Chapter 115: Credit default swaps

With a rumble of the engine, the helicopter took off from the roof of the villa and returned to Brighton.

This helicopter is Wells's private jet. Sun Wei, the general manager of the American branch of the Harbor City United Investment Fund Company, is on board, while Zhou Ming and Lin Muqing are standing on the roof to see him off.

As the plane flew further and further away, Zhou Ming asked, 'Sister Muqing, do you think that Sun Wei will really convince Wells to initiate merger and acquisition negotiations with Brighton Bank? No matter how many reasons or how much confidence I have, this matter itself is still a bit ridiculous. I think they definitely understand very well what they will face if they initiate these negotiations: relentless ridicule and mockery, which will be even more intense than what Wells just experienced.'

Lin Muqing replied to Zhou Ming, 'From what I know of Sun Wei, he is a person with a proper work ethic. If he is unwilling, no matter what our reasons are, he will oppose it. Now that he has accepted it directly, I have reason to believe that he will do it seriously.'

'Like when he came to the United States alone to establish the American branch of the Harbor City United Investment Fund?' Zhou Ming asked.

Lin Muqing shook her head and said, 'Strictly speaking, he was extremely opposed to setting up the branch because he didn't think we had the conditions. In particular, after analysing our investment habits and the US market, he was even more opposed because the differences between us and the US are great, and he was worried about our lack of adaptability. This time, however, he gave his unconditional support.'

Lin Muqing looked at Zhou Ming a few more times as she said, 'I always knew that you had a lot of charisma, but this is too much, isn't it? I feel that Sun Wei only accepted unconditionally because he believes in you as a person, unlike when I asked him to come to the United States, and I spent a long time talking to him.'

Zhou Ming felt a little embarrassed by Lin Muqing's words, because he could actually hear a hint of sourness in Lin Muqing's tone.

Does she think that she is so beautiful and wise that it is so difficult to persuade a man, but she has persuaded him simply by her personal charm, so she is a little jealous?

This made Zhou Ming feel very helpless. He had no interest in continuing to talk about such a depraved topic, so he had to change the subject and say, 'Just now I received a page from Louis. He said that he has sent all the documents and materials about the subprime loans of Brighton Bank.'

Lin Muqing of course understood that Zhou Ming was changing the subject, but she was not really a腐女 either. Although she was a little jealous that Zhou Ming's charisma was even stronger than her own, Zhou Ming was after all her man, and she was more than happy. At the same time, she understood that the most important thing right now was these subprime loans, so she nodded happily and went downstairs with Zhou Ming. They went directly to Louis's study.

Louis was sitting in the chair in the study. When he saw Zhou Ming and Lin Muqing come in, he raised an eyebrow and asked, 'Have you finished dealing with your business?'

Zhou Ming nodded and said yes. Louis threw a kraft paper bag at Zhou Ming: 'These are the subprime loan documents you want. My people have already helped you streamline them. I hope there is something you want in there. But I can remind you that although I don't think too highly of those poor people with subprime loans, perhaps this market is not as bad as you think.'

Zhou Ming took the brown paper bag. He was in no hurry to open it, but looked up and said, 'It seems that Mr. Louis must know something, right? Then you might as well share it with us.'

Facing Zhou Ming's inquiry, Louis laughed disdainfully and said, "Haven't I already given you the documents? Just read them yourself. Do I need to teach you?'

Zhou Ming glanced at the brown paper bag in his hands and looked up and asked faintly, "Are you sure you want me to read them myself, Mr. Louis? If I were you, I don't think I would make that decision.'

These words made Louis's heart tremble, and he suddenly remembered the fear of being dominated by Zhou Ming at one time. In the end, he angrily slammed the table and cursed Zhou Ming before saying, 'Okay, I don't mind telling you. I think you must think that those subprime loans were all lent to the poor. As long as some reason is created to make those poor people unable to repay the money, those subprime loans cannot be recovered, which will cause the bankruptcy of the subprime loan company and in turn threaten the Brighton Bank, right?'

In response to Louis' question, Zhou Ming just looked at him without saying a word.

However, Zhou Ming's attitude had already given a good answer, so Louis continued, 'Then I can tell you that your thinking is wrong, and very wrong!'

Lin Muqing was very unhappy with Louis's defiant tone, and he immediately retorted, 'What's wrong with this idea? Can't the subprime loans not be recovered and become bad debts? I know that Brighton Bank has very strong resilience with the support of the entire Brighton consortium, but without the support of the three families of Kendall, Lawrence and Lowell, the Adams family alone simply cannot withstand the pressure, right?'

Hearing Lin Muzhen's rebuttal, Louis laughed even more happily: 'You're right. Even if those subprime loans cannot be recovered, they cannot form bad debts.'

Lin Muzhen was very surprised: "Why is that? Are these subprime loans insured?'

Looking at Lin Muzhen's surprise, Louis felt very comfortable: "You're right. These subprime loans are really insured. CDS contracts, have you heard of such contracts?'

