EDITORIAL
The $400,000,000 Problem Part II
By Catherine Austin Fitts - June 27, 2013

This week's Solari Story from Catherine Austin Fitts is titled "The $400,000,000 Story, Part II." Here's a bit of the transcript:

Let me fast forward and continue that story. Several months later – I think it was probably about 9 months later – we ended up shutting down the coinsurance program because the corruption was so bad. And at that point we had a $9 billion portfolio and because we had shut down the new originations it was a fait accompli that a lot of that, if not all of that portfolio, would default back in for servicing at HUD.

At the time, I made a series of recommendations as to how to manage that process that would protect the portfolio, the projects and the FHA Fund. I put them in to the secretary and I got a call from the undersecretary who said, "I don't want you to meet with the secretary over this. This is too politically sensitive and we just want you to do A, B and C." And I said to him, "Al, A, B and C would default the whole portfolio in. It would make a huge mess. I can't do that. That's the wrong thing to do and the secretary, of course, can overrule me but he's going to have to overrule me because I'm not going to do something that defaults in the whole portfolio and is a lose-lose for the government and the private parties."

At the time, I made a series of recommendations as to how to manage that process that would protect the portfolio, the projects and the FHA Fund. I put them in to the secretary and I got a call from the undersecretary who said, "I don't want you to meet with the secretary over this. This is too politically sensitive and we just want you to do A, B and C." And I said to him, "Al, A, B and C would default the whole portfolio in. It would make a huge mess. I can't do that. That's the wrong thing to do and the secretary, of course, can overrule me but he's going to have to overrule me because I'm not going to do something that defaults in the whole portfolio and is a lose-lose for the government and the private parties."

So lo and behold, we ended up having a meeting and the secretary tried to get a lot of the other political appointees to agree that we should default in the whole portfolio. It was a very ugly meeting with the general counsel saying repeatedly, 'F the coinsurers. Who cares what happens to them? So what if they have contracts? By the time they win in court we'll be gone." It was a very lawless, chaotic meeting.

Please click on the image to view the full Solari video:

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