Maybe he'll bring back the money?

[Magda Hassan]

Will Defense Run the “Real” Stimulus Package?

By Catherine Austin Fitts

January 12, 2009 "Solari" -- - In fiscal 1999, the Department of Defense was “missing” $2.3 trillion dollars. To put that amount of money in perspective, it is approximately 3X what President-elect Obama is proposing to spend to revitalize America.In fiscal 2000, the Department of Defense was “missing” $1.1 trillion, about 1.5X what President-elect Obama wants to invest in America.
So between October 1998 and September 2000, the Department of Defense was “missing” $3.3 trillion. Because the amount of money disappearing is so enormous, years ago we started a archive of articles on the “missing money” to try to keep up with the trillions sliding out of the federal accounts.
From 1997 to March 2001, the Under Secretary of Defense (Comptroller) who served as the chief financial officer for the Department of Defense was William J. Lynn III. In that position, he was the chief financial officer for the Department of Defense and was the principal advisor to the Secretary and Deputy Secretary of Defense for all budgetary and fiscal matters. That means he was the person responsible to make sure no money went missing and that the Department of Defense published audited financial statements — which it failed to do in those years and every year since.
When Mr. Lynn left Defense in 2001, he joined DFI International and then in 2005 became the chief lobbyist for Raytheon. He was replaced at Defense by Dov Zakheim.

Today, President Elect Obama nominated William J. Lynn III as the Deputy Secretary of Defense. The press release said, “Lynn brings decades of experience and expertise in reforming government spending and making the tough choices necessary to ensure that American tax dollars are spent wisely.”
Obama also nominated Robert Hale to Lynn’s former position, Under Secretary of Defense (Comptroller). From 1994 to 2001, Mr. Hale served as the Assistant Secretary of the Air Force (Financial Management and Comptroller). That means that Hale, same as Lynn, was in charge of the money when all the money disappeared.
I guess the guys who got the last $3.3 trillion were pretty happy with Mr. Lynn and Mr. Hale and decided to bring them back.
Which brings me to the question I keep asking, “Where is the money and how do we get it back?“

[Jan Klimkowski]

Magda - excellent find. A few gatekeeper crooks in key positions can perform magick for Them.

Catherine Austin Fitts is that rare breed - a genuine, high level, insider whistleblower. Any of her work that can be found is invaluable.

I've just found some of her analysis that was new to me and frightening in its implications, so I'm posting it here:

Housing Bill, Part VIII
Catherine and News & Commentary,August 10, 2008 at 1:08 am
The Two Great Financial Mysteries of Our Time: Missing Money and Collateral Fraud


There are two great financial mysteries in America:

where is all the missing money and how do we get it back?
how big is the missing collateral black hole and how will it be resolved?
These two mysteries are essentially part of one mystery at the heart of the matter – who is in charge of - and what are - the real financial flows and assets of the central banking-warfare complex that increasingly governs the resources on our planet?

Since all financial frauds – from the manipulation of the precious metals markets, the engineering of the mortgage and housing bubble, ongoing naked short selling, Enron, the pump and dump of the internet and telecom stocks – come back to the same cast of characters, protecting our families and assets necessitates an integrated understanding of “the real deal” — who is really in charge and how the economy is really managed. Hence, it is useful to have a basic understanding of the missing money and missing collateral mysteries.

Let’s start with the first mystery, the missing money.


In fiscal 1999, the Department of Housing and Urban Development (HUD), under the leadership of Secretary Andrew Cuomo, reported $17 billion missing from its opening balance and $59 billion of undocumentable adjustments to close its books and refused to produce audited financial statements as required by law. In fiscal 2000, HUD refused to disclose the amount of its undocumentable transactions. For a sense of the magnitude of even the reported discrepancies, it means that the amount of undocumentable transactions occurring at HUD in 1999 was $1.13 billion a week, $227 million each work day and $28 million an hour.

The contractors that ran HUD’s auditing and payment systems also were large contractors at the Department of Defense (DOD) which reported $2.3 trillion of undocumentable transactions in fiscal 1999 and $1.1 trillion in fiscal 2000. DOD declined to report the number for fiscal 2001 and in all years subsequent to the legal requirement to do so, declined to produce audited financial statements as required by law, ensuring that the US Treasury could also not do so.

