MR Transcript – Unpacking Mr. Global, Part 2

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constitutionMEDIA ROOTS — Earlier this month, we featured the Guns & Butter broadcast with Catherine Austin Fitts, “Unpacking Mr. Global, Part 1.”  Today, we bring you “Unpacking Mr. Global, Part 2.” 

Last year, Washington D.C. national-security reporter, Sharon Weinberger wrote about the U.S. Military’s so-called Black Budget, “Not since the end of the Cold War has the Pentagon spent so much to develop secret weapons.”  Similarly, Catherine Austin Fitts says for decades we’ve been enabling a Black Budget, financed by Federal corruption siphoning off trillions of dollars per year, “enough money to endow a private government,” through various means of fraud, “enough money to buy and control the planet.”

Austin Fitts says $12 Trillion dollars siphoned by banks since the late ‘90s constitutes a leveraged buyout of the country and the planet, essentially, a financial coup d’état capable of permanently ending democracy. 



GUNS & BUTTER“So, we’re talking about enough money to buy and control the planet.  And, so, I think the time has come to ask the question, ‘What is the Black Budget?’  Who is it financing?  Where is the money really going?  And what are we gonna do about this?” –Catherine Austin Fitts

Bonnie Faulkner:  “I’m Bonnie Faulkner.  Today on Guns and Butter: Catherine Austin Fitts.  Today’s show: Unpacking Mr. Global, Part 2.  Catherine Austin-Fitts has been an investment banker, a government official, an entrepreneur, and an investment adviser.  She was a Managing Director and Member of the Board of Wall Street firm Dillon, Read & Company Incorporated; Assistant Secretary of Housing and Federal Housing Commissioner in the first Bush Administration; President of the Hamilton Securities Group (investment bank and financial software developer); and is currently Managing Member of Solari Investment Advisory Services and Sea Lane Advisory.  Catherine’s experiences on Wall Street and in Washington D.C. are chronicled in Dillon, Read and the Aristocracy of Stock Profits.

“Catherine Austin Fitts, welcome.”

Catherine Austin Fitts:  “It’s great to be back, Bonnie.”

Bonnie Faulkner (1:46):  “Well, what did you want to finish up saying about collateral fraud?”

Catherine Austin Fitts (1:49):  “What I discovered, ‘cos I went around the world.  You know, I spoke in London to investment managers.  I spoke in New Zealand.  I spoke in Sweden.   I spoke all around the world.  And I tried to warn people that the fraud was this significant.  And they literally couldn’t fathom it.  They literally couldn’t fathom it.  And the first time I saw somebody fathom it was, and I’ve written, one of my most popular blog posts is called ‘Financial Coup d’Etat.’  If you do a search for my name and ‘Financial Coup d’Etat,’ you’ll pull it up.  And I wrote it about a time, I was in London and there were three speakers who went right in a row.  John [Loughlin] who is a marvellous journalist in Europe told this story of the privatisation in Eastern Europe in the ‘90s.  And then Anne Williamson, who had reported for the Wall Street Journal in Russia, told the story of the privatisation and the rape of Russia in the ‘90s.  And then I presented a paper called “The Myth of the Rule of Law” talking about the privatisation in the United States in the ‘90s.  And we were all in a state of shock because what we realised was we were talking about the same banks, the same law firms, the same investors, and they were doing it everywhere.  It was one model and it was happening globally.  And it was a financial coup d’état.  It was amazing.  And that was one of the few times that I saw a group of investors get it and realise something:  ‘We’ve got to take this into account for purposes of our strategy because this is really happening.’  And it’s a global movement and it’s coming top-down.”

Bonnie Faulkner (3:28):  “With regard to the collateral fraud, how many people would have had to be involved in this?  I mean actually on the ground, buying and churning houses?”

Catherine Austin Fitts (3:39):  “You know; it’s funny how few people need to be involved, particularly, when you’re hiding behind the Federal credit.  So, if you’ve got control in the right places at Fannie, Freddie, and FHA, particularly, through the systems.  It’s a surprisingly few people.  What you do need is for everybody in 3,100 [U.S.] Counties involved in real estate to just shut up.  So, for example, you saw appraisers who knew that the appraisals were just, you know, going out of control and made no sense.”

Bonnie Faulkner:  “Right.”

Catherine Austin Fitts (4:17):  “And if you had [an] appraiser who wouldn’t play ball, he’d kind of be dealt with.  So, you had this sort of five to ten percent who objected to the corruption and would try and do something and would be dealt with in a variety of ways.  But what you needed was for everybody else to just play along and not ask questions.”

Bonnie Faulkner (4:36):  “Right, because they were making money.”

Catherine Austin Fitts:  “Right.”

Bonnie Faulkner:  “So, what did they care?”

Catherine Austin Fitts (4:39):  “Right.  And, so, literally, you know, sort of, the corruption of the housing bubble, it was essential that all the local realtors, home builders, attorneys go along with the corruption for a piece of the action, which most of them were willing to do.”

Bonnie Faulkner (4:56):  “Now, I understood your example of the drug dealer laundering money and then defaulting on the loan, but making money, ‘flipping the house,’ etcetera.”

Catherine Austin Fitts:  “Right.  Now, he wasn’t defaulting.  The straw buyer was defaulting.”

Bonnie Faulkner:  “Pardon me.  That’s right.  The straw buyer was defaulting.  But how many of those kinds of people would have to be involved in this?”

Catherine Austin Fitts:  “None.”

Bonnie Faulkner:  “None?”

Catherine Austin Fitts:  “Oh, well, you have people playing these default games on the mortgage.  But for the fraudulent mortgages, you could do the fraudulent mortgages with almost no one knowing.  Especially, once you get the MERS System [Mortgage Electronic Registration System] going because then you don’t have to deal with the local courthouse.”

Bonnie Faulkner:  “Right.”

Catherine Austin Fitts (5:31):  “So, if I’m sitting in Dubai and I’m buying a hundred million dollars of Fannie or Freddie securities, I don’t care if the houses are real or not because I’m looking to Fannie or I’m looking to, actually it’ll be Ginnie Mae.  So, if I have a Ginnie Mae, I’ve got the full faith and credit of the American Government.  What do I care if the houses are real or not?”

