An Exercise In Futility (Thank you for contacting the New York Fed)

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In case you’re looking for a job where you get paid for doing essentially nothing, here’s a personal suggestion where to send your letter of application to: the Press Offices of the New York Fed, the Federal Reserve in Washington DC, and the U.S. Treasury / Exchange Stabilization Fund.

By Lars Schall

“When truth is replaced by silence, the silence is the lie.” — Yevgeny Yevtushenko

Related to the following “Exercise In Futility” I want to point to this letter, which was written to a certain “fringe group” in 2009 by then-member of the Board of Governors of the Federal Reserve and then-member of the Working Group on Financial Markets (Plunge Protection Team), Kevin M. Warsh:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf.

The relevant passage for the following “Exercise In Futility” is this:

“In connection with your appeal, I have confirmed that the information withheld under Exemption 4″ — that’s Exemption 4 of the Freedom of Information Act — “consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

An Exercise In Futility (Thank you for contacting the New York Fed)
by Lars Schall

Part 1 of the exercise:

On March 16, 2011 I wrote to the Press Secretary of the Federal Reserve in Washington DC, Michelle A. Smith (michelle.a.smith@frb.gov), and the Press Office of the NY Fed (general.info@ny.frb.org) the following request:

Dear Ms. Smith, dear Ladies and Gentlemen!

My name is Lars Schall and I am a freelance journalist for finance from Germany. I would like to ask you some questions with regards to the German gold reserve at the NY Fed and a specific question of which I assume that also the Federal Reserve Board of Governors in Washington DC is a part of. Since I work related to that topic together with Chris Powell from the Gold Anti-Trust Action Committee, GATA, the U.S. journalist Max Keiser, and the Senior Managing Director for Market Intelligence at Omnis, Inc., James G. Rickards, could you send your response to those email-addresses as well, please:

Chris Powell: cpowell@xy.com
Max Keiser: maxkeiser@xy.com
James G. Rickards: jamesrickards@xy.com

Here’s the background: At the end of last year, I wrote a request to the German Bundesbank (that received the number 2010/020273), in which I have asked among other things:

“Does the Bundesbank has gold swap arrangements with the United States / Federal Reserve?”

I received more or less a standard response from the German Bundesbank:

“The Deutsche Bundesbank keeps a large part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centres. This has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centres.

The Bundesbank applies the principles of safety, cost efficiency and liquidity to the management of foreign reserves in general, and to that of gold reserves. Generally, changing depositories cannot be ruled out in this respect.

In managing foreign reserves, the Bundesbank fulfils one of its mandated tasks as an integral part of the European System of Central Banks (ESCB). We trust you will understand that we are not able to divulge any further information regarding this activity. Particularly with respect to the confidential nature of information about where gold holdings are kept, we are unable to go into any greater detail concerning exact locations and the quantities stored at each of these. Likewise, owing to the strategic nature of the activity, we are not at liberty to provide you with more detailed information about gold transactions.”

To make a rather long story short: all in all the Bundesbank wasn’t really cooperative. Therefore, I hope you can demonstrate a bit more transparency.

I have the following questions for you:

1) Does the Bundesbank has gold swap arrangements with the United States / Federal Reserve respectively does the U.S. / Federal Reserve has gold swap arrangements with the Bundesbank?

2) Given the response of the Bundesbank cited above, Chris Powell made the comment: “The Bundesbank refuses to say whether it has engaged in gold swaps and why. It’s as good as a confirmation.” Could you comment on this as far as your entity is concerned?

3) Do you have an idea what “strategic nature of the activity” means respectively what it means when the Bundesbank wrote to GATA consultant Rob Kirby:  Germany keeps much of its gold at “gold trading centers” abroad “in order to conduct its gold activities” (see: http://www.gata.org/node/7713)? What are you in that case at the NY Fed exactly doing with the German gold?

4) In the past the Bundesbank stated with regards to the German gold reserve abroad “that transportation to Germany and safekeeping in the Bundesbank’s own vaults would entail high costs.” Can you give me an estimation of the costs of safekeeping the German gold in the vaults of the NY Fed, please? (I would like to figure out why it costs less to keep it safe in the U.S. / NYC than in Frankfurt and/or Mainz.)

