Dow Jones story about Greenspan letter


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, 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.