Bonnie Faulkner:  “Exactly.”

Catherine Austin Fitts:  “Right.  So, you need the big servicers to be handling the mechanics of it.  So, you absolutely need JP Morgan Chase and Citibank, you know, going along and engineering the heart of it.”

Bonnie Faulkner (6:07):  “Now, how many straw men would you need to be buying these houses?”

Catherine Austin Fitts (6:11):  “Well, to do a simple collateral fraud you wouldn’t need any straw buyers because you could just sell for every time you do a predatory loan you just create ten more mortgages and don’t—”

Bonnie Faulkner:  “I see.  You just make it up.”

Catherine Austin Fitts (6:27):  “Yeah.  Let’s go back to that story.  Remember when I said I was looking at the foreclosure list that said I had ten houses on this lot and I get there and there are no houses?  You know?  What’s that about?  It was really funny when I became the FHA Commissioner.  We were the number one property disposition operation in Washington and in the country.  And then the RTC, the Resolution Trust Corporation, was created to resolve the S&L Crisis portfolios.  And they put a wonderful guy in charge of all the property disposition.  And he and I used to compare notes all the time and that’s what he’d say.  He’d say, ‘We have 20 properties on this block and then we’d go there and there’s nothing there.’”

Bonnie Faulkner:  “Oh, my god.”

Catherine Austin Fitts (7:08):  “Well, I’m telling you the fraud, the Black Budget fraud in the ‘80s was the precursor to the Black Budget fraud in the ‘90s.  The only thing that happened in the ‘90s was, if you look at all the models they created, they created them, you know, I mean some of these models are very, very old and I can take you back to my neighbourhood.  That’s what got me involved in this in the first place.  But you saw the models that say they, sort of, developed and honed in the ‘80s.  All they did in the ‘90s was add the stock market and derivatives, which gave it so much more power.”

Bonnie Faulkner (7:39):  “And you were saying to me before we sat down that in the 21st Century, they weren’t marking-to-market.  So, they couldn’t be cleaned up.”

Catherine Austin Fitts (7:49):  “Right.  And here’s the problem.  I think that collateral fraud was so significant.  They mark-to-market and let the market clear in ’89, ’90, ’91.  They haven’t been able to do that.  It’s interesting.  One of the things that happens, Bonnie, when you have an emergency in a county, there are all sorts of rules that, sort of, switch and allow you to pump money out of the government mortgage funds into that county in an emergency.  Well, 90% of the counties in this country have had emergencies so far this year.  And that’s what I say is a covert QE3.  I think they are creating or using emergencies to pump huge amounts of money to clean up this collateral fraud.  So, I think there’s all sorts of stuff going on, you know, behind the scenes is my guess.  But I think the reason they’re having to do that is the collateral fraud is so much you can’t mark-to-market ‘cos.  Here’s the problem.  In, both, the RTC loan sales and then the FHA loan sales that Hamilton Securities helped engineer for HUD, you would see people bid above the market.  And you’d think, ‘What was that?’  And then you’d realise, ‘Oh, they can’t afford for those files to get out, so they’re willing to pay a dollar for the mortgage and another fifty cents to make sure the criminal liabilities don’t get, you know, they buy back in.  And I think this time around the criminal liabilities in those files were so enormous that they couldn’t let the files get out in the market.  They had to control them.  And whether it was the Fed buying them or these games with the QE, QE-this and QE-that, or covert QE3, if I’m right about that, I think what they are trying to do is they’re trying to buy in those criminal liabilities.”

Bonnie Faulkner:  “Wow.  Well, is there any end in sight?  Where is this all gonna end?”

Catherine Austin Fitts (9:36):  “Well, here’s the question and it really does go back to the end of World War II.  We’ve had for decades, we’ve been financing what I call a ‘Black Budget.’

Bonnie Faulkner:  “Right.”

Catherine Austin Fitts:  “So, we’ve seen trillions of dollars in tax money or Federal credit being harvested, pulled out and pulled out and pulled out.  So, we’re all getting up every day, we’re going to work, and we’re getting drained.  So, there’s a debasement machine.  But the debasement is far more than just monetary policy.  The debasement is this enormous amount of money being clawed out of the government and clawed out of society.  It’s the cost of organised crime.  It’s the cost of financial fraud.  The question is where’s that money going?

Bonnie Faulkner:  “Exactly.”

Catherine Austin Fitts (10:23):  “Where’s that money going, number one.  And how do we make sure that the investment of that money adheres to the greater good of the whole?  Because that money is going someplace; and I assure you it is not going to Ferraris and off-shore bank accounts ‘cos we’re talking about much too much money.  We’re talking about the kind of money that builds private space programmes.  We’re talking about the kind of money that builds corporate armies.  We’re talking about enough money to endow a private government.  So, you’ve put enough money into an endowment that’s generating $2 Trillion dollars a year in dividends and interest, which can fund the equivalent of a private U.S. Government and private armies and private this and private that.  So, we’re talking about enough money to buy and control the planet.  And so I think Black Budget.  Who is it financing?  Where is the money really going?  And what are we gonna do about this?”

Bonnie Faulkner:  “Exactly.  That’s exactly the question.”

Catherine Austin Fitts (11:25):  “Right.  And I think the biggest problem is starting at the end of World War II, we created a financial mechanism through the CIA Act and the National Security Act in combination and then with a variety of Executive Directives that allowed private corporations to be the beneficiary of that money.  So, you’ve created between those steps, you created a financial mechanism where Government can borrow money and use that money to give money to private corporations on a non-accountable basis to own and control the most dazzling newest, hottest technology on the planet.  And Government and elected representatives lost control of the technology.  And as frustrated as we can sometimes get with Congress or the Federal Government, the reality is the Federal Government and Congress do not control that technology.  We now have private corporations in control of that technology.  And we have what I call a Breakaway Civilisation.  We have a group of people who have so much money and so much power and, literally, don’t feel under any compunction to obey the laws of the Constitution or any other laws for that matter.

Bonnie Faulkner:  “And what kind of technology are we talking about?”

