Treasury secretary was responding to GATA


Sunday, January 9, 2000

Dear Friend of GATA and Gold:

There's a lot of gold news and GATA news in the latest
"Midas" dispatch of GATA Chairman Bill "Midas" Murphy
to his subscribers at, and so
he has asked me to share it with you here.

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

* * *

By Bill "Midas" Murphy

January 9, 2000

The last several days have been loaded with GATA-
related activity, correspondence, news stories, etc. It
is clear that GATA is making progress toward our goal
of finding out what is REALLY going on in the gold
market and exposing that truth to gold market
participants, the public, Congress, and the press.

As you read this it will become very clear to you that
all of our efforts continue to pay off. But it is
tedious hard work, not that much different than a
detective trying to find the proof to solve a crime. It
is not glamorous; it is time-consuming, as many of you
helping us know. But there are many of you, for which
we are very grateful.

On that note, Chris Powell, my GATA co-founder and our
treasurer/secretary deserves a special pat on the back.
He has been working tirelessly behind the scenes (on
his own time and without any compensation), and as you
will ascertain below, he has been especially effective.

As you read the following correspondence, please keep
in mind that we view all them with the Clinton
administration's "Is" principle in mind. You know --
What does "is" mean? Until we close all the wiggle-room
loopholes, we will not be satisfied with the answers we
are starting to get from the Federal Reserve and the
Treasury Department; otherwise, they might come back at
a later date and say, "Well, you never asked us THAT

As many of you know, GATA posed certain questions to
Fed Chairman Alan Greenspan and Treasury Secretary
Lawrence Summers in an open letter in Roll Call on
December 9, 1999. Prior to that time Powell had been
working with Senator Dodd's office and had asked other
questions. He and the senator just received the


"January 7, 2000

"Dear Senator Dodd:

"Thank you for your letter concerning questions from Mr.
Chris Powell, managing editor of the Manchester Journal
Inquirer, regarding the Federal Reserve Board and the
Department of the Treasury.

"Enclosed you will find responses to Mr. Powell's
questions as they pertain to the Department of the

"If Mr. Powell needs clarification or has further
questions, he should contact Mr. John Longbrake in our
Public Affairs Office.


"Michelle A. Smith
"Deputy Assistant Secretary / Public Affairs"

"Q1: Do the Fed or the Treasury try to influence the
stock, bond commodities and gold markets? If so, how?

"A: The Treasury Department does not make any attempt
to influence the stock, bond, commodities, or gold

"Q2: Do the Federal Reserve and the Treasury Department
have a policy toward the price of gold? If so, what is

"A: The Treasury does not have any policy regarding the
market price of gold. The Mint, however, pegs the price
of the Golden American Eagle coin according to the
London Metal Exchange base price. The charge for the
coins are LME base plus 3 percent for 1 ounce, plus 5
percent for 1/4 ounce, plus 9 percent for 1/10 ounce
and mints to demand. Prior to 1971, however, the
Treasury pegged the market price of gold.

"Q3: Do the Fed or the Treasury trade in any financial
instruments besides U.S. government bonds? If so, which
ones and what do the Fed and the Treasury try to
accomplish with their trading?

"A: The Treasury Department does not trade Treasury
securities. The Treasury only conducts issuance
activities in Treasury securities and is considering
whether to buy-back its securities in the market. In
rare cases where the government receives securities,
the Treasury's Bureau of the Public Digest engages a
third part agent to sell the securities (see the answer
to 7, below).

"Q4: Have the Fed or the Treasury used foreign central
banks, foreign banks, or foreign accounts over which
they have custody or influence, or the Exchange
Stabilization Fund to intervene in the stock, bond,
commodities, or the gold markets?

"A: The Treasury does not use foreign central banks,
foreign banks, foreign accounts or the Exchange
Stabilization Fund to intervene in the stock, bond,
commodities, or the gold market.

"Q5: Do the Fed or the Treasury trade in gold or in
securities, futures contracts, or options that are
related to gold, or otherwise seek to influence trading
in gold? If so, how?

"A: The Treasury Department does not trade in gold or
futures contracts in order to influence the trading in

"Q6: Do the Fed or the Treasury lend or lease gold? If
so, whose gold is it, where does it come from, for what
purpose is it lent or leased, and under what terms is
it lent or leased?

