I decided to search out the reported indictment of Vice President Richard Cheney…

Texas DA Reveals Evidence Against Cheney
The Raw Story (27 November 2008)

Hearing Set for Monday to Oust Judge in Cheney Indictment
chron.com (25 November 2008)

This indictment underscores the importance of mapping out the incentives in our financial ecosystems and the risks of using federal deficit borrowing to underwrite laws, contracts and regulations that ensure that some people profit from the failure of other people. By doing so, we create an economy where people make money in the stock market from a failing economy. Until, of course, the whole thing inevitably comes crashing down.

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I first wrote about this in a letter to the New York Times nine years ago. Here it is.

Letters to the Editor
New York Times
letters@nytimes.com

Tim Egan’s Article on Prisons, March 7, 1999

Ladies and Gentlemen:

Thank you for Tim Egan’s article on prisons. It was an excellent summary of the growth in the US prison population over the last two decades. A welcome follow up might be an exploration on how the money works on prisons.

The federal government has promoted mandatory sentences and taken other steps that will increase the overall prison population to approximately 3 million Americans as recently legislated policies finish working their way through the sentencing system. This means that approximately 10-15 million Americans will be under the jurisdiction of the criminal justice system from arrest, to indictment, to trial, to prison, to probation and parole.

The enactment of legislation ensuring the growth of prisons and prison populations has been a bipartisan effort. Republicans and Democrats alike appear to have found one area where we can build consensus for substantial growth in government budgets, staffing levels and media attention. Indeed, during this period, the number of federal agencies with police powers has grown to over 50, approximately 10% of the American enforcement bureaucracy. This is further encouraged by federal laws permitting confiscation of assets such as homes, cars, bank accounts, cash, businesses and personal property that can be used to fund federal, state and local enforcement budgets.

One way to look at the financial issues involved is to view them from the vantage point of the portfolio strategists of the large mutual funds. We have approximately 250-280 million people in America. The question from a portfolio strategist standpoint is what productive value will each one be creating in companies and communities and how does that translate into flow of funds that then translate into equity values and bond risk.

The prison companies are marketing one vision of America with their prison and prisoner growth rates, while the consumer companies are marketing another. The two are not compatible. CCA’s assumptions regarding the growth in arrests and incarceration cannot be true if Fannie Mae’s, Freddie Mac’s and Sallie Mae’s assumptions about homeownership and college education rates are. We, the people, cannot refinance our mortgages or buy homes or raise our children and send them to college if we are in jail. Meantime, the municipal debt market is also facing conflicting positions. If prison bonds are a good investment, then some general obligation bonds may in trouble. We, the taxpayers, cannot support the debt: we are no longer taxpayers. We have become prisoners. Whatever we are generating in prison labor, it is certainly not enough to pay for the $154,000 per prisoner per year costs indicated for the full system by the General Accounting Office.

It would be very illuminating to get the rating agencies and the ten largest mutual funds together in one room for an investor roundtable to discuss pricing levels on the investment of our savings that is internal to their portfolios and ratings. We would compare equity valuations and growth rates of:

– Companies who make money from the American people losing productivity

– Companies who make money from helping the American people grow more knowledgeable and productive

We are investing in two different visions that cannot both come true.

We could then calculate which was going to succeed, and what the integrated pricing level would be. Better yet, what could happen that would make the most money for the investment community. The question is which vision is best for we, the equity investors of America? And why are investors assuming both win as they price their stocks and bonds?

It is critical to look at prison policy from the standpoint of maximizing return on equity investment. It would be a terrible thing, while I can no longer pay taxes or buy a house or send my son to college because I am in prison, if my vested pension benefits were wiped out by the time I re-entered society. It is bad enough that my life savings are being invested in companies that make money from promoting that me and my family should be arrested and incarcerated. It would be worse if I and my family were broke because companies that make money from loss of productivity turned out to also be a bad investment.

Such a roundtable might make for a great New York Times article. If you are willing to take it on, Solari would be happy to assist your staff by contributing background analytics on how the money works in prisons.

Sincerely Yours,

Catherine Austin Fitts
Solari, Inc.

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14 Comments

  2. I know, I did remind them you had the documentation posted but was told the media would never suppress it — that everyone HATES Cheney, that it would be on every front page. There must be some donkey reason for suppression, Cheney really is unpopular across the board. What do you think the reason is?

    If the event is thought to be hush hush, it could be fun if a group of us showed up en masse w/ party hats on!

  4. Regarding Williams observations about UNICOR. UNICOR actually seems to be a wholly owned subsidiary of the US Government. Here is a quote from FPI’s current published annual report http://www.unicor.gov/information/publications/pdfs/corporate/catar2007.pdf

    “Federal Prison Industries, Inc. (FPI) was established in 1934 by an act of the United States congress. FPI operates under the trade name UNICOR, as a wholly-owned federal government corporation within the Department of Justice, and functions under the direction and control of a Board of Directors, (The Board).”

    From a cursory look at their balance sheet, it certainly does appear that employees of UNICOR (not including the prison slave laborers) appear to be well paid people. The profit margin on UNICOR’s products must be astronomical considering that they pay a max of $1.15/hr to the inmates who make the products.