Catherine Austin Fitts (12:43):  “Well, that’s the question.  We can only speculate.  But I think we have the technology to control the weather or influence the weather.  I think we have technology that can trigger earthquakes and tsunamis.  I think we have invisible weaponry, certainly, that can basically invade any and all privacy.  And we have computer systems that can hack banks and on and on and on.  We have very, very powerful technology.”

Bonnie Faulkner:  “Yes.  And I’m sure they’re rolling a lot of it out in these wars that we’re not even aware of.”

Catherine Austin Fitts (13:16):  “Right.  Well, I’ll never forget.  I have a wonderful friend who wanted to buy a world bond fund, and this is many years ago, and they asked me to do a search.  And I looked and I looked.  And finally I found two that I could kinda stomach.  And, at the time, I wasn’t big on world bond funds, but, so they bought them.  One of them had 15% of the money in Indonesian sovereign debt.  And they bought them.  And then, about a week after they bought them, the one with the Indonesian sovereign debt dropped by 15% overnight, massive insider trading.  The market’s calm.  Interest rates are the same.  There’s no reason, nothing.  And we called the sponsor.  And we try and ask questions.  We were like, ‘What is going on?’  I couldn’t fathom it.  It was like the strangest thing I’d ever seen.  A week later the Indonesian Tsunami happened and I realised they knew.  They knew it was coming.  They knew.  How’d they know?  And it’s funny ‘cos I’m a very happy person.  I literally lay down and thought for a week.  I thought, ‘How do you manage money in a world where people know that a tsunami’s gonna happen a week later and keep it to themselves and just trade on the inside information?’

Bonnie Faulkner:  “Unbelievable.”

Catherine Austin Fitts (14:35):  “How do you manage money in that world?”

Bonnie Faulkner:  “And a sovereign debt fund doesn’t drop like that.”

Catherine Austin Fitts:  “15% overnight with no change in the market and no change in interest rates?  It didn’t make any sense.”

Bonnie Faulkner (15:02):  “Catherine you had said that it took $12 Trillion dollars to finance everything since the beginning of the country up until a few years ago.  Then, another $12 Trillion was given to the banks, which refinanced out all of the toxic paper and derivatives of the last 15 years, let’s say.  You have said that $12 Trillion dollars financed a leveraged buyout of the country and the planet.  You have described this as a financial coup d’état.  Could you elaborate on that?”

Catherine Austin Fitts (15:34):  “Sure.  One of the reasons I described the $12 Trillion dollars is [it’s] the equivalent of all the money we had borrowed.  And I should specify on the books.  It doesn’t include the collateral fraud.  But all the money we had borrowed since the beginning of the country is to help people understand the magnitude, the size of the bailouts, because you are, literally, saying, ‘We need to lend or give to the banks the equivalent of everything we’ve borrowed since World War I, World War II, the Korean War, the interstate highway system, everything.  I mean it’s such a phenomenal amount of money you just don’t even know how to express it in a way that really communicates the extent of it.  So, it was such an extraordinary amount of money.  Now, as I said before, at that time $8 Trillion dollars would have extinguished all the residential mortgages in the country.  So, that’s more money than 100% of the mortgages in the United States.  So, the question is: ‘What’s that about?’

Bonnie Faulkner (16:45):  “Right.”

Catherine Austin Fitts (16:46):  “And I think what happened was we saw a global origination of massive amounts of debt on a fraudulent basis and that cash used to, literally, buy up a variety of positions, including control of the White House and the Congress.  So, phoney-baloney debt issued; the money used to buy control in a variety of ways.  And then once control was had the market is crashed and you use the cash of what you now control to pay off the phoney-baloney paper.  That’s a leveraged buyout.  You buy something with massive debt and then you use the cash of the target to pay back the massive debt.”

Bonnie Faulkner (17:31):  “Right.”

Catherine Austin Fitts (17:32):  “So, we, literally, watched a leveraged buyout of the United States and sovereign government.  And what I would say, looking at this from the very long-term view, is debt is being used to reengineer our governance systems.  So, let’s create a character for a second.  Let’s say there’s one person who runs the planet who I call Mr. Global.  Mr. Global said, ‘You know, the sovereign government thing isn’t working, so I think I wanna reengineer governance and what we’re gonna do is we’ll basically get control of all the governments by getting them completely indebted and in over their head.  We have the invasive technology.  So, they can never have a private conversation.  So, they don’t have financial sovereignty.  They don’t have information sovereignty.  And then we can basically dictate terms.’  So, you’re, literally, watching the end of democracy through the financial mechanism because the creditors are telling a government what it will and will not do and what it can and cannot do.  They basically have the government over the barrel and they are using debt to do it.”

Bonnie Faulkner (18:36):  “Right. Exactly.  Describe the Uruguay Round of GATT.  You have talked about this before the General Agreement on Trade and Tariffs of the early ‘90s.  What was this agreement and what have been the results.”

Catherine Austin Fitts (18:53):  “Right.  The Uruguay Round, one way to look at what’s happening at the economy is that we really made a decision in terms of the freedom and the way we operate global trade.  When the Uruguay Round passed in 1995, we created the World Trade Organization and then began, Bonnie, a whole new round of globalisation that allowed us to move capital and manufacturing globally in a whole new way.  It made everything much more fluid.  And what it did was it put us in a world where, ultimately, there was no reason why an hour of labour in North America should be any different from an hour of labour in Europe should be any different than an hour of labour in Brazil should be any different than an hour of labour in China.”

Bonnie Faulkner (19:46):  “Right.”

Catherine Austin Fitts (19:47):  “So, we went into what’s being called the rebalancing of the global economy.  Now, let me explain the power of what that did.  What that gave was it gave the central banks the ability to offset liberal monetary policy with labour deflation.  So, if I print lots and lots of money, normally I’ll kick up inflation.  But if I can drop the value of labour consistently, the more I print money I have monetary, something that should lead to inflation, but by dropping and squeezing labour, I can offset and not get the same kick-start in inflation.  Does that make sense?”

Bonnie Faulkner (20:30):  “Well, are you trying to say that people’s buying power goes down, so that inflation doesn’t kick in?”

Catherine Austin Fitts (20:36):  “Think of it this way.  If I’m making cars, a part of my cost is the cost of capital and a part of my cost is the cost of labour.”

