A Week in December by Sebastian Faulks

two people had warned Wetherby that he might be driven mad by this - and Wetherby knew that the size of his first annual bonus would shortly be calculated. He told Veals all he knew about the debt covenants relating to the acquisition of the Spanish bank.
    John Veals merely nodded; but somewhere in the thicket of Wetherby's detail, he had caught a glimmer of movement, as a sight-hound sees the twitch of a rabbit's ear across a field of grass. Pushed to the last fragment of his recollection by Veals's insistent 'And was there anything unusual?', Wetherby recalled a debt-covenant clause inserted late in the negotiation by a lawyer anxious to protect the group of other banks who had lent Allied Royal much of the cash necessary to make the purchase. The covenant stated that if, following the successful acquisition, the market capitalisation of the enlarged Allied Royal should at any point fall below a certain level (a level viewed as impossible in normal financial weather) the creditors would have the right to call in their loans in full. Such a call would be impossible for ARB to meet without issuing yet more shares.
    'Surely the middle office checked all this?' said Veals. 'I mean the regulators are hot on all this, aren't they? You know, tier-one capital ratios and all that crap.'
    'Yes,' said Wetherby. 'But it was late. It was in a side letter, I believe. I didn't see it myself, it wasn't my job, but I was told about it by a friend in the leverage finance team. The FSA may never have seen the letter. And of course there was so much momentum for the deal at this point that--'
    'Yeah, yeah, they'd all got wood by then.'
    'Exactly.'
    For some weeks, Veals had reflected on this information, and how to make it work to his advantage. If the market cap or share value (Wetherby was not exactly sure about the triggers) of ARB did fall below the agreed level, those who had lent the money - large investment banks and insurance companies - would not be legally obliged to call in their debts (indeed, they'd be better advised not to); but the mere emergence of the news would cause a panic - and a run on the bank's deposits.
    Veals discussed his idea briefly with Stephen Godley.
    'Christ, John,' said Godley. 'Talk about working the blind side. All those pensioners. You'll be attacked by an army of zimmer frames. Savaged by--'
    'By a toothless fucking army,' said Veals.
    The precedent of a failing bank was less than three months old. In September, only three months ago, the British government had nationalised an overextended mortgage lender in north-east England as it was on the verge of going broke. The Prime Minister, like all politicians in Veals's experience, was childishly awed by cash - by the size of the contribution made to the economy by financial services. Though by instinct a state socialist, hot for high tax and interference, he was also a career politician, and he knew that his own life depended on the economy's continuing to grow. He had to protect the City's special interests and yield to the demands of its senior executives; he had no choice.
    Veals believed the Government would be loth to interfere with Allied Royal if it began to ail seriously, or plunge; it would show the PM to be a nanny and a fusspot who didn't trust the market. His party had spent many years out of office trying to convince the voter that it loved the market more even than its rival did; he couldn't afford to act like a socialist at this late stage. On the other hand, he would eventually calculate that he needed the combined votes of ARB depositors, creditors and pensioners to keep himself in power. He couldn't let it die; he would have to take it over.
    High Level's reputation would suffer when it emerged that they had made a killing from the demise of a bank; the plight of the pensioners in particular would keep the story in the newspapers for weeks. However, Veals had ridden storms before, notably one about the repayment of an African debt; he could