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Mark Perlstein - Black Sta r HUNTFOR SILVER Gary Allen is author of None Dare Call It Conspiracy; The Rockefeller File ; Kissinger; Jimmy Carter/Jimmy Carter; Tax Target: Washington; and, Ted Kennedy: In Over His Head. He is an AMERICAN OPINION Contributing Editor.

• NELSON BUNKER HUNT, fabled son television series. He is, in fact, a of the legendary billionaire H.L. happy combination of sober realist Hunt of Texas, has been called "Sil­ and idealistic visionary. He is a sober verfinger" by financial journalists realist because he understands' the eager to dramatize his silver invest­ perilous direction in which our civili­ ments in the purple ad hominems of zation has been headed - the politi­ a James Bond novel. Hunt is neither cal instability, the civil turmoil, the an eccentric villain out of James financial catastrophe of hyperinfla­ Bond nor a sinister schemer in the tion and moral bankruptcy. And he is mold of J.R. Ewing of the "Dallas" an idealistic visionary because he is

DE CEMBER,1 980 1 ~ . The miners at right help to deliver annual world production of silver that for twenty years has been in the neighborhood of 300 million ounces, Meanwhile, silver consumption is run­ ning at 500 million ounces a year. The Hunts realized that as available reserves are con­ sumed the price of the metal must rise.

working for a better world in which speculator in silver. Speculators are the people govern themselves and short-term players. They do not buy their economy without being victim­ their holdings to keep, as Hunt was ized by a paper aristocracy which doing and continues to do. People profits by manipulating government gamble on the future price of pork and inflating currencies. bellies to make money in a relatively Mr. Hunt is a faithful Christian, short period - not as a long-term friendly, unassuming, and temperate. investment. With gold and silver, on He refrains from both liquor and the other hand, there are many who tobacco, flies tourist class on com­ -like the Hunts - see the metals as mercial airlines, and dresses simply. cash and prefer them to paper A member of the National Council money. They are investors for the of The John Birch Society, he is a long term. Thus Bunker Hunt put a determined patriot and a formidable fortune in silver for three reasons: opponent of Establishment Insiders (1.) Mr. Hunt is aware that for who seek to make America one more the past twenty years world produc­ colony in a New World Order. tion of silver has been in the neigh­ Earlier this year, Bunker Hunt and borhood of 300 million ounces annu­ his brother Herbert were targets of ally while consumption has been one of the most spectacular swindles about 500 million ounces. This means in financial history. This was marked that every year the world comes up by the now-infamous silver crash short on silver by about 200 million that culminated on March 27, 1980. ounces. This "shortfall" has been But before we describe this biggest made up from silver mined and holdup since the Brinks job, let's stored over hundreds of years. Since examine some of the reasons the about a third of the world's silver is Texas billionaire set out to acquire in the form of jewelry in India ­ one hundred million ounces of silver and is locked up there because of the rather than, say, a million pounds of Indian Government's prohibition of kumquats. its export - Bunker Hunt quickly It has been alleged by the usual calculated that the "shortfall" would ~ Establishment propagandists that soon consume all the available re- j the Hunt brothers were irresponsible serves of silver and produce a price I "speculators" in silver and that it was squeeze. The price of silver was i their actions that produced the silver bound to rise dramatically. -£ debacle. But Bunker Hunt was not a (2.) Most people still listen to ~

2 AMERICAN OPINION

Bunker Hunt (left) and his brother Herbert (right) testify in Washington about silver. Hear­ ings have turned up substantial evidence sug­ gesting a plot to cheat the Hunts through commodity rules changes by persons who were holding short positions that would have required delivery of silver worth $1.9 billion.

