Solari Action Network

[Catherine]

In 1998, my attorneys asked me to record my recollections of serving as Assistant Secretary of Housing-Federal Housing Commissioner during the first Bush Administration, 1989-90. I had reported to HUD Secretary Jack Kemp and worked with his general counsel Frank Keating, his undersecretary, Al DelliBovi and his chief of staff, Scott Reed.

Kemp had announced as the Republican VP candidate in 1996, just after my company had received its first subpoena in the "enemy of the state" process and two weeks before Gary Webb's Dark Alliance story began publication in the San Jose Mercury News.

One of the reasons that was given for Kemp's choice was his ability to attract women and minority voters to support the Republican ticket. Obviously the truth of HUD fraud and narcotics trafficking in South Central LA was not something that either the Republicans or Democrats wanted to come to light.

While I never dreamed that I would circulate the truth of Kemp's behavior at HUD publicly at that time (and it took years of being targeted before I was willing to do so), the possibility may have been on the mind of both Kemp and Dole's campaign manager, Scott Reed, as my company was working for HUD, then led by Secretary Henry Cisneros who was a Democratic politician from Texas. The notion of neutralizing both Cisneros and Fitts with a fake scandal may have been attractive.

During 1998-1999, I dictated nine hours of recollections. The first hour or so were recorded with a cold in a Corvette on the highway.

After shipping the cassettes over to my attorneys, one of my colleagues asked me if they could listen to them. To my surprise, they found the Kemp Tapes remarkably interesting and informative. They said that they felt like they were walking around inside "how the money works" for the first time in their life. As a result, others wanted to listen and then others, and over time hundreds of cassette six-packs circulated among researchers interested in Iran Contra, HUD and financial fraud.

This is simply story after story, including the story of Kemp telling me that he would not come to my house for a party because my house was bigger than his house and he "would find it castrating". There is the story of Kemp ordering me to lengthen my skirts. And the story of the efforts to illegally award project subsidy to Andrew Cuomo in New York. And stories that describe the scenes created when billions of waste and Iran Contra fraud are being covered up. I left a few particularly sensitive stories out, but otherwise this is HUD raw.

===============================================

Anita Langley of Black Op Radio has posted The Kemp Tapes at their Hidden Room site:

http://mindgallery.com/hiddenroom/

With the following descriptions:

"The Kemp Tapes - recollections of corruption. Catherine Austin Fitts discusses her work as Assistant Secretary of Housing. There are 12 segments, each approximately 45 minutes. The first two are quite difficult to hear, but it gets easier. I, II, III, IV, V, VI, VII, VIII, IX, X, XI, XII."
===============================================

Much of what I learned about Iran Contra fraud came after I recorded the tapes. By reading and studying the available written material about HUD fraud and then estimating out how the money worked on the various stories, I developed a much better understanding in hindsight of what had really been happening.

For those interested in Frank Keating's recent role in the Catholic Church commission related to sex abuses, these tapes may also be useful.

There are a few stories that do not get told in full. One raises questions about whether or not Kemp was part of the Franklin Cover Up pedophilia rings. I add it here from an old internet archive (with a few edits) in the interest of insuring no material ommissions from the record:

***************************************************

Stopping an Illegal Funding Action in 1989 by Kemp for Cuomo:
An example of the power of sexual blackmail or "control files" to manipulate government officials for money?

I was a meeting in 1989 and Al DelaBovi, the Undersecretary, pulled me aside and told me to send project based certificates to Abe Biederman at New York HDC (Housing Development Corporation) immediately. I said something to the effect of "Al, we are in the middle of a mod rehab funding scandal, where you and the Secretary are attacking the former HUD officials and the current career staff for stearing project based subsidy to specific projects, as you are now ordering me to do (a big % of this mod rehab pie during Iran Contra benefited the Iran Contra networks and involved certainly Boston Financial and possibly Harvard Endowment who took Buffet out of his equity position in NHP in 1989}. DelaBovi looked a combination of scared and pleading and said, please just do it. I said, Al, I can't do it. You are talking about legal and political suicide. Meantime, I told him I would try to learn more about whether there was a legal pathway but I doubted it.