Bonnie Faulkner (20:45):  “Right.”

Catherine Austin Fitts (20:46):  “If I can use this kind of globalisation to dramatically lower my cost of labour then I can print lots and lots of money and lots and lots of debt and debase the currency without kicking up the cost of the car.  Because I’m dropping—”

Bonnie Faulkner (21:02):  “Oh, I see, without kicking up, yeah, the price of the car.”

Catherine Austin Fitts (21:05):  “So, I continually squeeze.  By deflating labour I can prevent inflation from happening.  And so what we did was we entered into a shift of capital and a shift of economic activity that was very profound and was guaranteed, if you didn’t do something to intervene, was guaranteed to significantly lower the standard of living in the ‘First World’ countries.  Now, what was interesting about it was that one of the things that happened in that process is the Baby Boomer generation has created enormous amounts of pools of capital.  So, they’ve worked and they’ve saved and they’ve put their money in pension funds and they’ve put their money in IRAs and they put their money in 401(k)s.  Part of this rebalancing was taking that capital and reinvesting it abroad to help facilitate the shift.  So, literally, you had the Baby Boomers, you know, aging, aging, aging, and before they could retire to ask for that capital back you pulled it out and reinvested it abroad.  And, in fact, to the extent that that transfer was illegal, you took it permanently.

So, there’s $4 Trillion dollars missing from the Federal Government during that period, the so-called missing money.  That money’s gone.  It got reinvested somewhere.  Maybe it was in Latin America.  Maybe it was Asia.  Maybe it was space.  Who knows?  But it’s no longer owned by the Government and the people here.  So, you, literally, saw a whole generation watch their capital get moved and they didn’t notice because they were enjoying the bubble.  Okay?  And now that the bubble is over, we’re all sitting here looking.  And, suddenly, the question is, ‘Well, what’s gonna finance our retirement?’  And whether it’s the pension funds or whether its the 401(k)s and IRAs, whether it’s the home that we thought was going up in value, all of the assets that we thought were standing behind our retirement are suddenly not looking as healthy as they once did.  And I think the big question for many people here is, ‘What’s the endgame on this?’”

Bonnie Faulkner (23:36):  “Well, now, exactly.  Now, what is in people’s pension funds if the real assets have been moved out?”

Catherine Austin Fitts (23:44):  “Well, I’ll give you an example ‘cos I think the pension funds are a mixed bag and it changes pension fund to pension fund. But pension funds own, the biggest financier of the Federal Government is not China.  It’s not Saudi Arabia.  It’s the pension funds.  So, as we were shifting money out of the country and moving jobs abroad, the pension funds were buying U.S. Government debt and were buying mortgage-backed securities.”

Bonnie Faulkner (24:15):  “I see.”

Catherine Austin Fitts (24:16):  “So, the pension funds played a major role in financing the bubble that kept everything going while the money was shifted out, which means now, let’s say all the kids in America and all the homeowners said, ‘You know something, this was all a scam; we’re gonna default on all the student loan debt; we’re just gonna walk away from the mortgage, from the [predatory] student loans.’  A lot of that would hit American pension funds because they’re holding a big, you know, we just sold the mortgages to ourselves.”

Bonnie Faulkner (24:47):  “Right, because the Government bailed out the banks.  So, they have the money.  And they bought the toxic waste.  So, that’s what the government has, right?

Catherine Austin Fitts (24:58):  “Well, the pension funds own a lot of, you know, whether it’s the Government paper or the mortgage-backed securities.  The pension funds have a lot of big, big positions in this stuff.  And that’s why the player who has the most to gain from a return to fundamental productivity at a County level are the pension funds because they are sitting with so much of this consumer and Government paper.  And if there’s anybody who can benefit from a reengineering of Federal investment by County and by place, it’s the pension funds.”

Bonnie Faulkner (25:33):  “Well, this sounds like a good time to talk about your experience with CalPERS in the spring of 1997.  Now, you had a meeting with them, right?”

Catherine Austin Fitts (25:44):  “This is actually a very important story.  I had a meeting; when I started Hamilton I said, ‘I wanna find real solutions. I wanna find a model for how we can invest our capital, so that private investors acting in their own interest will finance an economy, which is optimised across the board.’  Does that make any sense?”

Bonnie Faulkner (26:08):  “M-hm.”

Catherine Austin Fitts (26:10):  “Let me describe it this way.  An investment has a return to the investor, but it also has a return to the network.  And the combination is what I call a total economic return.  So, if I as an investor finance the building of a convention centre by a local government in a community, then I get a return to investor.  But if it’s successful, the community is better off and benefits.  That’s the return to the network.  So, my model is to always understand the total economic return and the return to network.  And use that knowledge to find opportunities for improving the return to the investor.  So, what I’m saying is understand your impact on the ecosystem and look for ways of adding value to the ecosystem to enhance your own returns.  Play win-win.  Okay?  And subject to one rule:  If anything you’re doing has a negative return on the total economic return, don’t do it even if it makes you money.  So, when somebody comes to me and says, ‘I want you to buy Monsanto; you could get a double.’  I say no.”

Bonnie Faulkner (27:16):  “Right.”

Catherine Austin Fitts (27:17):  “Whether it’s spiritual or financial, it’s funny, you know, I always say to people, ‘You lost everything in Enron and I still have the Hickory Valley meat market.’  And it’s amazing how many mistakes you avoid by following this simple rule.”

“Anyway, so, my company had a subsidiary that had a board of wonderful pension fund leaders, leaders in the pension fund industry.  And they were helping me figure out this model.  The question was:  How could we manage our funds so that we get an optimisation of the whole in a way that makes us more money?  And it’s the absolutely appropriate question for pension funds to ask.  Anyway, so we worked and worked and after much research we created relational databases, Community Wizard, that would let us look at all the government investment and private investment, by county, by place.  One of the things I discovered, Bonnie, was that if we just said, ‘Okay, we’re gonna forget about fees for our friends and we’re gonna re-optimise Government investment to make the pie as big as possible, forget who gets it just to make the pie as big as possible.’  There’s unbelievable wealth.

