A War of Words with William

Everyone's eyes were fixed on the conference room door, filled with curiosity and anticipation.

Before long, the conference room door was pushed open.

Helen entered first, with Feilan close behind her.

Most of those present had seen him at the celebration banquet three months ago.

As for those who had not attended, Feilan had studied records from later generations and knew their personalities, résumés, positions, and even weaknesses inside and out.

"Uncle Franklin, I've brought Feilan."

Helen walked up to Roosevelt, gave a slight bow, and spoke.

"Very good."

Roosevelt looked at Feilan, his expression complicated. "Child, your judgment was extremely accurate. Our banking system has collapsed, just as you foresaw."

"Still, I must admit one embarrassing fact: I made no preparations in advance."

"It's all right. Even if preparations had been made beforehand, it might only have meant stepping on brake pads that were already nearly worn through. To keep the United States from completely losing control like a car, what we need now is an unprecedented overhaul."

"Mr. President, forgive my presumption, but this is...?"

William finally spoke.

From the "young man" the President had mentioned that morning, and the crisis plan that followed, he had long been deeply curious about this man named Feilan.

Only then did Roosevelt snap out of his attentive focus. He pointed at Feilan. "Gentlemen, this is Feilan Roosevelt, my nephew."

Boom.

Feilan felt a jolt of electricity shoot up his spine and into the back of his head.

It seemed to come not only from his own emotions, but from the convulsing remnants of this body's original owner.

Born out of wedlock, the original owner had always desperately craved recognition of his identity.

And now, the head of the Roosevelt Family and President-elect of the United States of America stood in a room gathered with the nation's future highest authorities.

He had not introduced him as an illegitimate son, nor as James's brother's son, but with the words, "my nephew."

There was no doubt that this was recognition.

Feilan knew that even if he accomplished nothing today and simply walked out of this conference room, Roosevelt's single sentence would be enough to let him walk sideways through the entire United States.

This was not arrogance. It was political common sense in this country.

At that moment, however, the atmosphere around the conference table was somewhat delicate.

William, Cordell, Harold... every face bore restrained surprise and confusion.

The Roosevelt Family was a political aristocratic clan. From Oyster Bay to Hyde Park, the names, faces, and résumés of every adult member were basic intelligence that people in their political circles had to know.

Yet they had never heard the name Feilan Roosevelt.

"Mr. Feilan, I heard the President say that you predicted this crisis three months ago."

William picked up the crisis plan. "And that you also produced a crisis plan in advance. Forgive my bluntness, but in this plan, you predicted the outbreak point of the banking crisis, its timing, its path of contagion... Can you tell me how you did that?"

"I conducted some research. First, gold. The gold reserves of the Federal Reserve Bank of New York fell by nearly fifteen percent from last November to this January. That is no secret; the Federal Reserve disclosed it in its weekly bulletins."

"But few people directly connected it to the risk of bank runs. Gold outflows meant that foreign investors and wealthy domestic citizens were moving their assets abroad. It represented a fundamental loss of confidence in the dollar."

William did not interrupt, listening intently.

"Second, the commercial paper market. Since early February, interest rates on high-grade commercial paper have jumped by eighty basis points within two weeks, while trading volume has shrunk by more than forty percent."

Feilan paused. "Rising interest rates alongside shrinking transaction volumes did not fit normal supply-and-demand logic. The only explanation was that banks were no longer willing to lend to one another. They were hoarding cash and guarding against runs. This kind of liquidity drying up was a classic precursor to a systemic crisis."

"You say the gold outflow is public data. That is true, but you have overlooked one thing: this outflow began during Europe's currency crisis in 1931. There were fluctuations along the way, but it did not cause the banking system to collapse immediately. Both the Federal Reserve and Morgan believe that the existing gold reserves remain above the statutory requirement and are sufficient to support the dollar."

"As for commercial paper rates, the increase you mentioned does indeed exist. But it is primarily because industrial output has declined further in recent weeks, prompting the market to reprice short-term credit risk. It reflects economic fundamentals and does not necessarily mean that interbank trust has collapsed."

"So based on these two sets of figures alone, what gave you the right to conclude that the banking system would inevitably collapse within three months?"

Roosevelt had nominated William for Secretary of the Treasury Department because he was naturally one of the people in this country who understood finance best. In an instant, he voiced his own doubts.

"You are entirely correct, Mr. William. Those figures alone could not support such a conclusion. So I looked at something else. Not reports, but history."

Feilan leaned forward slightly, naturally folding his hands over the edge of the table. "In 1807, President Jefferson's Embargo Act cut off trade between the United States and Britain, bringing New England's shipping industry to a near standstill overnight."

"Alexander Hamilton was already dead by then, but his First Bank of the United States model was still operating. He had dealt with a similar liquidity crisis in 1792."

"But what did he do? He did not petition Congress for legislation. Instead, he used Treasury Department deposits to inject liquidity directly into the market, while requiring state banks to continue making payments. What he was doing was redistributing credit."

"In 1907, panic triggered by the collapse of the Knickerbocker Trust Company led J.P. Morgan to lock America's most important bankers inside his private library and force them to contribute money to form a liquidity pool."

"What triggered that crisis? Excessive speculation by several trust companies. But the deeper cause, just like today, was scattered reserves, a regulatory vacuum, and mutual distrust among banks."

He paused, his gaze sweeping over William and then the other Cabinet members. "In 1931, Europe's credit collapsed and the gold standard fractured. Our banking system was already flashing yellow then, so why did it not trigger a full-scale run?"

"Because people still believed that the federal government would stand behind them. They believed the government bonds held by banks were safe. They believed the next quarter would be better."

"But two years have passed. Farmers cannot sell their grain, workers cannot collect wages, factories are not purchasing raw materials, retailers are not ordering inventory. All real commercial activity is shrinking, yet banks are still 'rolling over' debts from borrowers who have long since lost the ability to repay. They are not doing it to help businesses, but to conceal the bad debts on their own books. This is a house made of paper. All it takes is one gentle push."