Indeed, the federal consolidated financial statements during this period were delivered with the following admissions by each Secretary of the Treasury:

Robert E. Rubin, 1997, Unauditable

“We believe that the publication of these audited statements is an important step in providing American citizens with more information about the operations of their government.”

Robert E. Rubin, 1998, Unauditable

“We believe that the publication of this financial report is an important step in providing the American public with useful information about their government’s assets, liabilities and operations.”

Lawrence H. Summers, 1999, Unauditable

“We are committed to producing and reporting financial information that meets the highest standards of integrity and to provide to the American people the accountability and professionalism they expect from their government.”

Paul H. O’Neill, 2000, Unauditable

“I am committed to producing and reporting financial information that meets the highest standards of integrity and to provide the American people the accountability and professionalism that they expect from the government.”

Paul H. O’Neill, 2001, Unauditable

“I believe that the American people deserve the highest standards of accountability and professionalism from their government, and I will not rest until we achieve them.”

John W. Snow, 2002, Unauditable

“I intend to continue the commitment to producing and reporting financial information that meets the highest standards of integrity and to provide the American people the accountability and professionalism that they expect from their government.”

From Kelly O’Meara, “Treasury Checks and Unbalances“, Insight Magazine, April 2004.

The U.S. constitution says that no payments can be made which are not provided for in an appropriations bill approved by the Congress. Specifically, Article 1, Clause 7 states: “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

It is quite significant that the government (and its accounting and payment contractors and bank depositories) engaged in an amount of illegal transactions in fiscal 1999 that was greater than the amount of total taxes it received in that year. It is even more significant that there has been little public discussion of this fact. This is no small violation of the Constitution in a country where millions go without health care and the infrastructure is in disrepair.

A handful of efforts to get to the bottom of what was going on met with little or no cooperation. Efforts by reporters and one brave Congresswoman, Cynthia McKinney, to identify the contractors responsible for managing the accounting and payments systems missing all this money were not successful. Investigative reporter Kelly O’Meara got David Walker, head of the General Accountability Office (GAO), the Congressional auditor, to commit during an interview that he would make this government contractor information public. However, GAO never did. One Tennessee congressman on the House Budget and Defense appropriations subcommittee confirmed to me that these billions were missing but that he was helpless to do anything about it. ( See Letter To Congressman Van Hilleary (R-Tenn.)

Things seemed to be coming to a head on September 10, 2001, when Donald Rumsfeld conceded in a press conference that DOD was missing trillions. However, that fact was not to attract much attention given 9-11 events the following day. Rather, the tragedy was used to justify the loss of financial records at the Pentagon (we are apparently to presume that the Pentagon is incapable of making or keeping back ups) and the inability of the Army to produce financial statements in 2001.

So where did the money go? Indeed, $4 trillion is a lot of money for us to lose. Especially when you add it to the money that was pulled out of pension funds and investors’ accounts with the pump and dump of the Internet and telecom stocks, the manipulation of the precious metals markets and movement of gold stores at below market prices and the bubbling of mortgage markets and other financial frauds. And, as beautifully described in Vanity Fair’s recent piece by Barrett and Steele, “Billions Over Baghdad”, money has continued to go missing from DOD at astonishing rates. Wars in Afghanistan and Iraq have created countless new opportunities for pork and pilfering.

Add it all up and my guess is more than $10 trillion of private and public funds has been pulled out of America by fraudulent means. That is an interesting number, given that it was an amount sufficient to pay off the direct national debt before the housing bill added Fannie‘s and Freddie’s debts to our burden.

In short, our problem is not that our national debt is out of control. Our problem is a financial coup d’ etat. The reason we have debt is that the federal accounts have a private back door that is feeding an insatiable parasite. The money we need to address our financial, social and retirement obligations has disappeared and we need to get it back. The housing bill does not do this. Quite the contrary: it represents a step in the opposite direction. Instead of getting the money back, the housing bill ensures that our contingent liabilities increase astronomically and puts in place additional mechanisms for engineering more missing money and draining small business and communities as a result of further centralization of mortgage credit into Washington and Wall Street.

