Credit: doganmesut –

German translation available here.

The law? The law? I don’t have to obey the law. I report to a higher moral authority.”
~ Jack Kemp as Secretary of Housing & Urban Development (HUD) in 1990
explaining why it was not necessary for HUD to obey U.S. law

By Catherine Austin Fitts

After 21 years of watching $21+ trillion go missing from U.S. federal accounts at HUD and the Department of Defense (DOD), I am often asked, “Where did the money go and how do we get it back?”

While the government has documented the money missing from these two federal agencies through fiscal 2015—and thus the documented violations of the Constitution related to financial accounts and disclosure as well as financial management laws—it has not published accounts of where the money went, who has those resources, and how it was reinvested or spent. Consequently, it is perfectly natural for us to engage in high-octane speculation, starting with asking questions about who stole it, how they did it, and who has the missing money or related assets. Who is liable? If money was laundered in or through DOD accounts from foreign wars or the Afghanistan central bank, we have no way of knowing.

We can safely assume that money continues to disappear. Thanks to the federal government’s continual refusal to produce audited financial statements as required by law and the 2018 adoption of FASAB 56 as an administrative policy (which allows federal accounts to be kept off books and secret), we no longer have any reliable means of determining the amount of “undocumentable adjustments” after fiscal 2015. Because the undocumentable adjustments were $6.5 trillion in 2015—the largest amount missing in one year—it is not surprising that the operations then went dark. In addition, there are numerous black budget and classification laws that can make it difficult, if not impossible, for us to tell what is really going on in the federal accounts. (For those interested, we recommend our seven-part series on the financial management laws of the U.S. government, including our piece describing FASAB 56. See the “Financial Laws” section at the Solari Missing Money website.)

The U.S. federal government maintains its bank accounts at the New York Federal Reserve Bank. When the money left the federal accounts, therefore, it left on the financial train tracks run by the New York Fed.

The New York Fed is a private bank owned by its member banks, including Citibank and JPMorgan Chase. (See “New York Fed” under “What Is a SPAC?” in the SPACs section of this Wrap Up.) Presumably, its member banks act as agents with respect to the New York Fed’s depository responsibilities for the U.S. government. That means they hold bank accounts or act as servicers or custodians for securities issued by or secured with subsidies or credit provided by the U.S. government and its mortgage insurance funds, such as the Federal Housing Administration (FHA) Single-Family Mortgage Insurance Fund. They also act as custodians and servicers with respect to government-held assets like defaulted mortgages and foreclosed properties acquired when mortgage owners make claims on FHA, VA, and other government mortgage insurance. It is fair to say the Fed member banks operate—even control—a significant part of the U.S. federal balance sheet and related accounts.

When looking at the accounts held by the New York Fed and its member owners as agents for the U.S. government, it is also worth asking another question: Where did the money that went missing come from? We can presume the bulk of the funds paid into the U.S. Treasury come from taxes and proceeds of debt issued by the Treasury through a group of dealers called “primary dealers.” Note that the New York Fed website says that the primary dealers are counterparties to the New York Fed in issuance of government securities. (Many of the primary dealers are also members/owners of the New York Fed, including Citigroup Capital Markets, JPMorgan Chase, and HSBC. See the “Primary Dealers in U.S. Government Securities” section in the “New York Fed,” under “What Is a SPAC?”)

Why is this important? It is important because it means New York Fed members/owners can sell U.S. Treasury bonds, put the proceeds in a HUD government account for which their bank serves as agent for the government, and proceed to move that money into a private account. Very few would be the wiser, particularly if the Treasury bonds were not properly recorded on the U.S. Treasury balance sheet or, as now may also be the case, were sheltered by FASAB 56.

We do know that, on occasion, foreigners have reported that they hold more U.S. debt than the U.S. government reports owing. The Financial Times described a particularly notable example in a June 14, 2006 article titled “Discrepancies in US accounts hide black hole.” Note that this article was published in the same year that the power to waive Securities and Exchange Commission (SEC) compliance by banks and contractors doing business with the government was delegated to the Director of National Intelligence.