"The Treasury Department does not engage in the lending
or leasing of gold.

"Q7: Do the Fed or the Treasury have or control
brokerage accounts? If so, with which brokers, and what
sort of trading is done with each? Where do the money
and securities deposited with these brokers for the
Fed's and the Treasury's accounts come from?

"A: The Treasury Department maintains a brokerage
account at Legg Mason Wood Walker Inc. in order to
liquidate securities holdings that come into possession
of the government. This facility is managed by the
Bureau of the Public Debt and receives securities from
any government agency to be sold. These securities may
be received as gifts, as settlements, payments, etc.
The only securities in this account are those awaiting
sale. The Treasury does not conduct any purchasing
activities through this account and does not have a
portfolio account at any brokerage firm."

* * *

You will note that this Treasury Department statement
says nothing about the Federal Reserve, and in
answering Question 5 leaves out any mention about
options. Leaving out options is a glaring omission.

Meanwhile, GATA supporter Michael Bolser received the
following from another Treasury official through his
U.S. Representative, Charles Canady. They are the same
answers. Michael writes:

"Dear Mr. Powell:

I have received an official Treasury Department
response through my congressman, Charles Canady.

"It is on letterhead, Dec. 17, 1999 and signed by Linda
L. Robertson, Assistant Secretary for Legislative
Affairs and Liaison.

"You should know that her responses mirror those
previously provided by the Federal Reserve working
committee. She issues blanket denials to each of the
six questions. Here are some highlights for your

"'Treasury Department does not have any policy
regarding the price of gold." (Except regarding
American Eagle coin pricing.)

"'Treasury Department does not trade in gold or futures
contracts in order to influence the trading in gold."

"'Treasury Department does not trade marketable
Treasury securities or any other financial

"'Treasury Department ... maintains a brokerage account
at Legg, Mason, Wood, Walker Inc. in order to
liquidate securities holdings that come in to
possession of the government."

"'Treasury Department does not make any attempt to
influence the stock, bond, or commodities markets.

"'Treasury Department does not engage in the lending or
leasing of gold.'"

"Chris, I now have documents (as I expect you do also)
from the Federal Reserve and the Treasury Department
which essentially deny involvement in what GATA asserts
is anti-trust activity.

"These two positions from two government agencies are
unequivocal statements of denial made to a U.S.
Congressman on behalf of his constituent -- me. If you
need copies of the correspondence, let me know.

"If there has been action designed to influence the
price of gold by the federal government, then there is
also a significant cover up under way as well."

"Goldbird1, the Deep Throat of the gold resistance,
needs to beam even more light and heat on the specifics
of everyday trading manipulations. As the momentum
builds in this story, it will be his and other's
informed leaks that confound and hamstring the

"Kindest Regards,

"Michael Bolser."

* * *


I just called up Michael to ask him about the Federal
Reserve document that he referred to. I was NOT aware
of one, so he faxed it to me.

"Board of Governors
"Of The Federal Reserve System
"Washington, D.C. 20551

"November 12, 1999

"The Honorable Charles Canady
"House of Representatives
"Washington, D.C. 20515

"Dear Congressman:

Thank you for your letter of October 22 in which you
requested answers to questions you received from your
constituent, Mr. Michael Bolser, concerning various
policies of the Federal Reserve and the Department of
the Treasury.

"I have enclosed a staff memorandum responding to the
questions regarding the Federal Reserve. Please let us
know if we can be of further assistance.


"Winthrop P. Hambley
"Deputy Congressional Liaison"

(The following enclosure was not written on Board of
Governors stationary but on blank paper.)

"Staff Memorandum Board of Governors of the Federal
Reserve System.

"November 1999.

"Do the Federal Reserve Board and the Department of the
Treasury have a policy toward the price of gold? What
is the policy?

"The Federal Reserve does not have a policy toward the
price of gold.

"Do the Federal Reserve Board and the Department of the
Treasury trade in gold or securities, gold futures, or
gold options, or otherwise influence trading in gold?

"The Federal Reserve does not trade in gold or gold
securities, gold futures, or gold options. Likewise, the
Federal Reserve takes no action designed to influence
trading in gold.

