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Original: http://scoop.co.nz/stories/HL0304/S00197.htm
Link here: http://blog.lege.net/content/Mapping_the_Real_Deal__The_American_Tapeworm__Part_3.html
Real Deal: Economic Resurrection for My Neighbors
Wednesday, 23 April 2003, 11:49 am
Column: Catherine Austin Fitts
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Mapping the Real Deal…
SOLARI
RISING
An Illumination of Economic
Resurrection for My Neighbors at Easter Time
By Catherine Austin Fitts
"Arise, shine: for thy light is come, and the glory of the
Lord is risen upon thee.
For, behold, the darkness shall
cover the earth, and gross darkness the people:
But the
Lord shall arise upon thee and his glory shall be seen upon
thee.
And the Gentiles shall come to thy light, and Kings
to the brightness of thy rising."
--Isaiah 60:1-3
April 2003
Willits Family Trucking Enterprises
250 Powell
Street
Hickory Valley, TN 38042
Dear Ruth &
Joe,
This morning in Women’s Bible Class, Ruth asked
for prayers for your trucking business. Your request struck
a chord. I know you both to be extremely excellent,
hardworking people If your trucking business is not doing
what you want it to, it is not for lack of performance on
your part. This is true not just for you but also for many
fine people in our area. What to do?
To celebrate a
beautiful spring day after church, I went outside and lay
under my Tennessee poplar tree to pray about our economic
dilemma. The following thoughts emerged from that time. The
long and short of it is that we need to start a solari here
in Hardeman County. However, let me build up to
that.
************** What Tennessee
Truckers Need
What most independent Tennessee
truckers need are:
· Lower Expenses:
Profits can be maintained with lower revenues if we can
lower our expenses. So this is critical. One of the expenses
that is eating us all alive is our interest expense . As
the economy slows, we need to ensure that our businesses are
not eaten alive by debt service and the time consuming
hassles of dealing with too much debt. Another is the
amortization of back office expenses through a co-op
mechanism that protects independent truckers from being out
competed by large organizations who can afford to pay for
cross cutting capacity that lower s variable
expenses.
· Equity Financing: Small
truckers in Tennessee are paying substantially more for
capital to fund our businesses than the corporations who are
accessing our state and local pension funds and other
savings through the stock market. Hence, we are financing
large corporations in a manner that disadvantages our own
businesses competing in the marketplace. Worse yet, pension
fund performance is poor as corporations like Enron &
WorldCom and venture capital like dot.com pump and dump
stock market frauds cannot produce the yields on investment
of our savings that our own honest small business can.
· More Revenues: As the economy slows, the
question is how we generate sustainable revenues for our
trucking businesses. If we are going to be attractive to
equity investors, our market needs to be healthy in both
short and long term. Besides, the best way to finance a
business is with
profits.
************** Conversion
to Equity Financing using the Solari Model
Linked
at the bottom is a copy of my article, “
Solari & the Rise of the Rule of Law.” It describes the
solari model in detail. The solari model is a mechanism
designed to allow small business, farm and local real estate
to access local and global venture and stock markets with
non-voting equity.
It does so in a manner that preserves
entrepreneurial control of individual businesses and local
control of a solari co-op type equity pool in a structure
that encourages cooperation and investment in cross cutting
functions like marketing and back office. The solari model
is also responsive to a growing demand for “place based”
equity investments and risk management by investors.
Among other things, place based equity investments create an
opportunity for private capital to benefit from improvements
in the environment, education and safety.
I would
think that the ideal way to start a solari (a databank and
investment advisor for a place) would be to do so with local
institutions who would see this kind of venture
capital/equity investment business as a complimentary add on
to their existing business. Two institutions that strike me
as ideal to explore are one of the local banks such as
Farmers & Merchants Bank and the Hardeman County Farm Co-op
who combine a variety of financial management and asset
management experience and skills. With the economy slowing
down, I would think that such an opportunity could generate
income and market flow for them – something that would be
good for all of us.
The best way to finance one or
more equity pools would be a community offering of
non-voting shares to people in the area combined with a sale
to one or more state and local pension funds or corporate
pension funds of companies headquartered in Tennessee. The
specifics are something that would benefit from consultation
with a variety of parties, but would certainly include
Eleanor Gordon here in Hickory Valley who is a local leader
with significant knowledge and experience in both banking
and business, and her son, Maxwell , who is a banker with
First Tennessee bank in Memphis. I do not know the Chamber
of Commerce in Hardeman County, but in other areas, there is
usually leadership in the Chamber that could be very helpful
to determining ideal structures along with some trusted
local attorneys and
accountants.