Indeed, the last time a U.S. Treasury Secretary made the mistake of commissioning a study of the outstanding U.S. government debt, the published study was taken down quickly, and he left shortly thereafter. This was Secretary Paul O’Neill in the George W. Bush Administration; O’Neill also made the mistake of trying to warn that the estimates for the cost of the Iraq invasion were unreasonably low.

As Assistant Secretary of Housing-Federal Housing Commissioner and then as President of Hamilton Securities, the lead financial advisor for the FHA at HUD, I regularly ran into anecdotal evidence and allegations that the amount of outstanding mortgage insurance issued by the federal mortgage insurance funds was significantly greater than what was reported on the FHA/HUD balance sheet.

When in my company’s role as FHA financial advisor I tried to build a complete database of total outstanding mortgages secured by federal mortgage insurance, the Department of Justice seized my company offices and all of our digital records. One of the lead government investigators was quite upset when he discovered that we had moved our computers out in the middle of the night to the offices of our attorneys, saying: “I have strict instructions that you may not keep a copy of your data.” I was required to certify that we had not kept copies of any HUD mortgage data. The investigating team could not come up with a legal reason why we should not be allowed to keep our own data once the HUD mortgage data had been removed.

I believe Hamilton’s portfolio analysis would have documented that the number of mortgages recorded in HUD’s databases were far greater than the number of houses in America—a reality supported by the fact that 2008 Financial Crisis bailouts of an estimated $27-$29 trillion were required to bail out the banks operating the mortgage markets, when this amount was sufficient to pay off all outstanding single-family mortgages in America several times over.

You would think that the rating agencies might notice the systemic criminality in the U.S. federal accounts and raise this question with investors in securities that pay for their reports. In fact, S&P, the leading U.S. rating agency, did attempt to downgrade the U.S. bond rating. Here is the story described in an article our general counsel, Carolyn Betts, and I co-authored: “Caveat Emptor: Why Investors Need to Do Due Diligence on U.S. Treasury and Related Securities”:

To demonstrate the likelihood that rating agencies are no longer able to withstand political pressure, notwithstanding post-Financial Crisis attempts to become more independent, witness what happened when, in August 2011, for the first time in history, Standard & Poor’s downgraded the U.S. credit from AAA to AA+. A furor ensued. In order to mend its relationship with the U.S. government, eighteen days after the U.S. debt was downgraded, S&P asked its then-CEO, Devin Sharma, to step down. Think about this for a minute. The CEO of a rating agency was fired for allowing his rating analysts to issue a perfectly reasonable rating change on the U.S. government’s credit.

Subsequently, the Department of Justice (DOJ) initiated an investigation into S&P’s role in the rating of several mortgage-backed securities that played a role in the 2008 Financial Crisis. In February 2013, DOJ and nineteen states’ attorneys general and the DC U.S. Attorney filed a $5 billion lawsuit against S&P and its parent company, McGraw-Hill, based upon the findings in the investigation, which was settled two years later for $1.375 billion. Neither of the other major rating agencies, which had not downgraded the U.S. credit but had joined S&P in the Financial Crisis debacle, was subject to such a lawsuit. This was a clear warning shot fired to prevent any rating agency from considering any future such downgrades.

But wait, there’s more! The New York Fed is also a depository for sizable gold inventory, including gold held for its own account and for central banks and governments around the world.

Of great importance, in addition to running the Fed open market operations (i.e., the purchase and sale of securities in the open market by a central bank), the New York Fed serves as agent for the U.S. Treasury Exchange Stabilization Fund (ESF), which has broad powers to trade and intervene in the gold, currency, and securities markets. I call the ESF the “mother of all slush funds.” If you are going to run the global reserve currency, you need a “financial bazooka.” I believe the bazooka is to be found in the trading accounts of the ESF and related syndicates.

