Letter from the Treasury Department
August 12, 2005
Mr. Chris Powell
Gold Anti-Trust Action Committee Inc.
Dear Mr. Powell:
Your letters to Roberta McInerney, assistant general counsel
(banking and finance), dated January 20 and July 17, 2005, have been
forwarded to me for response. I recently became the chief counsel
(foreign assets control).
The U.S. Code provision that you reference, 12 U.S.C. Sec. 95a, is a
duplicate codification of Section 5 of the Trading with the Enemy
Act of 1917, 50 U.S.C. App. Secs. 1-44 ("TWEA"), with respect to
which my office bears responsibility for interpreting.
As you may be aware, Congress enacted TWEA during World War I to
prevent certain transactions that might be of advantage to an enemy
during wartime. During World War II the Treasury Department
implemented extensive punitive blockings of Axis assets and
protective blockings of Allied assets.
In 1950 the United States imposed economic sanctions against the
People's Republic of China as a result of the Korean emergency to
prevent, among other things, Chinese acquisition of foreign exchange
through transactions with Americans. The Department of the
Treasury's Office of Foreign Assets Control ("OFAC") began enforcing
foreign asset control programs in the 1950s. Today the only economic
sanctions programs administered by OFAC under TWEA are with respect
to Cuba, North Korea, and certain third-country transfers of
You have asked how the Treasury Department construes the term "the
time of war," which appears in section 5 (b) (1) of TWEA. Although
TWEA does not include a definition of the term "during the time of
war," it does include definitions for the terms "the beginning of
the war" and "end of the war." The words "the beginning of the war"
are deemed to mean "midnight ending the day on which Congress has
declared or shall declare war or the existence of a state of war."
The words "end of the war" are deemed to mean "the date of
proclamation of exchange of ratifications of the treaty of peace,
unless the president shall, by proclamation, declare a prior date."
Thus the phrase "during the time of war" would seem to cover the
period between "the beginning of the war" and the "end of the war."
Since this period cannot come into existence without some form of
congressional declaration, it would appear that TWEA -- with the
exception of its present applicability to the Cuba, North Korea, and
transaction control programs referenced above* -- applies only to
situations involving a declared state of war. In exercising any of
the specific powers available to him under TWEA during the time of
war, the president would issue an executive order or other similar
instrument generally made available through publication in the
(* -- From the early 1930s until 1977, when the International
Emergency Economic Powers Act was enacted, TWEA applied not only in
times of war but also in situations in which the president declared
a peacetime national emergency. Pre-existing emergencies declared
with respect to Cuba and North Korea and certain transaction
controls were grandfathered, which explains why TWEA still serves as
the basis for those sanctions programs, even though the United
States is presently not in a state of war with respect to any of the
The construction of the term "hoarding," as used in section 5(b)(1)
of TWEA, would depend on how the president chooses to exercise his
authority with respect to hoarding in any particular instance.
In making any decisions under the authorities conferred by TWEA, the
president would, of course, be taking steps to address threats to
our national security during a time of war. In the past, the
president has used TWEA or TWEA-like authorities to criminalize
hoarding. See generally Bauer v. United States, 244 F.2d 794 (9th
Cir. 1957). Today, however, such activity is not restricted under
the only sanctions programs in effect pursuant to TWEA -- i.e., the
Cuba, North Korea, and transactions-control programs.
If, during a time of war, the president expressly chose to restrict
the hoarding of gold or silver, he could do so.
Among the many factors the president would likely consider before
taking such action, however, is the fact that the U.S. Government
now mints and issues gold and silver coins to meet public demand for
both numismatic and investment purposes.
(See 31 U.S.C. § 5112(a)(7)-(10) & (e)-(i).)
You also have asked about the president's ability to "interfere with
the ownership of shares in gold and silver mining companies merely
because shares of such companies also might be owned by foreign
nationals or foreign governments, at war with the United States or
Under TWEA during times of war -- and also under the International
Emergency Economic Powers Act, 50 U.S.C. Secs. 1701-05 ("IEEPA")
during peacetime national emergencies -- the president has broad
powers to regulate property in which there exists a foreign
interest. See TWEA § 5(b)(1)(B); IEEPA Secs. 1702 (a) (1) (B).
