prepared to reserve 165 million ounces of silver to meet the stockpile objective. He stated that the Treasury would hold this amount of silver for that purpose unless its use were to become necessary for critical national needs during the next 3 years of transition to new coinage materials including, without limitation, the exchange of silver certificates or outright sale of the silver where necessary to maintain the price at $1.29-plus per ounce. The Treasury Department was to retain physical custody of the silver. On October 13, 1966, after the Treasury's free silver stock had dropped to 181.7 million ounces, the Director of OEP asked for assurance that the Treasury would reserve the amount required to meet the stockpile objective. The Director's letter follows: OFFICE OF EMERGENCY PLANNING, Hon. HENRY H. FOWLER, DEAR MR. SECRETARY: On June 14, 1965, you wrote Gov. Buford Ellington, then Director of the Office of Emergency Planning, that in accordance with staff discussions held by the Office of Emergency Planning and the Treasury Department, the Treasury Department was prepared, with certain reservations, to reserve 165 million fine troy ounces of silver to meet the silver stockpile objective that had been established by the Office of Emergency Planning. From the daily statements of the U.S. Treasury I note that as of September 30, 1966, the Treasury held 631,141,120 fine troy ounces of silver, of which only 181,687,234 ounces, including 2,304,508 ounces in silver dollars, were not monetized to secure silver cirtificates. In view of the small balance of silver remaining in the Treasury, I should like to receive some assurance from you that the 165 million ounces of silver needed for the national stockpile will be reserved for that purpose. Sincerely, FARRIS BRYANT, Director. Replying to the Director of OEP on October 28, 1966, the Secretary of the Treasury said that legislation would be requested to permit the Treasury to write off an amount of silver certificates to offset those not likely to be presented for redemption. The reply of the Secretary of the Treasury follows: THE SECRETARY OF THE TREASURY, Hon. FARRIS BRYANT, Director, Office of Emergency Planning, DEAR GOVERNOR BRYANT: This is in reference to your letter The Department still stands ready to hold this amount of silver aside for that purpose under the conditions set forth in my letter of June 14, 1965, namely, unless its use were to become necessary for critical national needs during the transition period to the new coinage materials, including without limitation, the exchange for silver certificates or outright sale of the silver where necessary to maintain the price of silver at $1.29-plus per ounce. If such critical use were to become necessary, it would only be made after consultation with the Office of Emergency Planning. The tight coinage situation which prevailed at the time of my letter of June 14, 1965, has eased and there has been a flowback of subsidiary coins to the Federal Reserve banks. Production of the new coins has been substantial and is continuing at a heavy rate, thus permitting us to build an inventory of coins of the new materials, with the exception of the half dollar, which we do not consider to be critical as a medium of exchange to transact business. The stock of silver to which you refer was 622-plus million ounces on October 19,1966, of which 444-plus million was held as backing for silver certificates outside of the Treasury and 177-plus million ounces was free silver controlled by the Treasury. Although decreasing monthly, we still continue to get back silver certificates from the public which frees silver to offset withdrawals. We are of the opinion that a great many of the silver certificates which are shown on the "Daily Statement of the U.S. Treasury" to be in the hands of the public will never be presented for redemption. Inasmuch as the majority of these certificates were of the $1 denomination, we believe that many of them are being held by collectors and speculators and others. Also, we can count on a large number having been lost or destroyed. At a time we believe to be appropriate, legislation will be requested to permit the Treasury to write off an amount of silver certificates to offset the ones that we believe will not be presented for redemption. This will free silver for other uses, including silver for the stockpile. This legislation will be similar to the Old Series Currency Adjustment Act of 1961 (Public Law 87-66), which gives the Secretary of the Treasury the authority to write off currency which, in his judgment, has been destroyed or irretrievably lost and so will never be presented for redemption. Sincerely yours, HENRY H. FOWLER. The use of silver for coinage, redemption of silver certificates, and sales of silver for commercial uses lowered the Government inventory of silver to 594.2 million ounces by the end of 1966 from a record 2,106.2 million ounces in 1958, according to the Treasury Department. The Treasury held silver at the end of 1966 was comprised of 591.9 million ounces of bullion and 2.3 million ounces of silver dollars. Proposed legislation to authorize adjustments in the amount of outstanding silver certificates was introduced in the House of Repre sentatives and in the Senate in March 1967. In testifying before the House Banking and Currency Committee and the Senate Banking and Currency Committee early in May 1967, the Under Secretary of the Treasury stated: We have now reached the point at which further action is necessary. At the present time, we have total stocks of silver of about 520 million ounces. Of this amount, almost 430 million ounces are required by law to be held as reserves for $555 million of silver certificates outstanding. This leaves only about 90 million ounces of so-called free silver available. Late in 1966 the balance of uncommitted silver fell below the amount required for the stockpile and by December 30, 1966, was reported at 154.3 million ounces. The outflow of Treasury silver continued in 1967 and on May 18, 1967, while the Congress was considering legislation to authorize adjustments in the amount of outstanding silver certificates and thus increase Government holdings of free silver, the Treasury Department discontinued sales of silver to buyers other than domestic firms using silver in their business. The public announcement follows: TREASURY DEPARTMENT, Washington, D.C., May 18, 1967. Effective immediately, the Treasury Department is discontinuing