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1p ET Saturday, October 6, 2007
Dear Friend of GATA and Gold:
Because of recent inquiries to GATA
about the possibility of an attempt by the U.S. Government to confiscate
privately held gold and silver bullion and coins and shares in companies
mining the precious metals, we're republishing here the correspondence
between GATA and the U.S. Treasury Department on the subject in 2005.
The Treasury Department was
surprisingly candid in that correspondence, asserting the U.S. Government's
authority, in declared emergencies, to confiscate precious metals and to
restrict ownership of mining shares -- and to confiscate and restrict every
other financial asset as well. So perhaps precious metals investors
shouldn't feel too paranoid.
Confiscation has never seemed to GATA
to be a serious or imminent threat. While the U.S. Government in 1933 did
demand the exchange of circulating government-issued coins for paper money
(proceeding to devalue the paper money after the gold was surrendered), that
gold then was a huge part of the country's money supply, and amid the
national economic collapse at that time the government could make a plausible
complaint against "hoarding." There are no such circumstances
today, gold no longer being in general circulation as currency. (Yes, we're
working on that.)
But of course lately the arrogance
and imperiousness of the U.S.
government have far exceeded even the paranoia of precous
metals investors. Certainly capital controls may be imposed in the United States
in the next currency crisis, and it's not far from capital controls to even
more brutal interventions in the economy.
GATA's
correspondence with the Treasury Department on the subject of confiscation is
appended, along with the preface that appeared with the correspondence when
it first was published.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
12:11p ET Saturday, August 20, 2005
Dear Friend of GATA and Gold:
The U.S. Government has the authority
to prohibit the private possession of gold and silver coin and bullion by U.S. citizens
during wartime, and, during wartime and declared emergencies, to freeze their
ownership of shares of mining companies, the TreasuryDepartment
has told the Gold Anti-Trust Action Committee.
But gold and silver advocates
shouldn't feel too picked on. For the U.S. Government claims the authority in
declared emergencies to seize or freeze just about everything else that might
be considered a financial instrument.
The Treasury Department's assertions
came in a letter dated August 12 and written by Sean M. Thornton, chief
counsel for the department's Office of Foreign Assets Control, who replied to
questions GATA posed to the department in January. It took GATA six months
and a little prodding to get answers from the Treasury, but the Treasury's
reply, when it came, was remarkably comprehensive and candid.
The government's authority to
interfere with the ownership of gold, silver, and mining shares arises, Thornton wrote, from
the Trading With the Enemy Act, which became law in 1917 during World War I
and applies during declared wars, and from 1977's International Emergency
Economic Powers Act, which can be applied without declared wars.
While the Trading With the Enemy Act
authorizes the government to interfere with the ownership of gold and silver
particularly, it also applies to all forms of currency and all securities. So
the Treasury official stressed that it could be applied not just to shares of
gold and silver mining companies but to the shares of all companies in which
there is a foreign ownership interest. Further, there is no requirement in
the law that the targets of the government's interference must have some
connection to the declared enemies of the United States, or, really, some
connection to foreign ownership. Anything that can be construed as a
financial instrument, no matter how innocently it has been used, is subject
to seizure under the Trading With the Enemy Act and the International
Emergency Economic Powers Act.
Having just gone through a
controversy about a Supreme Court decision about government's power of
eminent domain, most Americans may be surprised to learn that the Trading
With the Enemy Act and the International Emergency Economic Powers Act could
expropriate them instantly and far more broadly without any of the due
process extended to parties in eminent domain cases. All that is needed is a
presidential proclamation of an emergency of some kind -- and of course
Americans lately have been living in a state of perpetual emergency.
When the Trading With the Enemy Act
was passed in 1917, gold and silver formed part of the official currency of
the United States
and were essential to ordinary commerce, so perhaps an argument could be made
then against "hoarding," even if "hoarding" could not be
well defined. That is no longer the case; the United States has officially
disavowed gold and silver as money and they no longer have a meaningful role
in commerce. (GATA is working on that.) So gold and silver investors may want
to ask their members of Congress to seek repeal of the statutes that give the
government the authority to interfere with the private ownership of gold and
silver, emergencies or not.
And ordinary citizens with no
particular interest in gold and silver may want to ask their members of
Congress to reconsider these statutes simply for being wildly tyrannical.