Walter Cronkite telling them that in­ began buying silver in the 1970s as a flation is rising prices. But Mr. Hunt hedge against inflation and political knows that rising prices are the effect chaos - an investment which had to of inflation and that the cause is increase in value due to the increas­ huge federal deficits that are spun ingly short supply in comparison to out into the economy as fiat credit the increasing world demand on the and currency. Bunker believes that metal. Nonetheless, some have ac­ the politicians will continue to pump cused the Hunts of trying to "corner" money into the economy, in effect the silver market. To "corner" a mar­ buying votes from the unproductive ket one would have to acquire enough to be paid for by reducing the value of an essential commodity to obtain of the savings of the productive. a virtual monopoly in it and be able Deficit money takes on value only by arbitrarily to set the price. That was diluting the purchasing power of all not the Hunt objective. As Alan the money that is already in circula­ Trustman observes in the September tion . Mr. Hunt realizes that this pro­ issue of Atlantic: cess might continue until it takes a " . .. Their behavior was not typi­ wheelbarrow full of Washingtons cal of that of cornerers. In the first and Lincolns to buy a Big Mac. place, they told everybody who would (3.) Should the purchasing power listen what they were doing; they of our currency approach zero in a were big, big buyers and intended to hyperinflationary nightmare, the peo­ buy more and more. A cornerer oper­ ple would demand a more stable ates in secret until he owns substan­ means of exchange. At that time, gold tially the entire available supply, and would be too precious to be used in the then he squeezes the surprised inno­ everyday monetary transactions of cents who have sold short and must the average citizen and silver coins buy in higher. would once again become a means of "You would have to have been exchange. But it will not be the face belligerently deaf and disbelieving value that is stamped on the coin and anything but innocent to sell which is important (i.e., ten cents, short and then be caught surprised if twenty-five cents, fifty cents), but Nelson Bunker and William Herbert 0 the silver content of the coins. A dime had cornered silver and demanded :-.:§ might have the same purchasing pow­ that you deliver. Everybody knew I er as ten dollars in currency. they were buying and willing to pay a ~ For these three reasons the Hunts higher price. ~

4 AMERICAN OPINION

"In the second place, they never to find oneself. But, just like every tried to squeeze anyone. They took other player, the " shorts" knew the their deliveries slowly, over many risks when they contracted. They months, even accepted in settlement were all over twenty-one and none of some of their contracts non-certi­ arrived in town atop a wagonload of fied silver not on deposit with the pumpkins. Mr. Trustman reports exchanges, and gracefully rolled the what happened: bulk of their futures forward into ". . . the short sellers of silver later and later months so as not to were very short and in very hot water. squeeze the sellers. Cornerers? Not They had had plenty of advance qui te. " warning, and, as one month after While it is true that the Hunts another rolled around where the longs wished to acquire large quantities of never tried to squeeze the shorts,(and silver, as we have noted, they had the could not have done so even if they soundest of reasons for doing so. wished to, with the CFTCt and the Which is why they went into the ruling bodies of the exchanges look­ futures markets. As silver's price ing on), it became more and more continued to go up, the value of the difficult to sympathize with the Hunt silver futures rose rapidly, and short sellers of silver. But short they those paper profits were used to bor­ were, and facing the prospect of row more money with which to buy enormous, crushing loss." more silver futures positions.* In other words, these players had As this mountain of silver grew made a mistake in the market - a with the rise in price, the "shorts" crucial mistake. Trustman continues: who had agreed to deliver silver they "Silver was going out of control. didn't have, and therefore had to buy As the pri ce of silver mounted, it silver at increasingly higher prices to became ridiculous in the eyes of fulfill their contracts, grew progres­ many exchange members. Six dollars sively more nervous. Those who go an ounce? Seven dollars? For silver? hea vily short in a rising market lose. Sooner or later the bubble would Having to purchase silver at a high break. If not, they could always price in order to deliver it for a low make it break. It would be their duty, price is not a good situation in which they would claim, to make the price break, for the benefit of the makers •A commodity fut ures cont ract is a legally and users [of silver] and for the pro­ binding agreeme nt to buy or sell a designated tection of the public. And some of amount of a given commodity, at a specified them - we suspected and now know time in th e future, and at a price agreed on at from the CFTC - shorted silver, the time the contract is made. On every side of a futu res contract there is a " long" investor selling futures on silver they did not and a "short" investor. The " long" believes own." th at the price will be higher when the futures The higher the price of silver contract comes due in anywhere from one to went, the more the "shorts" stood to eight months. The "s hort" investor on the lose. Facing enormous losses, some of other side of the same contract is banking on the price being lower at the time the contract them used their influence on the comes due. Hun t was " long" on thousa nds of governing bodies of the commodity contracts for five thousa nd ounces of silver exchanges to sabotage the market each. He obviously expected the price to con­ and support the shorts at the expense tinue to go up, and added to his positions. [ Commodity Futures Tradin g Commissio n, of the longs - primarily the Hunt the government burea u which oversees the brothers. They did this by getting the futu res tra ding indus try. (Continued on page ninety-seven. )