************** Step
One: Pay Off Our Debt
Let’s say we started
a solari and raised equity capital in a co-op type structure
to pay off all of our debt. Assuming we can figure out the
best structure given state and local laws and our individual
needs, we would lower our expenses significantly and would
be in a position where whatever cash dividends we do pay
would increase the value of our equity. Depending on where
the needs are we could do a pool for trucking businesses,
one for farmland, one for small businesses, etc. If you have
ever seen a “family of mutual funds,” this is conceptually
similar.
Step Two: Build Infrastructure That
Generates Revenues, Lowers Expenses & Builds Local Customer
Loyalty
Once our existing businesses are
freed from debt worry, we should also think in terms of
using one or more solari equity pools to capitalize capacity
in local businesses or to incubate new businesses that would
help generate new revenues for existing businesses. Kerry
Keener in Hickory Valley is interested in starting a
Farmers Shed that could help generate significant local
intra-county markets for food and produce grown locally ---
something that excellent local markets like Creekmore and
Maxwell’s could also use to provide an alternative to the
new Wal Mart. Indeed, if the equity pool were defined for
all small business (or we do one for truckers and one for
farmers) in combination with a community offering, we would
create a financial incentive for everyone in the area to
shop at Kerry ’s Farmer Shed, Creekmore and Maxwell’s or any
other business in the pool. If the customer owned stock,
then their purchases would generate increased equity value
for the customer – something that will not happen at
Wal-Mart.
Another example is a shared
website/marketing capacity that helped market our local
business and products in combination with supporting an
increased tourist business in combination with local
festivals and Arts Council, church and other events. There
are numerous other possibilities in this category, which I
would be delighted to explore if there is interest. However,
it is critical to emphasize the power of what is possible
when equity financing creates incentives systems that
support far greater cooperation locally.
Step Three:
Review of Federal, State & Local Expenditures in Tennessee
for Reengineering Opportunities to Generate Trucking
Revenues
Tennessee taxpayers fund
significant contracts and purchases here in Tennessee. A
detailed review of the trucking business (and all
businesses) generated by these contracting budgets and
expenditures and credit support will show that local
trucking and small business can provide better services at a
lower cost than the current state of affairs. It will also
show that our current expenditures are also not generating
equity for Tennessee citizens, homeowners and taxpayers.
It’s the worst of all worlds. We are paying more than we
would if our business were doing the work; meantime, our
pension funds are losing money because they are financing
someone other than us, and our taxes are not generating
equity for us.
If we could build a
constituency of local businesses, the new governor, Governor
Bredesen, and our local Representative, Johnny W. Shaw,
might be open to encouraging the transparency of federal and
local expenditures that we need to identify the win-win
reengineering opportunities. Indeed, if the state and local
pension funds are our investors, such reengineering could
have a significant impact on improving their investment
yields, which may help the state budget and ease the
concerns of retirees.
Normally, such a
transparent review of governmental expenditures would not be
politically feasible. However, given the downturn in the
economy combined with state financial problems, such
transparency should be more feasible at the state level.
While the political sensitivities of transparency at the
federal level have traditionally been significant, the
federal governments refusal to comply with the laws
regarding financial disclosure and the significant amount of
money that is missing from federal agencies in recent years
(over $11,600 for every man, women and child) strengthens
the hands of citizens who are prepared to improve the
productivity of our governmental expenditures and do so in a
way that also addresses local unemployment and poor pension
fund performance. I have also enclosed an article on
participatory budgeting practices adopted in Brazil to deal
with similar reengineering opportunities that we are
facing.
A thorough review of governmental
budgets in Tennessee will produce significant win-win
opportunities to increase local business revenues, decrease
local business expenses and increase local capital
gains/equity through government reengineering that also
soften the blow of budget cuts. Assuming we do our job in
selling/distributing equity to all the right constituencies,
we should be able to create a powerful foundation/alignment,
which can make such reengineering politically and
economically feasible in a practical way.
Profit
Potential of a Solari Equity Pool
The potential
capital gains on such an equity pool could be
significant:
· Liquidity: small
business equity is generally valued at 1-5 times annual net
income, while that same income in a liquid equity stock that
could be created by a larger pool could rise to as much as
5-20 times.
· Increased Profits: Lower
debt service and a profit flow from government reengineering
and any crosscutting efficiencies achieved over time would
increase profits.
The combination of increased profits
combined with a higher equity multiple would generate
sufficient capital gains opportunity to attract global
capital of the kind that would ensure a profitable exit
and/or liquidity for initial local and pension fund
investment, so long as mechanisms were in place to ensure a
sustained balance between local and non-local investment in
the non-voting shares
Community Wizards
Ultimately, the health of any economy or business comes down
to putting the honest, hardworking people in charge. The
problem with the current construct of government budgets in
Tennessee is that a great deal of contracts and spending is
organized to generate profits and subsidies for companies
and their investors, organizations and individuals whose
performance is not as excellent as that which can be
generated by local small business. In short, our economy has
become more centralized that economic performance would
warrant. At the root, the reengineering opportunity is to
shift capacity over to the most productive people in the
county in a way that benefits local, state and global
investors. In a recent article that I have attached, The
Community Wizard of Sebastopol, I described our most
productive people as the “Community Wizards.”
