«The bubbles of the 1990’s and 2000’s were at the heart of what I call “a financial coup d’état.” The coup d’état, however, is not just in America. It is world wide. »

An Interview with Catherine Austin Fitts by Jorge Nascimento Rodrigues, editor of Janelanaweb.com

Catherine Austin Fitts is president of the American investor advisory company Solari Inc from 1998. She was Assistant Secretary for Housing-Federal Housing Commissioner, 1989-1990, responsible for the operations of the Federal Housing Administration (HUD), at the Bush father Administration.

This famous Department was a key tool in the financial creative engine of those times. She denounced the incredible situation and was crowned the “cleaning lady” of the financial mess such as the savings and loan (S&L) scandal at HUD. Her research proved that S&L and HUD fraud were perpetrated by the same networks, in the same places, and involved the same use of federal credit.

Fitts was fired by the Bush father administration in 1990 after only 18 months on the job. Later she was persecuted in her business deals.

Catherine worked at Wall Street and Washington, but she remains ‘addicted’ to her business ethics. She lived among finance czars, speculators, bureaucrats and politicians, a high voltage cocktail. Few people know more than her about how the money works really in those toxic environments.

Her experiences on Wall Street and in Washington D.C. are chronicled in Dillon Read and the Aristocracy of Stock Profits. Dillon Read & Co was a Wall Street firm where she worked.

She is very vocal about the roots of the financial tsunami going on nowadays. Just recently she sent an e-mail to a member of the Research Team at Goldman Sachs (GS) asking to unsubscribe from the emailing list of the GS newsletter: “The history of Goldman Sachs over the last two decades is a living proof that it is possible to kill with a financial system and a pen”. Ironically, she was an internship in 1977 at Goldman.

A former government and financial insider she said once: “One of the things that it is interesting about reading conspiracy theory is that much of what folks think is conspiracy is really many people acting in concert to make or protect their money.” In another occasion she wrote: “The lethal combination of a debt based financial system, falling productivity and the absence of meaningful feedback systems means that the magic of compound interest will dictate that the American tapeworm’s hunger for more capital is accelerating.”

History in a certain sense repeats itself, copy its patterns in new contexts with innovative packages. Observing the bubbles and the crashes of the 1980’s, the 1990’s and the 2000’s, the networks are the same, the places and the tricks also. The rentier system and the tapeworm model of life continues to grow. But its dynamics is its death penalty: “Ultimately large complex systems cannot held together by greed, technology and fear alone. Suspicion, lawlessness and smallness of mind ultimately cause implosion from within”, said Catherine. As we have been witnessing right now. Ultimately Main Street pays the bill.

Catherine publishes a column, “Mapping the Real Deal,” in Scoop in New Zealand.

INTERVIEW

QUESTION: Which are the roots of the ongoing financial crisis? A group of Wall Street’ criminals from the so-called shadow banking system, or a couple of legislation pieces and policies since Clinton’s repeal of the Glass-Steagall Act of 1933 and Alan Greenspan’s so called financial revolution?

ANSWER: It is much deeper than this. I recommend for your readers to listen to the audio seminar that I recorded in 2005 to explain the deeper history. At the heart of the problem is the “red button” test. See the last chapter of my book. When surveyed, out of 100 people, 99 said they would not push the red button. Our financial dependency on unsustainable economics is broad, ingrained and deep. There’s also an old Wall Street saying – the expression ‘never fight the tape’. It means never try to oppose the market – always go with the market’s trend and direction.

Q: If there had not been financial “creativity” in the last 20 years, we would still have had the same level of growth in the economy and consumption, stock bubbles in the US and the same level of globalization of financial capital?

A: The bubbles were developed to accommodate a number of goals. First, was to facilitate the shift of capital out of the US to reinvest in Asia and the emerging markets and to ensure global dominance for the corporations and investments facilitating the shift. While the US was bubbled, with moving money out at a high dollar price, economies in Asia, Latin America and Eastern Europe experienced the withdrawal of credit, devastating their currency and market values, so that major assets could be picked up on a very economic basis. Second, was to help reengineer global governance out of households, communities and sovereign governments and centralize it into private corporations and banks. So the bubbles were at the heart of what I call “a financial coup d’ état.” The coup d’ état, however, is not just in America. It is world wide. The commitment of the American people to democratic process and individual property rights and freedom is a major obstacle to the coup. Hence, the financial confrontation under way is a dramatic one and important to the whole world.