6 AMERICAN OPINION From page SI X 'appropriate' cushion against a pos­ sible drop in price when the price of HUNT FOR SILVER silver was $5 an ounce and the 5000 exchanges to change the rules in the ounces cost $25,000. But, now that middle of the game. As Herbert the price was $15, and the 5000 Hunt later remarked: "To put it in ounces cost $75,000, the initial mar­ the terms of a football analogy; the gin of $1000 was deemed inadequate. game starts, the rules are changed, And the changes were retroactive. If and finally when you get to the last you had put up $1000 initial margin quarter the referee says only the when you bought, and they bumped other side can have the ball." the requirement to $10,000, you had Throughout 1979 the price of sil­ to put up the other $9000 or you were ver had risen dramatically. By Labor subject to a margin call and the sale Day it had reached $11 an ounce. But of your futures contract. the price kept rising, up to the $15 to "The little people who had pyra­ $16 level in October. Acting on be­ mided in accordance with existing half of the shorts, the Commodities rules; and bought more and more Exchange (Comex) of New York and futures, had to put up a lot of addi­ the Chicago Board of Trade (CBOT) tional margin - or sell some of their began to raise margin requirements.* futures. Which was the purpose of This action was intended to discour­ the new rule, of course - to force age new buyers of futures contracts them to sell their futures. When peo­ and to encourage traders to sell the ple have to sell, sell at any price, the contracts they were holding. Each price tends to go down." time margin requirements were Despite the series of margin in­ raised, the small traders had more creases made by the exchanges, how­ trouble holding on to their positions ever, the price of silver did not fall. and were forced to sell. Whereas be­ The rule changes hadn't worked. fore a trader could buy or sell a 5,000­ Only the little traders were forced to ounce silver futures contract worth sell - and they didn't own very much $25,000 at $5 an ounce for only silver compared to the big investors. $1,000, by Labor Day the exchanges The price of silver stayed up around required him to pay $2,000 for the the $15 to $16 range in October. The same 5,000-ounce contract. Eventual­ insiders on the exchanges, millions of ly, as traders were required to put up ounces "short," were now desperate. more and more margin, a point was And silver began to climb once more, reached when as much as $75,000 in closing at $18.82 in November, zoom­ margin deposit was required for one ing through $20 by December twelfth, 5,000-ounce contract! This is quite a $25 by December .twenty-sixth, hike from $1,000. Trustman explains $34.45 on December thirty-first, and how this inevitably squeezed the then, $38.85 on January second. A small traders out of the market: spectacular climb! The Hunts were "The rationale was plausible, if doing very well indeed, but those who not sound. Tiny, as it was, initial were short the market were contem­ margin of $1000 had been deemed an plating a leap from their penthouses. The response of the exchanges? ' Ma rgin is an amount of money deposited Change the rules some more, and with a commodities broker to protect against loss if the price should move in th e wrong keep changing them, to cheat the directio n - that is. aga inst the direc tion the Hunts. Within a period of two weeks, trader is betting on in his fut ures contract. three new rules were imposed. On

DECEMBER. 1980 97 January eighth, the exchanges laid contracts were knowingly approved down position limits, decreeing ­ by James Stone, the activist chair­ with retroactive force - that no man of the Commodity Futures Trad­ trader could own more than 2,000 ing Commission. Mr. Trustman ob­ futures in all months, or 500 in any serves: month. This was designed to force "This created an anomaly. If you the big traders to sell their "excess" owned more than fifty contracts, contracts. And, with this new retro­ you would still have to make payment active rule suddenly imposed on on the due date unless you sold your them, the Hunt brothers found extras, but you couldn't demand de­ themselves holding a great many livery on more than the fifty fu­ more futures positions than the new tures. Holders were given until Jan­ exchange rules would now permit. uary 31 to get their positions in line. Then the exchanges lowered the What? That's right. Ten whole days. monthly limits for January and Feb­ Could the exchanges really do it? ruary to only fifty contracts! Wasn't it illegal? Unconstitutional? But, while the price of silver did Isn't there something in the Constitu­ dip a few dollars, it began to recover tion about impairing the obligations its upward trend. The Hunts had of contracts? found a way around the rule changes "Chairman Stone made speeches and position limits. They sold their declaring what was fair and for the "excess" futures to Engelhard Min­ general good; it was the function of erals and Chemical Corporation, a the CFTC to declare the policy and company that was heavily short the purpose of the markets, and the sole market and hence was delighted to purpose of the markets, the chair­ buy the long position to offset its man now decreed, was to provide an shorts. Along with this was a private opportunity for makers and users to arrangement in which Bunker and hedge against rising or falling prices, Herbert agreed to buy from Engel­ and not an opportunity to own the hard, within sixty days, 19,000,000 underlying commodities, and never ounces of silver at $35 an ounce ($665 mind what the futures contracts million). This silver was to come said, or that you had to have an from Engelhard's inventory and not underlying delivery contract to make from the futures market where the contracts meaningful, or that you Engelhard was short. needed speculators who were willing Now the price of silver shot up to take delivery in certain cases to through $40 an ounce and then, on have a working market. It was per­ January seventeenth, briefly broke fectly all right to make the buyers $50 an ounce. The shorts were in a pay while lifting the delivery re­ panic and screaming for relief from quirement from the sellers." their contracts. Thereupon the ex­ The exchanges and the shorts had changes imposed two more new rules. been playing a game of fractional­ First, they said that buyers could not reserve commodity trading; there demand delivery of their silver at the wasn't nearly as much silver on de­ maturity of their futures, even posit at banks and warehouses as was though it was their right as stipulated represented by the futures contracts in the terms of their futures con­ held and traded. The supply of silver tracts. Alan Trustman reveals that overhanging the commodities market this and subsequent rules which con­ amounted to about 400 million travened the terms of commodities ounces of above-ground bullion for

