Texas Tries to Bring Home its Gold Bars, Distrusts NY Fed, HSBC

They are “stored” at HSBC and the New York Fed. That worries Texas.

Clint Siegner, Director at Money Metals Exchange:

When Governor Greg Abbott signed House Bill Number 483 in his own hand on Friday, Texas gave a big gold “finger” to Wall Street and will soon bring $1 billion in gold bars back to the Lone Star State.

The University of Texas made headlines in 2010 by adding more than $500 million in gold to their endowment. The decision to plough half a billion dollars into gold was only the first chapter of the story. Perhaps the bigger news was the choice not to simply buy shares in a gold ETF or gold futures contracts. Custodians decided to buy physical bars instead – signaling a distinct lack of faith in paper gold.

Like most gold investors, they have seen very little to inspire confidence since.

In fact, those with the fiduciary responsibility for managing the Texas gold are feeling less certain than ever. That’s why they convinced state officials to build a depository and move the gold bars home from Wall Street. Texas joins Germany, Venezuela, the Netherlands, and other governments that have lost trust in New York depositories for safeguarding their metal.

Who could blame them? Gov. Abbott indicated on Friday in his signing statement that some of the Lone Star State’s gold is actually in the grubby hands of the New York Fed itself. And HSBC, the bank reported to be storing some of the gold, has been the subject of criminal investigations and lawsuits.

HSBC’s suspected activities range from manipulation of metals and currency markets to rigging LIBOR interest rates. And the bank avoided prosecution for laundering Mexican drug cartel money in 2012 by paying nearly $2 billion in fines instead.

Texas could have chosen to store with another bank. The problem is the alternatives aren’t much better. Virtually all of the major Wall Street banks appear to be engaged in some pretty unsavory activity – including ripping off their own customers. In recent years, banks have paid nearly $200 billion in fines.

Federal regulators and prosecutors may be investigating and levying some fines, but they aren’t planning to send a single one of the traders or executives implicated in these scandals to prison. That also weighs heavily on confidence. No one who is paying attention, including officials in Texas, should expect the Federal government to enforce the rule of law or property rights when it comes to the financial sector.

Investors tangled up with MF Global learned that lesson the hard way. The Federal bankruptcy trustee in charge froze all assets, including gold and silver bars stored in COMEX depositories – like HSBC’s. The owners of the bars had warehouse receipts proving they held title, but that didn’t prevent the trustee from liquidating their metal and putting them at the back of the line with the rest of the unsecured creditors.

The building location for the Texas depository is yet to be determined, and there is no word yet as to how long construction will take. Given the uncertainty over timing, it will be harder to gauge any reaction the metals markets have to the news. If other states or large organizations follow the Texas lead, it would likely be positive for prices. Demand for physical gold outside of the banking system would rise.

The story will bear close watching as HSBC and the New York Fed prepare for Texas to take actual delivery down the road.

The state’s gold holdings are reported to now total $1 billion in value. If those gold bars have been surreptitiously leased out, pledged, hypothecated, or even sold, then we could see a scramble for the physical metal. Clint Siegner, Director at Money Metals Exchange

If the swindling, particularly of their own “valued” customers isn’t enough, there are plenty of other reasons to worry about where you bank. Read…  Are You Still Banking with a Criminal Enterprise?

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  9 comments for “Texas Tries to Bring Home its Gold Bars, Distrusts NY Fed, HSBC

  1. John Wehland says:

    I left Wells Fargo after banking with them for 10 years. I made it clear that I wasn’t happy with their criminal activities. They tried to re-open my accounts by depositing 1 penny without my consent or knowledge. “Thanks for the donation Wells Fargo!” After a check I had written 6 months prior bounced I was pretty upset.

    They then closed my accounts for good. (At least as far as I know) I’m sure they left my account open for reporting purposes. Apparently they have no respect for me or the law.

    Don’t bank with these liars. If you have a mortgage with them I feel sorry for you.