What we discovered is the whole economy is so profoundly sub-optimised because, rather than Government playing the clean enforcer, Government is intervening in a way that makes the optimisation shrink.  Tyranny is unbelievably bad for business is what it says.  So, I took our results and we used the Philadelphia area.  I grew up in Philadelphia.  We used the Greater Philadelphia area and we did a sources and uses of Government money, using Community Wizard, in Philadelphia.  And what we showed was that the government investment in Philadelphia was slowly enervating and harming the economy because, whether it was people at the very top of society or people at the very bottom of society, we were basically paying people to do things that made them stupider.”

Bonnie Faulkner (29:36):  “M-hm.”

Catherine Austin Fitts (29:37):  “So, prisons:  Paying some people to learn how to sit around and watch other people sit around and do almost nothing, you know, it’s hugely wasting of human talent.  Okay, so, we made the presentation and then we showed if you reengineer the Government investment, but in a model where equity investors were investing in these community venture funds and investing in place, you could make a huge amount of money, including for the pension funds.  So, it was perfect.  And it’s funny; one of the guys who was a corporate pension leader from New England, he said, ‘this is great,’ he said, ‘we can save the country and make lots of money.’  And the head of CalPERS is a wonderful man.  I’ll never forget it.  He had worked for Saul Alinsky as a young man.  He said, ‘This is Saul’s model.’  He said, ‘But they were able to stop him.’  Well, he was right and I was wrong.  I said, ‘Saul Alinksy did not have the internet.’  You know, the learning speeds can go so much higher now.  And it’s much harder, well, of course, he was right and I was wrong.  So, he froze and he said, ‘You don’t understand; it’s too late.’  I said, ‘What do you mean it’s too late?’  He said, ‘They’ve made a decision to move all the money out of the country starting this fall.’  That was spring of 1997.  And that fall was October of 1998, the beginning of the ’99 fiscal year when all the $4 Trillion dollars started to go missing from the Federal Government.  He said, ‘you’ve gotta get to Nick Brady, who’d been the [68th U.S.] Secretary of the Treasury in the [G.H.W.] Bush Administration, but [he was] Chairman of my firm on Wall Street [Dillon, Read & Co.].  And he said, ‘you’ve gotta tell ‘em it’s not hopeless. They think it’s hopeless. They’ve given up.’  And, um—”

Bonnie Faulkner (31:15):  “‘They’ meaning whom?”

Catherine Austin Fitts (31:19):  “Well, that’s the $64,000 dollar question.”

Bonnie Faulkner (31:20):  “Right.  Of course.  Yeah.”

Catherine Austin Fitts (31:21):  “If you’ve ever seen the movie “Captains and Kings,” there was a TV series.  And it was, sort of, a fictional version of the Kennedys, John Kennedy story.  And it describes this group of global magnates who were Mr. Global, the Committee Mr. Global, running the world.”

Bonnie Faulkner (31:38):  “Okay.”

Catherine Austin Fitts (31:39):  “And, so I presumed when he said, ‘They,’ he meant them.”

Bonnie Faulkner (31:43):  “Sure.”

Catherine Austin Fitts (31:44):  “So, here’s what was so interesting.  Then when the housing bubble took off and I saw what was happening, I realised that CalPERS was financing the Government debt and the mortgage-backed securities to finance this bubble while they’re sucking huge amounts of money out of the country.  Now, if you’re CalPERS and you know they’re moving all the money out of the country, well, that’s not a sound investment.  So, that’s in violation, to me, of the laws and so you ask the question, ‘Well, is CalPERS following the law?’  Is CalPERS acting in the best interest of the beneficiary?  Or is CalPERS being told by ‘They’ what they have to do upon pain of death?  So, my interpretation is CalPERS doesn’t have the control they need internally to follow the best interests of the beneficiaries.  They’re being told what to do from above.”

Bonnie Faulkner (32:40):  “And, of course, if that’s happening to CalPERS, it’s happening in other pension funds.”

Catherine Austin Fitts (32:43):  “Right.  CalPERS is the biggest pension fund in the country.  So, if it’s happening at CalPERS, it’s happening to everyone.”

Bonnie Faulkner (32:48):  “And that was, wow, over ten years ago.”

Catherine Austin Fitts (32:51):  “That was April of 1997.  Now, in fairness to CalPERS, if you believe you’re part of a centrally-managed model and the model’s gonna go to the right, then you’ve got to go to the right.  And I’ll tell you what was very interesting.  When I spoke in Europe and Asia and the United States about the housing bubble and warned people of the collateral fraud, one, I think that they couldn’t fathom that it was as bad as I was saying, but, two, they were kind of stuck in this model where the central banks are gonna make good.  So, I don’t need to worry that it’s trading sardines because I’m never gonna eat the sardines.  I’m just gonna trade ‘em to the next guy.  And 2008 was a profound wake-up call because 2008 said, ‘You know something? They’re not gonna keep, if you buy trading sardines at a hundred, they might be worth zero. They’re not gonna guarantee your price on the, they’re not gonna guarantee you a good exit.’  And that was the wake-up call that everybody got that, ‘Wait a minute, suddenly the line of who’s an insider and outsider can be moved dramatically quickly.”

Bonnie Faulkner (34:00):  “And what do you think of the crash in September 2008?  Was that managed?  Was that, you know, I mean we hear stories about the threats that [Henry] Paulson made against Congress when they first voted down the bank bailout.  So, what about the crash?  Do you think—”

Catherine Austin Fitts (34:19):  “Somebody was blackmailing.  Somebody was blackmailing and, frankly, every five minutes I would call my Congressman’s office and say, ‘You may not vote for this.’  ‘Cos my attitude was, ‘Fine, let it all crash.’  Here’s the thing.  If you look at a corporate stock, if a corporation makes a dollar and its stock goes up $20 dollars if it’s trading at a multiple of 20 times.  And that multiple from one to 20 comes about because the market believes in the rule of law.  Without the rule of law, one equals one.  The whole thing crashes down.  And so my attitude is, ‘Hey, let it crash because if there’s no rule of law then nothing has any value other than what I can protect with a gun.  So, let it crash because we need the Breakaway Civilisation to stop being able to blackmail us.  So, we have a lot of land.  We have a lot of resources.  We have each other.  And I, frankly, would rather live free.  Death is not the worst thing that can happen here.  It really is not.  And I, I’ve personally gone through this.  And the reason I’m alive here today is because many times I said, ‘Fine, kill me. I am not, I am not doing that because death is not the worst thing that can happen.’  Particularly, ‘cos we’re talking about a culture, a centralising culture, which can be phenomenally perverting.  I mean phenomenally perverting.  To me the bailout was a blackmail and I think I would’ve pushed the red button so to speak.  I would’ve said no to the blackmailers.  ‘Cos I think the rule of law is more important.  And now I can understand why somebody sitting in a politician’s chair would’ve let himself be blackmailed, but I like to take my pain early.  But I think that was a political situation, not a financial situation.