"Do the Federal Reserve Board and the Department of the
Treasury trade in any financial instruments besides
U.S. government bonds? If so, which ones and what do
the Fed and the Treasury try to accomplish with their

"Virtually all the Federal Reserve's trading
activities relate to U.S government securities. The
Federal Reserve buys and sells U.S. government
securities in the open markets (open market operations)
in order to implement monetary policy. The Federal
Reserve conducts such transactions in U.S. government
securities both on an outright basis and under
repurchase agreements. In addition, the Federal Reserve
very recently has sold options on repurchase agreements
in U.S. government securities to help address concerns
in financial markets associated with the century date

"From time to time the Federal Reserve, in cooperation
with the Department of the Treasury, conducts operation
in foreign currency. The purpose of these purchases and
sales is to counter excessive pressure on the
international value of the dollar. The Federal Reserve
also carries out transactions in the U.S. foreign
exchange market as an agent for foreign monetary

"Do the Federal Reserve Board and the Department of the
Treasury have or control brokerage accounts? If so,
with which brokers.

"The Federal Reserve has no accounts with stockbrokers.

"The Federal Reserve's transactions in government
securities are conducted primarily through the book-
entry system that the Federal Reserve maintains on
behalf of the Treasury. In the book-entry system,
depository institutions (such as commercial banks)
maintain accounts with their local Federal Reserve
Banks. These accounts record the ownership of the
securities by their ultimate owners. In addition, the
Federal Reserve maintains government securities
accounts as the two major U.S. banks that are active in
providing clearing services in U.S. government
securities, the Bank of New York and Chase Manhattan

"Do the Federal Reserve Board and the Department of the
Treasury try to influence the stock and commodity
markets? If so, how?

"The Federal Reserve does not try to influence the
stock and commodity markets. The Federal Reserve's
statutory objectives in conducting monetary policy are
maximum employment, stable prices, and moderate long-
term interest rates. Of course changes in the stance
of monetary policy, and even public comments by Federal
Reserve officials regarding monetary policy or economic
conditions, affect markets, including the stock and
commodity markets. For instance, a tightening of
monetary policy designed to reduce inflationary
pressures would likely reduce stock and commodity
prices, other things equal.

"Do the Federal Reserve Board and the Department of the
Treasury lend or lease gold? If so, to whom and for
what purpose?

"Under the Gold Reserve Act of 1934, title to any gold
acquired by the Federal Reserve is vested in the
Department of the Treasury. Accordingly, the Federal
Reserve Board has no holdings of gold that could be
lent or leased and does not engage in any such

* * *

These answers are in much greater detail than we
obtained from the Treasury, but they still leave wiggle

For example, the last question does not say whether the
Federal Reserve lends gold in behalf of the Treasury.
It just says that they don't lend gold that they don't
own. In addition, we have not asked the Fed or the
Treasury about "forwards," so naturally they have not
answered that one yet.

In the weeks and months ahead we hope to have all our
questions answered. If the Fed and Treasury deny any
active involvement in any way or form, they are either
lying or telling the truth. If they are telling the
truth, then the bullion dealers cannot use a Federal
Reserve/Treasury defense to say they manipulated the
gold price at the instructions of the Federal

That has been a worry of ours over the past year and
the Fed/Treasury may be closing that excuse door for
some of the bullion dealers down the road -- unless, of
course, they are not giving us the straight scoop, in
which case we will hold the Fed liable for damages.

The more questions we ask, the more answers we get, the
closer we get to proving what players are really behind
the orchestration of the low gold price. Concrete
smoking-gun evidence is out there. We will find it.

The hoopla these past few days does not end there. On
Friday the staff director for U.S. Rep. Sherrod Brown
of Ohio, called to ask me how we were getting along and
what was the status of our potential legal course of
action. This staff director, Dave Savolaine, was up to
date on the Peter Hambro/Bank of England/UK Treasury
correspondence, the Roll Call open letter to Fed
Chairman Greenspan and Secretary Summers, etc. He asked
me to keep him informed of news on our end.

Rep. Brown's main interest is health care, but MANY of
his constituents have been flooding him about the GATA
questions and the issues we are raising about the gold
market. Rep. Brown and Dave Savolaine were responding
to their constituents. Very impressive and nice going
Cafe and GATA members out there. Your efforts are
paying off. This is evidence that we can all make a
difference. (Rep. Brown is a member of the Commerce and
International Relations Committee.)

