'

  'He wanted us to celebrate this one. He'll sign off on it if we have any problems.' The benefit of having friends in high places. 'Actually,' Mike went on, 'Kim said he spoke to you and I told him you were doing a great job.'

 

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