Bonnie Faulkner (36:13):  “Right.  And they did, indeed, start to crash the market, right?  And that’s when they got their bailout.”

Catherine Austin Fitts:  “Right.”

Bonnie Faulkner:  “Right, because I remember the major bank stocks went down to penny stocks, didn’t they?”

Catherine Austin Fitts (36:23):  “Right, but I don’t think the problem, if you look at what happened, Congress voted against it the first time and the market didn’t crash.  There was one bright shining moment when everybody felt good, like, ‘Oh, you know—”

Bonnie Faulkner (36:39):  “That’s right.”

Catherine Austin Fitts (36:40):  “Right.  And then they came back and lobbied hard.  And here is the core of the issue.  I think we are talking about people who have the ability to kill with impunity.

Bonnie Faulkner (36:50):  “M-hm.”

Catherine Austin Fitts (36:50):  “Okay?  And, so, when they come into Congress to lobby, they’ve got your control file.  They’ve got your dirty pictures.  When I was in Washington, the fear always is if they’ve got dirty pictures on you you’ve gotta do what they say.  If they don’t have dirty pictures, then it’s a ten year litigation to prove that the dirty pictures they have are phoney-baloney.  They’ve got nothing.  But it, literally, took me ten years and $6 Million dollars to prove that their hand was empty.  So, most people are not prepared to go through a ten year, $6 Million dollar, proof to do it.  And the reality is I’m lucky to be alive.

Bonnie Faulkner (37:32):  “Boy, I can say that again.  I still can’t believe that you did that for ten years.  I had to bring a lawsuit once and it was just horrible.”

Catherine Austin Fitts (37:41):  “Well, here’s the thing.  I have a, and it’s not something I’m recommending anyone to do, I had, you know, one of my prayers when it was happening was, ‘Please don’t let this be about old family business. Please don’t let this be about old family business.’  And the further along I got I realised, ‘This is probably connected to old family business.’  So, one of the reasons I, kind of, got sucked into it was my parents had problems with the same cast of characters.  And, after watching what happened to them and then having it happen to me, I just said, ‘You know something, we just have to fight.’  There are some times you just have to hold the line and you have to fight.  This was more than just a business.  This really had to do with the fundamental criminality of society.  And it’s a longer story.

“I ended up, it’s funny, when we had a very dirty moment in court and I popped out an article about my mother’s death, I believe my mother was murdered, I popped out a little article about my mother’s murder.  And something very dirty happened about six weeks ago when I started to write the story of my father’s death.  So those were, I wrote a book review on Dick Cheney’s new book.  It’s called ‘Dick Cheney’s Fluffernutter.’  If you do a search it’ll link to the article about my mother’s death, so you can get a taste of it.  And one of the things I said in it, I wrote it at the time when I was helping with a 9/11 Truth group.  One of the things I said in it is, ‘You know, there are thousands and thousands and thousands of people who have lost family and loved ones to the Black Budget.  It’s not just the families of 9/11.  If you look at the drugs, if you look at the nuclear testing, if you look at all the different things that the Black Budget folks in this Breakaway Civilisation have done, we’re talking about thousands and thousands of people at all classes and all levels across America.  But we’re not a We yet ‘cos we keep thinking, ‘Oh, it’s drugs.’  Or we keep thinking, ‘It’s nuclear testing or this or that.’  And it’s not.  It’s that you have a force in our society, which is above the law.  And we are all grappling with the cost of that.  And we need to step back and look at it and not get caught in our little boxes, but say, ‘Wait a minute. We have a bunch of people running around who think they can kill with impunity and we need to deal with that because that’s our economic problem.’

Bonnie Faulkner (40:36):  “Well, so that’s interesting.  So, there was, as you phrased it, old family business, like your parents had to deal with this type of thing.”

Catherine Austin Fitts (40:42):  “Right.  And it’s funny ‘cos the way I got started on all of this, I grew up at 48th and Larchwood in West Philadelphia.  You’re from California, so you’ve probably have never, this is one of those little row, lots of row houses financed with VA Housing.  My father was a surgeon.  He wanted to be near the hospital.  And there were four HUD fraud deals up catty-corner to our [house].  And he bought the house for $12,000 dollars.  So, figure he had like maybe two or three thousand of equity, which in those days was a lot of money.  And there were these four phoney-baloney HUD fraud deals, just of the kind that I just described to you, and it was catty-corner.  And, Bonnie, it wiped out the equity, you know, any house contiguous to that, it wiped out our equity.  And those houses sat empty for four years.  I’ll never forget it.  It was when I was about ten to fourteen.  And, so, we have these four boarded-up homes and they had this big sign on the front:  ‘By order of the Assistant Secretary of Housing, Federal Housing Commissioner,’ one of the longest titles in the Federal Government.

“Meantime, across from me is a family of six people living in a one-bedroom apartment while these four houses are empty.  And I thought this doesn’t make any sense because if you look at the amount of money they made on the fraud, it’s a lot less than all the equity wiped out by all these people.  And then you’ve got these people who would love to take care of one of those homes in this stupid one-bedroom apartment.  So, the whole thing was what a financial person would call an enormous sub-optimisation.  And that’s part of what got me interested in, ‘Okay, why can’t the honest people make more money making the Popsicle Index going up instead of going down?  And it was funny because I’ll never forget.  So, I would walk by this boarded up house at least once a week and I used to always think, ‘Who is that person, this Assistant Secretary of Housing, this horrible person?  And when I got sworn and the Secretary said, ‘By order of the President, you are now the Assistant Secretary of Housing, Federal Housing Commissioner,’ I said, ‘Oh, no, I’m the A-you-know-what. Oh, my god!’  And I went right downstairs and I called in the Single-Family Deputy and I said, ‘How many foreclosed properties do we have in America?’  He said, ’50 thousand.’  I said, ‘I want that 25,000 in a year.’  Well, of course, that’s the first thing I ever did that really irritated the Black Budget Black Budget guys ‘cos they were playing games on that inventory.