GATA's
correspondence with the Treasury Department is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
January 20, 2005
Roberta K. McInerney
Assistant General Counsel / Banking and Finance
Department of the Treasury
Washington, D.C. 20220
Dear Ms. Mclnerney:
Michael Kirk of U.S. Rep. John B.
Larson's office has forwarded to me your letter to him of December 17, which
answered my e-mailed inquiry to him about forcible redemption by the Treasury
Department of gold and silver coins held by private citizens. You replied
that a statute empowering the Treasury Department to do that, 12 U.S.C.
Section 248(n), had been repealed.
But since reading your letter I have
learned of a similar statute: Title 12. Chapter 2, Subchapter IV, Section
95a, which provides in part:
"During the time of war, the president
may, through any agency that he may designate, and under such rules and
regulations as he may prescribe, by means of instructions, licenses, or
otherwise -- (A) investigate, regulate, or prohibit any transactions in
foreign exchange, transfers of credit or payments between, by, through, or to
any banking institution, and the importing, exporting, hoarding, melting, or
earmarking of gold or silver coin or bullion, currency or securities. ..."
Section 95a further authorizes the
president to "prevent" the "use" by U.S. citizens
of "any property in which a foreign country or a national thereof has
any interest."
These provisions are of the greatest
concern to investors in gold and silver bullion, coins, and shares of gold
and silver mining companies, and to those companies themselves. So the Gold
Anti-Trust Action Committee urgently requests that the Treasury Department
explain how it construes these provisions. Particularly, we'd like to know:
* How does the Treasury Department
construe "the time of war"? How can gold and silver investors know
when the powers described in Section 95a are in operation or likely to come
into operation? Are formal declarations of war by Congress required here, or
lesser declarations, or none at all, but rather declarations made only by the
president?
* How does the Treasury Department
construe "hoarding"? Does it include the ordinary collection of
gold and silver coins, numismatic or not, and bullion by U.S. citizens, businesses, and corporations,
absent any collaboration with enemies of the United States?
* Does the Treasury Department
construe Section 95a to empower the president to interfere with the ownership
of shares in gold and silver mining companies merely because shares of such
companies also might be owned by foreign nationals or foreign governments, at
war with the United States or not? Under what circumstances would the president be so empowered?
In essence, we need to know whether
Section 95a contemplates the instant destruction of gold and silver investors
and the precious metals mining industry in the United States. So the Gold
Anti-Trust Action Committee asks the Treasury Department for a meeting with
the officials who might become responsible for implementing Section 95a, at
which we might discuss the concerns of precious metals investors and mining
companies. Would you kindly forward our request to the appropriate people?
Thanks for your help.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
February 28, 2005
Mr. Chris Powell
Gold Anti-Trust Action Committee Inc.
Manchester, Connecticut
Dear Mr. Powell:
Thank you for your follow up letter
dated January 20, 2005, requesting information about how the Treasury
Department interprets aspects of Title 12, Section 95a, of the U.S. Code.
Most of the questions you raise fall
within the jurisdiction of Treasury's Office of Foreign Assets Control
(OFAC). Consequently, I wanted to let you know that I have forwarded your
letter to OFAC's Office of the Chief Counsel for a
response. The chief counsel's office will ensure that you receive a response
to your letter.
If you have questions about the
status of your request, please call Mark Monborne, OFAC's acting chief counsel.
Thank you for taking the time to
write.
Sincerely,
Roberta K. McInerney
Assistant General Counsel (Banking and Finance)
U.S. Department of the
Treasury
Washington, D.C. 20220
* * *
August 12, 2005
Mr. Chris Powell
Gold Anti-Trust Action Committee Inc.
Manchester, Connecticut
Dear Mr. Powell:
Your letters to Roberta McInerney, assistant general counsel (banking and
finance), dated January 20 and July 17, 2005, have been forwarded to me for
response. I recently became the chief counsel (foreign assets control).
The U.S. Code provision that you
reference, 12 U.S.C. Sec. 95a, is a duplicate codification of Section 5 of
the Trading with the Enemy Act of 1917, 50 U.S.C. App. Secs.
1-44 ("TWEA"), with respect to which my office bears responsibility
for interpreting.
As you may be aware, Congress enacted
TWEA during World War I to prevent certain transactions that might be of
advantage to an enemy during wartime. During World War II the Treasury
Department implemented extensive punitive blockings of Axis assets and
protective blockings of Allied assets.
