    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                       INVESTIGATING THE GOLD: H.R. 1495,
                       THE GOLD RESERVE TRANSPARENCY ACT
                          OF 2011 AND THE OVERSIGHT OF
                          UNITED STATES GOLD HOLDINGS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON

                            DOMESTIC MONETARY POLICY

                                 AND TECHNOLOGY

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 23, 2011

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 112-41

                                    _____

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                       SPENCER BACHUS, Alabama, Chairman

    JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts,
        Chairman                             Ranking Member
    PETER T. KING, New York              MAXINE WATERS, California
    EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
    FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
    RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
    DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
    WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
    JUDY BIGGERT, Illinois               BRAD SHERMAN, California
    GARY G. MILLER, California           GREGORY W. MEEKS, New York
    SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
    SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
    RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
    PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
    JOHN CAMPBELL, California            JOE BACA, California
    MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
    THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
    KEVIN McCARTHY, California           DAVID SCOTT, Georgia
    STEVAN PEARCE, New Mexico            AL GREEN, Texas
    BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
    MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
        Pennsylvania                     KEITH ELLISON, Minnesota
    LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
    BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
    BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
    SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
    NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
    JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
    ROBERT HURT, Virginia
    ROBERT J. DOLD, Illinois
    DAVID SCHWEIKERT, Arizona
    MICHAEL G. GRIMM, New York
    FRANCISCO R. CANSECO, Texas
    STEVE STIVERS, Ohio
    STEPHEN LEE FINCHER, Tennessee

                       Larry C. Lavender, Chief of Staff
            Subcommittee on Domestic Monetary Policy and Technology

                           RON PAUL, Texas, Chairman

    WALTER B. JONES, North Carolina,     WM. LACY CLAY, Missouri, Ranking
        Vice Chairman                        Member
    FRANK D. LUCAS, Oklahoma             CAROLYN B. MALONEY, New York
    PATRICK T. McHENRY, North Carolina   GREGORY W. MEEKS, New York
    BLAINE LUETKEMEYER, Missouri         AL GREEN, Texas
    BILL HUIZENGA, Michigan              EMANUEL CLEAVER, Missouri
    NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
    DAVID SCHWEIKERT, Arizona

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        June 23, 2011................................................     1
    Appendix:
        June 23, 2011................................................    23

                                   WITNESSES
                            Thursday, June 23, 2011

    Engel, Gary T., Director, Financial Management and Assurance,
      U.S. Government Accountability Office (GAO)....................     5
    Thorson, Hon. Eric M., Inspector General, U.S. Department of the
      Treasury.......................................................     3

                                    APPENDIX

    Prepared statements:
        Paul, Hon. Ron, including a statement and attachment from the
          United States Mint.........................................    24
        Engel, Gary T................................................    30
        Thorson, Hon. Eric M.........................................    42

                  Additional Material Submitted for the Record

    Thorson, Hon. Eric M.:
        Written responses to questions submitted by Chairman Paul....    54
        Written responses to questions submitted by Chairman Paul and
          Representative Luetkemeyer.................................    60
            Attachment 1: Gold Assay Reports.........................    62
            Attachment 2: U.S. Mint's Custodial Gold: List of Bars
              Assayed................................................   117
            Attachment 3: List of Audits of U.S. Gold Holdings.......   125
            Attachment 4: Mint's Schedule of Inventory of Deep
              Storage Gold Reserves..................................   127
            Attachment 5: FRBNY Schedule of Inventory of Gold Held...   128

                       INVESTIGATING THE GOLD: H.R. 1495,
                       THE GOLD RESERVE TRANSPARENCY ACT
                          OF 2011 AND THE OVERSIGHT OF
                          UNITED STATES GOLD HOLDINGS