    I am very sorry William for the difficulty that you’ve had in finding work. It is an outrage that people are punished years beyond their sentence.

    It is ironic. God not only forgives our sins, but He forgets them. We live in a culture that professes to hate God and anything to do with the Law of God. Yet the God-hating State not only does not forgive after exacting punishment, but the State remembers to the bitter end the “sins” of its citizens. It’s a pretty ruthless system.

  6. Catherine,I have passed around the news of the Cheney indictment — a couple of people have written back to say they can’t find it ANYWHERE other than the sources you mention, and that if it WAS true don’t I think the media would be allover it? I have assured them that you check your sources and would not be posting it as news if it is not true, and that frankly I have no high regard for mainstream media, but can you give me any more ammunition? Thanks, love you, joanna

  7. Hmm, it’s me again — I seem to be on a roll. For anyone who has yet to see the original movie zeitgeist, or the updated version, believe me it’s worth a look. Pour a glass of wine or brew a mug of tea and prepare to be riveted. Here’s the link, an added blessing, it’s FREE! http://www.zeitgeistmovie.com/

  8. Amen to David’s posting above. I served 3 years in federal prison for transporting and selling marijuana. While in prison I met a surprising number of doctors, some of whom were there because they had violated some protocol or other by actually curing their patients of diseases that are supposedly not curable! (Using methods not sanctioned by the AMA). Most of the inmates I interacted with were as normal and decent human beings as any you or I might meet in daily life. I completed my prison sentence in 1998 and completed supervised release in 2003. I have 4 years of college and am a journeyman carpenter by trade. I have experienced an extremely difficult time finding suitable employment, or, since June, ’08, any employment at all. Apparently many kinds of insurance which various businesses must have to operate have more or less recently begun to refuse to extend coverage relating to employees who have felony records.
    Also while in prison I learned that the federal prison industry system, called UNICOR, in which I worked, has stock that is mostly sold to insiders, and is sold only on the British stock exchange but not on the US stock exchange! This system was created by Congress in the 30’s. Of course state prisons have always used prison labor in one way or another. And we hypocritically criticize China for utilizing prison labor!

  9. Catherine Austin Fitts, you have brilliant ideas, but you need to review rules of grammar and syntax in order to express them. Poor English distracts one from the concept.

  11. The federal prison system is definitely designed to be a welfare system for prison guards and other bureaucrats that staff the system. Many of these guards and bureaucrats would be homeless, pushing shopping carts, diving into dumpsters, and living in cardboard shacks under bridge beams if it were not for the employment of the federal prison system.

    I submit that one of the reasons why there has been an increase in the number of incarcerations is to increase the size, scope, power, and influence of the federal government. You have to keep the prison population growing in order to keep expanding the budget of the BOP and keep people employed and to keep the numbers of potential homeless people down. And the only way to keep the prison population growing is to create, manufacture, or otherwise design new crimes so that innocent people are entrapped or ensnared by federal law enforcement agents.

    The prison system is certainly not designed to help the incarcerated get back on their feet. In fact once released from the tentacles of the federal government, you wear the scarlet letter “F” on your breast the rest of your life. Your civil rights are stripped, but you’d better pay those income taxes. Society then punishes you by denying you opportunities to work until you’ve passed some magical ten-year mark.

    Perpetual punishment creates a permanent underclass of people who have skills and abilities but who are often hampered in employing their skills, talents, and abilities in productive and meaningful areas.

  12. John Sheehan, you are full of shit and apparantly uneducated.
    I am certainly not anymore a Pres. George W. Bush backer, but I also hate liers.
    I can’t belief that the owner of this website would even let your trash stay on
    the previous message.
    We have enough things to consider and the public doesn’t need your kind of thought.

  13. pres gw bush is now constructing the pres gw bush presidential library located in houston texas. this pres library will consists of the massive volumes of pres gw bushs book collections which consists one one book the bible. there will be a massive asennal at the front of this pres library, with a special section for dick cheney and sarah palin can check there firearms. since the pres library will consist of one book, there will be massive murals of jesus inside this library for those guests and visitors that are literacy impaired.
    for eight years american has been cursed by a horiffic presidential reign of unprecented abuse that has curently nearly taken doen this country. sadly many republican wasps in this country have taken there money out of american financial institutions and placed them into swiss banks, swiss francs and gold coins dubai accounts, and off shore accounts. god bless america

  14. At the extraordinary levels of imprisonment the US has experienced over the past 20 years,
    I was struck by something Ted Nace had to say in his book, “Gangs of America.”

    Nace’s book is a history of the corporation, both old and new. In previous empires
    such as the Dutch, Spanish and British– British for this reference– there was a concerted effort to control so-called undesirables by unceremoniously shipping them off to
    colonies such as Jamestown and once there, left to survive or die. The fatality rate for Jamestown was high.

    So, thinking the worst, could this not be a method of conscripted servitude: the penalty
    for ‘unemployment’ due to one cause or another?

    If so, what do we know about the extent of prison labor in the corporate sphere as it exists today?

    I highly recommend Gangs Of America (2003.) I couldn’t put it down.

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