  2. Julian the Apostate says:

    I view Texas’ move as a positive. While we here at Wolf Street are paying attention most people here in the US are not, especially those of the younger generation who don’t remember when real silver coins were in circulation. And none of us remember gold in circulation. Americans have swallowed the Big Lie that gold is a barbarous relic hook line and sinker. With Utah and Oklahoma leading the way, Texas has now joined the ranks locally. If I ran an outfit like Brinks I’d be trying to sell my services to the Texas folks until they get their own depository built. The mainstream media will do nothing to report developments, other than to bash them as they do us. Welcome to the tinfoil hat crowd, Governor. I for one would like to hear some interviews with you on FSN or Goldseek. If nothing else you won’t feel so much like the Lone Texas Ranger.

  3. Dan Romig says:

    On 5 April 1933, FDR signed Executive Order 6102 and confiscated the gold from law abiding citizens. In return, citizens were given Federal Reserve Notes of fiat currency, and those citizens who refused to turn over their gold were fined and imprisoned.

    In theory, the Federal Reserve Notes were backed by gold until Nixon took the dollar off the gold standard on 15 August 1971, but the last time Fort Knox was audited was 1953.

    All Americans should know this!

    • Jerry Bear says:

      Ummmm….. I think you got your facts a little wrong. At the beginning of the Great Depression, the people who were still wealthy largely pulled their money out of the economy. Cash became scarce everywhere, in some areas people were reduced to barter. Then FDR and his people discovered that the wealthy were buying large amounts of gold with the intention of sending it off to Europe. Had they been allowed to continue, they would have destroyed the U.S. dollar and guaranteed that the depression would never end nor would we have been able to fight WWII. FDR passed his order and forced those holding large amounts of monetary gold to sell it to the government in exchange for currency. FDR then built the national depository of Ft. Knox to hold all the gold and thus was able to establish it as the backing for the U.S. Dollar which would have become worthless otherwise. In effect, he saved the future U.S. economy. Nobody was actually jailed or fined for violating the order. But the threat of this was effective in making people take it seriously. The real threat was having your gold confiscated and that was effective in ensuring compliance. I honestly have to question the patriotism of extreme libertarians. Had your policies been followed in 1940 there wouldnt be a United States now and in the territory of what once was would be speaking German on the East Coast and Japanese on the West. Rooseveldt did what he had to do to save the country. When 70 respected experts on American History were, independently of each other, asked to name the 3 greatest American presidents, they all unanimously gave the same answer: George Washington, Abraham Lincoln and Franklin Delano Rooseveldt. There are good reasons why they did this. The fact that after the war, the United States of America became the greatest nation on Earth has a lot to do with it.

      • jse says:

        Do you even know who owns majority of the federal Reserve corp.and how fractional reserve banking really works? (By the way the statute said anybody any gold …if your Argument is gold was being shipped out by the wealthy then why was the public forbidden from holding all amounts of 24k

  4. ERG says:

    I’ve got $50 (that would be in fiat currency, btw) that says Texas will never get their gold back.

    • Vespa P200E says:

      There will be no doubts “delays” and pleas for delivery spread out over months if not years kind a like German request to repatriate their gold over few years. Alas what if other CBs and big holders afraid that there may not be enough gold at the Fed also demand their gold back.

      Perhaps Deja Vu like Chinese Cu holding houses who used it as collateral many times over till the banks showed up with their IOUs…

    • night-train says:

      If you can find somebody to take that action, I might want to get in on it. I think I have some old Confederate notes in Great Granddad’s old trunk. And then there is my primo collection of Beanie Babies.

  5. Julian the Apostate says:

    Dan, I believe Ft. Knox was audited in the mid ’70s at the insistence of some Congressman, and I don’t think anyone was arrested under FDR’s executive order. But your point is well taken. The government’s guns were pointed at the People and they were ripped off.

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