DE CEMBER,1980 99 trading purposes, plus whatever the ment: "There was no way to sell any­ exchanges were willing to sell short at thing except at a distress price. The the risk of having delivery demanded shorts were sitting on the Comex as provided for in the terms of the board, and we were sitting down here contracts. With the new rule, the in Dallas long, trusting them." shorts were no longer under the dis­ Greatly disenchanted by the whole cipline of facing the possibility of outrage, Bunker Hunt observes: "All demands for delivery; they were free those exchanges are run by the shorts, to sell silver that wasn't there. This and with the connivance of the meant that the effective supply of shorts. There are 23 people on the silver became potentially infinite in Comex board. I've heard at least half terms of the paper contracts. Whata of them made a huge amount of way to drive the price of silver down money. They positioned themselves to Hades! the day before the big January 21 Then, the final touch to sabotage liquidation vote. They didn't even the silver market: the third of the have the silver bullion. They just sold three rule changes. On January 21, short. They knew they could break 1980, the New York Comex again the market because they were the changed the rules in the middle of guys voting." the game by suspending all trading Herbert Hunt's analogy about the excep t for liquidation purposes (and referees at a football game changing no deliveries) while raising margin re­ the rules in the fourth quarter was quirements to their highest level in right as far as it went. Now players the history of the exchanges. The from the other side had climbed into Ch icago Board of Trade imposed costume as referees to make abso­ similar restrictions the next day. lutely certain their team won. Sud­ This meant you couldn't sell un­ denly the game was being run with all less you were long - and you couldn't the fairness and equity of a lynch­ buy unless you were short. Even if ing. you were willing and able to put up The series of margin hikes and the $50,000 initial margin the ex­ position limits was bad enough. changes were demanding, you would These drove out small buyers, and not be permitted to buy except to forced large traders to dispose of cover your short position. Longs were their contracts. The effect was to not permitted to buy in the new mar­ make the market increasingly illiquid ket. They were excluded - stacking and cash poor. Between September the deck in favor of the short sellers 28, 1979, and February 1, 1980, the who wanted the price to drop down number of outstanding contracts had far enough so they could get out of dropped fifty-three percent on the their positions. This effectively Comex and more than sixty-nine per­ killed the silver futures market in cent on the CBOT. But the " liquida­ America. The shorts - which Con­ tion only" rule was the final move of gressional Hearings later revealed to the vested insiders to rescue them­ include members of the exchanges selves as short players and sandbag and members of the Commodity Fu­ the Hunts. tures Trading Commission itself ­ One of those vested insiders ­ had used their influence to intervene and a character who played a key role and sabotage the market to swindle in arranging for the Comex to adopt the Hunts. the "liquidation only" rule - was As Bunker Hunt was later to la- Dr. Henry Jarecki. A former Yale

