This article was originally printed in the latest issue of Numismatic News.
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In recent weeks, there’s been a lot in the daily newspapers as well as the hobby press and the Internet concerning claims that the U.S. government is on the verge of banning private gold ownership all over again – much as it did in the Roosevelt Administration in 1933-1934.
Some of my law firm’s clients have asked for information – I’ve published it on these pages, as well as talked about it privately – but some still doubt the results.
Recently, the mechanics of the “seizure” were called into question; in addition, some were saying that there was no element of compulsion then, and that the seizure – or recall – was really a voluntary act. That was coupled with a claim that the ability to hold numismatic coins was limited to a single example of “rare and unusual” coin; that is, if you had several 1927-D Saints, one could be retained, the rest went to the melting cauldrons.
No one can really predict what will happen next time the government makes a seizure of rare coins or precious metals, but we can learn from what truly did happen the last time – in a pre-Internet age.
Just how did people find things out in that era before everyone had the capacity to check on almost everything? It is the newspapers that can provide an answer – which becomes important because the years that this happened (1933 and 1934) came before the Code of Federal Regulations came about (1936) and before the Federal Register daily began (1938).
That’s important, because if the Treasury secretary or the President take action today, it may not be in plain sight and open to view, but you can go back easily to look at it and decide whether it is as it says, or whether perhaps there is an ulterior motive and something less than the facts that are reported.
If you go to the Federal Register today, it is a daily “newspaper” with listings of regulations about what every department of government is doing. For example, on Aug. 30, the U.S. Mint made a revision in its regulations concerning how someone can become a “bulk purchaser” for the American Eagle program.
That’s ironic, because some 80 years ago the Mint was instrumental in making people turn in their gold coinage. The Federal Register today says, “The United States Mint has revised the requirements to become an Authorized Purchaser of American Eagle Gold Bullion Coins. The revised qualification requirements are documented in the revised “Procedures to Qualify for Bulk Purchase of Gold Bullion Coins.’’
It goes on to say that, “These changes apply to new applications effective immediately. Significant modifications include clarifications to the ‘Purpose’’ section and ‘Marketing Support’’ section, and adjustments to the ‘Experienced Market-Maker in Gold Bullion Coins’’ section and ‘Tangible Net Worth’’ section.”
Mostly, the 1933-1934 story is told from the standpoint of President Roosevelt and his demand on the Treasury Secretary (first William Woodin, then Henry Morgenthau Jr., a Duchess County, N.Y., neighbor of FDR with plenty to do in the administration, serving as Treasury secretary from late 1933 to mid-1945.
Here’s the chronology from FDR’s first days in office forward on the gold coin crisis:
(XO is executive order by the President; OST is an order of the Secretary of the Treasury; RST is a regulation by the Treasury chief, and PubL is a public law.
March 4, 1933, FDR inaugurated 32nd President
XO: March 6, 1933, FDR issues Emergency Banking Proclamation
PubL: March 9, 1933, Bill introduced, Congress approves, FDR signs (all same day) emergency legislation
XO: March 10, 1933, XO6073 issued by FDR; prohibits gold export
XO: April 5, 1933, XO6102 signed; forbids hoarding of gold coin, some exemptions
XO: April 20, 1933, XO6111 prohibits earmarking for foreign accounts, and export of gold coin, gold bullion, or Gold Certificates
RST: April 29, 1933, Treas. Dept Gold Regulations
PubL: Joint Resolution of June 5, 1933, 48 Stat. 112-13, ch. 48, 1,31 U.S.C. 462, 463 (1970) (repeals gold clause in private contracts)
XO: Aug. 28, 1933, XO6260 revokes April 5 & 20 XO; required information returns to be filed by anyone owning or possessing gold; section 4 allows licensing to acquire gold; section 5 prohibited ownership or possession of gold except under license and provided for the requisition of all privately held gold in America
XO: Aug. 29, 1933, XO6261 American gold producers required to sell output to U.S. Treasury at secretary’s price
XO: Oct. 25, 1933, XO6359 revokes the Aug. 29 XO, minor amendment to Aug 28 XO
OST: Dec. 28, 1933, secretary exempts all collector gold coins except $2.50
OST: Jan. 13, 1934, secretary adds quarter eagles; allows up to four of each date and mintmark
XO: Jan. 15, 1934, XO6560, codified in 31 C.F.R. 127.0-127.7 and 127.14 (1972) (foreign exchange, coin and currency)
RST: Jan. 31, 1934, Jan. 31, 1934: Provisional Treasury regulations amended with regard to purchase and sale of gold by United States mints: also collectors of rare coins
For purposes of what ultimately transpired, it is useful to know that the first actions done by FDR and subsequently the additional executive orders, were evidently incorrect as one Federal Judge ruled in November 1933, in Campbell v. Chase Nat’l Bank (5 Fed. Supp. 156 (SDNY 1933)). Key point of the judge’s ruling:
“It must always be remembered that the power to requisition gold bullion delegated by Congress was lodged only in the Secretary of the Treasury under section 3 of title I of the Act of March 9, 1933, and not in the President under section 2. .. the secretary of the Treasury has not acted yet under the powers so given to him which I have above found to have been inherent in the currency power of Congress.”