Zhou Ming and Lin Muqing did not speak this time, and Louis felt even more comfortable. 'The CDS contract is explained as a credit default swap contract. That is to say, if I have a project that requires a bank loan, in order to avoid the risk of default, I can choose to find an investment bank or insurance company to sign a CDS contract. I pay a high annual premium to the other party, and once I have a risk of default, the insurer will repay it for me.'

Louis paused deliberately before continuing, 'So the situation is now clear. All subprime loans are insured, so how is there still room for you to play?'

Although Lin Muqing hated Louis very much, hearing him say this still made her gasp. She asked Zhou Ming with great concern, 'How can this be? How can someone insure and underwrite this kind of thing?'

'Why wouldn't anyone insure it? You have to understand that in this world everyone is willing to be driven for the sake of profit.' Louis looked at Zhou Ming and Lin Muqing and continued, 'You think you are very clever, discovering a new continent that has been forgotten by everyone? But unfortunately, that continent already has many inhabitants, and they are all laughing at your stupidity and arrogance!'

Lin Muqing was very dissatisfied with what Louis said and said, 'Mr. Louis, I don't know what you are happy about. Could it be that our misjudgment has benefited you in some way?'

'It hasn't benefited me, on the contrary, it will cause me a lot of trouble, but I just like to see you embarrassed, can't I?' Louis said deliberately.

Lin Muqing secretly cursed Louis as a pervert, but then Zhou Ming stepped forward and said, 'Mr. Louis, it's too early to say that this is an advantage, isn't it? Although the situation is a bit unexpected, I have never said that it would be easy. Mr. Louis, how can you be so sure that the situation is not within our expectations? And now we haven't even seen the materials yet, and you've already come to this conclusion. No wonder you'll be under the Adams family for the next 300 years.'

Louis slammed his hand on the table and said, 'Zhou Ming, I'm asking you to pay attention to your words and actions!'

Zhou Ming ignored him and just left the study with Lin Muqing, carrying a kraft paper bag.

...

On the other side, Wells and Sun Wei returned to Brighton by helicopter, which landed on the roof of the financial building where they were. Wells and Sun Wei got off the helicopter and returned to the company's office.

Wells sat down and before taking a sip of water, he asked Sun Wei, 'Sun, do you really want to listen to that Mr. Zhou Ming and want to start merger and acquisition negotiations with Brighton Bank? And it's only 3 million US dollars.'

'Of course, I have already promised Mr. Zhou Ming. A person must keep their word. Isn't this what you often say, Mr. Wells?' Sun Wei said.

'I did say that, but the situation then was not the same as it is now,' Wells said. 'With all due respect, what you are doing is actually a kind of foolish loyalty. Such trust is meaningless. Or we should consider how to make the company make more profits. This is a kind of loyal minister, not blindly following their orders. They don't understand the situation here, and they will bury the company and all the investments.'

Sun Wei still shook his head and said, 'Mr Wells, I think you also need to have a little faith in Mr Zhou Ming's judgment.'

After that, Sun Wei thought for a moment before adding, 'Mr Zhou Ming once told me that there are currently major hidden dangers in the subprime mortgage market in Brighton. As long as he detonates this hidden danger, he can easily threaten Brighton Bank. Then, once there is a major problem within Brighton Bank, a merger and acquisition of 3 million is not entirely impossible.'

Wells wanted to say something more, but Sun Wei spoke before him, saying, 'Mr Wells, we are just looking for a return when we invest. Now, $3 million to gain control of Brighton Bank is a very good deal, isn't it?'

'Whether it is cost-effective or not depends on whether it can succeed, but I don't see such a foundation.'

Wells emphasized, 'Sun, I know a lot about the subprime loans you mentioned. In fact, my own investment bank is engaged in this business. I admit that this business does have certain risks, but which investment does not have risks? And not to mention that I have already put a good lock on the risks in the subprime loans, and there will be no problems.'

'What do you mean by saying that you have put a lock on the risks in the subprime loans?' Sun Wei asked.

'Insurance. I have taken out credit default insurance for every one of my subprime loan contracts. As long as any one of the subprime loans defaults, the insurance company will make a payment. How could anything possibly go wrong?'

Wells continued, 'From your expression, I can tell that your boss has not told you about this, so he probably doesn't know about it himself. I don't blame you guys. After all, this is the United States, not Hong Kong. In a free market, any interest is guaranteed.'

Sun Wei thought about it for a moment, then picked up the phone on his desk and said, 'I think I need to ask Mr. Zhou Ming first.'

Wells made a gesture of invitation, and Sun Wei immediately dialed Zhou Ming's number. After the call was connected, he immediately told Zhou Ming about the credit default insurance and asked if Zhou Ming needed to suspend it.

Zhou Ming gave his answer immediately after just a moment of consideration: 'No need to suspend, just continue with the original plan and start negotiations with Brighton Bank.'

At this answer, Wells cursed Fark!