100 DECEMBER,1980 Medical School professor, Jarecki is was having big money problems, a member of the Board of Governors Herbert and Bunker Hunt flew up to of the New York Commodity Ex­ New York to visit with Dr. Jarecki. change and serves as chairman of its They stayed several days. Bunker re­ margins committee. It is very inter­ calls: "When the price of silver is esting to note that Henry Jarecki is going up, Jarecki will give you almost also chairman of the board of Mo­ a religious speech about how he's ful­ catta Metals Corporation, which was ly hedged. But let me tell you, I was one of the major players heavily concerned about getting our silver short the market, and who thus had a back before he blew it." strong interest in forcing down the Although Jarecki now claims that price of silver by whatever means Mocatta's solvency was never in necessary. Jarecki helped to arrange jeopardy, Herbert Hunt remembers just the right scenario. Jarecki rushing into his office and An irony in this story is that it was announcing: "When it hits $22.90 I'm the Hunts who had bailed Mocatta broke - Mocatta is insolvent." A Metals out of a potentially fatal few minutes later, according to Her­ predicament only a few months ear­ bert, Jarecki came back in and anx­ lier in October of 1979. At that time iously admitted, "I've miscalculated. Mocatta was heavily in debt to banks The figure 's a little lower." from which it had borrowed to fi­ The Hunts finally settled with nance its short position on the Mocatta through an "exchange for Comex. In fact, according to Green's physicals" transaction. The brothers Commodity Market Comments, Mo­ matched up some of their long posi­ catta owed more than $400 million, tions with Mocatta's short positions, and was worth only about $40 million. canceling them out and reducing Mo­ The Hunts allowed Jarecki to reduce catta's margin requirements. Also, Mocatta's short position rather than Mocatta sold 23 million ounces of go deeper into debt as the price of silver to International Metals Invest­ silver rose. ment Corporation, a Bermuda-based In an interview with Fortune maga­ company the Hunts owned jointly zine (August 11, 1980) Herbert Hunt with several Arab partners. The cash recounted the episode: "Chairman from that sale was used by Jarecki to Henry Jarecki was in complete tur­ payoff the bank loan he had taken moil; he was getting eaten alive by out against the 10.7 million ounces of margin calls . Between us, Bunker and Hunt silver. Did the Hunts ever get I had put up 10.7 million ounces of their 10.7 million ounces back from silver with Mocatta, for which we Mocatta? Not exactly. They had to had obtained loans totaling $50 mil­ settle for a combination of some lion. But the loan agreement was so bullion, silver leases, and bags of fouled up we didn't have the right to silver coins. A bag of silver coins with pay it off without Mocatta's permis­ a total face value of a thousand sion. In fact, we didn't even realize dollars can contain anywhere from that Mocatta could borrow against 715 to 727 ounces of' silver metal, our bullion. It was perfectly legal, depending on how worn the coins are. but suddenly I discovered that he had Bart Cousins, Herbert Hunt's attor­ hocked our silver for as much as the ney, comments: "Jarecki insisted on banks would loan him - about $185 getting credit for 725-ounce coins. He million, I believe." got the best of us by three or four When they realized that Mocatta ounces per bag ."

AMERICAN OPINION 101

As beneficial as this deal was for the Hunts. Viewing the Hunt silver Mocatta, Jarecki seems to hold a play and its possible future hard­ grudge against Bunker Hunt. Accord­ money implications as a dangerous ing to Fortune, Jarecki had remarked threat to their paper-money empire, to a friend that, "Bunker Hunt cost the international manipulators may me a lot of sleep . But for every hour have conspired to bring down the he's cost me I'm going to make him Hunts' huge silver position and, if lose ten!" possible, destroy them. Bunker's reaction? "I want you to In the commodities futures mar­ know I'm a very good sleeper," drawls ket, a great deal of the buying is done the Texas billionaire. "I may lose with borrowed money. When interest money, but I don't lose sleep ." rates are high, it is more difficult It was Mocatta chairman Henry and less attractive to borrow money Jarecki - along with other shorts to purchase new positions or to fur­ operating through the exchanges ­ nish additional margin. If the big who stabbed the Hunts in the back banks - which set the prime lending and ruined the silver market in the rate - wanted to help the shorts and United States. It was they who engi­ clobber the Hunts, they could do neered the rule changes which made what they did - push the prime rate it virtually impossible for longs to to twenty percent and discourage buy and ultimately led to a massive, people from borrowing money to if temporary, price collapse. A mar­ compete in the commodities futures ket consisting only of sellers - as market. As a result, investors would decreed by the exchanges - would of sell out their positions, and the price course have to collapse. On March 27, of silver would drop. 1980, it did. It was the commodity Did it happen that way? Note exchanges and the Commodity Fu­ that, in the months subsequent to the tures Trading Commission that were silver crash, interest rates which had responsible for the silver debacle. been forced to an all-time high plum­ But of course the rapid and ex­ meted faster and further than at any treme rule changes were not the only time in history. A drop in the prime factors involved in creating the silver rate from twenty percent to twelve crash. There is, in fact, a great deal percent in three months represents a more that is suspicious here. Interest forty percent drop. Normally, the rates were rocketed and loans from prime won't vary more than a point or the banks for "speculative" purposes two in a year. Of course, these are were severely curtailed. Of course uncertain times and this could all be high interest rates tend to draw in­ coincidence. vestment money out of the precious Realizing the difficulties in get­ metals and into attractive short-term ting large sums of money in the Treasury bills. United States under the Paul Volcker Many analysts, observing that the policy at the Fed, Bunker Hunt de­ prime rate peaked at precisely the cided to try European lending institu­ point at which the price of silver tions. After all, European financial plummeted to its lowest level, theo­ institutions have long been more ea­ rize that the Federal Reserve (under ger to make loans with precious met­ C.F .R. member Paul Volcker) may als as collateral than banks in the have been working in concert with the United States. Hunt now found to big banks and insiders on the ex­ his dismay that the U.S . Federal Re­ changes to pull the rug from under serve had sent out a form letter to all