With respect to the ESF, the New York Fed reports directly to the Treasury Secretary—there is no need for government civil service to be involved. When there were rising complaints regarding the large derivative positions held by the owners of the New York Fed to suppress gold prices—owners like JPMorgan Chase—the bank officer in charge of JPMorgan Chase’s derivatives book explained that all of the bank’s gold derivative positions were in its role as agent, not as principal. I translated that to mean that the ESF and/or the New York Fed as agent for the Treasury owned those positions. Hence, the ESF had a “put” to the taxpayers with market power defined by an $850-billion-a-year annual military budget, the U.S. nuclear arsenal, one or more “Rod of God” weapons, and the largest satellite fleet of any country in the world.

What this means is that the ability of the New York Fed and its members/owners to create money, monetize the federal debt, and act as agent for the U.S. government in all global financial markets gives it unlimited access to the financial resources of the U.S. government. What is not clear are the options at the New York Fed members’ disposal to take that money and move it into private hands.

In my opinion, there are many ways—likely as many ways as there are recipes in the culinary classic The Joy of Cooking. Consider that data about money in a digital financial system can be worth more than money and that the owners of the New York Fed have superb access to insider information. They can move digital data, digital credit, and digital money to create profits anywhere on the planet.

These days, I am focused on one of the primary mechanisms for moving money, gold, and valuable data about money—namely, through the global accounts of the Bank for International Settlements (BIS).

Who and what is the BIS? The BIS is a private bank in Basel, Switzerland that is governed by a self-perpetuating board representing its 63 central bank members. The BIS was created in 1930 under Swiss law and endowed with various forms of sovereign immunity that were fleshed out in the Brussels Protocol of 1936. If you review the BIS powers of immunity (available on the BIS website), what you realize is that once gold, deposits, securities, data, and documents are in the possession of the BIS, they can be transferred globally on behalf of BIS members or by its members as agents, all while enjoying complete secrecy and immunity from the laws of sovereign nations.

Upon first discovering the BIS, most people—I among them—assumed that the sovereign immunities of the BIS applied solely to BIS operations in Switzerland and to BIS member-representatives traveling to and fro. However, there is now evidence to suggest that the BIS has created mechanisms to extend these immunities to a syndicate of “systemically important banks,” “systemically important financial institutions” (for example, insurance companies), and “systemically important payment systems” (presumably major clearing or settlement systems) through the Financial Stability Board (FSB), an affiliated Swiss association that the BIS hosts. (For more, see John Titus’s video All the Plenary’s Men about the 2012 U.S. Department of Justice’s settlement with HSBC, and my August 2022 Special Solari Report with Patrick Wood on the BIS, as well as related links at

The BIS also has extended its sovereign immunities and secrecy powers through its contracts with various governments involving the recently created BIS Innovation Hubs located around the world. The BIS Innovation Hubs were created to facilitate the launch of central bank digital currencies (CBDCs). If you have not read John Titus’s piece on CBDCs in our 2nd Quarter 2021 Wrap Up: CBDCs – Why You Want to Hold On to Your Cash, I strongly recommend it.

BIS General Manager Agustín Carstens clearly explained the BIS affection for CBDCs in an October 2020 International Monetary Fund (IMF) panel on cross-border payments:

The key difference with the CBDC (as compared to cash) is that the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability. And also, we will have the technology to enforce that. Those . . . two issues are extremely important.

So, let’s return to the period when $21+ trillion started to go missing from DOD and HUD accounts in October 1997. Interestingly, it was three years before that, in September 1994, that the U.S. Federal Reserve first purchased BIS stock, becoming an owner of the BIS. The Fed had had the right to purchase BIS stock for some time but, up until that point, had declined to do so due to the potential for conflicts of interest. Numerous Fed and New York Fed officials had served at the BIS, and Americans had served in the BIS leadership. However, the institutional relationship between the Fed and BIS took a significant step up in 1994 with the Fed’s stock purchase and with Fed Chairman Alan Greenspan’s appointment to the BIS board. As explained in October 1994 by Charles J. Siegman, Senior Associate Director of the Federal Reserve Board’s Division of International Finance, in “The Bank for International Settlements and the Federal Reserve”:

On September 13, 1994, the Chairman of the Board of Governors of the Federal Reserve System assumed the seat on the Board of Directors of the Bank for International Settlements (BIS) designated for the central bank of the United States. The central bank of the United States has had the right to be represented on the BIS’s Board of Directors since the BIS was established more than sixty years ago. For a variety of reasons, however, the Federal Reserve had, until this year, never exercised its right. The Federal Reserve Board’s decision to assume representation on the BIS’s Board was made in recognition of the increasingly important role of the BIS as the principal forum for consultation, cooperation, and information exchange among central bankers and in anticipation of a broadening of that role. Federal Reserve membership on the BIS Board marks a new chapter in the relationship of the Federal Reserve System with the BIS.

