Are financial institutions too big to prosecute as well as too big to fail?


9:13p ET Tuesday, October 29, 2002

Dear Friend of GATA and Gold:

James Turk, editor of The Freemarket Gold &
Money Report, founder of, and
GATA's consultant, has an important new essay
about his attempt to get the Federal Reserve
to provide information about U.S. gold
holdings. It is appended here.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Finally, A Reply

By James Turk
Copyright 2002
by The Freemarket Gold & Money Report

It has been several months (see FGMR Letter
No. 301, March 18, 2002, "Asking for Help
from My Congressman"), but my congressman has
at last received a reply from the Federal
Reserve. Unfortunately, the reply did not
come from Fed Chairman Alan Greenspan but
rather from an apparently low-level
bureaucrat, Winthrop Hambley, the Fed's
deputy congressional liaison.

Consequently, it is not surprising that the
Fed's letter falls far short of what is
required. However, I am not going to let this
matter rest. To understand why I am
relentless on this point, please read the
following letter I have today mailed to the
Federal Reserve's chairman.

* * *

Dear Mr. Greenspan:

This is in reference to Mr. Winthrop P.
Hambley's Sept. 19, 2002, letter to my
Congressman, the Honorable John Sununu, which
I have just received.

Mr. Hambley's letter addresses the
"discrepancies between the published figures
for the U.S. official gold reserves as
published in the Federal Reserve Bulletin and
the Treasury Bulletin." He accurately states
my conclusion that "the discrepancies in the
two published series are attributable to
Exchange Stabilization Fund activities." He
also identifies my basic motivation in
pursuing this matter: "One of Mr. Turk's
complaints is that the Federal Reserve
Bulletin no longer mentions the ESF in its
description of the gold stock line item,
which he views as an attempt to keep the
public uninformed about ESF gold

In fact, that is my ONLY complaint. Given the
need and the desire for open and honest
disclosure, particularly in this post-Enron
environment, I am sure you share my view that
the important matter I have identified is one
that needs immediate resolution. I am
therefore writing to you to offer a simple
suggestion that will accomplish this

Mr. Hambley makes the oft-stated claim that
the "Treasury's Exchange Stabilization Fund
holds no gold and has not held any gold since
1974." He goes on to say that the "change in
the line description [i.e., eliminating any
mention of the ESF in the report of the gold
stock in the Federal Reserve Bulletin] was
intended to reflect this fact. Mr. Turk
refuses to believe this, but it is not clear
what we can do other than to repeat

First, I would like to clarify that "belief"
is not an issue here. We are dealing with a
clear, factual matter. This matter arose
solely because of actions taken by the
Federal Reserve. Specifically, you restated
historical data, and at the same time you
also changed your reporting format by
eliminating any mention of the ESF. Taken
together, these two steps arouse one's

I can accept the fact that errors sometimes
occur, which require restatements to data.
However, when you restate data and at the
same time change your well-established
reporting convention by deleting any mention
of the ESF, then -- to be quite frank --
alarm bells ring. It appears that the
restatement was made not to correct errors
but rather to eliminate the ESF's gold data,
and this conclusion is only reinforced by
your decision to change at the same time your
historical reporting convention to eliminate
all reference to the ESF.

If as Mr. Hambley claims that the ESF holds
no gold, what's the harm in continuing to
mention the ESF in the gold stock report in
the Federal Reserve Bulletin? Of course there
is no harm, and, in fact, the outcome is
quite beneficial. By restoring your
historical reporting convention, it will
produce two immediate benefits. Not only will
it eliminate the suspicions of those
observers -- of whom I am one -- who question
the motivation of the Federal Reserve in
making its restatement of the gold stock, but
it will also confirm the accuracy of Mr.
Hambley's statement that the ESF holds no

Second, despite Mr. Hambley's uncertainty
about how to resolve this matter, it is very
clear what the Federal Reserve needs to do.
Here is my suggestion, but it should not come
as a surprise because it has been included in
my letters to you from the very beginning
when I first brought this matter to your
attention. For example, here is what I said
in my last letter to you, which was sent on
Dec. 28, 2001: "Specifically, I have
requested that Table 3.12 of the Federal
Reserve Bulletin be prepared to again include
the month-end gold stock of the ESF, and,
further, that this information be back-dated
from February to the present. As I previously
noted, there is no reason to withhold this
information from the American public."

If as Mr. Hambley states that there is no
gold in the ESF, then a comparison of the
Federal Reserve's report, which includes the
ESF, to that of the Treasury's, which does
not include the ESF, will reflect this fact
because the gold stock in each report will be
identical. It seems clear that by returning
to the time-tested reporting convention the
Federal Reserve has used for decades is the
only possible way to resolve this matter.

More to the point, until the Federal Reserve
again includes the ESF in its reports, there
is no other conclusion than the obvious one.
Namely, that the Federal Reserve has changed
its reporting on Table 3.12 for reasons other
than "routine data revisions/corrections"
that you have claimed. One possible reason --
which is the most obvious one -- would be
that Mr. Hambley's contention is not correct,
and that contrary to his assertion, the ESF
is indeed involved in the gold market.

I look forward to your response, and your
confirmation that the Federal Reserve will
again begin including the ESF's gold stock on
Table 3.12 of the Federal Reserve Bulletin,
including back-data to February 2001.

I am copying my congressman on this letter,
so that he may stay informed on how the
Federal Reserve intends to resolve this
important matter of disclosure.

Yours truly,
James Turk



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