DECEMBER, 1980 105 the major banks in the world request­ and two Arab partners would issue ing that they not make any loans to interest-bearing international bonds Americans for "speculation" in gold backed by their silver holdings. or silver. Representatives of the Fed­ The effect of this announcement eral Reserve were even flown over­ was to fuel the rumor mills in the seas from Washington, warning the financial markets where it was mis­ foreign banks not to lend substantial interpreted as a desperate call for sums of money to Americans - and help to raise cash. Traders began to specifying Bunker Hunt. panic and dumped silver contracts Mr. Hunt was acquainted with a like they caused cancer. The de­ number of the people at key foreign lighted shorts watched the price fall banks, and he asked them, "What do and covered their short positions. you people care what the Federal Re­ On that very day, Bache informed serve says? You're not Americans; the Herbert Hunt in Dallas that the Federal Reserve doesn't run you." brothers faced a staggering margin They explained that they didn't dare call of more than $100 million. It was cross the Federal Reserve because a call that was later to total some they had branch offices or other $300 million. Due immediately. interests in the United States and the "They had always met their calls Fed could make things very tough on until this week," said Bache's execu­ them. Bunker Hunt comments: tive vice president Elliot Smith. But "That came as quite a surprise to me, they now declined immediately to do because I didn't realize they had that so and Bache began to liquidate Hunt kind of power. But they really do." bullion, futures contracts, and stocks There was never any question - including huge positions in Texa­ about the ability of the Hunts to co, Gulf Resources, Louisiana Land, remain solvent. But, as a conse­ and First Chicago Corporation. quence of record interest rates im­ By this time, rumors were spread­ posed by the Fed and the big banks, ing like quicksilver. One tale claimed and the huge margin deposits sud­ that Bache had issued a margin call denly required by the commodity ex­ for one billion dollars - and the changes, the Hunts found them­ Hunts couldn't make it. A full -scale selves caught in a liquidity squeeze panic had been triggered. According that would have bankrupted many to Elliot Smith, "It was a classic nations. blowout. It was the culmination of Due to the rule changes made by the news that a major silver buyer the exchanges and a great deal of was being liquidated, of the pres­ public selling of old silver, the price sures of high margin rates, of all the of silver had already begun to drop inflation and recession talk. Every­ from its January seventeenth peak body worried about being able to get of about $50 an ounce. As they be­ their money out of the market, and came increasingly pressed for cash, people were just selling irrationally." their broker (Bache Halsey Stuart Bache announced that the margin Shields) began making large margin calls had not amounted to a billion calls to the Hunts to secure their but only $300 million, that the Hunts positions. In an apparent effort to had already paid two-thirds of the push the price of silver back up and tab, and that Bache would make up to raise cash to help relieve the situa­ the balance the next day. These as­ tion, Bunker Hunt announced from surances helped to stem the selling Paris on March twenty-sixth that he panic, but silver had already fallen