A day or so later, Al and I ended up in Kemp's office, with Kemp insisting that I send the project based certificates to New York HDC. I explained to
him how dangerous this was for him. He said he did not care, to do it. The
only way I can describe his demeanor was that of terror, something I had
never seen Jack in the throws of before. It was almost like his fear had
replaced all ambition, judgement, discernment. It was scarey.

I then left to go on a field trip. I was in a field office and one of my
deputies called me. Al DelliBovi had gotten a series of my deputies together as well as the appropriate career official and arranged for the project based certificates to be promised to NY HDC out of the next years
approrpiation (this is a violation of the anti-deficiancy act, among other
things.) After calling Biederman at HDC to assure him we would replenish his inventory and he could go ahead and fund the project, he made another call and said to the party in Italian, "It's done."

My deputies informed me later that the money was to fund one of Andrew
Cuomo's homeless homes and he had called Andrew. As I had handled a lot of Dillon Read's New York State and City municipal business, I was clear that Andrew had been raising money for his dad since a very young age, and from what I saw on Wall Street considered law and ethics to be a bore and nothing that he had to bother with. His operation was pretty much what I call "Long Island Town Supervisor" in style.

I called Frank Keating, the General Counsel, now Governor of Oklahoma, who had such a major hand in helping to reinvent HUD as a enforcement agency, and who would understand the political risk of such a criminal violation, and asked him to interceded. He did, and after a day talking to Jack and Al, the trade was reversed.

It was not until I did the chronology and looked at the timing of the
Washington Times stories on the homosexual prostitution rings that I started to realize the possible connection. The Franklin Cover Up by John De Camp gives a sense that this Washington Times story may have been the tip of the iceberg. That prostitution and pedophila networks were being used for covert ops to win favor from and/or blackmail DC politicians. Looking at the chronology and some of Kemps more irratic behavior, it is a distinct possibility that Kemp was nervous about exposure of his own activities.

For a copy of one of the Washington Times stories, see
http://www.thelawparty.org/WTpage1.gif

One of my deputies tried to warn me about this at the time. He was the most understated and discrete of people and would never engage in gossip. He would only say things like this to me if he considered essential to protect me or the operation from "stepping in it". He pulled me aside and said that folks who worked on Kemp's campaign staff who he absolutely trusted had confided in him that Kemp's sexual activities were far worse than merely bi-sexual and to be very careful. Looking back on it now, I realize he was probably trying to give me a heads up on the pedophilia problem. At the time, I was simply too dense to believe this and Iran Contra and CIA drug dealing were really going on. It was just too far a leap for me. Oh, well.

For the longest time, I never could come up with a rational explanation for how Andrew Cuomo could induce such terror in Jack Kemp in 1989. Now, I have a plausible one, although that does not make it true. If Cuomo and his dad were an intimate part of the shadow government financial fraud network we are discussing, he and the network would have easy access to the necessary pictures, vidoes and various blackmail material needed to ensure they got what they wanted out of HUD. No doubt if the Clintons were helping to run Mena for Bush's Enterprise during Iran-Contra, surely the Cuomo's in New York would have had some major action. Various Mena allegations allege that the Gotti family were helping to distribute in NY.

Anyway, that is my personal experience with how Andrew Cuomo as a private developer in a law practice and "campaign fundraising manager" for his dad, the Governor of the State of New York, thought that New York's HUD homeless funding should be managed in 1989 and why Kemp was on board for so much corruption and fraud in Bush I -- and so effective at covering up Iran Contra fraud.

Easy to understand now why Fitts and her financial disclosure and place based transparency had to go.

Since that time, I have read and been told that extensive "control file" systems are in existence. Corporate and government leaders do not go above a certain level of responsibility unless they have a "control file." It is a bit like J.Edgar Hoover's dirty pictures. I am told that if the powers that be can not get a control file on a person, that ultimately they are targeted and discredited like me or "suicided" like the many people who ended up on the website "death lists." This was said to include Bill Colby who was instrumental in helping John DeCamp write and publish The Franklin Cover Up and win his lawsuit for one of the mind controlled children involved in the pedophilia ring.

So many people ask me, Why are people allowing this to go on?

To which I always answer, When and how can we create a mechanism for people like me who refuse to go along to be supported through the onslaught of smear, harrassment and expense?