So, a re-do, this time by FDR’s friend and neighbor. On Dec. 28, 1933, Morgenthau signed off on a Treasury Regulation that no one can very easily find today. The regulation was sent around from bank to bank by the Federal Reserve. In the 8th District (St. Louis) none other than William McChesney Martin (who later headed up the Fed) sent the notice out:
“Will you please give the widest publicity possible to the order of the Secretary of the Treasury reprinted below and in those cases where necessary call it to the attention by telegraph or telephone to each of your customers whom you have any reason to believe holds any gold coin, gold bullion or Gold Certificates required to he delivered under the order.”
There was no taking a chance on this one: the Dec. 28, 1933, change was signed by two people: H. Morgenthau,Jr., Acting Secretary of the Treasury. And below his signature a more familiar one with his acquiescence: “Approved: FRANKLIN D. ROOSEVELT. The White House.” Of the two, it was Morgenthau’s signature, not his patron, that mattered most.
The Treasury secretary called for voluntary turn-in – if by voluntary you don’t want a $10,000 fine, a 10-year prison term and up to twice the face value of the gold held as an additional penalty. What was required: basically everything except, “Gold coin having a recognized special value to collectors of rare and unusual coin (not including quarter eagles, otherwise known as $2.50 pieces).
Back on March 15, William Woodin told the New York Times that all of this was aimed at major hoarders and the Times headlined, “Big Gold Hoarders Hunted by Woodin,” then characterizing that “Not after little fellow.” Eliminating quarter eagles suggested just the opposite – and particularly when not exempting them for collectors.
They finally figured it out, and the Jan. 13, 1934, regulations translated to this New York Times headline: “Gold Order Amended, excludes $2.50 coins. Morgenthau permits retention of not over four by collectors and numismatists.”
A new clause was added: “Now, therefore, I, Henry Morgenthau Jr., Secretary of the Treasury, do hereby amend said order of Dec. 28, 1933, by inserting after the word ‘pieces’ in the parenthetical phrase in Paragraph (B) of the first section thereof a comma and the following:
“‘Unless held, together with rare and unusual coin, as part of a collection for historical, scientific or numismatic purposes, containing not more than four quarter-eagles of the same date and design, and struck by the same mint.’
“This order may be modified or revoked at any time.
“H. Morgenthau Jr., Secretary of the Treasury.
“Approved, Franklin D. Roosevelt.
“The White House.” Jan. 11, 1934.”
So, if you were a collector – and a young Louis Eliasberg in Baltimore was about to become one on the basis of this distinction – you could have up to four quarter eagle coins of each date and mintmark (and evidently no limit on higher denominations – though some preach four coins for safety). And that’s the story of the exemptions that a number of people would rely on for precedent should a government gold seizure happen again.
Here’s how the final regulation reads from Morgenthau’s January 1934 Regulation:
“B. Gold coin having a recognized special value to collectors of rare and unusual coin (not including quarter eagles, otherwise known as $2.50 pieces unless held, together with rare and unusual coin, as part of a collection for historical, scientific, or numismatic purposes, containing not more than four quarter-eagles of the same date and design, and struck by the same mint).”