Key ideas: Published in 1973. The title says it all. This very important publication is out of print, however it was freely provided by Henry Mark Holzer on his site. Archived version: here.
For the first time since [James] Bond had known Goldfinger, the big, bland face, always empty of expression, showed a trace of life . . . . "Mr. Bond, all my life I have been in love. I have been in love with gold. I love its colour, its brilliance, its divine heaviness . . . . I have worked all my life for gold . . . . I ask you . . . . is there any other substance on earth that so rewards its owner?"
Indeed, during the monetary crisis of the last several years, the price of gold soared in free world markets as more and more individuals around the world acquired gold as a hedge against actual and potential currency devaluations.3 Unfortunately, while others scrambled to protect themselves from the instability of paper money, Americans had to watch from the sidelines. For them, owning gold has long been a criminal offense, punishable by up to ten years in jail and/or up to a $10,000 fine; they also risk confiscation of the gold and a penalty of twice its value.
Most Americans are unaware of the existence of these harsh criminal sanctions. Fewer still, including the legal community, are aware of how—and why—Americans lost their right to own gold in the first place. The facts, which should startle layman and lawyer alike, expose the shaky legal foundation on which the gold prohibition rests: an unconstitutional arrogation of congressional power and the improper delegation of that power to the President, leading to what can be called the “endless emergency” rationale.
The existence of a state of war between the United States and Germany in 1917 had prompted the passage of the Trading with the Enemy Act, one purpose of which was to make unlawful all dealings between Americans and the enemies of the United States. However, an obscure subsection of the Act authorized the President to regulate, investigate, and prohibit “under such rules and regulations as he may prescribe . . . any transactions in foreign exchange, export or earmarkings of gold or silver coin or bullion or currency . . . by any person within the United States . . . “ These sweeping new presidential powers had teeth in them: elsewhere the Act provided for severe criminal sanctions of up to ten years in prison and/or up to a $10,000 fine for violation of any decrees which the President might make under the Act.
The net result of the Act, vis-à-vis transactions in gold, was the arrogation by the Sixty-Fifth Congress of a money power not granted by the Constitution-and further: the delegation of that power to the Executive branch of the Government.
The war emergency and the President’s duty to fight the war provided Congress with a convenient rationale for the Act. The fact is, however, that the Constitution nowhere empowers Congress to prohibit dealing in gold-much less authorizes Congress to delegate that power to a coordinate branch of government.
Worst of all, the power which Congress delegated to the President enabled him to make criminals out of honest American citizens whose crime would consist only of trying to protect themselves from official debasement of their money. In more fundamental terms, Americans henceforth would be “under the gun” for exercising a fundamental, inalienable right: the right to deal with their own property as they saw fit. Gold, no matter what its special characteristics, is, after all, just another form of property...
Franklin D. Roosevelt was inaugurated as President on March 4, 1933. Throughout the country, banks were slamming their doors on depositors clamoring to withdraw their own money, preferably in gold. For people who were seeking to exchange soft paper currency for the more stable metal—as existing law allowed, and as the Government had solemnly pledged—the new President had other ideas.
On March 5, 1933, one day after taking office, Roosevelt issued a Proclamation convening Congress in Extra Session at noon on March 9, 1933, a decision allegedly necessitated by what the Chief Executive referred to vaguely as “public interests.”
But March 9 was still four days away, and Roosevelt apparently was impatient to stop bank depositors from withdrawing their paper money or converting it to gold. Accordingly, the next day, March 6,1933, he took an unprecedented step. For the first time in United States history, an American president closed the nation’s banks.
By Proclamation, he stated the following: the recent gold and currency withdrawals had been “unwarranted” and for the purpose of “hoarding”; speculation abroad had caused “severe drains” on the “Nation’s” gold stocks; the result was to create a national “emergency”; further “hoarding”; and “speculation” must be prevented and “appropriate measures” taken “to protect the interests of our people”; the Trading with the Enemy Act, as amended, had given the President certain powers over private gold; and therefore, “to prevent the export, hoarding, or earmarking of gold,” the banks would take a “holiday” from Monday, March 6, 1933, to and including Thursday, March 9, 1933, and that during the holiday no bank would “pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever of any gold . . . or take any other action which might facilitate . . . hoarding.”