[Guest]

Catherine, I've begun listening to the Kemp tapes. Fascinating. I gave up on tapes 1 and 2, too much background noise, but got through tape 3.

I'm a fast typer, so I did a transcript of it on the fly. If I get a chance, I'll type up the other tapes as I listen to them as well. There were a couple of words I didn't get, I marked them with TK, short for "to come." If you get a chance, you can correct these words.

I also have one question -- What's capitalized insurance? (Re Puller's 18% default on insurance portfolio anecdote, in this transcript below.)


*********************************************************************************************************
TRANSCRIPT OF THE KEMP TAPES, TAPE 3
Transcribed by Thomas Hartman
http://www.geocities.com/solaridatabank/

Note: TK = To Come, I'm not 100% sure I transcribed correctly, check back later
Also, See discussion on solariactionnetwork forum:

*********************************************************************************************************


Jack Kemp's staff was concerned about corruption at HUD before I got
there.

How much of corruption was lack of internal control, how much corruption,
how much just politics?

Reagan administration hadn't managed money properly, actually no
administration had, except cisneros, but cisneros and his team got
screwed for it.

IG had been documenting problems at HUD, then dropped it into Kemp´s lap.
Every day a new headline related to HUD. Tremendous pressure on me to
understand what was going on, and to communicate with Kemp and implement
reforms.

Between GAO, IG office, independent auditors, OMB, congressional
auditors, there were more auditors auditing than people doing.

But even if you read all the reports, you could never get a clear sense
of what was really going on. There were 7000 people working for FHA,
that many including press and auditors, and all the auditors were left
brain people.

I proceeded to have my team do the "comic book", 100 pages of graphs
explaining how stuff works. This much single family, this much multi
family, by type of mortgage, by place, so on.

I asked for the budget. Read it. Asked, how much money are we making or
losing per year.
Staff said, we don`t know, that's not in the budget. What I came to
understand was, you can give credit to give away a lot more money and
make home builders and realtors happy if there aren't internal controls.
So budget was pretty irrelevant budget. Turned out we were losing 11
million a day in the single family fund, you couldn`t tell that from the
budget. I said to the controller guy, we need independent audited
financial statement. He said we couldn`t afford it. (This is on a
portfolio of 320 billion.) B, he said, we don't need audits because we
were audited a couple of years ago. Scary.

After the comic book I did Spic N Span, went office by office, broke
organization down, what`s this office, what´s problems, what`s caused the
problems and what's needed to fix them.

Problem was that leadership was very insecure high turnover. So you had
an organization not managed to principals of performance, subject to very
high turnover, volatile interaction with politics. Essence of the
problem was that the FHA required by law to run single family fund on an
actuarially sound basis, and all programs were required by law to be run
on an actuarially clear basis. Myth legally was the organization was run
for the taxpayers, but the reality was the organization was run as a
patronage operation. And the schizophrenia of that was eating the
politicians alive and eating the organization alive. For example,
gridlock was not a reflection of an inefficient bureaucracy, gridlock was
a plan.

Example. Three ways you can allocate 4 billion of multifamily insurance
a year. 1 is to price it at the market. So 4 billion of demand for 4
billion of profit, supply and balance equate. Or you can lower the rate,
subsidizing. Or if you can`t equate supply and demand through price, you
can equate supply and demand through policy criteria. So you can say, we
have 25 billion demand, we give first choice to blue dot, second choice
to red dot, write it out and give it to field offices, they carry it out.
Problem is, then you have to be very honest about what your policy goals
are, and then all the people who didn't get the policy come to your
office to whine and complain about why they didn't get the subsidy. Then
there's the third way. This is, you are horribly unclear about who'se
first second and third, let everything gridlock, then let politics decide
who makes it through and who doesn't, or certain types of people who know
how to work the system. This third way, "unintentional" intentional
gridlock, is how you can implement policy goals that you couldn't
possibly implement in writing.

The Kemp people didn't understand that when they got there. And it
became more and more painful for them to explain to the press that they
were going to do one thing, and then turn around and do the opposite
thing for politics.

What was amazing, was the extent to which the organization was run by
homebuilders and congress. Congressmen's office reserved the right to
call up the multifamily insurance staff offices, and tell them what they
were and weren't going to do, and the multifamily staff truly thought
they had to do it that way.