106 AMERICAN OPINION to $10.80 on the morning of March hard that may now seem less than twenty-seventh. It was Silver Thurs­ brilliant with the Canadian Govern­ day. ment moving to nationalize oil. Because they had bought most of Also, the Hunts negotiated a big their silver bullion at under $10 an loan from the banks totaling $1.1 bil­ ounce, however , the Hunts were still lion. In order to get this huge loan, ahead of the game in terms of their however, the Hunt brothers had to holdings in the actual metal. But the put up virtually all their income-pro­ value of their bullion had dropped by ducing assets as collateral - includ­ nearly four billion dollars since Janu­ ing silver, oil, cattle, race horses, art, ary as the price of silver began fall ­ and securities. According to Herbert, ing in response to the quickie rule these collateralized assets have a changes imposed by the exchanges. In market value of eight to nine times the futures market, they had lost the amount of the loan - which over a billion dollars on silver con­ means that even after the biggest tracts they had bought when the price swindle in history the Hunts are of silver was in the neighborhood of worth around nine billion dollars. $35 an ounce. And, of course , they Many have wondered why the In­ still had the agreement with Engel­ sider megabanks would - with the hard to buy 19 million ounces at $35 approval of Federal Reserve Chair­ . an ounce, a deal made before the man Paul Volcker - come to the aid precipitous decline in silver. of their mortal enemies the Hunts. On the Sunday following Silver Evidently the big bankers were Thursday, Bunker Hunt flew in afraid that the temporary Hunt from Saudi Arabia and met with liquidity crisis might precipitate a Herbert and representatives of major domino effect culminating in Engelhard Minerals. The rug had a mammoth collapse of the entire been pulled from under the Hunts banking system. Banks, brokers, and and they moved to negotiate with creditors were in danger of insol­ Engelhard on the huge silver pur­ vency if Bunker and his brother were chase at a marathon day-and-night cash-squeezed and unable immedi­ session involving representatives not ately to pay their obligations. They only from Engelhard, but also of the did not want to be dragged under. big banks - Citibank, Chase Man­ Having victimized the Hunts, the Es­ hattan, Morgan Guaranty Trust, tablishment then guaranteed their Bank of America, Manufacturers liquidity - not because of guilt or Hanover Trust, and the First Nation­ charity, but out of fear that their al Bank of,Dallas. Also wandering in own empires might go down while the and out of this top-level meeting was Hunts were righting their ship. none other than Federal Reserve In April , two weeks after the big Chairman Paul A. Volcker . .. wear­ loan to the Hunts was signed, Fed ing pajamas. Evidently the big bank­ Chairman Paul Volcker announced to ers believed they had the Hunts the press that one of the conditions where they wanted them. of the loan was that the Hunt broth­ The upshot was that the Hunts ers would have to liquidate their en­ settled with Engelhard by giving tire silver stock and promise not to them 8.6 million ounces of silver bul­ buy precious metals in the future. lion and, in addition, valuable drill­ This was not encouraging news for ing rights for oil and gas in Canada the silver market in the United - a bargain settlement for Engel- States. Alan Trustman pointedly ob-