Roosevelt’s action was devoid of even arguable legal justification. Nowhere in the Constitution is any branch of government, let alone the Executive, given the power to close privately owned banking institutions.
Nor did the Proclamation even purport to invoke constitutional authority. And despite the Proclamation’s passing reference to an alleged “national emergency,” no war conditions were present which could have enabled Roosevelt to argue that, under the Commander-in-Chief’s “war powers,” he had the authority to place in suspended animation a huge, crucially important part of America’s commercial establishment.
The Proclamation’s reference to the World War I Trading with the Enemy Act, which had long since expired, was a strained attempt to find some semblance of legal support for Roosevelt’s unprecedented assumption of complete control over America’s banking system.
It is no wonder that Roosevelt immediately sent to a docile and compliant 73rd Congress, a hastily drawn but comprehensive bill to amend the moribund Trading with the Enemy Act and to attempt to secure a legal basis for the unilateral action he had already taken.
The House of Representatives convened at noon on March 9, 1933. After the customary opening prayer and the disposing of certain routine “housekeeping” matters, a message was received from the President which requested passage of H.R. 1491.
The bill’s preamble dramatizes the haste with which the President’s minions sought to railroad the bill through both Houses of Congress: “An Act to provide relief in the existing national emergency in banking, and for other purposes. Be it enacted . . . that the Congress hereby declares that a serious emergency exists and that it is imperatively necessary speedily to put into effect remedies of uniform national application.”
In the House, Majority Leader Joseph W. Byrns, Democrat of Tennessee, asked for immediate consideration of the bill and that debate be limited to forty minutes, twenty minutes for each party. Mr. Byrns expressed the hope that under the peculiar circumstances and
under the serious circumstances which confront the country, we agree to take this bill up now, pass it, send it to the Senate so it may become a law this evening, and thus enable the President of the United States to open the banks tomorrow.
Next rose House Minority Leader Bertrand H. Snell, Republican of New York. After noting that “it is entirely out of the ordinary to pass legislation in this House that, as far as I know, is not even in print at the time it is offered,” Mr. Snell, in a burst of bipartisanship, observed:
The house is burning down, and the President of the United States says this is the way to put out the fire. [Applause.] And to me at this time there is only one answer to this question, and that is to give the President what he demands and says is necessary to meet the situation. I do not know that I am in favor of all the details carried in this bill, but whether I am or not, I am going to give the President of the United States today his way. He is the man responsible, and we must at this time follow his lead. I hope no one on this side of the aisle will object to the consideration of the request. [Applause]
Someone then produced a copy of the bill, and it was read by the Clerk of the House. The bill was passed. After a short discussion, the spectacle of what had just transpired in the House in that hour-and-a-half session was best expressed by Congressman Lundeen:
"Mr. LUNDEEN. Mr. Speaker, today the Chief Executive sent to this House of Representatives a banking bill for immediate enactment. The author of this bill seems to be unknown. No one has told us who drafted the bill. There appears to be a printed copy at the speakers desk, but no printed copies are available for the House Members. The bill has been driven through the House with cyclonic speed after 40 minutes debate, 20 minutes for the minority and 20 minutes for the majority.
I have demanded a roll call, but have been unable to get the attention of the Chair. Others have done the same, notably Congressman SINCLAIR of North Dakota, and Congressman BILL LEMKE, of North Dakota, as well as some of our other Farmer Labor Members. Fifteen men were standing, demanding a roll call, but that number is not sufficient; we therefore have the spectacle of the great House of Representatives of the United States of America passing, after a 40-minute debate, a bill its Members never read and never saw, a bill whose author is unknown.
The great majority of the Members have been unable to get a minute’s time to discuss this bill; we have been refused a roll call; and we have been refused recognition by the Chair. I do not mean to say that the Speaker of the House of Representatives intended to ignore us, but everything was in such a turmoil and there was so much excitement that we simply were not recognized.
I want to put myself on record against procedure of this kind and against the use of such methods in passing legislation affecting millions of lives and billions of dollars. It seems to me that under this bill thousands of small banks will be crushed and wiped out of existence, and that money and credit control will be still further concentrated in the hands of those who now hold the power.
