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[GATA] Greenspan says other central banks attack gold, not his

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  • GATAComm@aol.com
    10:50p EST Monday, January 24, 2000 Dear Friend of GATA and Gold: Federal Reserve Chairman Alan Greenspan has answered the questions posed last month in GATA s
    Message 1 of 1 , Jan 24 8:26 PM
      10:50p EST Monday, January 24, 2000

      Dear Friend of GATA and Gold:

      Federal Reserve Chairman Alan Greenspan has answered
      the questions posed last month in GATA's open letter to
      him and Treasury Secretary Lawrence Summers and
      published in the Washington newspaper Roll Call.

      Greenspan's answers came in a letter dated January 19
      to U.S. Sen. Joseph I. Lieberman, who had intervened on
      GATA's behalf. The letter was obtained and published
      today by Dow Jones Newswires. GATA doesn't yet have
      official notice of it.

      While Greenspan seems to deny any involvement in the
      gold market by the Federal Reserve, he does not answer
      for the Treasury Department -- from which we're still
      awaiting answers to some of the same questions. And
      the Greenspan seems to acknowledge that other central
      banks -- but not the Fed -- have been leasing gold precisely
      to keep the price down.

      This acknowledgement by the Fed chairman that other
      central banks have been attacking gold -- that there is
      indeed some sort of a conspiracy against gold -- seems
      to me to be the big story here. While that's not how
      Dow Jones Newswires played it today, we will be
      bringing this point to that news agency's attention as
      well as to the attention of other news agencies. You
      can help spread the word too.

      In any case a week ago Treasury Secretary Summers
      replied directly to GATA, if incompletely, during an
      interview with reporters in Boston, and now the Federal
      Reserve chairman has begun to answer us directly. I
      hope you'll agree that this is progress for the gold cause,
      and perhaps more than has been accomplished by any
      gold-oriented organization.

      I'm including below today's statement about the
      Greenspan letter by GATA Chairman Bill "Midas" Murphy,
      already distributed to his subscribers at
      www.LeMetropoleCafe.com, and the text of the
      Greenspan letter.

      You can find the full text of GATA's ad in Roll Call at:


      Please post this as seems useful.

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

      * * *

      Statement by Bill "Midas" Murphy
      Chairman, Gold Anti-Trust Action Committee Inc.
      Monday, January 24, 2000

      Federal Reserve Chairman Alan Greenspan has written to
      U.S. Sen. Joseph I. Lieberman in response to the
      questions directed to the Fed by the Gold Anti-Trust
      Action Committee through an open letter in Roll Call,
      the Washington newspaper.

      A copy of Greenspan's letter was sent by the Fed to
      Alan Yonan Jr. of Dow Jones Newswires, who forwarded a
      copy of it to me. GATA found it a bit unusual that Dow
      Jones was able to report on the letter even before we
      received notice of it from Senator Lieberman. It would
      appear that Chairman Greenspan wanted his side of the
      story out as soon as possible.

      Senator Lieberman wrote to Greenspan on GATA's behalf
      on January 10, and Greenspan's reply to the senator is
      dated January 19.

      Here is some analysis from our camp.

      It would seem that Greenspan has sidestepped certain
      questions while agreeing with GATA that it would be
      wrong for the Fed to manipulate the gold market.

      Our questions were phrased as such: "Do the Federal
      Reserve or the Treasury Department...."

      The Treasury was not mentioned once in Greenspan's

      It was notable that Greenspan stated repeatedly that
      the Federal Reserve owns no gold so that it can't be
      selling any. GATA knows that the Federal Reserve does
      not own the gold of the United States; the Treasury
      Department does. Why does Greenspan keep asserting

      Further, it seems that Greenspan is acknowledging that
      central banks ARE leasing gold to suppress the price.
      He notes "the observed willingness of some foreign
      central banks -- not the Federal Reserve -- to lease
      gold in response to price increases."

      Who are the borrowers?

      Greenspan does not address whether the New York Federal
      Reserve Bank might be managing the gold market in
      behalf of the Treasury's gold. He states that the
      Federal Reserve is not managing the Fed's gold, which
      we all know the Fed does not own.

      GATA would like clarification of whether Greenspan's
      statement on behalf of the Federal Reserve meant also
      to answer for the New York Federal Reserve Bank and if
      the New York Fed is involved in the gold market in any
      manner in behalf of the Treasury Department or foreign
      central banks.

      The renowned financial markets analyst James Turk makes
      an astute observation about the Greenspan letter's
      statement: "As for Question 1, the Federal Reserve does
      not, either on its own behalf or on behalf of others,
      including other government agencies, lend gold or

      Turk notes the phrase "but not limited to" was left out
      after "government agencies." In legalese, that may mean
      that Greenspan has not included the Treasury in his
      response, as it the Treasury is the government itself,
      not a government agency.

      The world usually dissects Greenspan's every word. He
      is known as the master of couching everything he says.
      There are no mistakes in his deliveries.

      Does Greenspan want to get as far away as possible from
      the budding scandal about the manipulation of the gold
      market? Is this letter his way of saying: I know there
      will be a big problem someday, as the gold loans are
      too big and the bullion banks are in way over their
      heads, so keep me out of it?

      Is Greenspan saying discreetly: I had nothing to do
      with the manipulation of the gold market? Is he
      distancing himself from former Treasury Secretary
      Robert Rubin and present Secretary Lawrence Summers?
      Remember, Secretary Rubin is the former CEO of Goldman
      Sachs, which has all the bullion bank connections.

      Much more that will be said about all this in time.
      Greenspan invited Senator Lieberman to let him know if
      he could be of any further assistance. We will ask
      Senator Lieberman to help us clarify some things.

      In the meantime, GATA awaits Treasury Secretary
      Summers' response to the same questions.

      * * *


      Board of Governors
      of the Federal Reserve System
      Washington, D. C. 20551

      January 19, 2000

      The Honorable Joseph I. Lieberman
      United States Senate
      Washington, D.C. 20510

      Dear Senator:

      Thank you for your recent letter from your constituent,
      Chris Powell, concerning the open letter published in
      the Thursday, Dec. 9, 1999, edition of Roll Call.

      The letter asserts that the Federal Reserve has been
      seeking to manipulate the price of gold by intervening
      in or otherwise interfering with the free market in
      gold. This is not true.

      The Federal Reserve owns no gold and therefore could
      not sell or lease gold to influence its price.
      Likewise, the Federal Reserve does not engage in
      financial transactions related to gold, such as trading
      in gold options or other derivatives.

      Most importantly, the Federal Reserve is in complete
      agreement with the proposition that any such
      transactions on our part, aimed at manipulating the
      price of gold or otherwise interfering in the free
      trade of gold, would be wholly inappropriate.

      My testimony before the House Banking Committee and the
      Senate Agricultural Committee in July 1998 was
      concerned with the regulation of over-the-counter
      derivatives and included a phrase at the end of the
      statement below that has been wrongly interpreted.

      The statement merely means that more than one central
      bank stands ready to lease gold. It does not say that
      all central banks do so, and, indeed, I presumed it
      would be understood that the statement was not
      referring to the Federal Reserve, whose public balance
      sheets indicate no ownership of gold. I did not think
      it was necessary to indicate that the Federal Reserve
      was not part of the group of central banks who do lease
      gold since the Federal Reserve owns no gold.

      "To be sure, there are a limited number of OTC
      derivative contracts that apply to nonfinancial
      underlying assets. There is a significant business in
      oil-based derivatives, for example. But unlike farm
      crops, especially near the end of a crop season,
      private counterparties in oil contracts have virtually
      no ability to restrict the worldwide supply of this
      commodity. Even OPEC has been less than successful over
      the years. Nor can private counterparties restrict
      supplies of gold, another commodity whose derivatives
      are often traded over-the-counter, where [ITALICS]
      central banks stand ready to lease gold in increasing
      quantities should the price rise." [END ITALICS]

      The final clause of this statement, highlighted in
      italics above, was quoted in the Roll Call letter. In
      their original context these words obviously do not
      assert that the Federal Reserve itself participates in
      the gold market in any way. The observation simply
      describes the limited capacity of private parties to
      influence the gold market by restricting the supply of
      gold, given the observed willingness of some foreign
      central banks -- not the Federal Reserve -- to lease
      gold in response to price increases.

      The answers to the 11 questions posed in the open
      letter are straightforward:

      As for Question 1, the Federal Reserve does not, either
      on its own behalf or on behalf of others, including
      other government agencies, lend gold or silver,
      facilitate the lending of gold and silver, or trade in
      any securities, such as futures contracts and call and
      put options, involving gold and silver. Thus, Questions
      2 through 8 are inapplicable because they presuppose an
      affirmative answer to Question 1.

      Question 9 asks whether the Federal Reserve ever owns
      or deals in derivatives that are connected with
      precious metals and whether any other agencies write
      call options against the Federal Reserve's gold
      holdings. The answer to Question 9 is no; in
      particular, the Federal Reserve has no gold holdings,
      as noted above. Question 10 is inapplicable because it
      presupposes an affirmative answer to Question 9.

      Question 11 asks whether the Federal Reserve, either
      directly or through its management of foreign custody
      accounts, collaborated with the Bank for International
      Settlements, the Bank of England, or any other central
      bank with a view to managing, smoothing, or otherwise
      affecting the market price of gold. The answer to
      Question 11 is no.

      I hope this information is helpful. Please let me know
      if I can be of further assistance.


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