An astonishing, shocking development was revealed today in the Federal Reserve Chairman Ben Bernanke’s semi-annual monetary policy hearing before Congress. Fed watchers were treated to an amazing display of ignorance on the part of the head of the nation’s most powerful institution. Bernanke showed that he had no clue about billions worth of Fed holdings and proved entirely unsure over whether or not a particular asset existed at all within the Fed: physical gold.
Republican Congressmen Randy Neugebauer of Texas, and chair of the Oversight and Investigations sub-committee, questioned Bernanke on what should be a trivial issue for a Fed Chairman: ‘what the Fed owns’. I am sympathetic to the public’s lack of knowledge about the Fed’s gold holdings, or rather lack thereof, as the reality is quite confusing. I produced a lengthy report on the history of the Fed’s gold ownership following the public confirmation by a Fed attorney that the Fed does not currently own any gold.
Today’s remarks, however, even caught me by surprise, and I do not hold Bernanke in high esteem, because Bernanke displayed confusion on every aspect of the issue of the Fed’s gold ownership. He proved unaware of whether or not the Fed has any gold, saying they “maybe” own a “little”. Bernanke did not have a clue how much in gold certificates the Fed owns and Bernanke did not appear to understand what the gold certificates even are.
Here is the quotation of the exchange in reference (see video below):
Congressmen Neugebauer: “does the Federal Reserve hold gold?”
Bernanke: “uhhh… no”
Congressmen Neugebauer: “you don’t hold any gold?”
Bernanke: “I don’t think so… maybe a little bit”
*Bernanke turns his head and asks…
“do we have gold?”
Bernanke: “looking for my colleagues here, I don’t think so, no.”
*a few seconds later*
Bernanke: “I’m told we have gold certificates”
Congressmen Neugebauer: “and what do we do with those?”
Bernanke: “they’re part of our reserves”
Congressmen Neugebauer: “do you know, can you furnish me with how much that is?”
Bernanke: “we will… but what i do know is the great bulk of US gold is held by the US treasury, not by the Fed.”
(Fast forward to 2:36:05)
Please read the report referenced above if you want to learn more about the Fed’s dealings with gold. There is also confusion on the treasury’s gold holdings which I have covered before, and recommend reading as well.