What was strange pretty early on in the scandal, my focus was figuring
out how the money worked, figuring out what went wrong, and figuring out
what the secretary wanted and then implementing it. But it was pretty
hard to do that because the secretary would tell the press we were going
to this thing, and then he would hate the ramifications of doing that
thing he ordered, or he would want the opposite done and not admit it to
me, so I was constantly in the situation where he would order us to do
red, then punish us for doing red, then proceed to order my deputees that
he really wanted blue but not to tell me.

I was required to run the operation in accordance with certain financial
laws and controls and algebraic principals, and he wanted to say we were
doing things according to taxpayers purposes but be able to do the
opposite and not have that conflict. And of course the world doesn`t
work that way because all the boxes come together into one system, they
all come together in the money.

Another thing that happened when I did spic and span, I did a green line.
Essentially I went through every operation, figuring out, what was every
branch supposed to be doing, how many hours would that take, and how much
capacity did they have. So what we figured out of course was that by law,
we were supposed to be doing 10000 hours of stuff. But we only had 2000
hours of staff time. But in terms of organizational balance the bigger
problem was you couldn't fire the difficult guys, you couldn't reengineer
or delete ridiculous functions, or you didn't have the expertise to
reengineer it so you could do that thing in far fewer hours. It's what I
used to call trying to run an airport with 6000 maintenance men and no
pilots.

A real imbalance, because for example, just responding to audits and
investigations and related requests, could eat up 100% of the time of
certain divisions and branches so they couldn't do their real work, they
just had to sit around all day and respond to audits of people auditing
how they were doing what they were doing, instead of doing what they were
supposed to be doing. It was ridiculous and of course the more problems
there were, the response was to add more auditors. So what you had, if
you've ever read edward Demming, you had sort of a negative feedback loop
where everybody responded to symptoms, never looked at the thing whole,
and their response to symptoms was to do more top down enforcement
auditing kinds of things that would do nothing fundamentally but weaken
the line and put more burden on the line, so you were forcing implosion
of your line management talent and operation, and there was a lot of
ambivelance within the organization about wanting to build a strong line
operation that could attend to these things you said you wanted attended
to, but then that if you built a strong line operation that it wouldn't
the criminal illegal and other politically corrupt things that you wanted
the line to do. So there was an operation with a built in ambivelance
around the money.

A perfect example was what happened early on, with Mod Rehab, one of the
early scandals was that Mod Rehab money had been allocated without a
really true competitive process in the early years Reagan, and Kemp and
the press made a big deal about this. Most of this was simply in
violation of the regs and ethics. Reason it had given as much offense
as it had was Mod Rehab had been combined with tax credits in a way that
caused developers to get truly windfall profits before the market started
to get truly competitive around the tax profits.

Anyway, during the process Keating who was general counsel, and Delli Bovi were both pretty aggressive about blaming the career staff in the
section 8 and Mod Rehab area and my area for letting the politicals do
that kind of thing. So in that environment Jack gets it in his head that
he wants to allocate project based certificates to a project in new york,
in violation of the procedures we've now installed so that this could now
never happen on our watch. So one day I'm in a meeting and Delli Bovi
actually pulls me aside and says, I want you to send this many project
based certificates to Abe Biedermann of HDC in New York. And I said, Al
are you crazy, what you're asking me to do, is exactly what we've just
stood up in the papers and said was wrong for the Reagan administration
to do, and we've just now put in a whole bunch of proceedures and now
you're asking me to do it. But there's something even more important,
we're out of project based certificates for the year. And Al said, just
promise them next year's, and I said, Al that is a violation of the
anti-Deficiency act, that is illegal, you are ordering me to do something
that is illegal. But wait, let me make this more clear to you. If I'm
going to have to do this, I would have to pull up a bunch of career
bureaucrats who came in here, just sat around and got criticized for
letting the Reagan guys do this. So how long do we think it's going to
take for them to call up the New York times and the IG Hotline and report
us for doing this. I mean, forget that it's illegal, and forget that
it's unethical, and forget that we said we would never do this. Let me
assure you, we will get caught. We will absolutely get caught. And al
said, just do it anyway. And I said, no Al, I'm not going to do it. And
Al said, well, you've got to talk to talk to Jack.

