27 The Real Game of Missing Money When I started Hamilton, I wanted to build an investment bank that would create real wealth—that would take new technology and apply it in practical ways that would help indi- viduals, families, businesses, and communities be more productive. Indeed, our prototyping at Hamilton indicated that the wealth potential was explosive. That is how we end poverty—by creating wealth. Those hopes ended with the failure of the Clinton administration and Congress to reach a bud- get deal and with the U.S. federal government shutdown at the end of 1995. As the president of CalPERS, the largest pension fund in the country, explained to me in the spring of 1997, “They have given up on the country. They are moving all the money out starting in the fall.” The financial coup d’état had begun. Among many other things, that meant bubbling the housing market in a manner that would generate significant funds and doing so with a signifi- cant round of new mortgage fraud. This was a coordinated effort by the leading member banks of the New York Federal Reserve and the federal agencies involved in housing and finance, including Treasury, the DOJ, and HUD. Hamilton and the honest government officials we worked for at HUD represented one set of obstacles getting in the way of attempts to significantly increase mortgage fraud. Another was Gary Webb’s Dark Alliance story, which brought transparency to drug trafficking during the Iran-Contra period. Hamilton’s software tools and databases showed suspicious patterns of mortgage defaults in communities such as South Central Los Angeles, which threatened to expose even more about these fraudulent operations. For example, following HUD’s initial attempts to produce audited financial statements as required by the CFO Act, I had a mortgage banker show up in my office at Hamilton insist- ing that the FHA’s outstanding mortgage insurance in force was many multiples of what was shown on the newly issued FHA/HUD balance sheet. In short, financial transparency of federal financial flows in local communities threatened many constituencies—from narcotics operations to mortgage fraud to traditional political patronage. Failure generated many “fees for our friends,” as long as more government debt was available to finance it. Transparency about the extent of the global mortgage fraud could halt liquidity in the U.S. mortgage and fixed income markets. As the derivatives markets grew, the danger of such a liquidity event grew. To clear the honest government officials and Hamilton out of HUD, the loan sale program was targeted by a series of fabricated investigations and qui tam (whistleblower) and related civil lawsuits. Hamilton Securities ultimately managed 18 audits and investigations, 12 tracks of civil litigation, endless smear campaigns, and targeting and harassment of employees and vendors. The multitude of covert tactics and dirty tricks my team and I encountered was mind-bog- gling—it was quite an education. The intentions and allegations were phony—although it took eleven years and many millions of dollars to prove it. Ultimately, my investment in building a website to document what was happening was a major factor in our success. No indictments were ever forthcoming and no penalties ever assessed. The process in such cases is designed to reverse the notion that the accused should have an opportunity to address their accuser before irreparable harm is done. Instead, the goal was to engage in irreparable harm so that the accuser would never have to back up their phony allegations and would have plenty of time for a fishing expedition, which was bound—or so the thinking went—to find something, anything.