Latest essay by Tocqueville Gold Fund''s John Hathaway

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9:11p ET Wednesday, October 30, 2002

Dear Friend of GATA and Gold:

Let's not forget to rank the New York
Post's John Crudele up there with Thom
Calandra of CBS.MarketWatch.com and
the few other mainstream journalists
who dare to tell what is really happening
in the world economy. Crudele's column
in yesterday's Post is devastating, in
three parts, and is appended here.

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

-----------------------

ARE FINANCIAL INSTITUTIONS
TOO BIG TO PROSECUTE?

By John Crudele
New York Post
Tuesday, October 29, 2002
http://www.nypost.com/seven/10292002/business/60774.htm

Are financial institutions too big to
prosecute?

Back in the 1980s, investors in struggling
banks like Continental Illinois had their
concerns eased by the fact that these
institutions were considered "too big to
fail."

Translated, that meant Washington had no
choice but to bail banks out whenever they
got into trouble.

Let me now introduce the concept of "too big
to prosecute." Not only banks this time, but
also securities firms.

There have been a lot of investigations and
legal action recently against wayward
brokerage outfits. But in case you haven't
noticed, they are almost all civil suits,
which at best would result in hefty fines.

To untrained eyes -- which once included mine
-- the prosecutors seemed to be trying to hit
the brokerages where it hurts: in the wallet.
Merrill Lynch, for instance, paid a big fine,
looked contrite and went about its business.

But experts tell me there's another thing at
work here.

A former federal prosecutor I know calls the
latest wave of get-Wall Street actions "trial
by publicity." It could also be called
extortion.

And, oddly enough, both the prosecutors and
the brokers would probably much rather have
it this way than face off in criminal court.

"I'm not at all surprised prosecutors aren't
going to chase after the big brokerage firms
anymore," says my prosecutor friend. "The
idea is that if you indicted someone like
Citigroup, you could begin a process that
ends in the unemployment of 100,000 people."

Just look at Arthur Andersen. Gone, along
with thousands of jobs.

And prosecutors probably give no small weight
to their own ambitions.

If Eliot Spitzer plans to graduate from being
New York State Attorney General to some
higher office he's going to need the support
of the financial community.

Being credited with destroying thousands of
jobs won't enhance his resume.

Here's how prosecution probably would work.

If criminal charges were filed against a
brokerage firm, it would almost certainly be
shunned by states that need investment
banking help. A criminal complaint against
these firms could, in essence, put them out
of business.

And while states such as New York may want
the stock criminals of the 1990s punished, it
would be politically and economically unwise
to shut them down altogether.

So, "too big to criminally prosecute" seems
to be the order of the day.

Alas, there is always one party that doesn't
play. Utah is threatening Goldman Sachs with
a criminal action.

If that idea proceeds, the fallout could be
enormous.

* * *

Why is the Federal Reserve already leaking
the fact that it will cut interest rates? And
why doesn't the stock market seem to care?

The answer to the first is that the Fed is
probably very worried that the U.S. economy
doesn't seem to be doing much. But even
worse, consumers - representing 80 percent of
the economy - are getting tight-fisted at a
time of year that is crucial to retailers.

The Fed might not want to wait until next
week's policy meeting to let its intentions
be known. So it put the word out yesterday
through its usual leak to the Washington
Post.

There may be another reason for the leak.

Because of next week's congressional
elections, the Fed has pretty much been boxed
in. An unusual cut between meetings might be
considered beneficial to the Republicans.

Typically, no matter which party is in the
White House, the Fed remains inactive between
September and Election Day.

Why didn't the market care about yesterday's
leak?

Because after 11 rate cuts, the magic of
cheap money has faded.

Time repairs the damage done by bursting
bubbles. And enough time hasn't yet passed.

* * *

When is the American Association of Retired
Persons going to support its members by
poking a hole in the government's cost of
living figures?

Washington says inflation was just 1.4
percent last year, which gives Social
Security retirees a $14-a-month hike -- the
lowest increase in four years.

The government makes shoddy and dishonest
assumptions and adjustments to its numbers to
keep its costs to retirees low.

And the AARP continues to say nothing.