So the two of us went in, it was one of the few times Al ever let me in
in front of Jack, and Jack said, you know, I want you to do it.

And Jack seemed scared to death.

And I said, Jack, you can't do this. You will get caught. This is too
dangerous. You cannot do it. And he just looked and me and said, do it.
And I said, Mr. Secretary, I can't do it. One it's illegal, but two
you're going to get caught, we're all going to get caught. You can't do
it. Let me see if there is another way, but I have to tell you, we can't
do it.

So I left the office thinking, what in the world is giong on.

I had to go to Chicago shortly thereafter. I called in and found in from
Jim Loag (TK?) the deputy assistant secretary of Multifamilies, and what
Jim Loag tells me is that while I've been out, Delli Bovi has gotten my
general deputy Peter Monroe, and Jim Loag, and Larry Goldberger who runs
the Mod Rehab area, he's arranged for them to send the certificates, and
he's pulled them into his office and told Abe Biederman of HDC and said
to them in Italian, "it's done." In front of all of them. So I called
Keating, who was the general counsel, and I said, Frank, uh, what Al just
did is illegal. It's agains the law. And he just did it in a way that a
lot of people are going to find out about that. Now, you are the general
counsel and I understand that you don't care about the law, but I
understand that you do care about politics. So what I'm going to tell
you is, you have got to unwind this.

Now.

Because this is very dangerous.

So, Frank hung up and went in and worked on Jack and Delli Bovi and got it
unwound. What I found out subsequent to that was that the certificates
promised were for one of Andrew Cuomo's first homeless project in New
York. Now, sort of the training partner politics around D'amato... Mario
Cuomo, Andrew Cuomo, and Jack Kemp were always very intimate and
interesting. But what was amazing about the whole story was, how afraid
Jack was. He was scared to death. And, he didn't care what kind of
press or problems we had getting those project based certificates to
Andrew, he was scared to death, I will never forget his face.

I have no idea what that means, but it said to me that the relationships
between Jack D'Amato and the Cuomos were, um, exponential amount of dirty
pictures on each other. But that was my first sort of Kemp and Cuomo
experience.

Um, one of the pieces of the scandal that was the most... evil... was
coinsurance.

Coinsurance had been a process by which the origination of multifamily
insurance had been delegated to mortgage banking companies during the
Reagan administration. They had issued about 9 billion dollars of
multifamily insurance through coinsurance. The program was very poorly
structured and designed, and had a bunch of bad players in it. The whole
situation was made worse by the fact that the real estate market had been
overinflated during the eighties and after passive losses were cancelled
in 86 and the market topped out on top of that, you had tremendous mark
to markets. And so a combination of a poorly structured managed program,
plus a lot of sort of TK? behavior by some of the players, plus the
market marking down tremendously in 1989 meant you had a 9 billion dollar
portfolio that was -- a mess.

When I first got there Jim Schillinberger who was the number two general
deputy, so associate general deputy, pulled on my shirt and said you got
to look at coinsurance, we got a real problem here. And I knew nothing
about multifamily insurance, the only thing I knew about multifamily
insurance was that while I was on wall street all the people who did it
were just, ugh, horrible, it was kind of the bottom of the barrel. And
so, ah, my first encounter was that one of the coinsurers was a guy named
Puller, and he had a portfolio of about 400 million dollars which he had
originated. And my staff came to me because they wanted to advance him
money to help him keep his portfolio afloat, and they needed my approval
because FHA had promised the IG that they would never do that again.

So I got in a room with about thirty people and they give me a copy of
the portfolio, and you have to understand I know nothing about
coinsurance, I know nothing about multifamily insurance, and I look at
the portfolio and i say ok this guy's issued about 400 million dollars of
multifamily insurance in three years, so about 130 million plus a year.
And the majority of what he's issued is new construction with three year
capitalized interest. And already the portfolio has an eighteen percent
default rate. Now, if you're issuing insurance in 86, 87, 88, with three
years capitalized interest, how can you already have a default rate of
18%?

[TPH Note: Capitalized interest financing is one in which you borrow money to pay the interest for the first 18-36 months.]

