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August 7, 2007  


In 1995, a senior Clinton Administration official shared with me the Administration's targets for Fannie Mae and Freddie Mac mortgage volumes in low- and moderate-income communities. We had recently reviewed the Administration’s plans to increase government mortgage guarantees — most of these mortgages would also be pooled and sold as securities to investors. Even in 1995, I could see that these plans would create unserviceable debt loads in communities struggling with the falling incomes expected from globalization. Homeowners would default on mortgages while losses on mortgage-backed securities would drain retirement savings from 401(k)s and pension plans. Taxpayers would ultimately be hit with a large bill . . . but insiders would make a bundle.

I looked at the official and said that the Administration was planning on issuing more mortgages than there were houses or residents. “Shut up, this is none of your business,” the official snapped back.

Recently, we have seen numerous press accounts of bank and hedge fund losses from sub-prime mortgages. Remarkably, these reports imply that the losses are the result of a market downturn or contracting credit cycle. But there has been no mention of the extraordinary profits that were generated or who reaped them. There is no mention of who is poised to make a fortune on the bubble collapse. Even the most sophisticated commentators of our day are describing this financial coup d'etat as the unintentional consequence of "market forces."

To help the Solari network survive and thrive, I have written and spoken about the intentional engineering of the U.S. housing bubble and its ramifications for Americans and global investors. "Do not attempt to cure what you do not understand" is our motto for navigating the gathering storm. As we work to mitigate investment losses in the mortgage market and the harm done to communities through the fraudulent inducement of debt, we are well served to understand what has happened, who is benefiting, and why. The following resources will help.

— Catherine Austin Fitts    
Housing Bubble

As Assistant Secretary of Housing under Bush I, I helped work out the '80s housing bubble collapse. Then as lead FHA financial advisor under Clinton, I watched the engineering of today's housing bubble. In this Solari Audio Seminar, you will share an insider's view of the deeper history of the bipartisan manipulation of the housing and mortgage markets.
"Navigate the Housing Bubble" at the Solari Store


Part of understanding today's housing bubble is understanding the stock profits generated from the gentrification of communities. My case study Dillon, Read & Co. Inc. and the Aristocracy of Stock Profits shows how Wall Street and Washington insiders engineer War on Drug and prison policies and contracts as they engineer the explosion in subprime mortgage credit. When you look through the "pump and dump" of the mortgage and stock markets what you see is the "pumping and dumping" of real communities.


One way to understand the housing bubble is to understand the alternatives that were rejected. Rather than load Americans up with debt, we could have promoted new skills and financed small business and communities with equity. In The Story of Edgewood Technology Services, I take you "inside the Beltway" to see a surprising array of groups who preferred a bubble to building real wealth.

  Blog Updates
Cramer Melts Down. Market, Too?
"U.S. Housing is Among ‘Biggest Bubbles,’ Rogers Says"
By Chen Shiyin & Pimm Fox - (3 Aug 2007)
"Too Big to Fail: Germany Rescues Subprime Lender"
By Tim Bartz, et al. - Financial Times, London (1 Aug 2007)

© Solari, Inc. 2007

Disclaimer: Nothing in this Solari Update should be taken as individual investment advice. Anyone seeking investment advice for his or her personal financial situation is advised to seek out a qualified advisor or advisors and provide as much information as possible to the advisor in order that such advisor can take into account all relevant circumstances, objectives, and risks before rendering an opinion as to the appropriate investment strategy.