Now imagine it’s October 1, 1997 at the beginning of the federal fiscal year during which money started going missing from HUD. Imagine that one of the leading New York banks such as J.P. Morgan or Chase Manhattan (before they merged in 2000)—and remember that these banks are owners of shares in and members of the New York Fed, as well as primary dealers and acting as depository agents with respect to HUD accounts at their banks while also enjoying immunities and protections in their role as agents for the New York Fed—acting as agent, shareholder, and member on behalf of the BIS, transferred money, securities, and/or assets from one or more of its HUD accounts to an account in the name of the BIS, either directly or through trading operations in the ESF.

Now that the money is in the secret BIS global “pipes,” it can be moved anywhere in the world on a secret, encrypted basis under protection of sovereign immunity. It can, for example, show up in the accounts of the Government of Norway or New Zealand, which can then, for example and in theory, generously donate it to the then newly formed Clinton Foundation. Again, in theory and for example, the missing money could move through the ESF where, through a series of trades, it could result in additional profits in the U.S. Treasury and mortgage securities portfolio of Berkshire Hathaway, which could then generously donate those profits to the Gates Foundation, enjoying an offsetting tax exemption. Defaulted mortgages could be moved to an account at the Financial Trust Company in the U.S. Virgin Islands to capitalize Jeffrey Epstein’s operation.

Twenty-one trillion dollars is a lot of money. Add on top of that the $27-$29 trillion in bailouts, including those executed with off-balance-sheet vehicles such as the AIG bailout-related Maiden Lane I, II, and III. Then add to that the trillions of dollars of quantitative easing (QE)—the central bank monetary policy involving large-scale purchases of bonds or other financial assets. (What if the bonds the Fed purchased via QE from undisclosed banks at par were worth much less than that? Wouldn’t you want to know who the Fed bought these bonds from, and who got the benefit of the $6 trillion injected by the Fed during the Going Direct Reset?) The total involved in these transactions is staggering—enough to finance an endowment to operate a global government on a privatized basis. So, it is not surprising that when all this money started to go missing and undisclosed parties got the benefit of Federal government largesse, the deposits in offshore havens ballooned. If you have not watched the documentary on the City of London and the British offshore systems, The Spider’s Web: Britain’s Second Empire, I highly recommend you do so.

We know that money poured into leveraged-buyout and venture firms, which then went on a reinvestment spree like an invading army. As the money started flowing out of the back door of HUD, Carlyle Group announced its first Asia fund, targeted at $1 billion. Where did that seed money come from? Financial institution capital in offshore havens is certainly one of many possibilities. Wherever the funds came from, events were reminiscent of what the president of the largest pension fund in the United States was referring to when he told me in April 1997 that “they” (whoever they are) had given up on the country and were moving all the money out starting in the fall. (See the full story in my online book, Dillon Read & Co. Inc. and the Aristocracy of Stock Profits.)

If you read my 2022 book review of Christopher Leonard’s book, The Lords of Easy Money, you will know the story of how current Fed Chairman Jerome Powell made his personal fortune on a leveraged buyout at Carlyle financed with leveraged-buyout fund money financed from. . . well, someplace.