And we calculated at the time that we were gonna lose 50 cents on the
dollar. Meantime we're charging 50 basis points for the insurance
premium. I said, ok, so we're defaulting 18 cents on the dollar, we're
losing 9 cents on the dollar if you figure we're recovering 50 cents on
the dollar (we weren't actually, but at that time that was the number we
were using), and we're charging a half a cent. So for every dollar this
guy originates we lose 9 cents, and we charge him a half a cent. Now why
would we want to advance money to this guy to have him keep going? Why
would we lend a guy money so he could continue to issue our credit, upon
which we're going to continue to use 8 and a half cents automatically?
Why would we do that?

Now, no one would look at me, everybody was looking at their feet. And I
said, look I just don't understand how this works, but I must be missing
something. And finally Frank Brown, who ran the office at Multifamily
Insurance, who was a brave man, looked at me and said, Mr. Puller is a
major Republican contributor.

I went ballistic.

I said, *I'm* a major Republican contributor! But when you're a major
Republican contributor they give you -- cuff links. They don't give you
400 million dollars of federal credit to just like, spend and give to
your friends and you know, irregardless of anything.

[TPH Note: CAF raised ~$100,000 for Bush I presidential campaign.]

And I, I thought to myself, what in the world is going on here?

I don't care how much... I mean, let's say Mr. Puller raised a million
dollar for the Republican party. You don't have the tax payers lose, and
I figured on this portfolio they were going to lose like 50 million
bucks, you don't spend 50 million of the taxpayers dollars to get a
million. I mean that's stupid politics.

So I thought, ugh, god, these guys are not only corrupt, they're just
hugely -- they don't know how to optimize their campaign dollars. Anyway
so I said, well, you know, we're not advancing the money, Mr. Puller's
going down. So, I get back to my office, and in 20 minutes, the AA, top
staffer for one of the senators of Indian, which is where Mr. Puller's
company is located -- calls me. Very gruff. Very hostile. Saying, how
dare you, blah blah blah.

So I said to -- let's call this guy Harry. I said, Harry, uh, before you
go any further, let me say a couple of things to you. You don't know me,
but I came to this position from Dillon Read and Cmpany where I was a
partner. Uh, I have an MBA in finance from Wharton. I'm on the Wharton
advisory board, I believe you know Senator Brady. He's secretary of
treasury, he was my partner at Dillon Read. I said, I have been through
Mr. Puller's portfolio, and I have been through how he operates his
business, and I am... I know your senator by reputation, and I know him
to be a man of great integrity, and an impeccable reputation. And I know
that if he knew -- and you knew -- what I know, about Mr. Puller's
business, that he would be very grateful that I am never going to tell
anyone his name and that you made this call on his behalf.

And there was about a long ten second silence.

And the guy said, oohhh, thank you, I really appreciate that. Uh, I'm
real sorry I called. Never mind. Bye. And hangs up.

And I thought, well that bluff worked. Maybe.

About five minutes later I get called up into Jack's office with the
thirty members of principal staff, and I get screamed at for half an
hour, literally at top lung. I mean he is just screaming as loud as he
can, calling me names, how dare you shut this company down, blah blah
blah, who do you think you are, blah blah blah. And I said, uh, Jack.
You ordered me to not let any of the coinsurers, uh, get away with
anything. Now, what this guy has been doing is incompetent, it may even
be illegal. I'm not kicking him out, I'm not doing anything. I'm simply
not lending him two million dollars, which I'm not supposed to do under
the rules, and which I promised, which actually FHA has promised, the
Inspector General it won't do again. So, what I've done is ruled that we
will not lend him cash, which is not our business. It's not part of the
program. As a result, his business is going to fail. But his business
is going to fail, because his business is extremely, uh -- because his
business deserves to fail. I don't know what you would have me do.

Well it's interesting because Jack could never take emotional
responsibility for the political ramifications of implementing his own
policies. So if Jack ordered us to do something and that made somebody
happy, or if that made somebody unhappy, then we would have to be
punished for their unhappiness. Because Jack could never face the thing
whole. He could never grapple with the fact that he couldn't do it clean
and dirty at the same time. Why he couldn't grapple with that or
understand that, I don't know. I dealt with for eighteen months on the
same situation, again and again and again. And it was as though I was
dealing with a twelve year old child, who couldn't emotionally deal with
the concrete. And couldn't emotionally deal with accountability. And I
think it was one of the reasons why I came to believe that Jack was one
of the most unhealthy personalities I've ever dealt with, but why I truly
believe if there hadn't been some kind of press, Jack would have used
physical violence to get his way. Whatever Hitler or Kaddafi was capable
of, Jack was absolutely capable of. And the only reason why he doesn't
do it is, he thinks he would get caught, and then he wouldn't get to be
president. But the extent of his emotional immaturity and inability to
deal with concrete operational reality, to this day, astonishes me.