108 AMERICAN OPINION serves : "An odd statement for Mr. Another big winner was Norton Volcker to make. Knowledgeable as Waltuch, vice president of Conti­ he is, and he unquestionably is Commodity Services Inc. in New knowledgeable, he had to know the York. Waltuch emerged from this impact his statement was likely to hustle with a personal profit believed have - and did have - on the shell­ to be more than ten million dollars. shocked- precious metals markets, Although he strutted confidently before he decided on the following around the Comex silver pit, exuding day to qualify what he had said. assurance in the soaring price of sil­ What was he trying to accomplish? ver, Norton Waltuch later let his Save the dollar as we know it? " clients go down the drain when he Despite Volcker's pronouncement, sold short . In the frank opinion of the requirement that the Hunts dis­ one of his former associates: "Nor­ pose of t heir silver holdings was ton betrayed us. " never a condi tion of the loan. Congressional investigations of Meanwhile, not everyone had lost the silver swindle were soon in the roller-coaster ride that had launched. Hearings held by Senator been afforded to silver. Some had William Proxmire's Senate Banking sold short before the big plunge. One Committee have turned up substan­ of the "lucky" winners was Occiden­ tial evidence of conflict of interest tal Petroleum chairman Armand on the part of members of the ex­ Hammer, whose father had been a changes and possibly certain mem­ major founder of the Communist bers of the C.F.T.C. also. Based on Party in the United States. Hammer data provided to the Committee by revealed that his company had gone the Commodity Futures Trading Com­ short in both silver and gold in Jan­ mission itself, Proxmire revealed uary when prices were high, just be­ that at least nine of the twenty-three fore the big drop. Occidental wound members of the Board of Governors up with a profit of $119 million. of the Comex were holding enormous Had Armand Hammer acted on in­ short positions which would have re­ side information? Is a five-pound quired them to deliver more than 38 mosquito fat? Even Hammer would million ounces of silver bullion, not have dared risk Occidental's cor­ worth about $1.9 billion in January pora te funds in the futures market when silver was still near its peak. unless he had been assured that he This amounts to one of the greatest was getting in on a sure thing. Had plunders by conflict of interest in the price of silver gone to $60 instead financial history. of plummeting, Hammer would have Bunker Hunt guesstimates that, on gone to the slam m er in an act of paper, some fifteen to twenty billion poetic justice. dollars may have changed hands be­ Mr. Hammer's "good fortune" tween the time silver was at or near was not simply brilliant speculation. its peak of $50 and the time it The Big Boys were dividing up the pie dropped to $10.80. This includes all and apparently cut Armand Hammer of the traders involved, the whole in for a piece of the action on what is market, not just the Hunts. known in horse-racing circles as a Bunker acknowledges that he was " boatride." It was a fixed race. aware all along that the Comex and Others doubtless did as well as Ham­ the CBOT had the power to make mer, but did not call a press confer­ rule changes any time they wanted ­ ence to gloat. but any such rule changes, he ex-

DECEMBER,1980 109 plains, were supposed to be neutral in others did - but he had urged a great their effect on the market players. many of his friends to follow him in The extreme and rapid rule changes investing in silver. He could not bail by the exchanges were anything but out without betraying those friends. market neutral! On that basis, the So Nelson Bunker Hunt retained his Hunts are contemplating a legal suit integrity under circumstances said to against the Comex for its role in the have cost him four billion dollars. silver debacle. The Comex may some­ That hurts even when you have other day be renamed the Hunt Commod­ billions on which to get by. ities Exchange. Mr. Hunt's satisfaction in all of The whole episode demonstrates this comes in the fact that while he the classic tendency of government may have lost a battle, there is no regulatory agencies to take sides with ' question that he will win the war. special interests within the industry Bunker Hunt reportedly has 63 million under regulation. Government inter­ ounces of silver left, even after vention is never "market neutral," being robbed of some 30 million and can only help some at the forced ounces. The basic factors of supply expense of others. The commodity and demand in the world silver out­ exchanges made their disruptive rule look have not changed. The same changes - in conflict with previous reasons which led the Hunts to invest contract obligations - with the millions of dollars in silver apply knowing approval of the Commodity more than ever today. Ever more sil­ Futures Trading Commission. The ver is being consumed than is being culprits in this financial episode were mined; government deficits and not the Hunt entrepreneurs, but monetary inflation still ravage the those engaged in collusion between currency; and, hard-money experts the government's C.F.T.C. and spe­ realize that as inflation grows the cial interests in the exchanges. American people will abandon paper Through all of this the major and return to a money system based media have nonetheless attempted to on precious metals. make the Hunts look like stereotypi­ At current silver price levels, Nel­ cal capitalist villains consumed by son Bunker Hunt is already well their own greed. Bunker Hunt, who ahead of the game. And he still fully has no use for the media moguls of expects that one day the silver-to­ the "Liberal" Establishment, under­ gold price ratio will be one to five. stands the game very well. As he put This would mean that an ounce of it: "The same guys that were able to silver would have a price equal to one­ break the market were also able to get fifth the price of one ounce of gold. the media to attack its victims ­ If gold were $800 an ounce, for ex­ which happened to be us." From the ample, silver should have a price of point of view of the Insiders of in­ $160 an ounce. If the price of gold ternational banking and their kept were $1,500 an ounce, silver might be press, the Hunts represented a colos­ around $300 an ounce. sal threat to a power structure based Even at the approximate historical on paper money. They still do. ratio of one to twenty, silver has a lot But now all the world has seen the of catching up to do before it can character of Bunker Hunt. He surely begin to fulfill its great potential. saw the trap that the bandits running But silver, the "poor man's gold," has the Comex were preparing for him. a bright future. And so has Nelson He could have dumped and run, as Bunker Hunt.••

110 AMERICAN OPINION