If you look at various estimates of what it would cost to end global poverty, ensure that all Americans had health care and no one lost their home to foreclosure or solve this problem or that problem, what you discover is this $10 trillion is more than enough to make significant inroads in solving most of the world’s ills. It appears our problems may not be material. Instead they are political. Which means they are ultimately cultural and spiritual.

So where did the money go? Ten trillion dollars is too much money to all be sitting in the accounts of swindlers, politicians and correspondent banks in the Cayman Islands or Dubai.

I don’t know where the money went. It is still a mystery - one that we can no longer deny if we are to significantly shift or transform our current trend and direction.

Interestingly enough, few people tend to get upset when you bring up the missing money. It is as if all individual and corporate liabilities are so protected behind layers of complexity, friendly Congressional representatives, statutes of limitations and national security law that no one is particularly worried. Apparently, we can lose $4 trillion so long as most people feel they got a piece of the action. Besides, it is boring to talk about government accounts when sex scandals are used to manipulate government officials who object to financial coup d’etat and to distract. (See our recent blog posts on sex and mortgage fraud (1)(2)(3)(4)(5)(6).

The numbers are too big and the financial system too overwhelming in nature for many activists to be able to relate to the algebra of what is really happening. Unfortunately, we have developed a system where we resent what is stolen from our income statement. However, if monies disappear from our individual and collective balance sheets, we appear not to notice or to attribute it to fate and the invisible hand of the marketplace.

Our second great mystery relates to collateral fraud.

Unlike the missing money, collateral fraud is a topic that I have found traditionally to be quite dangerous.

My first experience with serious media censorship was in 1989. A reporter from the New York Times had to resign to keep the Washington bureau chief from tampering with a story about me when I was Assistant Secretary of Housing - FHA Commissioner. I did not understand what was happening. Many years later, I came to believe that the problem related to my efforts to bring financial transparency to the FHA and Ginnie Mae operations at HUD and the risks that transparency posed to what I now believe was the operation of collateral fraud and related securities fraud at FHA-HUD.

Seven years later I ran into a serious problem with the Washington Post. A front-page story about me was spiked and the reporter would not return my calls. It related to the seizure of my company’s digital databases by the HUD and the Department of Justice. We were creating software programs and databases that could reconcile outstanding mortgage backed securities data to street level housing data. The prospect of such reconciliation had sent official Washington into a state of complete panic. One of my systems administrators was informed by government investigators that under no circumstances were we to be allowed to keep a copy of our digital records. When asked for detail or a legal basis why a company should not be allowed access to its own databases, he could not explain.

Looking back, I now believe that these events related to a need to cover up very significant collateral fraud.

More recently, my “Community Business” segment on Flashpoints on KPFA radio was censored by order of station management on the same week that the housing bill was being voted on by Congress. I had just finished raising $45,000 for KPFA and was just about to do another fundraising show. There was no warning and the management refuses to speak to me or return my calls and letters. I am censored, and there is no explanation as to why.

Collateral fraud occurs when the stuff that you use to secure a loan is just not there. So, as an example, ten mortgages are created on one house and put into ten different mortgage-backed security pools

I am sometimes asked how HUD could have more in undocumentable transactions in fiscal 1999 than the size of its entire budget for the year. My answer, in a nutshell, is securities fraud.

As an example, let me hypothesize one of many different ways that this could be achieved. The government could issue mortgage-backed securities without recording them on the official books. Here is how it might work.

As depository and government contractor, you shift $100MM out of a government account such as the FHA Mutual Mortgage Insurance Fund reserves with a debit entry. You use that money to purchase Ginnie Mae securities that are not recorded on the Ginnie Mae books. The cash received through the sale of the Ginnie Mae securities replenishes the reserves. You sell these Ginnie Mae securities off shore — in China, Japan, Dubai or the Cayman Islands.

Now you have $100MM. You do it again. And again. And again.