Consequently, the president may restrict shares in any company owned
by foreign persons consistent with the purposes of any declared
In this respect, foreign-owned shares in gold and silver mining
companies are no different from foreign-owned shares in companies in
any other industry.
Finally, you raise concerns about the "instant destruction of gold
and silver investors and the precious metals mining industry in the
United States." In the establishment and implementation of
sanctions, the U.S. Government is always mindful of the domestic
impact of restrictions meant to serve national security and foreign
policy purposes. Just as the U.S. Government has been mindful of the
practical impact that sanctions have on various service and
manufacturing industries, it would also be mindful of the potential
impact of sanctions with respect to the markets and industries
associated with precious metals.
I hope you find this letter instructive. Thank you for your
interest. If I can be of any further assistance, please call me.
Sean M. Thornton
Chief Counsel (Foreign Assets Control)
U.S. Department of the Treasury
Washington, D.C. 20220
PRESS RELEASE: Treasury Department Claims Power to Seize
Gold, Silver -- and Everything Else, GATA Says
GATA Press Release via Business Wire
Monday August 22, 2005
The U.S. Government has the authority to prohibit the private possession of gold and silver coin and bullion by U.S. citizens during wartime, and, during wartime and declared emergencies, to freeze their ownership of shares of mining companies, the Treasury Department has told the Gold Anti-Trust Action Committee.
But gold and silver owners aren't alone in such jeopardy. For the U.S. Government claims the authority in declared emergencies to seize or freeze just about everything else that might be considered a financial instrument.
The Treasury Department's assertions came in a letter to GATA dated August 12 and written by Sean M. Thornton, chief counsel for the department's Office of Foreign Assets Control, who replied to questions GATA posed to the department in January. It took GATA six months and some prodding to get answers from the Treasury, but the Treasury's reply, when it came, was remarkably comprehensive and candid.
The government's authority to interfere with the ownership of gold, silver, and mining shares arises, Thornton wrote, from the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and from 1977's International Emergency Economic Powers Act, which can be applied without declared wars.
While the Trading With the Enemy Act authorizes the government to interfere with the ownership of gold and silver particularly, it also applies to all forms of currency and all securities. So the Treasury official stressed in his letter to GATA that the act could be applied not just to shares of gold and silver mining companies but to the shares of all companies in which there is a foreign ownership interest.
Further, there is no requirement in the law that the targets of the government's interference must have some connection to the declared enemies of the United States, nor even some connection to foreign ownership. Anything that can be construed as a financial instrument, no matter how innocently it has been used, is subject to seizure under the Trading With the Enemy Act and the International Emergency Economic Powers Act.
Having just gone through a controversy about a Supreme Court decision about government's power of eminent domain, most Americans may be surprised to learn that the Trading With the Enemy Act and the International Emergency Economic Powers Act could expropriate them instantly and far more broadly without any of the due process extended to parties in eminent domain cases. All that is needed is a presidential proclamation of an emergency of some kind -- and of course Americans lately have been living in a state of perpetual emergency.
When the Trading With the Enemy Act was passed in 1917, gold and silver formed part of the official currency of the United States and were essential to ordinary commerce, so perhaps an argument could be made then against "hoarding," even if "hoarding" could not be well defined. That is no longer the case; the United States has officially disavowed gold and silver as money and they no longer have a meaningful role in commerce. (GATA is working on that.) So gold and silver investors may want to ask their members of Congress to seek repeal of the statutes that give the government the authority to interfere with the private ownership of gold and silver, emergencies or not.
And ordinary citizens with no particular interest in gold and silver may want to ask their members of Congress to reconsider these statutes simply for being wildly tyrannical.
GATA's correspondence with the Treasury Department is posted on the Internet here: