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SILVER PURCHASES UNDER THE PITTMAN ACT
SUBCOMMITTEE OF THE
UNITED STATES SENATE
S. Res. 469
CREATING THE COMMISSION OF GOLD AND SILVER INQUIRY
MAY 29 AND 31, 1923
Serial 1-Part 1
Printed for the use of the Senate Commission of Gold and Silver Inquiry
COMMISSION OF GOLD AND SILVER INQUIRY.
TASKER L. ODDIE, Nevada, Chairman.
KEY PITTMAN, Neveda, Vice Chairman. THOMAS STERLING, South Dakota.
THOMAS J. WALSH, Montana. FRANK R. GOODING, Idabo.
H. N. LAWRIE, Assistant to Commission,
SILVER PURCHASES UNDER THE PITTMAN ACT.
LETTER OF SENATOR KEY PITTMAN, VICE CHAIRMAN OF THE SENATE COMMISSION
OF GOLD AND SILVER INQUIRY, TO THE TREASURY DEPARTMENT RELATIVE TO PURCHASES OF SILVER UNDER THE PITTMAN ACT.
UNITED STATES SENATE,
Washington, June. 9, 1923. Hon, S. PARKER GILBERT, Jr.,
The Undersecretary of the Treasury, Washington, D. C. MY DEAR MR. GILBERT: I herewith submit to you for your consideration a digest of the evidence of the first two formal hearings of the subcommittee of the Senate Commission of Gold and Silver Inquiry. This subcommittee, of which I am chairman, is particularly charged with the investigation of the administration of the Pittman Act. I have also the honor to voluntarily submit some comments and suggestions. The digest is attached to this letter as an addenda. The complete hearings are also submitted, and are printed immediately following the letter and the addenda. I have only referred to excerpts from the testimony, as the entire evidence is included in the same pamphlet and therefore may be examined at the same time and in connection with an examination of the excerpts that I refer to. As further hearings are had from time to time printed copies, together with similar digests, comments, and suggestions, will be furnished you.
The major questions to be determined are, Has all the silver sold and tendered to the Government under the Pittman Act been the product of mines in the United States, as required by the act; and has the act been so administered as to encourage the production of silver, as is also provided in the act. If it had been practicable to follow the identical silver from the ore through the various reduction stages to the refined silver, no question as to whether foreign silver was sold or tendered to the Government under the Pittman Act would have arisen.
On May 17, 1920, the Director of the Mint issued the following statement :
"The provisions of the Pittman Act are mandatory and, in accordance with them, the Secretary of the Treasury has given standing orders to the Director of the Mint to buy silver at $1 per ounce, 1,000 fine, delivered at the option of the Director of the Mint at the Assay Office in New York or the mints in Philadelphia, Denver, and San Francisco, up to the aggregate amount of 207,000,000 ounces. Under the terms of the act the silver so purchased must be the product both of mines situated in the United States and of reduction works so located, and clear and unequivocal proof to that effect will be required. Forms for such proof may be obtained at said assay office and mints.” (See Transcript, p. 19.)
It will be observed that this regulation did not permit the sale of mixed silver.
The reduction works, however, convinced the Treasury Department that it was economically necessary to mix foreign and domestic ores in the reduction process and to mix bullion in the refining process. (See Addenda, p. 9; Tr. pp. 56, 63, 64.)
To meet this condition the Director of the Mint on June 18, 1920, issued a statement or regulation, from which I quote the following:
" In order to cover the practical situation presented by the fact that a large proportion of the domestic production of silver is smelted and refined in conjunction with foreign silver and comes from the refineries as part of a mixed product of domestic and foreign silver, the Director of the Mint is further prepared to purchase under the act silver which forms part of a mixture of foreign
silver and domestic silver up to the proportionate part of such mixed product which represents the product of mines located within the United States and of reduction works so located, upon clear and unequivocal proof as to the proportionate part of the mixed product which represents domestic production."
And in such statement he also said:
“ It will be noted further that in order to have assurance that the benefits of the Pittman Act go to American producers, for whom they were intended, the Director of the Mint will require in connection with the purchases supporting affidavits from the miners to the effect that settlement has been made with them on the basis of the fixed price of $1 per ounce, adjusted to the equivalent price for silver 999 fine and to the cost of delivery refinery to mint." (Tr. pp. 19, 19, 20.)
The enormous tenders and sales during the last few months aroused a doubt in the minds of producers as to whether or not foreign silver was being sold to the Government for $1 an ounce under the Pittman Act, due to inaccuracies that might arise in computing the amount of American-produced silver in the mixed refined bullion tendered and sold to the Government. The amount of silver sold and tendered to the Government appeared to be in excess of the total production of silver in the United States, as reported by the United States Geological Survey for the same period. The average monthly tenders during the period of the operation of the Pittman Act, from January 17, 1920, to March, 1923, were 4,768,843 ounces. The average monthly tenders since that time have been over 10,000,000 ounces. (Addenda, pp. 9, 10.)
As required by the Director of the Mint in his regulations quoted, no mixed silver bullion could be purchased except “ Upon clear and unequivocal proof as to the proportionate part of the mixed product which represents domestic production,"
There is evidence, in the form of affidavits by the miners and producers of American silver, as to the amount of American silver produced and sold to the smelters. I unhesitatingly charge, however, that no satisfactory proof has been submitted to the Treasury Department, as far as I can ascertain from that department or to the commission, which clearly and unequivocally proves the proportionate part of the American silver so purchased remaining for delivery in the mixed bullion after metal losses were incurred in the smelting and refining operations. I base these charges upon the evidence and the conclusions there from, which I will now attempt to set forth.
There is an actual loss of silver metal in the smelting, reduction, and refining processes necessary to separate the silver from the ores and from other metals. This loss, according to the testimony of Mr. Brownell, vice president of the American Smelting & Refining Co., is caused by part of the silver being taken off in the slag from the furnace, by part of the metal being carried up the flue of the smelter as minute particles or in a gaseous form, and by the blowing away of fine particles of the silver with ore while the same remains in the cars or the ore bins at the smelter. (Tr. pp. 77, 77.)
This loss must necessarily be deducted from the gross production before the amount of silver salable under the Pittman Act can be determined. It is self-evident, therefore, that unless the full amount of this loss is deducted in computing sales of American silver in mixed foreign and domestic bullion that the result must be the purchase of foreign silver by the Government. It is the duty of the Treasury Department, therefore, to be certain that the deductions for metal losses, no matter how or by whom estimated, should safely. include the actual loss of silver in the process of reduction and refining.
The question then naturally arises as to what method should be insisted upon by the Treasury Department to insure a safe margin covering such metal losses. This involves a study of the methods used by the smelters and reduction works in determining such losses in buying ores and the methods now adopted by these same smelters and reduction works in computing the amount of silver that they have to sell to the Government under the terms of the Pittman Act.
Almost since the beginning of the business of smelting in this country the smelters have fixed an average treatment loss of 5 per cent of metal in making purchases of ore from the miners--that is, they have only paid the miner for 95 per cent of the silver content of his ore-on the theory that an average of 5 per cent of such silver was lost in the process of reduction and refining.
What is the result of the method now adopted by these same smelting companies in determining the amount of metal loss in smelting and refining operations?' In its settlements with the Government upon sales under the Pittman