Bonnie Faulkner (43:07):  “What a story.”

Catherine Austin Fitts (43:08):  “I know.  So, well, here’s the thing.  All the fraud on the planet can be brought down and expressed in the intimate financial flows in our lives.  That’s one of the reasons I say we’re all powerful.  I was sitting; I had a checking account at JP Morgan private banking.  You know, now it’s JP Morgan Chase.  Then it was JP Morgan.  And they were one of the lead banks at HUD.  And, so, when the litigation started and it was very ugly and dangerous and there was all sorts of physical harassment, I was writing a check and I realised, ‘Why am I banking at one of the banks that somehow must be connected to the people who are trying to kill m-, why am I doing this?’  I said, ‘I need to come clean. I need to clean up my own.’  And, so, the thing that’s powerful is if we all come to see our investment, not as something we do over here, but something that is connected to all the different flows.  I’m swimming in the ecosystem, whether it’s financial or it’s material.  And everything I do, everything I use, everything I think, participate in, invest in, I’m influencing.  I’m choosing.  I’m acting.  And if every one of us can say, ‘Wait a minute. I’m going to try and shift what I do and how I do it, so that I’m interacting with my ecosystem in a way, which, for me, is net energy plus and I do my best to not contribute to these things.’

“So, I got out of JP Morgan Chase and got into what is arguably the most wonderful, righteous, ethical community bank I’ve ever heard of and it’s a pleasure doing business in a bank you really love.  I mean, can you imagine banking in a bank where you love your bank?  It’s wonderful.  It’s really wonderful.  And it’s powerful if we all choose, but a lot of that, we’re trained to think of investment and the financial system as something over there and not part of my lifeAnd we’re all supposed to think of our participation in the financial system as not having an influence.  Somebody will say, ‘Well, my checking account’s really small; it doesn’t count.’  Wrong.  In an economy this centralised, layered up with derivatives, one account is really powerful because it’s levered many times upstairs.  So, what you do and what you think and how you do it is important.

Bonnie Faulkner (45:38):  “Catherine, could you explain the significance and effect of three defence contractors controlling databases?  What are the three defence contractors and do they control all databases?”

Catherine Austin Fitts (45:52):  “If you look, there are several websites that track, contracting for the Federal Government.  And what you’ll see is the information technology contracts are very consolidated into a relatively small number of firms.  So, for example, when I was Assistant Secretary of Housing, Lockheed Martin got a hundred-fifty million dollars a year to manage both the IT and the payment systems at HUD.  I believe Lockheed Martin is still the number one contractor of IT and payment systems at the Department of Defense, which is a real conflict of interest because it means the company that’s sending bills for weapons and weapons systems is the company then paying those bills.  Now, I mention that because over $3.4 Trillion dollars is missing from the Department of Defense, which meant, if it’s missing then Lockheed, you know, whoever’s running the payment systems and is doing the depository banking, which is the New York Fed, is responsible.  For many years when the General Accounting Office would come back and say, ‘The Federal Government has refused to produce audited financial statements as required by laws,’ I had one friend who was a reporter who would constantly say, ‘Which contractors are running those payment systems?’  And they would never answer the question.  They were too afraid.”

Bonnie Faulkner (47:12):  “So, when you were at HUD, you would try and get information from Lockheed?”

Catherine Austin Fitts (47:15):  “When I was at HUD, both as Assistant Secretary, but even more so when we were the Financial Adviser.  We were responsible for portfolio strategy.  And, of course, the power of portfolio strategies when you have very rich relational databases that can look at your portfolio, both by function and type of mortgage but by place (real estate is local, right?), and I would try and get the data from Lockheed Martin.  They just wouldn’t give it to us.  They just wouldn’t.  I mean, it was a war.  We used to call it The Data Beast.  And I eventually wrote an article about ‘The Data Beast.’  But the reality was you had Lockheed Martin and their subcontractors owning and controlling that data and you couldn’t get it.  It was unbelievable.”

Bonnie Faulkner (47:58):  “But there are also these contractors are also running other databases, right?  I mean, how does this affect, let’s say, the health care bill?”

Catherine Austin Fitts (48:05):  “What I believe is if you were to look at the Federal Government, I wrote this in an article called “The Data Beast,” if you were to look at 21 Federal agencies, not as Government agencies, but as databases and you said, ‘Okay, which contractors have access to what data?’ you would see a very different map.  So, for example on the Census, the lead contractor on this latest Census was IBM.  So, you have IBM and its subcontractors putting together very, very rich databases of every house in the whole country.  And if you look at all the other databases that IBM and their subcontractors have access to government-wide, the question is if you integrate those databases what you’re talking about is a complete control system ‘cos you’ve got the mortgages, you’ve got the IRS payments, on and on and on and on and on.  So, if you watch the movie ‘Enemy of the State’ or you watch the movie ‘Listening,’ you’re talking about an intelligence capacity that can basically manage and manipulate the economy at a very detailed level, whether it’s manipulation of the stock in the financial markets or manipulation of households.

Bonnie Faulkner (49:27):  “Oh, and that’s so scary because they have all the information on you.”

Catherine Austin Fitts (49:30):  “Well, IBM is one of the leaders in the software for the smart meters.  So, if you take the database they put together on the Census and you add the data they’re gonna create from these smart meters—”

Bonnie Faulkner (49:42):  “And you’re talking about your utilities.”