Then yesterday Jim Bruce sent GATA the following
Reuters wire story about Secretary Summers. Our
presence is being felt and the press is finally
starting to ask questions.

"Summers Says U.S. Not Selling Any Gold Reserves."

"11:24 a.m. ET , January 8, 2000

"BOSTON (Reuters) -- The United States has not sold any
of its gold reserves and has no plans to do so, U.S.
Treasury Secretary Lawrence Summers said on Saturday.

"I categorically deny assertions that U.S. gold
reserves were being sold off or that there is any plan
to sell them off," Summers told reporters on the
sidelines of an economics conference.

"His denial came amid talk in the gold markets that some
of the weakness in the gold price over recent years may
have been caused by direct U.S. sales of gold.

"The International Monetary Fund, for its part, has
begun to sell its gold to raise cash to pay for debt
relief for some of the world's poorest nations. But the
gold never actually reaches the market; in a
complicated transaction, the fund sells its gold at
market prices to member countries that owe it cash. The
members then use that cash to repay their obligations
to the fund.

"The deal creates windfall profits for the IMF because,
under a quirk of international finances, IMF gold is
valued at some $48 per ounce, while the market price is
around $285.

"The idea of off-market gold sales was hatched as a way
to placate those who feared that direct sales of IMF
gold could drive prices lower and hurt the very
countries the debt relief is designed to help. Some
poor debtor countries are also gold producers."

* * *

The following Associated Press suggests that the
international financial adviser Martin Armstrong has a
rough go ahead of him. Previous to this story, his
attorneys were ordered to return the money they
received from Armstrong or his firm in preparing his
defense. Now he has been ordered to turn in $16 million
of his personal assets.

I don't have a clue what the real story is here, but it
disturbs me greatly that the government is taking away
a man's right to defend himself with proper legal
representation. Good lawyers have to be paid. This has
to be an incredibly complicated financial legal case. A
public defender would have to study finance for a year
before he could be of any help to Armstrong.

"What is worse is that I suspect the government is
doing all this on purpose so that the bullion banks,
such as Republic Bank, do not get their records
subpoenaed. It would seem that the government wants to
smother any chance Armstrong has to bring facts out
into the open that might go against the big-money New
York crowd. First Edward Safra was silenced. I mean
really silenced! Is that also the big boys' way of
neutralizing Armstrong? The United States of China is
at work once again when it comes to going against the
cronies of the establishment.

"Friday January 7, 7:04 pm Eastern Time

"Market Guru Ordered To Return $16 million"

"NEW YORK (AP) -- A judge on Friday ordered renowned
market forecaster Martin A. Armstrong to produce $16
million of gold bars and rare antiquities in an attempt
to recover the assets of investors who were bilked out
of about $1 billion.

"Armstrong, 50, founder of Princeton Economics
International, violated a court order to turn over the
valuables to a court-appointed receiver, Judge Richard
Owen in the U.S. District Court in Manhattan ruled.

"The judge ordered him to produce them by Tuesday at 3

"Prosecutors believe Armstrong has 102 bars of gold, a
$750,000 bust of Julius Caesar, hundreds of rare coins,
a bronze helmet and other antiquities.

"In addition, Armstrong's ex-girlfriend, Tina Mustra,
who also is his executive assistant at Princeton
Economics, testified Friday that she helped Armstrong
remove company records from their Princeton, N.J.,
offices shortly before they were raided last September
by FBI agents.

"'The testimony of Ms. Mustra (supports) that Mr.
Armstrong has been personally involved in the taking
and secreting of these items,' Judge Owen said in
signing his order.

"On Thursday, attorneys for the receiver searched
Armstrong's spacious vacation home in Long Beach
Island, N.J., but said it had been cleaned out.

"Behind some books on the top shelf of a bookcase, they
found a bar of fine Swiss silver, they said. They also
found some packaging for antique coins, complete with
auction slips, and two small coins.

"'It is overwhelming evidence the coins are in his
possession,' said Alan Cohen, an attorney for
O'Melveny & Meyers and the receiver in the case.

"Armstrong, who is free on a $5 million bond, had no
comment following the hearing, but his attorney,
Lawrence S. Feld, said, 'Mr. Armstrong has authorized
me to say that he will turn over whatever is in his

"Had Armstrong not signaled that he was willing to
comply, U.S. marshals were standing by to arrest him.

"Armstrong has pleaded innocent to charges of fraud
brought by the Securities and Exchange Commission, the
Commodity Futures Trading Commission, and the U.S.

"Armstrong owes almost $1 billion to some 100 Japanese
corporate investors. His companies, including Princeton
Economics and Cresvale International Ltd. in Tokyo, had
raised money from investors and promised to repay the
debt, plus interest.

"Instead of investing the money in safe bonds, as he
promised, Armstrong made risky bets on currencies and
derivatives. Only $46 million has been recovered to
repay investors.

"Cresvale filed for bankruptcy last month and its
chairman, Akira Setogawa, was indicted for tax evasion.
Setogawa also has admitted giving rebates to Japanese
companies who continued to invest with Armstrong."

* * *

How bad is the stench in the gold market? The following
is a Kitco comment that was emailed to me:

"Date: Fri Jan 07 2000 01:48 GO GOLD (Ashanti news)
ID 428144: Copyright -- 1999 GO GOLD/Kitco Inc. All
rights reserved.

"I was lucky enough to spend some time over Xmas with a
Standard Bank employee who told me that as primary
lender to Ashanti, they were very close to going under.
The bank, that is. If the Bank of England had not
stepped in to underwrite Standard in return for their
not calling in their debts from Ashanti, then Standard
would no longer be around. Standard had no option other
than to comply, since the BOE made it clear that they
would have had to stand in line with other creditors,
and they would never get all their money back.

"Now why would the Bank of England involve itself in
corporate issues like this -- unless they were scared
of Ashanti not being around any more to deliver that
lovely gold into the market. I just think the whole
thing STINKS. I just cannot believe that the powers
that be out there are quietly manipulating the market
while publicly and very loudly pushing the open and
free markets. I eagerly await their downfall."

That very same day, a Cafe member told me that he heard
that Barrick Gold is going to move in on the
significant assets of Ashanti and that an announcement
would be made in the next couple of weeks.

The same Cafe member told me he felt that is why the
gold price has been ratcheted down once again. Goldman
Sachs wants this deal consummated to get it off the
hook, as it has received horrendous conflict of
interest publicity -- even from the likes of the
Financial Times in London. To do so Goldman Sachs needs
the price of gold lowered so that some short covering
can be done on Ashanti's behalf.

My feelings for Barrick Gold are well known to all of
you. They are louses of the first order and one of the
worst examples of industry leadership in the history of
corporations. Their excess hedging strategies and
complicity with bullion dealers such as J.P. Morgan and
Goldman Sachs are causing untold suffering to so many
in the gold industry. Their executives brag how great
they are, yet while many stock prices are making new
highs, Barrick's share price is mired right above 52-
week LOWS at 17 and change. Very impressive!

Goldman Sachs was lead adviser to Ashanti. On Friday,
Bridge News reported the following from Accra, Ghana:

"The group treasurer of Shanti Goldfields company has
quit her job, in the wake of the company being wrong-
footed late last year in its forecast of the world gold
price. Mona Caesar-Addo, 37, who was in charge of the
company's hedging activities gave a month's notice of
here resignation on Nov. 30 and subsequently left with
the entire treasury staff, Bridge learned today."

I'd love to chat with this widowed mother of two, Mona
Caesar-Addo, some time. I wonder what she has to say
about the advice Goldman Sachs gave her.

The Barrick/Ashanti story is only what I hear from a
good source. It will be interesting to see if it plays

* * *

The gold loans are around 10,000 tonnes, the monthly
supply/demand deficit is around 150 tonnes per month,
the big gold shorts are trapped, gold demand is running
at record levels, bond yields are soaring due to
inflation fears, base metals have risen sharply, the
economic story of the day is global economic growth,
and all that is superb news for present and future gold
demand. On top of that, the U.S. money supply has
expanded dramatically.

All this and the gold price goes nowhere to lower. It
is being manipulated and orchestrated lower. How clear
can that be?

The good news is that the perpetrators of this fraud
are slowly being found out. As each month goes by they
run out of future massive sources of supply to hold the
gold price down. It is only a matter of a little time
before they do run for the proverbial "them thar" hills
and the price of gold begins to advance toward its fair
equilibrium price of $600 per ounce.