Shell Game (Stand Alone 2) by Joseph Badal Page B

area.”
    Frances Dougherty was a fifty-eight-year-old woman who started at the bank right out of high school, working her way up from teller to Senior Vice President of Investments. She managed the investment portfolio, which included the bank’s investments in Treasury bonds and bills, other securities, overnight funds invested with the Federal Reserve, among others. She also set interest rates on the bank’s certificates of deposit and money market and savings accounts.
    “As of close of business yesterday,” she said, “we had $53.2 million in Treasuries, $36.0 million in mortgage-backed securities, and $112.0 million in municipal bonds in the bank’s portfolio. In addition—”
    “What’s the average yield on the portfolio?” Folsom demanded.
    Dougherty referred to a sheet of paper and answered, “three point one percent on the federal government bonds, five point eight percent on the MBS, and two point four percent on the Muni’s. The weighted average yield is almost three point two percent. And keep in mind the Muni’s are tax-exempt, so the actual after-tax yield is even greater.”
    “You’re okay with that performance?” Folsom asked.
    Dougherty’s face reddened. She seemed confused for a moment. “I’d say that’s pretty good performance considering the economic climate and the bank’s aversion to taking too much risk.”
    “And on a mark-to-market basis, what’s the current value of the portfolio?” Folsom pushed.
    “The Treasuries and Muni’s are in a profit position of 101.2, or slightly more than $167 million.”
    “And the MBS?”
    “The mortgage-backed securities are marked at eighty-three percent of par. We’ve lost $6.1 million on that part of the portfolio.”
    “Jesus Christ! What idiot put us in mortgage bonds?” Folsom suddenly looked rabid.
    Dougherty’s lips compressed. She straightened her back and stuck out her chin a bit. “I am the head of the Investment Committee. I am responsible for our investment policy. I—”
    Eli Black cleared his throat, interrupting. “Our investment decisions are made by committee. Frances executes our strategy. Despite the drop in the mark-to-market valuation of the MBS, the performance of that part of the portfolio is exceptional. Delinquencies are less than two percent, despite what has been going on in the residential real estate markets. And as the economy improves so will the value of these securities.”
    Folsom glared malevolently at Black. “Nice speech, Mr. Black. That kind of attitude caused the Feds to bring me in to salvage this sinking ship.”
    “I believe that’s a mischaracterization of this bank, Mr. Folsom. Broad Street National has continued to be profitable, despite the economy, and the regulators’ action in taking over this institution was without justification.”
    Folsom leaned back in his chair and roared with laughter. The others in the room sat as though frozen in place. Cunningham let slip a sly smile.
    “You don’t seem happy about the ownership change, Mr. Black. In fact, you look downright displeased. The last thing I want is unhappy employees.” He turned to Cunningham. “Sandy, escort Mr. Black down to his office, give him five minutes to collect his personal things, and then toss his unhappy ass out on the street.”
    Black jumped out of his chair and stormed out of the room without a word. Cunningham followed him out.
    “Anyone else want to defend the bank’s investment strategy or portfolio?” Folsom asked, an edge of malice to his voice.
    Frances Dougherty lowered her head as the others stared at one another silently . No one made eye contact with Folsom.
    “Ms. Dougherty,” Folsom said.
    She raised her head slightly and looked in Folsom’s direction.
    “What’s the size of the CD portfolio and its average interest cost?”
    Dougherty referred to another sheet of paper. “$479 million at an average cost of slightly less than three point five percent.”
    “Are you aware that when