Mapping the Real Deal…
An Illumination of Economic Resurrection for My Neighbors at Easter Time
"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."
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
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
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
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
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
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
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.
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
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
Names have been changed to protect confidentiality.
Solari & the Rise of the Rule of Law, by Catherine Austin Fitts, Sanders Research Associates, London, 2002
The Community Wizard of Sebastopol, by Catherine Austin Fitts, Scoop Media, New Zealand, 2003
The Experience of the Participative Budget in Porto Alegre Brazil, MOST Clearing House Best Practices Database
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