5) According to Dimitri Speck’s German written book “Die Geheime Goldpolitik” (published at the Finanzbuch Verlag in Munich, 2010 – see: http://www.gata.org/node/9349), the amount of the part of the German gold reserve (total 3.446 tonnes) that is located in the United States / NY Fed is 66%. Can you confirm that?

6) In case the Bundesbank would order the German gold reserve that is located in the United States to Frankfurt: would there be any insurmountable problems involved from your side?

I am optimistic that some clear answers related to the questions above could put long lasting rumors and irritations to rest. By the way: together with Dimitri Speck and Professor James K. Galbraith I’ve put some rumors and irritations with regard to the German gold reserve / Federal Reserve recently indeed to rest:

http://www.gata.org/node/9547

Thank you very much for your attention!

Kind regards,
Lars Schall.

I received then a few hours later from the NY Fed this message:

“Thank you for contacting the New York Fed.  We will respond to your e-mail as soon as possible. For more information, please visit our website at http://www.newyorkfed.org./.“

On May 2, seven weeks later, I wrote about “The Sound of Silence” that the NY Fed and the Board of Governors of the Federal Reserve System sent me afterwards – see:

http://www.gata.org/node/9871.

Part 2 of the exercise:

On October 10, 2011 I published an essay at the website of GATA about a request that I did forward to the Bank of England and the the U.S. Treasury – see here:

http://www.gata.org/node/10550.

My email to the U.S. Treasury said:

Request re Exchange Stabilization Fund.

To: Press@treasury.gov
CC: Kara.Alaimo@treasury.gov

Dear Ladies and Gentlemen and dear Ms. Alaimo,

My name is Lars Schall and I am a freelance journalist for finance from Germany. I have three simple questions for you related to a rather mysterious topic:

Swap arrangements between the Exchange Stabilization Fund and the Deutsche Bundesbank, respectively the national German gold reserves that are placed in the United States of America.

Due to the fact that in the past:

a) the Deutsche Bundesbank, the Federal Reserve Bank of New York, and the Federal Reserve System’s Board of Governors in Washington treated my public requests in that regard not very well; and:

b) since the Exchange Stabilization Fund is the entity that is involved with gold market operations on behalf of the U.S. Treasury (and to a lesser extent on behalf of the Federal Reserve), I would like to ask you now for some clarifications, please:

1) Regarding the swap arrangement that was acknowledged / mentioned during the Federal Open Market Committee meeting in January 1995 (see FOMC19950201meeting.pdf / Page 125) between the ESF and the Deutsche Bundesbank, is this strictly a swap arrangement related to foreign currency / exchange?

2) Do you have any swap arrangements with the Deutsche Bundesbank related to the German gold reserves that are located in the United States?

3) For what reason do you need a swap arrangement with the Deutsche Bundesbank related to its gold in the U.S. — or with any other foreign central bank / foreign gold reserves — if you actually have one or would seek to get one? (See the minutes of the FOMC meeting in January 1995 FOMC19950201meeting.pdf / Page 69, the remarks by Mr. Mattingly.)

Thank you for your attention!

Best regards,

Lars Schall.

The response that I have received? Zero.

Part 3 of the exercise:

On November 14, 2011 I wrote an email that contained my requests to the New York Fed, the Federal Reserve in Washington and the U.S. Treasury (after I tried my luck again at the NY Fed – you’ll see…). That email went to:

jack.gutt@ny.frb.org;
andrea.priest@ny.frb.org;
jonathan.freed@ny.frb.org;
eric.pajonk@ny.frb.org;
matthew.ward@ny.frb.org;
krista.dente@ny.frb.org;
michael.held@ny.frb.org;
GeneralInfo.NYFed@ny.frb.org

michelle.a.smith@frb.gov;
Press@treasury.gov;
Kara.Alaimo@treasury.gov;

CC:

cpowell@xy.com
maxkeiser@xy.com
jamesrickards@xy.com

Dear Ladies and Gentlemen,

as a financial journalist from Germany I try to get some specific answers to specific questions for quite some time now (see below). Could you take care of it, please? This would be very appreciated.