By the end of the year Ginnie Mae has issued $59 billion of securities backed by the full faith and credit of the US government that are not reported on the official HUD books. You pay the debt service by defaulting fraudulent mortgages in the Ginnie Mae pools and putting them back into the FHA fund as a claim on FHA’s insurance.

Because FHA mortgage insurance originations are growing thanks to the mortgage bubble, FHA is taking in lots of premiums so you can skim from these reserves. This is – in essence – stealing from the premium holders. However, they have no way of knowing. Doing so requires manipulating the actuarial studies. Given what your accountants and auditors are already going along with, cooking the actuarial studies is certainly not a problem.

Again, this is only a hypothetical methodology. In theory, there are hundreds of ways of doing it, including with the full range of Treasury and agencies securities.

By the summer of 2001, to finance trillions of undocumentable transactions – the US government would have built up quite a discrepancy between outstanding securities and those reported on the US government books and another between agency securities collateralized with things like mortgages and actual valid liens on real things in the material world.

Which leads us back to the interesting fact that the first plane that headed into the World Trade Center North Tower on September 11, 2001 took out Cantor Fitzgerald, the leading government bond dealer. All 658 employees present that day died, along with the system Cantor Fitzgerald used for settling transactions. This was not the only financial data destroyed that day. DOD has claimed that the attack on the Pentagon that day destroyed financial records. In addition the destruction of WTC 7 resulted in loss of SEC and other federal agency enforcement records.

Rob Kirby’s recent piece, “Dead and Buried But Not Forgotten” connects the dots between the possibility of securities and collateral fraud and 9-11.

The increase in defense appropriations after 9-11, ongoing missing money since that time and the excusing of DOD from many mandated financial reporting requirements could all have helped the system dig out of or simply maintain a collateral black hole.

My reason for describing the missing money and missing collateral mysteries is to explain why I have such a bad feeling about this housing bill.

Whatever discrepancies existed between the official US government financial statements and real debt outstanding before the housing bill, my guess is that such discrepancies are now suddenly much bigger after the housing bill. In other words, we are in the process of merging all outstanding mortgage fraud with existing US government securities and collateral fraud. Add to that the assumption of the back door liabilities protecting all of JP Morgan’ and the NY Fed member banks’ positions on cleaning up Bear Stearns and maintaining large derivative positions, including in the mortgage and precious metals market. Now add to that whatever collateral fraud is embedded in the Fannie Mae and Freddie Mac portfolio and significant increases in liabilities at FHA.

I used to have a deputy when I was the Federal Housing Commissioner who said that FHA was where mortgages went to die. This time around, this describes a very, very big number given that many of the mortgages that need to be buried are fraudulent – the only valid “lien” they have is the criminal liability associated with them.

In short, as we centralize power and control of the financial system into the US Treasury and Federal Reserve banks, we also consolidate outstanding collateral and securities fraud.

Typically, when a lot of toxic liabilities consolidate into one central point at the same time assets (such as the $10 trillion) are privatizing or leaving, one of two things is going on.

Either the toxic waste is being consolidated for disposal and long-term containment.

Or, everything is being moved into one place so it can more easily be put into bankruptcy, reorganized, or destroyed.

Whatever the outcome, if you hold a position in which you manage large databases covering the U.S. mortgage or government bond markets, or any other markets with symptoms of significant collateral or securities fraud you might want to consider finding a new job.

Nicholas Negroponte once said, “data about money is worth more than money.” In this instance, the right data could give the right team of people the power to get $10 trillion back. That is real power – the kind that has a tendency to attract hostility from all sides of the political spectrum, not to mention accidents and terrorist attacks.

Read Parts I, II, III, IV, V , VI, VII, IX of this commentary >>>

http://solari.com/blog/?p=1400

[David Guyatt]

I know Catherine well.

Too well perhaps...

[Magda Hassan]

Do you mean in the biblical sense David?

[Jan Klimkowski]

I know Catherine well.

Too well perhaps...

:listen:

[Peter Lemkin]

Interesting thread, but I feel compelled to ask the obvious question - what does any of this have to do with 'change'? Looks to me like business [and I mean BUSINESS] as usual....:eviltongue: