``Swapping Lies: Fed and Treasury Officials Hanging Themselves,'' GATA's Howe Says.

Business Editors

DALLAS--(BUSINESS WIRE)--Aug. 1, 2001

"Gold Anti-Trust Action Committee (GATA) consultant Reg Howe's August 1 commentary at his www.GoldenSextant.com Web site deals a devastating blow to claims by Fed Chairman Alan Greenspan and U.S. Treasury officials that the United States is not manipulating the gold market," says GATA chairman Bill Murphy in Dallas, Texas.

"Evidence is mounting that they are trying to cover up what they have done that has hurt so many unsuspecting people, including the poor in the sub-Saharan gold-producing countries of Africa," Murphy says.

On June 25 Sen. Jim Bunning of Kentucky received a letter from Fed Chairman Alan Greenspan in which he restated what he wrote to Senator Lieberman in 1999:

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

That letter to Bunning also included a recent memo to Greenspan from J. Virgil Mattingly, concerning remarks he made in January 1995 in his capacity as general counsel to the Federal Open Market Committee FOMC: (www.federalreserve.gov/fomc/transcripts/1995/950201Meeting.pdf)

It's pretty clear that these ESF operations are authorized. I don't think there is a legal problem in terms of the authority. The statute (31 U.S.C. s. 5302) is very broadly worded in terms of words like 'credit' -- it has covered things like the gold swaps -- and it confers broad authority.

Mattingly went on to say in the memorandum:

"I believe that my remarks, which were intended as a general description of the authority possessed by the Secretary of the Treasury to utilize the ESF, were transcribed inaccurately or otherwise became garbled."

"Does this mean that all Fed minutes cannot be trusted to be accurate?" Murphy asks.

In a direct contradiction to what Mattingly told Greenspan, Reg Howe reports on yet another reference to gold swaps in another Fed minutes, citing:

"another official reference to gold swaps, this time in the transcript of the minutes of the Federal Open Market Committee on March 26, 1991." (http://www.federalreserve.gov/fomc/transcripts/1991/910326Meeting.pdf).

It specifically refers to a comment by former Fed Governor, Wayne Angell:

"And if you mark our gold to the $358 price, we end up with something like $170 billion. There are opportunity costs because we don't get interest on that gold as we do on our foreign exchange (holdings). That cost is out there also. I would hesitate for us to have foreign currency holdings that have swap puts that just sit there, (which) is now becoming the case for our gold."

That finding adds to the importance of another discovery in Reg Howe's startling commentary:

"Last October, the European Central Bank issued a paper entitled Statistical Treatment of the Eurosystem's International Reserves (http://www.ecb.int/pub/pdf/statintreserves.pdf). Part IV of this document contains an appendix with numerical examples illustrating how euro area central banks should account for these transactions."

Howe's reference to example No. 3: a "gold swap with the United States Federal Reserve" in which the euro-area central bank swaps 1,000 ounces of gold against US$300,000 in currency, with the transaction to be reversed one month later "at the spot price of gold prevailing in the market at that moment."

Howe goes on to explain that if, as Chairman Greenspan and Mr. Mattingly insist, the Fed does not intervene in the gold market, either for itself or on behalf of the Treasury or the Exchange Stabilization Fund, why did the ECB select the Fed as the hypothetical counterparty in its third example?

"It hardly seems likely that the ECB would choose for this example a counterparty with which no euro-area central bank had done a gold swap," says Howe.

Howe also points out that, "like his predecessor Lawrence Summers, Treasury Secretary Paul O'Neill -- eschewing personal responsibility -- delegates to underlings with no authority to speak for the ESF the task of denying any involvement by it in the gold market. In a letter dated July 16, 2001, to GATA's Chris Powell, Sen. Joe Lieberman passed along answers from John M. Duncan, the Treasury's assistant secretary for legislative affairs, to questions Chris had promulgated."

Question 2 was: What "gold swaps" have been made by the ESF, the Treasury Department, or the Federal Reserve in the last 10 years? Whose gold was involved? What other parties were involved? What is the status of these "gold swaps"?

Mr. Duncan's response for the Treasury was: "There have been no gold swaps in the last 10 years."

Reg Howe echoes what the Gold Anti-Trust Action Committee stated publicly two years ago:

"As evidence of U.S. participation in gold swaps accumulates, so do official denials of their existence. What thus emerges is a very disturbing picture: a decade of secret gold swaps starting prior to the Clinton administration and involving top officials from both major parties."

"The Anglo-American war against gold is being concealed from the American people by a bipartisan program of swapping lies -- first by Fed and Treasury officials with each other and then to members of Congress, who pass them along to their constituents. This procedure enables top government officials to avoid giving false public testimony before Congress while at the same time allowing the people's elected representatives to appear to be doing their jobs. But this stratagem notwithstanding, what official Washington wants to cover up may soon emerge as the greatest financial and political scandal in U.S history."

A lawsuit has been filed in U.S. District Court in Boston by GATA consultant Reginald H. Howe against the Bank for International Settlements; Federal Reserve Board Chairman Alan Greenspan; William J. McDonough, president of the Federal Reserve Bank of New York; bullion banks J. P. Morgan & Co., Chase Manhattan Corp., Citigroup Inc., Goldman Sachs Group Inc., and Deutsche Bank; and Lawrence H. Summers, former secretary of the treasury, who by law exercised control of the U.S. Exchange Stabilization Fund, subject only to approval by the president of the United States.