Further, I would like to ask that you don’t write to me (and the gentlemen in the cc) a response that says: “Not for quotation or attribution.” This isn’t a private exercise. In contrast, this is an issue of public concern. Moreover, I ask you specific questions, and I would thus expect specific answers to them.

Let me point out that the “swap” question is of prime interest to us.

Thank you very much for your attention!

Kind regards,
Lars Schall.

Today:

Thank you for contacting the New York Fed.  We will respond to your e-mail as soon as possible. For more information, please visit our website at http://www.newyorkfed.org./

In response to your message:

Dear Ladies and Gentlemen,

may I remind you on your message from March 16 of this year related to my inquiry, which said:

“We will respond to your e-mail as soon as possible.”

It’s not my goal to sound rude, but I think enough time has passed by now to come up with your response and make your promise a reality.

Below you’ll find my inquiry.

Kind regards,

Lars Schall.

If you guess that I received an email coming from New York City that said:

Thank you for contacting the New York Fed.  We will respond to your e-mail as soon as possible. For more information, please visit our website at http://www.newyorkfed.org./

In response to your message:

Dear Ladies and Gentlemen,

as a financial journalist from Germany I try to get some specific answers to specific questions…

…then you are absolutely right about it.

Part 4 of the exercise:

On November 24, 2011 I wrote to the same people:

I find it quite bizarre: you are several people working in press / public relations departments for the N.Y. Fed, the Board of Governors of the Federal Reserve, and the US Treasury / Exchange Stabilization Fund. I am a journalist for finance. I have asked each of you a very, very simple question. And not a single one of you can even reply to me with a single sentence?

Since it is now proved beyond doubt that a US/German gold agreement was reached in 1975 to “manage” the price of gold:

http://www.gata.org/node/10686,

I consider it a legitimate question that I have forwarded to you months ago.

Before I will ask it again, please be assured that this question will be raised more often in the future going forward. It won’t go away. You can’t be silent about it forever.

Here is the question one more time:

Does the United States of America and/or the US Treasury/ESF, N.Y. Fed, the Federal Reserve System have any kind of swap arrangement with the Deutsche Bundesbank and/or the Federal Republic of Germany related to that part of the souvereign German gold reserve that is held at the N.Y. Fed?

By the way, after I heard nothing from the New York Fed and Federal Reserve in Washington, I asked GATA Chairman Bill Murphy about it.

Murphy replied: “I think their lack of response and lack of denial — I mean, that’s pretty simple to deny, really simple — that they haven’t come back to you at all is indicative of the answer.”

Kind regards,
Lars Schall.

Of course, I received an automatic response from the New York Fed that said:

Thank you for contacting the New York Fed.  We will respond to your e-mail as soon as possible. For more information, please visit our website at http://www.newyorkfed.org./

In response to your message:

I find it quite bizarre: you are several people working in press / public relations departments…

Part 5 of the exercise:

On December 30, 2011 I wrote to the same people:

Dear Ladies and Gentlemen,

at the end of the year, everyone is doing New Year resolutions. One of mine is that you’ll get in 2012 at the last day of every single month the same old question from me:

Does the United States of America and/or the US Treasury/ESF, N.Y. Fed, the Federal Reserve System have any kind of swap arrangement with the Deutsche Bundesbank and/or the Federal Republic of Germany related to that part of the souvereign German gold reserve that is held at the N.Y. Fed / within the United States?

This way a story will build up very naturally all by itself that will make you look foolish at the end.

All the best in 2012!,

Lars Schall.

I will go ahead with the exercise – and as I wrote to the same people on that same day:

…and this will be the running gag of the story:

2011/12/30 GeneralInfo.NYFed@ny.frb.org

Thank you for contacting the New York Fed.  We will respond to your e-mail as soon as possible. For more information, please visit our website at http://www.newyorkfed.org./

In response to your message:

Dear Ladies and Gentlemen,

at the end of the year, everyone is doing New Year resolutions. One of mine is…

Part 6 of the exercise:

The sixth part is today’s publication of the first five parts.

To be continued…

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