Catherine Austin Fitts (49:45):  “Yeah.  But if you look at the smart meters, my understanding on the smart meters is, they’re collecting that data and sending it back on a wireless basis, which means it’s easy to hack into.  So, there’s no reason.  So, the question is:  Who has that data?  But you’re talking about real-time data from the banking systems, from the mortgage system, from the housing system, all coming in and being used in a variety of ways, which are very invasive.  And the reality is if I, you know, Nicholas Negraponte once said that data about money was worth more than money.  If I have real-time data on all of your activities and transactions 24/7, then, ultimately, I can own you, particularly, if I can print money whenever I want to.  So, we’re talking about a complete control system.  And the scary thing about it, I would really encourage people to read my article, “The Data Beast,” because one of the things I point out was IBM was the company that built the infrastructure that made the Holocaust possible.”

Bonnie Faulkner (50:50):  “Oh, that’s right.”

Catherine Austin Fitts (50:51):  “Right.  So, if you go back and you read Edwin Black’s book about, literally, how the holocaust was made feasibly by advanced database technology.  And IBM really built it and managed it, from what I understand of his book, you’re basically having that same company build the ultimate databases today.  And the Government is paying them to do it.”

Bonnie Faulkner (51:20):  “Do you think that there will be a move on to do away with cash?

Catherine Austin Fitts (51:27):  “Oh, absolutely.”

Bonnie Faulkner (51:29):  “Yeah, it seems like it to me, too.”

Catherine Austin Fitts (51:31):  “Sure, because, if you can go back to this data system and the value of data, if somebody does things with a credit card or a debit card or something that goes through, you know, if people are transacting with cash then I don’t have that data.”

Bonnie Faulkner (51:45):  “That’s right.”

Catherine Austin Fitts (51:46):  “Right.  I can’t control that.  I just posted an article up on the blog.  Louisiana is outlawing cash for second-hand transactions and barter, which I’m not clear how they can do it since it’s legal tender.  I don’t know if that’s constitutional, but anyway that’s what’s reported from Louisiana.

Bonnie Faulkner (52:03):  “Yes, I heard about that, too, and I didn’t know whether to believe it or not.”

Catherine Austin Fitts (52:07):  “I don’t see how they could because right now it’s legal tender and you can’t refuse legal tender as a way of transacting.  So, what is really happening I don’t know, but we have seen, I have seen, enormous efforts by the banks to not pay out cash or to make it very expensive for merchants to get change.  So, there’s real, I would say there’s a real lock-down within the banking system to encourage only digital transactions and not cash transactions.

Bonnie Faulkner (52:44):  “Yeah, that’s very creepy.”

Catherine Austin Fitts (52:46):  “Right.  Well, part of it, I think, is you get a lot more leverage without the cash and having that control.  But I think, here’s the funny thing:  You have throughout society about, I think Jon Rappoport breaks it down to about nine cartels.  You have the banking cartel.  You have the energy cartel.  You have the medical cartel.  You have the government cartel, the agents in intelligence agencies, you know, but a series of different cartels.  And, to a certain extent, they’re competing with each other for power.  And, so, one will do something invasive to control the [diadem] in their area and the others will follow, not because they are trying to, necessarily, hurt us, they are just trying to not get out-powered by the other cartel.  So, you have them all competing.  And as they all become more invasive, of course, what it does is it drains more and more value from the beast because nothing drains economic value out like the absence of privacy.

“And it goes back to, ‘How does tyranny destroy value?’  That’s one of the ways.  And, so, you have this competition among all the players.  And part of it is because the technology allows them to do it.  So, that’s one of the reasons we have to think very carefully about, ‘How do we wanna use technology?’ because we can use technology to decentralise.  But we can also use it to centralise in a way that’s negative.  And the more They try to control it, the worse the economy gets.  And the more They try and control it and it can’t be controlled, they’re frustrated.  And you see that frustration.  One of the things that’s got to happen here is it takes more than force to run a planet.  It takes more than force to govern a planet.  It takes alignment of spirit.  The thing that makes a culture powerful is it’s got some values higher than, ‘If you don’t do this, I’ll kill you.’

“So, we have this group of people who have unbelievably powerful technology and they’ve developed a learning speed, which is much faster than the rest of us.  So, we’ve got a huge non-alignment.  And I think the question is, ‘Okay, how do we create a culture to govern this planet, which will adapt to this new technology and adapt to taking responsibility bottom-up, but doesn’t force us into this high-tech-friendly fascism?’  Because fascism’s not gonna work.  So, that’s the conundrum.  And it gets us back to the question about, ‘Who in the world is They and why are They doing this?’   You know, to a certain extent, off and on my whole life I’ve struggled to watch and deal with the covert side.  And the hardest thing for me is having to live in a world where everybody wanted to pretend it really wasn’t there.”

Bonnie Faulkner (55:59):  “Right.”

Catherine Austin Fitts (56:00):  “You know?  So, if I just pretend it’s not there then it won’t bother me.  I can live over here in the bubble and meantime it’s growing stronger and stronger and stronger.  And, to a certain extent, no matter how depressing the world is right now, I, kind of, feel like I’m welcoming everybody, ‘Welcome to my world.’  You know?  Because it’s not gonna go away.  It’s gonna get stronger and stronger.  We all pay attention to it.  We all honour it.  We all want its money.  We want its treats.”

Bonnie Faulkner (56:25):  “Catherine, thank you.”

Catherine Austin Fitts (56:25):  “Thank you.”

Bonnie Faulkner:  “I’ve been speaking with Catherine Austin Fitts.  Today’s show has been ‘Unpacking Mr. Global, Part 2.  Catherine Austin-Fitts has been an investment banker, a government official, an entrepreneur, and an investment adviser.  She was a Managing Director and Member of the Board of Wall Street firm Dillon, Read & Company Incorporated, Assistant Secretary of Housing and Federal Housing Commissioner in the first Bush Administration, President of the Hamilton Securities Group (investment bank and financial software developer), and is currently Managing Member of Solari Investment Advisory Services and Sea Lane Advisory.  Catherine’s experiences on Wall Street and in Washington D.C. are chronicled in Dillon, Read and the Aristocracy of Stock Profits.  Visit her website at  Guns & Butter is produced and edited by Bonnie Faulkner and Yara Mako.  To make comments or order copies of shows, email us at [email protected] .  Visit our website at”

Transcript by Felipe Messina


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