“Life span has something to do with that,” he said. “As does the tendency of the Empire to invade whenever it doesn’t have anything better to do.”
“Trade has more to do with it.”
“Maybe.” He shrugged. “I suppose. But how does all of this relate to corruption among the great and wonderful leaders of our great and wonderful—”
“That’s what I’m saying, Vlad. It isn’t corruption. It’s worse—it’s incompetence. And, worse than that, it’s inevitable incompetence.”
“I’m listening, Kiera.”
“Why does a banker go into business?”
“I thought we were talking about the Empire?”
“Trust me.”
“All right. A banker goes into business because he’s an Orca and he doesn’t like the sea.”
“Stop being difficult.”
“What do you want?”
“Obvious answers to stupid questions. Why does a banker go into business?”
“To make money.”
“How does he make money.”
“He steals it.”
“Vlad.”
“AH right. The same way a Jhereg moneylender does, only he doesn’t make as much because his interest rate is lower and he has to pay taxes—though he does save some in bribes.”
“Spell it out for me, Vlad. How does a banker make money?”
He sighed. “He makes loans to people and charges them for it, so they pay him more than he loaned them. In the Jhereg, interest is calculated so that—”
“Right. Okay. Here’s another easy one: what determines how much profit a banker makes?”
“How much money he loans, and at what interest rate. What do I win?”
“So what keeps him from running up the interest rates?”
“All the other bankers.”
“And what keeps them from getting together and agreeing to raise the rates?”
“Competition from the Jhereg.”
“Wrong.”
“Really? Damn. And I was doing so well. Why is that wrong?”
“I’ll put it another way: what keeps them from getting together, including the Jhereg, and fixing interest rates that way?”
“Uh ... hmm. The Empire?”
“Congratulations. The Empire sets limits on the rates, because the Empire has to take loans out, too, and if the Empire got rates that were too much better than everyone else’s, the Great Houses would object, and the Empire has to always play the Houses off against each other, because, really, the Empire is just the sum of the Great Houses, and if they all combined against the Empire ...”
“Got it. No more Empire.”
“Exactly.”
“Okay, so the Empire fixes the maximum loan rate.”
“Rates. There are several, having to do with, well, all sorts of complicated things. That’s Shortisle’s job.”
“Got it. Okay, go on. So, in effect, the maximum profit a banker can get is set by law.”
“Nope.”
“Uh ... okay, why not?”
“Because there’s another way to maximize profits.”
“Oh, right. Loan more money. But you can’t make loans if people don’t need the money.”
“Sure you can. You can create the need.”
“You mean the land swindle?”
“No. That’s trivial. Oh, I’m sure that’s why it’s being done, but it isn’t happening on anywhere near the scale that would pull the Empire into it.”
“All right. Go on, then. How?”
“Undercut the Jhereg.”
He shrugged. “They always do that. But the Jhereg moneylenders stay in business, anyway.”
“Why?”
“Because we aren’t as fussy about making sure the customer can pay us back, because we have our own ways of making sure we get paid back.”
It was interesting that Vlad still thought of the Organization as “we,” but I didn’t choose to comment on that. I said, “Exactly. And so ... ?”
He frowned. “You mean they start making it easier to get loans?”
“Precisely.”
“But then, what if the loans aren’t paid back?”
“Vlad, I’m not talking about small stuff, like someone wanting to buy a house. I’m talking about big finance, like someone wanting to start a major shipping firm.”
He smiled. “Just to pick an example by random? Well, all right. So then what happens?” He answered his own question. “Then the banks go under. That’s stupid business.”
“Maybe. But what if you don’t have any choice?”
“What do you mean?”
“If you had a pile of cash—”
He smiled. I’d forgotten how much money he had.
“Let me rephrase. If you had a pile of cash that you wanted to put into a bank—”
“Ah!”
“Which bank would you choose?”
“I wouldn’t. I’d give it to an Organization moneylender.”
“Work with me, Vlad.”
“All right. I don’t know. I guess the one that had the best rates.”
“What if they were all the same?”
“Then the one that seemed the most reliable.”
“Right. What makes a bank reliable? Or, more precisely, what would make you think a bank was reliable?”
“I don’t know. How long it’s been around, I suppose, and its reputation, how much money it has.”
“How do you know how much money it has?”
“The Empire publishes lists of that sort of thing, doesn’t it?”
“Yes. Another of Shortisle’s jobs.”
“You mean he’s been lying?”
“Not exactly. Don’t get ahead of me. What determines how much money the bank has, or, rather, how much money the Empire reports the bank as having? I mean, do you think they go in and count it?”
“Well, sort of. Don’t they do audits?”
“Yes. And do you know how the audits work?”
“Not exactly.”
“They look at how much gold they claim to have on hand and compare it with what they find in the vaults, and then—here’s the fun part—they look at their paperwork and add the amount they have, as we’d put it, on the street.
And the more money they have on the street, the richer they are. Or, rather, the richer they look.”
He frowned. “So, you mean, if they start making risky loans, it looks like they’re doing really well, when in fact they may be—”
“Tottering on the edge of ruin. Yes.”
He didn’t speak for a moment. Savn was snoring in a corner, Buddy curled up on one side of him, Rocza on the other, with Loiosh next to her. There were occasional sounds from the predators outside, but nothing else. I gave Vlad some time to think over what I’d told him.
Eventually he said, “The Empire—”
“Yes, Vlad. Exactly. The Empire.”
“Aren’t they supposed to check on things like that?”
“They do their best, sure. But how many banks are there making how many loans? Do you really thing Shortisle has the means to inspect every loan from every bank to make sure it isn’t too risky? And, even if it is, it has to be pretty extreme before the Empire has the right to step in.”
“But—”
“Yes, but. But if several banks fail all at once, then what happens to trade?”
“It falls apart. And they can’t allow that.”
“So what do they do?”
“You tell me,” said Vlad.
“All right. First of all, they curse themselves soundly for having allowed things to get into that sort of mess in the first place.”
“Good move. Then what?”
“Then they try to cover for the banks as much as they can.”
“Ah ha.”
“Right. If word get out that Fyres was murdered, then they’ll have to find out why, and then—”
“Right,” said Vlad. “Then word will get out that lots of big banks, starting with the Verra-be-damned bank of the Verra-be-damned Empire, are very rich on paper and, in fact, are on the edge of taking that big tumble into oblivion. And if that happens—”