Here are some Community Wizards who I would recommend
consulting with as to how to use a solari to “put our oxygen
mask on” here in Hickory Valley:
1. Bob and Donna
Milstead : Bob and Donna are very astute at the farming
business and many aspects of small business and government
here in the county.
2. Jamie and Alice Milstead :
Jamie runs a trucking business in addition to running the
Powell farm business with Billy.
3. The Gordons :
The Gordon family owns and runs Magnolia Plantation in
Hickory Valley and are very knowledgeable at banking,
investment and small business.
4. Kerry Keener :
Kerry runs her farm in Hickory Valley and is knowledgeable
about the trucking business. She is working with the group
at University of Tennessee that are helping small farmers
reengineer their businesses. They are a group that Kerry
could help involve, if appropriate. In, addition Kerry is
on several state committees that are relevant to support for
small business.
5. Other members of our
congregation: This would include other members with trucking
interests Charles & Betsy and members who might be looking
for local investments and successful small business people
like Patricia & Ricky .
6. Mike Willits : My Uncle
Mike is an architect and his wife, Leila , is one of the
top consultants in Tennessee (if not the country) on
tourism. Mike and Leila could be invaluable in helping us
understand the how to build alignment with numerous
constituencies that would help ensure such a venture got off
the ground and performed excellently over time.
7.
Additional Family: We have additional family and close
friends in West Tennessee who might be potential trucker and
small farm and business owners, investors or participants in
developing a model that could be used in Hardeman County,
Madison County, and Shelby County and around the State. The
more communities interested in doing this, the more feasible
it will be to achieve state support for creating
transparency in the state and federal budget.
8.
Other Organizations: I have mentioned the Hardeman Farm
Coop, Farmers & Merchant Bank (and other local banks), UT
Agriculture Extension and the Chamber of Commerce. Others
that come to mind as organizations and businesses to consult
with include: the leadership of the Farm Bureau, the Bolivar
Library (for data collection), Edward Jones (re Community
Offering), the Bolivar Times and one or more trusted local
attorneys and accountants. Whatever happens should be
organized to use and build business for existing capacity
--- with a focus on first moving oxygen to the most
productive and trusted people.
Step Four: Strategic
Opportunities
There are a number of
areas where acting now can transform our current economic
risks into significant opportunities for us.
Privatizations : My understanding is that the
current Administration is negotiating to reduce the barriers
to global investors in buying up critical strategic
governmental and civic infrastructure in the US – including
water, electricity/power, and land. We will shortly be in a
position to watch significant capital, which has been moved
illegally offshore out of our federal government and pension
funds moving back in to buy our land and infrastructure at
below market prices that reflect the economic troubles that
such theft helped to create. This process is what has
devastated Latin America and Asia. I am very concerned that
we avoid this process in the US.
Rather than
sitting back and being the victim of such a trend – lets
take advantage of it to benefit our family, our neighbors
and us.
If we organize a solari and its equity
pools now, we can first rid ourselves of our debt. Too much
debt is what makes us vulnerable to global and corporate
models that are less than optimal. Then lets privatize or
finance our infrastructure under strong local control and
use non-voting shares in the local model to attract in the
global equity capital at the best price for us. Such a
structure allows us to allocate stock and stock option
opportunities, which incentivize local players to support
local citizens. By asserting control now, we get a bigger
share of the equity and ensure a more strategic and economic
performance over time. Global investors make more than in
the current models and we with them.
Land & Real
Estate: Equity pools in the solari model would also
allow us to buy up local land and real estate, including
swapping equity for defaulted debt held by government,
national entities and banks. In 1989, when I served as
Assistant Secretary of Housing, the federal government in
the form of FHA, VA, Farmers Home and with Freddie Mac,
Fannie Mae, and FHLBB, owned as much as 70% of the homes in
a small town as a result of defaulted mortgages. Local
communities were not set up to exchange local equity for
these assets. As a result, the resulting workouts and
liquidations were less than ideal for the citizens,
homeowners and taxpayers.
However, if we start
now, we can ensure that the most productive people control
the workout of defaulted assets in our area in a manner that
generates income and retirement savings for us.
Local
Alternative Energy and Food : Finally, as the recent
events in the middle east make clear, there are benefits
to all of us of generating more local income by reducing
our dependency on fossil fuel. If we have the equity and
capacity to reengineer, there are numerous energy strategies
that could generate increased revenues for local farmers ---
wind, solar, corn husk and corn stoves , bio gas production
from manure and ethanol and bio diesel production among
them.