In 1950 the United States imposed economic sanctions
against the People's Republic of China as a result of the Korean
emergency to prevent, among other things, Chinese acquisition of foreign
exchange through transactions with Americans. The Department of the
Treasury's Office of Foreign Assets Control ("OFAC") began
enforcing foreign asset control programs in the 1950s. Today the only
economic sanctions programs administered by OFAC under TWEA are with respect
to Cuba, North Korea,
and certain third-country transfers of sensitive materials.
You have asked how the Treasury
Department construes the term "the time of war," which appears in
section 5 (b) (1) of TWEA. Although TWEA does not include a definition of the
term "during the time of war," it does include definitions for the
terms "the beginning of the war" and "end of the war."
The words "the beginning of the war" are deemed to mean
"midnight ending the day on which Congress has declared or shall declare
war or the existence of a state of war." The words "end of the
war" are deemed to mean "the date of proclamation of exchange of
ratifications of the treaty of peace, unless the president shall, by
proclamation, declare a prior date."
Thus the phrase "during the time
of war" would seem to cover the period between "the beginning of
the war" and the "end of the war."
Since this period cannot come into
existence without some form of congressional declaration, it would appear
that TWEA -- with the exception of its present applicability to the Cuba,
North Korea, and transaction control programs referenced above* -- applies
only to situations involving a declared state of war. In exercising any of
the specific powers available to him under TWEA during the time of war, the
president would issue an executive order or other similar instrument generally
made available through publication in the Federal Register.
(* -- From the early 1930s until
1977, when the International Emergency Economic Powers Act was enacted, TWEA
applied not only in times of war but also in situations in which the
president declared a peacetime national emergency. Pre-existing emergencies
declared with respect to Cuba
and North Korea and
certain transaction controls were grandfathered, which explains why TWEA
still serves as the basis for those sanctions programs, even though the United States
is presently not in a state of war with respect to any of the affected
countries.)
The construction of the term
"hoarding," as used in section 5(b)(1) of
TWEA, would depend on how the president chooses to exercise his authority
with respect to hoarding in any particular instance.
In making any decisions under the
authorities conferred by TWEA, the president would, of course, be taking
steps to address threats to our national security during a time of war. In
the past, the president has used TWEA or TWEA-like authorities to criminalize
hoarding. See generally Bauer v. United States, 244 F.2d 794 (9th Cir.
1957). Today, however, such activity is not restricted under the only
sanctions programs in effect pursuant to TWEA -- i.e., the Cuba, North Korea, and
transactions-control programs.
If, during a time of war, the
president expressly chose to restrict the hoarding of gold or silver, he
could do so.
Among the many factors the president
would likely consider before taking such action, however, is the fact that
the U.S. Government now mints and issues gold and silver coins to meet public
demand for both numismatic and investment purposes.
(See 31 U.S.C. § 5112(a)(7)-(10) & (e)-(i).)
You also have asked about the
president's ability to "interfere with the ownership of shares in gold
and silver mining companies merely because shares of such companies also
might be owned by foreign nationals or foreign governments, at war with the
United States or not."
Under TWEA during times of war -- and
also under the International Emergency Economic Powers Act, 50 U.S.C. Secs. 1701-05 ("IEEPA") during peacetime
national emergencies -- the president has broad powers to regulate property
in which there exists a foreign interest. See TWEA § 5(b)(1)(B); IEEPA Secs. 1702 (a)
(1) (B).
Consequently, the president may
restrict shares in any company owned by foreign persons consistent with the
purposes of any declared emergency.
In this respect, foreign-owned shares
in gold and silver mining companies are no different from foreign-owned
shares in companies in any other industry.
Finally, you raise concerns about the
"instant destruction of gold and silver investors and the precious
metals mining industry in the United
States." In the establishment and
implementation of sanctions, the U.S. Government is always mindful of the
domestic impact of restrictions meant to serve national security and foreign
policy purposes. Just as the U.S. Government has been mindful of the
practical impact that sanctions have on various service and manufacturing
industries, it would also be mindful of the potential impact of sanctions
with respect to the markets and industries associated with precious metals.
I hope you find this letter
instructive. Thank you for your interest. If I can be of any further
assistance, please call me.
Sincerely,
Sean M. Thornton
Chief Counsel (Foreign Assets Control)
U.S. Department of the
Treasury
Washington, D.C. 20220
Chris Powell
Secretary /
Treasurer
Gold Anti-Trust
Action Committee
www.GATA.org
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