Lesson 1: Consolidation using these “pump and dump” cycles is an inherent part of the economic warfare we are experiencing.

Q: With a default in American bank reserves of more than $150bn and a growing run-out of international capital from the US, what can you expect for the rebuilding of US financial leadership?

A: My expectation is that the folks who pulled the capital out during the last decade will be able to buy back in cheap. This is the same process we saw at the end of the last housing bubble bust in the US in 1989-1993. Those who sold at the top of the “pump” were in position to buy in cheap on the “dump.” Consolidation using these “pump and dump” cycles is an inherent part of the economic warfare we are experiencing. Numerous factions appear to be competing for control. It is impossible to say who will emerge in command. Whatever happens, my hope is that the process creates a sufficient spiritual and cultural shift to support the creation of serious alternatives to the central banking-warfare model that has dominated our planet for 500 + years. Whoever is running things here or in Europe, these events could never have occurred without widespread greed within the general population.

Lesson 2: The bailout will address a short-term symptom at the cost of promoting a greater unraveling.

Q: Can the $700bn bailout rescue package (plus the $110bn for trickle down perks) restore confidence in the banking market, or will the money be “lost” in the corridors of consulting and asset management companies, financially targeted “friends” en route to mega acquisitions and a new «bubble» in Wall Street?

A: The package should be sufficient to handle credit default swap settlements during October as well as to ease the liquidity squeeze in the major US institutions through the election. I doubt it will carry us much past the election or inauguration. Part of the challenge, is convincing depositors and investors that the system is fundamentally unsound. Hence, the bailout will address a short-term symptom at the cost of promoting a greater unraveling.

Lesson 3: The dollar’s value is determined politically and is supported by military capacity and power projection.

Q: Is it possible for the US to combat the ongoing financial crisis as a lonely financial superpower?

A: Yes, if the US and UK in combination are prepared to use sufficient military and covert force.

Q: What do you mean? Hard power or covert power projection, certainly will accelerate other strategic moves from China, Russia and even a few others, including provocateurs, but I am not sure that Europe (even UK) will follow…

A: The dollar’s value is determined politically and is supported by military capacity. The new President will not have a mandate to support the dollar. The people who finance the government will decide, and the question is what they want. If continuing a global taxation system through the dollar-managed system is what they desire for political reasons, it can and will continue. See my post about this aspect.

Q: So you mean that the countries and institutions all around the world that finance American crazy debt and deficit system are paying a kind of global tax to the superpower?

A: Global treasuries and Sovereign wealth funds, central banks and a variety of large institutions buy Treasury securities or hold dollars not because there is true economic value behind them or because these financial assets are sound fiscally or in terms of credit. The US debt and deficit financing is no longer a debt system. It is a global taxation system.

Q: Even with all this recent financial carnage?

A: Hence, demand for US dollars and government and agency bonds continues even as value falls dramatically. The losses on these holdings represent a tax paid to the “Empire”.

Q: Don’t we need a multilateral approach, particularly with the Chinese and the European Union?

A: A multi-lateral approach is preferred. The question is, is it possible or are there too many direct conflicts over resource and resource pricing issues between the US and China and direct power conflicts between the US and Russia.

Lesson 4: In the long run, financial systems require reliable standards.

Q: How do you evaluate the recent European financial decisions?

A: On one hand, it makes sense to have a coordinated European response. On the other hand, national governments are required to intervene in support of the individual banks. Hence, what can a European-wide response really do? Actually, over time it can lead to more information sharing and ensuring that the leaders support each other and feel not alone. The bigger problem is that the credit freeze results from an absence of trust. And that absence of trust is well deserved.

Q: Why?

A: We have had a steady deterioration in the integrity of legal, accounting and banking practices. On one hand, part of what we are watching is the full cost of corruption within the system. In the short run, government can guarantee everything. However, in the long run, financial systems require reliable standards. This is a little bit like sending up a space shuttle in which all the engineering decisions were based on political considerations and convenience. The thing will not fly. So we need consolidation and a cultural revolution. In part, we need the consumers and citizens to create market demand for standards.

Obs: For Portuguese readers, see comments on this interview at Janelanaweb.com