It is safe to say that in normal times, after careful study of a printed copy and after careful debate and consideration, this bill would never have passed this House or any other House. Its passage could be accomplished only by rapid procedure, hurried and hectic debate, and a general rush for voting without roll call.
I believe in the House of Representatives. I believe in the power that was given us by the people. I believe that Congress is the greatest and most powerful body in America, and I believe that the people have vested in Congress their ultimate and final power in every great, vital question, and the Constitution bears me out in that.
I am suspicious of this railroading of bills through our House of Representatives, and I refuse to vote for a measure unseen and unknown.
I want the RECORD to show that I was, and am, against this bill and this method of procedure; and I believe no good will come out of it for America. We must not abdicate our power to exercise judgment. We must not allow ourselves to be swept off our feet by hysteria, and we must not let the power of the Executive paralyze our legislative action. If we do, it would be better for us to resign and go home—and save the people the salary they are paying us.
I look forward to that day when we shall read the bill we are considering, and see the author of the bill stand before the House and explain it, and then, after calm deliberation and sober judgment—after full and free debate—I hope to see sane and sensible legislation passed which will lift America out of this panic and disaster into which we were plunged by the World War."
Fundamentally, the Act accomplished three things.
First, it retroactively approved the President’s illegal action of March 6, 1933. (If Roosevelt had thought himself to be on solid legal ground when he closed the banks, one could ask why he thought it necessary to go to Congress in the first place. This legislative “rubber stamp” approach to past and future executive action would be used more than once in the months ahead.)
Second, it amended section 5(b) of the Trading with the Enemy Act, to provide that:
Finally, it added a new subsection (n) to the Federal Reserve Act, giving the Secretary of the Treasury virtually unfettered discretion to compel holders of gold coin, gold bullion, and gold certificates to surrender them to the Treasurer of the United States, and to accept paper money instead.During time of war or during any other period of national emergency declared by the President, the President may, through any agency that he may designate, or otherwise, investigate, regulate, or prohibit, under such rules and regulations as he may prescribe, by means of licenses or otherwise, any transactions in foreign exchange, transfers of credit between or payments by banking institutions as defined by the President, and exporting, hoarding, melting, or earmarking of gold or silver coin or bullion or currency, by any person within the United States or any place subject to the jurisdiction thereof; and the President may require any person engaged in any transaction referred to in this subdivision to furnish under oath, complete information relative thereto, including the production of any books of account, contracts, letters or other papers, in connection therewith in the custody or control of such person, either before or after such transaction is completed.
Whoever willfully violates any of the provisions of this subdivision or of any license, order, rule of regulation issued thereunder, shall, upon conviction, be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than ten years, or both, and any officer, director, or agent of any corporation who knowingly participates in such violation may be punished by a like fine, imprisonment, or both. As used in this subdivision the term “person” means an individual, partnership, association, or corporation.
Ironically, while the Act ostensibly reflected Congress’ alleged concern with gold withdrawals, Congress itself took no action at all. Instead, consonant with the remarks on the floor of each House, Congress gave the President sole authority to regulate all banks and financial transactions in general, and everything concerning gold in particular (with the Secretary of the Treasury acting as his “Requisitioner-in- Waiting”).
And more: Roosevelt’s new powers far surpassed those granted President Wilson by the World War I Trading with the Enemy Act; Roosevelt’s authority extended beyond “time of war” to “any other period of national emergency declared by the President.” Needless to say, just as the Act contained no elaboration as to what the current “emergency” was, neither did it establish any criteria by which the President was to ascertain the existence of any emergency—an omission which was to prove crucially important to future presidents—and to future owners of gold.
Passage of the Emergency Banking Act on March 9, 1933 did not end that day’s hectic activities. Still later that night, under the authority given him only several hours earlier, Roosevelt issued a new Proclamation. This one continued, in full force and effect, “until further proclamation by the President,” the provisions of his March 6, 1933 bank holiday Proclamation and the regulations and orders which had been issued thereunder.
However, a last loophole remained to be plugged: many individuals still had gold in their possession and no requisition had yet been made by the Government. Something had to be done to keep the gold where the Government could get at it when the time came.