The coinsurance story is a long story but to give you a sense of where it
went, we decided that we would try and save the program, because we were
cancelling so many programs that we decided we would try and save it.
When we couldn't save it, the manner in which it was cancelled was
particularly immature. Jack just decided at some point he needed a
headline. And Frank Keating was pushing, and Delli Bovi was pushing. I
had no problem cancelling it, other than the fact that Jack had promised
everybody we would try and keep it going, so I was trying to do what he
wanted. What was disturbing was, when we did cancel it, they finally
realized that we would need a way to originate new insurance. And they
decided to cancel it, and then get me to say that we would have a
delegating processing function up and running within a certain amount of
time. And I'd made very clear all along that that was not possible.
However when they started to write the press release, they decided they'd
change their mind, and they now needed delegating processing contiguous
with closing the program down. And I said, no guys, as we've discussed
over the past thirty days it's going to take six to eighteen months. And
what you want is not possible. We've agreed it's not possible, we've
told you it's not possible, and so the answer is, no. I'm not going to
say it, and I'm not possible to design the program, put the contracts
out, or do any of that stuff within that period of time. It's not
possible.

But it's amazing, as usual they didn't want to deal with the substance,
they just wanted to make something up and then blame someone else when it
didn't happen. They didn't care whether delegating processing worked or
not, or whether it ever got up, as long as they could say in the press
release that it would. So if it didn't they didn't care, as long as they
could blame somebody else when that happened.

When we cancelled the program, there were a series of things we could do
to protect the outstanding portfolio of losses and defaults. And I came
forward with a package of things that could be done, that I estimated
would save the federal government half a billion to three quarters of a
billion dollars, and prevent an operational nightmare. Delli Bovi and
Frank Keating and the whole group didn't want to do those, because they
felt that they might be the basis by which some coinsurers made windfall
profits. And, Delli Bovi said, you know Jack's never going to approve
these.

And I said, Al, look, let me be really honest. Under the statute I ami
required to run the funds according to fiduciary principles and the
Secretary is free at any time to overrule me, as the president is free to
overrule him. However, because the taxpayers will lose half a billion
dollars or more if we don't do these, I need the secretary to formally
overrule me. I'm a fiduciary, I must do what is in the taxpayers best
interests, unless I am overruled in writing by the secretary. And so, I
must discuss this with him and I must get a clear order from him. And Al
looked at me with this look that said, oh no, this is going to be
horrible.

And so, I went to a meeting, and Jack of course rigged up a thing with 30
other staff members, and Jack asked every person and principal staff to
say what they would do. And you have to understand there was a bizarre
mob psychology culture, it was like a lynch mob atmosphere, working for
Jack. And we went around the room, and every principal staff said that
they would never do this, it was a terrible idea what I was recommending,
blah blah blah. And we got to Frank Keating who was the general counsel.

And Frank said, you know Jack, these coinsurers are -- parasites. They
are leeches. And I say, fuck em, just fuck em. And, this is how we deal
with waste fraud and abuse, and fuck these people... he must have used
the F word ten times. And it was pretty outrageous, even Jack said, well
you know, some of these are businesses that are only doing what we asked
them to do, I mean they're not all criminals. And uh, of course, Frank
wasn't even referring to the fact that we had contracts with them and all
sorts of other stuff. So we go around the room and everybody said that
what I'm recommending makes no sense and under no circumstances would
they do it. So Jack says to me, having stacked the deck, well, I can't
imagine what you could say that could redeem your position.

And I said well Jack, it's pretty simple. It comes down to the criteria
upon which you base your recommendation and decision. I said, the thirty
people who have spoken so far are basing their recommendation on what is
good or not good for coinsurers, the belief being that if we do this,
that some coinsurers might be better off than they might be otherwise,
and we can't afford to have anyone think that we're giving benefits or
helping coinsurers, that would be bad for our image. But their criteria
relates to what is or is not for coinsurers and whether that's good or
not.

