Regulators Stonewall on Government Intervention in Gold Market
Does the U.S. Commodity Futures Trading Commission have jurisdiction over manipulative futures trading by the U.S. government, other governments, or brokers acting for them?
Is the commission aware of futures trading by governments?
In a letter to U.S. Rep. Alex Mooney, R-West Virginia, dated January 28 and released to Money Metals and Gold Anti-Trust Action Committee (GATA) this week, the commission's chairman, Heath P. Tarbert, refused to say.
GATA put those questions and others to the CFTC in 2018 but could get no response.
At our urging, Mooney put those questions and others to the CFTC a year ago in February.
He too got no response but kept pressing.
Tarbert's January 28 letter to Mooney, contains an attachment prepared by commission staff that acknowledges the key questions but fails to answer them.
Question 5 in the attachment, asking whether the commission's jurisdiction covers manipulative trading by the government itself, is a yes-or-no question.
But the reply says only: "The CFTC has exclusive jurisdiction over futures trading on trading facilities registered with the commission as designated contract markets."
Question 6 in the attachment, asking if the commission is aware of trading by the U.S. government or other governments, is also a yes-or-no question.
Instead the commission's reply says: "The commission may not publish 'data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.'"
But the commission's admission of simple awareness of trading by governments would not disclose any transactions or market positions, and official filings and statements by CME Group, operator of the major U.S. futures exchanges, explicitly acknowledge that governments are secretly trading futures under CME Group's Central Bank Incentive Program.
Chairman Tarbert's reply to Representative Mooney is also misleading in at least two other respects.
First, Mooney questioned how the commission's years-long investigation of silver futures market manipulation found no actionable misconduct even though a subsequent investigation by the U.S. Justice Department, covering the same period investigated by the commission, managed to find such misconduct, prosecute it, and obtain confessions.
Instead of accounting for his commission's inability to find misconduct on its own, Tarbert's reply simply notes fines imposed by the commission following the Justice Department's investigation.
And second, responding to Representative Mooney's question about the huge increase in the emergency "exchange for physicals" mechanism of settling gold futures contracts on the New York Commodities Exchange, Tarbert dismisses the increase as a function of increased trading in gold futures generally.
But that doesn't explain what the EFPs are doing and are meant to accomplish. That could be explained without revealing any particular trader's positioning.
GATA long has maintained that the U.S. government construes the Gold Reserve Act of 1934, as amended, which establishes the Treasury Department's Exchange Stabilization Fund, to authorize the government to intervene secretly in and manipulate any market in the world.