Accordingly, the next day, March 10, under the authority of the Emergency Banking Act and “all other authority vested in me,” Roosevelt issued Executive Order No. 6073. In addition to authorizing the Secretary of the Treasury to decide which of the nation’s banks could open, the order prohibited owners of gold from exporting or otherwise removing it “from the United States or any place subject to the jurisdiction thereof. . . except in accordance with regulations prescribed by or under license issued by the Secretary of the Treasury.”
Given this frozen state of financial affairs, the President could now turn his attention to what earlier he had deprecatingly referred to as “hoarding”—i.e., the holding of gold by the people who owned it. It took Roosevelt a month. Acting under the authority he thought had been given him by the Emergency Banking Act, the President, on April 5, 1933, issued Executive Order No. 6l02. Its title clearly discloses how Roosevelt intended to deal with “hoarding”: “Executive Order Forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates.”
There were exceptions to this general prohibition: every American could retain a maximum of one hundred dollars in gold coin and gold certificates, rare coins were excepted altogether, and reasonable amounts of gold could be retained for use in industry and the arts. Banks, however, were required to turn over gold coin, gold bullion, and gold certificates “owned or received by them,” to the Federal Reserve Bank. This included not only gold owned by the banks, but also gold owned by their depositors.
In short, on or before May 1, 1933, all privately owned gold in the United States (subject to a few minor exceptions) was to be confiscated by the Government. As compensation, the owners were to receive paper money, whether they liked it or not. Willful failure to submit to the confiscation was punishable by up to ten years in jail and/or up to a $10,000 fine. [...]
Roosevelt’s next Executive Order on the subject of gold was necessitated by a critical error he had made in an earlier Order (the Executive Order of April 5, l933), which had been promulgated under the authority granted him in the Emergency Banking Act of March 9. While it was true that the Act had given Roosevelt broad powers, those powers existed only “[d]uring time of war or during any other period of national emergency declared by the President . . . .” However, despite the Administration’s apparent preoccupation with the alleged, but as yet unspecified, “emergency,” when Roosevelt had issued his April 5 Executive Order, he forgot to declare that an emergency even existed!
Eventually, however, someone must have noticed the omission, because, on August 28, Roosevelt promulgated a new Executive Order which was, and is, one of the two main props of the gold prohibition: it resurrected the fiction of a “national emergency,” (although once again the Order failed to mention what that emergency was):
it revoked the earlier Executive Orders of April 5 and 20, 1933; and it tied together in one neat package everything that Roosevelt had done up to that time with regard to private ownership of gold. For example: section 3 required information returns to be filed by anyone owning or possessing gold; section 4 authorized the Secretary of the Treasury to grant licenses authorizing the acquisition of gold; section 5 prohibited ownership or possession of gold except under license and provided for the requisition of all privately held gold in America; and section 10 made willful violation of the Order “or of any license, order, rule, or regulation issued or prescribed” under the Order a criminal offense punishable by up to ten years in prison and/or up to a $10,000 fine.
A Boston University law professor of the day eloquently summed up the dubious “accomplishments” of the New Deal’s gold manipulations:
March 6, 1933, began that complex sequence . . . of correlated proclamations, messages, declarations, resolutions, enactments, authorizations, embargoes, inhibitions, repeals, amendments, executive and departmental orders, regulations and requisitions, through which the President and Congress are dealing with the national emergency. The first great thing to be profoundly changed was the money of the people.
Gold has been nationalized, that is, the national treasury has seized as its own all the privately treasured gold coins and bullion it could lay hands on, as well as the circulating certificates of gold deposits. Gold, the king of coinage, is a prisoner, locked up within bars of bullion and carefully guarded.
No gold will be paid upon presentation and demand at the Treasury. No more gold coins are to be struck. A new felony has been created, merely having gold money, now termed hoarding and considered dishonest. A new legal tender dollar has been established. *The dollar standard of the founders has been revalorized, that is, the actual value has been cut down, but the denominational and legal value for paying old debts remains; further inflation is indicated as quite certain to come*:
silver coinage and greenback issues are in the works, express provisions of statutes now inhibit the enforcement of otherwise legal obligations to pay in specie dollars or their equivalent in legal tender, the Statute of 1869 pledging the Nation’s faith always to pay national debts in standard gold is repealed and the pledges made under it repudiated: we’re off the gold standard; many think we’re off the ethic standard.
[Hannigan, The Monetary and Legal Tender Acts of 1933-34 and the Law.]