In a chapter called “The Fixer,” Leonard describes Powell’s ascendancy—from Dillon Read and the U.S. Treasury department to Carlyle—where he led the leveraged buyout of an industrial conglomerate called Rexnord based in Milwaukee, an area with longstanding Dillon ties. Clarence Dillon’s first wife was from Milwaukee, and Dillon had worked there in his early career (hyperlink omitted). At Carlyle, Powell led the purchase of Rexnord using $359.5 million from its buyout fund along with two loans totaling $585 million. The deal closed in September 2002. Rexnord instantly took on more debt; Leonard points out that “Rexnord would pay more money in interest costs than it earned in profit during every full year that Carlyle owned it.” To help fund this, Rexnord implemented employee pay cuts, moved jobs to non-unionized states, eliminated jobs, and took other steps to squeeze value out of the company and turn Rexnord into what I would describe as a “trading sardine.”

In 2006, Powell led the sale of Rexnord to Apollo Management LP for a $900 million profit. To fund the purchase, Apollo syndicated new leveraged loans of $1.825 billion. The deal solidified Powell’s status as a multimillionaire, and he left Carlyle after the sale closed. In 2018, his net worth was listed as $20–$55 million. It is fair to say that Rexnord’s contribution to the real economy did not improve as a result of Powell’s leadership. Leonard explains:

“Rexnord itself didn’t fare as well. The company Powell left behind was crippled with debt. Its total debt burden rose from $753 million to $2 billion in one year. Its annual interest-rate payments rose from $44 million in 2005 to $105 million in 2007. The company would pay more money in interest than it earned in profit every year for more than a decade. Rexnord had become a company that was emblematic of the private equity world. It was no longer a company that used debt to pursue its goals. It was now a company whose goal was to service its debt.

I have said often on the Solari Report since 2016 that one of the reasons that the British leadership wanted to leave the European Union was to prevent the European Central Bank (ECB) and German regulators from looking into exactly what was happening in the City of London and its network of offshore havens and substantial interests throughout the Commonwealth.

To my knowledge, the BIS has not yet established a list of “systemically important offshore havens” nor created an Innovation Hub in Antarctica, in the suborbital platform, or on the moon. I am suspicious, however, especially given efforts to create new space laws that promote privatization of assets in space. Indeed, Nokia and Vodafone were contracted in 2018 to create a 4G network on the moon. There is a reason for these contracts. (See “Nokia and Vodafone shoot for the moon.”) I would suggest one possible reason is to protect assets from prying eyes and any criminal liabilities that might be asserted for assets that do not enjoy interplanetary sovereign immunity.

As you can see, I think often about the financial and legal steps that bankers take to create or steal money that they can then give to their friends to buy up more positions on the Monopoly board.

In fact, think of these times like a game of Monopoly. Every time we pass “Go,” we collect $200. Every time they pass “Go,” the friends of the central bankers collect $200 million. Or a special handful collect $200 billion. After all, mafias have hierarchies, too. When we land on “Go to Jail,” our small businesses are declared non-essential. When they land on “Go to Jail,” they get a “Get Out of Jail Free” card.

As I look for hard evidence to help inform my high-octane speculation, I see waves of money invading America to buy up the Monopoly board or to finance the companies that build or make up the control grid. The Covid-19 pandemic unleashed not just waves of money, but a literal tsunami of money. One of the more interesting aspects of the flood of money surrounding the pandemic was something called “special purpose acquisition companies,” better known as SPACs.

There were many shocking elements to the Covid-19 pandemic, and certainly many of them were more important to humanity than the wave of SPACs that flooded the IPO markets. However, to a serious financial professional, the surge of SPAC investment was beyond shocking.

As someone interested in how massive monetary infusions by central bankers translate into a tsunami of money directed by insiders that rolls over the Monopoly board, I decided it was time to take a look at SPACs to see what the phenomenon said about the Going Direct Reset under way.

So, I asked Carolyn Betts and the Solari team to take a look. Our 1st Quarter 2022 Wrap Up theme, “SPACs: Investment Craze or Reset Laundry?” will tell you what we found.

The bottom line: Follow the money for a fascinating story of hundreds of billions of dollars that went merrily by while most of us were locked down and losing our jobs, businesses, and lives while fighting mandates. It is a reminder of the old adage that no matter how bad things look, “there is a bull market somewhere.”

Indeed, in 2020 the central bankers made sure of that. . . .

Stavoren, Netherlands
July 2022