Fed can keep most gold secrets but must yield one, judge rules

8:55p ET Thursday, February 3, 2011

Dear Friend of GATA and Gold:

The Federal Reserve can keep secret most of the gold documents at issue in GATA's freedom-of-information lawsuit against it, a federal judge ruled today. But the judge, Ellen Segal Huvelle of U.S. District Court for the District of Columbia, ordered the Fed to disclose to GATA a potentially crucial document by February 18.

Judge Huvelle ruled that most of the Fed's documents were exempt from disclosure under the U.S. Freedom of Information Act for being "pre-decisional or deliberative" or for containing privileged or confidential commercial or financial information obtained from a person or corporation.

Among the documents so exempted, the judge found, is "an email exchange" among Federal Reserve Board and Federal Reserve Bank of New York staff members "discussing what information to include in response to requests from Congress regarding the Federal Reserve's involvement in gold."

Similarly exempted, the judge found, is "a September 17, 2001, draft document entitled 'Confidential Draft: Potential Repo/Swap Involving Treasury Gold.' The document identifies issues that would be raised if a swap or repurchase transaction involving Treasury gold were to occur."

The one document whose disclosure was ordered by the judge was described in her memorandum of decision as "a staff member's notes on the discussion by the Gold and Foreign Exchange Committee of the Group of Ten (or "G-10"), as well as a transmission memorandum from Mr. [Ted] Truman to the board." The notes, the judge found, "are a straightforward factual recounting of a meeting with representatives of foreign central banks, detailing what each of the participants said."

Judge Huvelle ruled in favor of the Fed and against GATA on the adequacy of the Fed's search for documents relevant to GATA's FOI request. GATA considered the search inadequate for several reasons, not least because the Fed never acknowledged the gold swap arrangements with foreign banks that were acknowledged by Fed Governor Kevin M. Warsh in his denial of GATA's FOI request in September 2009:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

Regardless of the adverse parts of the judge's decision, GATA considers its lawsuit a success for having established in open court that the Fed has many secrets about gold, a subject where secrecy's only plausible purpose can be surreptitious market intervention, which would be fully consistent with the official documentation GATA has compiled about such intervention. (See http://www.gata.org/taxonomy/term/21 and particularly http://www.gata.org/node/9545.)

That the Fed has participated in gold swaps for market-rigging purposes has been established, among other things, by the January 1995 minutes of its own Federal Open Market Committee (http://www.federalreserve.gov/monetarypolicy/files/FOMC19950201meeting.pdf) and by the refusal two months ago of Germany's central bank, the Bundesbank, to deny that it has undertaken gold swaps with the United States (http://www.gata.org/node/9363).

Further, the record of GATA's case may be useful to U.S. Rep. Ron Paul, R-Texas, new chairman of the House Financial Services Committee's Subcommittee on Domestic Monetary Policy, should he, as many hope and expect, formally question Federal Reserve officials about the Fed's surreptitious involvement in the gold market.

Of course GATA's case also suggests all sorts of questions that could put to Fed officials about gold should financial journalism ever report on that market seriously.

Judge Huvelle's memorandum of decision in GATA's lawsuit against the Fed can be found here:

http://www.gata.org/files/GATAFOILawsuitRuling-02-03-2011.pdf

The judge's order can be found here:

http://www.gata.org/files/GATAFOILawsuitOrder-02-03-2011.pdf

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