sales of silver to any buyers other than legitimate domestic concerns which use silver in their businesses. The Department is also immediately invoking its legal authority to prohibit the melting, treatment, and export of silver coins. The rights of holders of silver certificates to exchange them for silver will not be affected. These actions have become necessary because of a rapid increase in the amounts of purchases of silver held by the Treasury. These purchases have been rising at an unprecedented rate during the past week and, if unchecked, could lead to exhaustion of the silver supplies which the Treasury is authorized to sell. This, in turn, could result in excessive hoarding of silver coins needed in our national economy at present, as well as in disorderly, speculative dealing in silver affecting the U.S. economy. The price of silver purchased from the Treasury by domestic concerns will remain at $1.29 an ounce, and these concerns will be allowed to purchase it under terms of end-use certificates attesting that it will be used for normal business operations. Pending orders will be filled only upon completion of an end-use certificate. Under the Coinage Act of 1965, the Treasury has been holding the price of its free silver at $1.29 an ounce. The Treasury has sold silver at that price to all purchasers, whether for foreign or domestic use. This has kept the world price of silver down to the same level, forestalling hoarding of U.S. silver coins. Meanwhile, the Treasury has expedited production at the mints of the new cupro-nickel clad dimes and quarters to meet the country's needs for coins. Progress in this production has been satisfactory, and by the end of the year, if not earlier, there should be enough of these new coins To help assure continued orderly transition to the new U.S. The attached fact sheet gives further information on the developments which have brought about these actions and provides material in statistical form. Accompanying the Treasury announcement of May 18, 1967, was the following data: FACT SHEET-BACKGROUND ON THE SILVER SITUATION World demand for silver exceeds known world supplies. In the United States, with the authority vested in the Treasury by the Coinage Act of 1965, widespread hoarding of silver coins has been prevented, in the main, by selling silver out of Treasury stocks to all purchasers-foreign and domestic―at $1.29 an ounce. Holding the price at this level has been necessary to keep U.S. silver coins in circulation until there are enough of the new cupro-nickel clad coins in everyday use and in reserve to meet the country's economic needs and to prevent the silver coins from exceeding their face value. During fiscal year 1967, the Treasury expects to produce, 4 billion of the clad dimes, 2.7 billion of the clad quarters, and 208 million Kennedy half dollars. In fiscal year 1968, production figures are expected to be 2 billion dimes, 1 billion quarters, and 200 million half dollars. The only silver the Treasury is presently authorized to sell is "free silver"--which does not stand behind the $553 million silver certificates outstanding. Presently, if all pending orders on hand were filled, there would be 54.5 million ounces of free silver remaining in Treasury stocks. In early May, the Treasury, before the House and Senate Banking and Currency Committees, requested legislation to permit the writing off of silver certificates determined to be lost or destroyed and end the exchange of those certificates for silver a year after the legislation is enacted. Treasury indicated it would write off $150 million of these immediately after enactment. Congressional enactment of this silver legislation would, therefore, add 116 million ounces to the "free" silver stocks. This amount, if the rate of demand by purchasers had not risen as sharply as it has since then, probably would have been sufficient to hold the price down, without further action, until enough of the newer clad coins were in circulation or in inventory. However, since May 1, as is shown in the following statistical material, purchases and orders for silver have been rising. These purchases have been principally by brokers, mostly for export, with the heaviest volume being in the last 4 working Even if the Congress were immediately to enact the legislation currently before it, heavy purchase demands would be expected to continue in the absence of the actions taken today. The Daily Statement of the U.S. Treasury of June 2, 1967, showed the balance of uncommitted silver to be 45 million ounces, or 136.7 million ounces below the amount held just prior to the time the Director of the Office of Emergency Planning asked the Treasury for assurance that sufficient silver would be held to meet the stockpile objective of 165 million ounces. The proposed legislation to authorize adjustments in the amount of outstanding silver certificates, and for other purposes, passed the House of Representatives and the Senate and was approved on June 24, 1967 (Public Law 90-29). This legislation authorized the Secretary of the Treasury to determine from time to time the amount of silver certificates (not exceeding $200 million in aggregate face value), issued after June 30, 1929, which in his judgment have been destroyed or irretrievably lost, or are held in collections, and will never be presented for redemption. This act also contained a provision relating to the transfer of silver to the strategic and critical materials stockpile. Public Law 90-29 provided that from and after the date of enactment, and until transferred to the national stockpile in accordance with this act, the Secretary of the Treasury shall hold as a reserve for purposes of the common defense not less than 165 million fine troy ounces of silver. It was further provided that upon the expiration of 1 year after the date of enactment, the Secretary of the Treasury shall transfer not less than 165 million fine troy ounces of silver to the national stockpile. Public Law 90-29, approved June 24, 1967, reads as follows: Public Law 90-29 90th Congress, S. 1352 June 24, 1967 AN ACT To authorize adjustments in the amounts of outstanding silver Be it enacted by the Senate and House of Representatives SEC. 2. Silver certificates shall be exchanged for silver bullion for one year following the enactment of this Act. Thereafter they shall no longer be redeemable in silver but shall be redeemable from any moneys in the general fund of the Treasury not otherwise appropriated. |