My criteria is based on what is good for the American taxpayers and what
is in the best interest of the agency. And I said, I believe that the
American taxpayers will protect half a billion more of value, and avoid
an operational mess, in the orderly liquidation of the existing
portfolios. And I said, I've asked Price Waterhouse to prepare these
estimates and these estimates are coming from Price Waterhouse. Now, I
don't disagree that some coinsurers will be financially better off, you
know, win win, under my proposal than if we don't do this proposal. But
my concern is not to insure that they don't do well, my concern is to
make sure that the taxpayers and the agency do as well as possible.

And Jack looked at me. He was so stunned. It was inconceivable to him
that I would say anything that would change his mind. And then suddenly
he realised that he was in an extremely dangerous position, because he
was about to spend half a billion to three quarters of a billion dollars
so that he could look -- tough, when there was absolutely no financial
merit. And when you realise that the average american makes $17.50 an
hour and pays a third of that in taxes, you're talking about, at six
bucks an hour, how many hours are american taxpayers going to have to
work to pay for that half a billion to three quarters of a million
dollars. So that Jack can look tough. It's an awful lot of money for
the american people to have to pay, so that Jack can look tough.

So, Jack says, I think I'm going to think about it overnight, but I want
to talk to OMB. The long and the short of it is, he gets my deputy Peter
Monroe, who I'll explain more about later, and one of the special
assistants for Delli Bovi, and he has them call Ken Ryder at OMB. And do a
series of things that I'll describe in a second.

The next day we come back together for a meeting and he said, I've talked
to Dick Darman, and Dick Darman does not want to do Austin's
recommendations [TPH note, Catherine Austin Fitts], so we're not going to
do them, and that's OMB's decision. So I thought to myself, this doesn't
make any sense. Why would dick Darman ever intercede on a 9 billion
dollar coinsurance portfolio. So I called Ken Ryder and I said, Ken, did
Dick Darman really make this decision?

And he said, of course not, Dick Darman doesn't know a thing about this,
don't be ridiculous. And I said, well did you say that we shouldn't do
this? And he said, sure. Peter Monroe and Lloyd Jason called me last
night and said that you wanted to make sure that these things didn't
happen, and was that okay with us, and I said sure. Because, Austin, if
that's what you want, then I know that's the financially proper thing to
do.

And I said, well, Ken, it's the opposite. I recommended, and I'll send
you the memo, that we do these things.

And he said, God, I'm sorry, but that's what Peter Monroe said.

And I said, thanks Ken. And hung up.

So what Jack had done was, tried to my deputy and Delli Bovi's deputy, to
rig something at OMB, in a way that I took responsibility for the result.
Now that happened constantly. That was a, uh, classic thing to do. But
um, it's the perfect example of the Washington politician who will spend
literally billions of

-- END TAPE 3.

[Catherine]

Thomas...

In your transcript, you have million where it should be billion. Don't know if it was me or you"

So...

spend half a million to three quarters of a million dollars

Sbould be

spend half a billion to three quarters of a billion dollars.

Thanks,

Catherine

[Guest]

Please see

http://www.solariactionnetwork.com/phpBB2/viewtopic.php?p=2043#2043

for a 10 Hour Project Proposal to promote the Kemp Tapes via filesharing networks.

[Guest]

First of all, the above link to the washington post story snapshot describing the washington pedophilia ring is dead.

this link works:

http://sf.indymedia.org/news/2003/02/1570946.php. Someone may want to archive this if it's really important.

Secondly, the washington times is a Reverend Sun Myung Moon operation, ie, the moonies. So just on the basis of that, I would take it with a few healthy heapings of salt.

Has the washington times had any major scoops besides the pedophilia ring thing?

Thomas.[/i]

[Guest]

http://www.amazon.com/gp/reader/0963215809/ref=sib_dp_rdr/002-5737807-4277663#reader-page

[Guest]

Unclean! Unclean!

Main sources (keywords) on this seem to be alex jones, john decamp. Catherine, again, take on alex jones/infowars?

Thomas.

[Guest]

[The Secret Team]

you used to have a Corvette. What year? I love those cars. Silly I know, but, what do you expect from guys raised on hot wheels.