This is not just economic – this relates
to our faith. As Christians, it is our duty to reduce our
dependency on resources that are scarce and therefore
triggering warfare not to mention harming our environment. I
am also very concerned about the heath implications of
eating corporate food and food shipped at very long
distances. Shifting market share to local farmers we know
and trust means local jobs, local equity and stronger immune
systems --- not to mention better, fresher tastes.
Tax/Debt Reengineerings: Once we have an equity
vehicle, there may be attractive opportunities to swap our
non-voting equity shares with private investors for
outstanding federal, state and local government debt in a
three party transaction in which we renegotiate the sources
and uses of federal, state and local funding and regulation
in our area. Government failure to comply with the laws
regarding financial, tax and debt management in combination
with weakening credit ratings and/or defaults may strengthen
the opportunities that we have.
Consumer Debt:
We have numerous neighbors struggling under a load of very
expensive credit card and IRS debt. If we have an equity
vehicle that can generate jobs and small business income, we
can also profit from refinancing high coupon consumer debt
for local citizens who are likely to participate in job
creation.
Community Currency: Recent
developments in open source software and gold money that can
be transferred and accessed with debit cards make it
possible for us to create local currencies that would be
more attractive to some local citizens that the currency
issued by the Federal Reserve and which would circulate more
money and purchases
locally.
************** Next
Steps
If these ideas are of interest, I can
do a workshop at City Hall to describe the opportunities to
a group of our interested “Community Wizards.” All of the
opportunities described require an invention by a group of
people, so first we need to simply ensure a common literacy
of the conceptual opportunities to the extent we understand
them. Second, we need a process for brainstorming and
deciding on a pathway that gives short-term energy to our
immediate and pressing business
needs.
************** My
Interest
My interest is two fold.
First, as Assistant Secretary of Housing in the Bush
Administration and then as President of Hamilton Securities,
lead financial advisor to the FHA in the Clinton
Administration, I tried to bring local transparency to all
government expenditures and to help reengineer government
expenditures to be ensure a level playing field between
small business and large corporations locally through
citizen and small business access to data and equity. Our
success demonstrated the extent to which the current
construct is overly centralized at the expense of citizens,
homeowners, small businesses, farms, banks, taxpayers and
our pension funds.
I came to Hickory Valley
because I believed the way to implement local transparency
and equity financing was locally ---- here in Tennessee
among those who would most benefit from decentralization of
markets based on excellence, performance and integrity.
The best way to resolve my litigation with Ervin &
Associates is to demonstrate the opportunity to generate
significant new employment for Americans and significant new
wealth for state, local, corporate and union pension funds
through my work that Mr. Ervin and those supporting him have
tried to stop.
Second, I came to Hickory Valley
because I decided that anything this hard was only worth it
if it made a difference in the financial security and
quality of life for my family. Hence, it is critical to me
to find a pathway that makes a significant difference to my
family in Hardeman and Madison County and their farm,
trucking and other businesses. America only has a future if
Community Wizards like my family are leading and building
it.
There is so much more to say about our
opportunities if we can somehow come together to address
them. Let's see if this is of interest and then let’s get
folks together to explore the possibilities.
Very
Truly Yours,
Catherine Austin Fitts
Solari
**************End Notes:
Names have been changed to protect
confidentiality.
Related reading:
Solari & the Rise
of the Rule of Law, by Catherine Austin Fitts, Sanders
Research Associates, London, 2002
http://www.sandersresearch.com/html/MappingtheRealDeal/CAFAugust02/CAF080802.htm
The Community Wizard of Sebastopol, by Catherine Austin
Fitts, Scoop Media, New Zealand, 2003
http://www.scoop.co.nz/mason/stories/HL0303/S00231.htm
The Experience of the Participative Budget in Porto Alegre
Brazil, MOST Clearing House Best Practices Database
http://www.unesco.org/most/southa13.htm
************** Catherine
Austin Fitts is the President of Solari, Inc.( http://www.solari.com), a
founding member of UnAnsweredQuestions.org (
http://www.unansweredquestions.org) and member of the
Advisory Board of Sanders Research Associates (
http://www.sandersresearch.com). Ms. Fitts is former
Assistant Secretary of Housing-Federal Housing Commissioner
in Bush I and a former managing director and member of the
board of directors of Dillon Read & Co. Inc. She is
currently litigating with Ervin and Associates (acting on
behalf of the US government) and the Department of Housing
and Urban Development related to John Ervin's efforts to
stop responsible financial management in the US government
mortgage insurance portfolios. To support Catherine's
litigation efforts:
http://www.solari.com/vote.php . Ten percent of all
donations are tithed to an Independent Media Fund managed by
Venture Collective.
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Anti©opyright Catherine
Austin Fitts April 2003