                                  ----------

                            Thursday, June 23, 2011

                 U.S. House of Representatives,
                      Subcommittee on Domestic Monetary
                                 Policy and Technology,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 9:31 a.m., in
    room 2128, Rayburn House Office Building, Hon. Ron Paul
    [chairman of the subcommittee] presiding.
        Members present: Representatives Paul, Jones, Luetkemeyer,
    Huizenga, Schweikert; Clay, Maloney, and Green.
        Chairman Paul. This hearing will come to order. Without
    objection, all members' opening statements will be made a part
    of the record.
        I will start with my opening statement and proceed to
    anybody else who is anxious to do the same.
        For far too long, the United States Government has been
    less than transparent in releasing information relating to its
    gold holdings. Not surprisingly, this secrecy has given rise to
    a number of theories about the gold at Fort Knox and other
    depositories.
        Some people speculate that the gold has been involved in
    gold swaps with foreign governments or bullion banks. Others
    believe that the gold has been secretly shipped out of Fort
    Knox and sold. And, still others believe that the bars at Fort
    Knox are actually gold-plated tungsten.
        Historically, the Treasury and the Mint have dismissed
    these theories rather than addressing these concerns with
    substantive rebuttals. No one from Congress has been allowed to
    view the gold at Fort Knox in nearly 40 years. Recent
    photographs of gold holdings seem to be hard to come by. And
    the Mint and the Inspector General's audit statements contain
    only the bare minimum of information.
        Because the Government has for so long refused to provide
    substantive information on its gold holdings, it is not
    surprising that so much confusion abounds, both within and
    without the Government.
        The difference between custody and ownership, questions
    about the responsibility for U.S. gold held at the New York
    Fed, and that issue of which division at Treasury is ultimately
    responsible for the gold reserves are just some of the
    questions that have come up during the research for this
    hearing. In a way, it seems as though someone decided to lock
    up the gold, put the key in a desk somewhere, and walk off
    without telling anyone anything.
        Only during the preparation for this hearing was my office
    informed that the Mint has in fact conducted assays of
    statistically representative samples of gold bars, and we were
    provided with a sample assay report.
        This type of information should be reported, or at least
    tabulated and published, so that the public knows exactly how
    many bars of gold exist, what their fineness is, and whether
    they are encumbered in any way through loans or swaps.
        While the various agencies concerned have been very
    accommodating to my staff in attempting to shed some light on
    this issue, it should not require the introduction of
    legislation or a congressional hearing to gain access to this
    information. This information should be published and available
    to the American people.
        This gold belongs to the people, especially since much of
    it was forcibly taken from them in the 1930s, and the
    Government owes it to the people to provide them with the
    details of these holdings.
        We would greatly benefit from a full, accurate inventory
    audit and assay with detailed explanations of who owns the gold
    and who is responsible for ownership, custody, and auditing.
        While the Mint and the Inspector General trust the accuracy
    of the audits performed between 1975 and 1986, this still means
    that at least two-thirds of the gold reserves were last audited
    over a quarter century ago. Surely, a full audit every 25 years
    is not too much to ask.
        I look forward to the testimony of the witnesses regarding
    the conditions of the gold reserves, the accounting audits that
    are regularly performed, and the inventories and assays that
    have been conducted on some of this gold over the years.
        I am also very interested to hear the comments on the Gold
    Reserve Transparency Act, so that we may put forward a measure
    that provides the public with accurate and complete information
    on their gold.
        I yield back the remaining time of my 5 minutes, and yield
    to Mr. Clay for his 5 minutes.
        Mr. Clay. Thank you, Mr. Chairman. And thank you for
    holding this hearing, entitled, ``Investigating the Gold: H.R.
    1495, the Gold Reserve Transparency Act of 2011 and the
    Oversight of United States Gold Holdings.''
        I, too, look forward to the witnesses' testimony.
        And I also noted that in the Treasury Inspector General's
    written testimony, he wrote that the IG is required by law to
    perform an annual audit of the Mint public enterprise fund's
    financial statements. And those statements include the balance
    of custodial deep storage gold reserve held by the Mint.
        It seems as though there is already an annual audit that
    both the IG and the GA believe is required of them.
        However, Mr. Chairman, one other suggestion is perhaps we,
    as a subcommittee, may consider taking a tour of Fort Knox and
    the other place or places that house the gold and really
    witness for ourselves if it is going--I don't know if that
    would be enough to determine if the gold is authentic.
        But, it may be something for the committee to consider. So
    I look forward to the witnesses' testimony. And, again, I thank
    the chairman.
        Chairman Paul. I thank the gentleman. I also thank the
    gentleman for his suggestion. I think it is a good idea to go
    and at least show our interest. But I personally would feel
    like I would have shortcomings on looking at a bar and knowing
    exactly what I was looking at. But there is no reason why we
    can't at least consider that as a starting point.
        Would any other member like to make an opening statement?
        Okay. I will proceed to the witnesses.
        I would like introduce our two witnesses. Mr. Gary Engel is
    the Director of Financial Management and Assurance at the
    Government Accounting Office. He directs GAO's annual audit of
    the U.S. Government's consolidated financial statements, as
    well as audits of key financial statements at the Department of
    the Treasury.
        And I want to welcome Mr. Engel, as well as the honorable
    Eric M. Thorson, who has been the Inspector General of the
    Department of the Treasury since 2008. He manages oversight of
    the Treasury through independent audits, investigations, and
    review.
        And we will go ahead and proceed with the testimony of Mr.
    Thorson.

    STATEMENT OF THE HONORABLE ERIC M. THORSON, INSPECTOR GENERAL,
                    U.S. DEPARTMENT OF THE TREASURY

        Mr. Thorson. I thank you for the opportunity to appear
    before you this afternoon.
        My testimony will cover the audits done by my office on the
    United States Mint's Schedule of Custodial Deep Storage Gold
    Reserves. Hereafter, I will mostly refer to them simply as the
    gold reserves.
        Before I discuss the details of the audits that are the
    topic of this hearing, I want to make one point very clear: 100
    percent of the U.S. Government's gold reserves in the custody
    of the Mint has been inventoried and audited. Furthermore,
    these audits found no exceptions of any consequence.
        I also want to assure you that the physical security over
    the gold reserves is absolute. I can say that without any
    hesitation, because I have observed the gold and the security
    of the gold reserves myself.
        Accordingly, the requirements of H.R. 1495, which calls for
    a full assay, inventory, and audit of gold reserves of the
    United States, together with an analysis of the sufficiency of
    the measures taken for the security of such reserves, is
    redundant of audit work already done.
        Since 1993, my office has performed annual audits of the
    Government's deep storage gold reserves held by the Mint. In
    fact, our Fiscal Year 2011 audit of the gold reserves is
    currently under way.
        My testimony today will briefly describe what the Mint gold
    reserves include, and the annual audits performed by my office
    since 1993.
        The Mint maintains its storage gold reserves in three
    highly secure locations: Fort Knox, Kentucky; West Point, New
    York; and Denver, Colorado. While it would be inappropriate for
    me to discuss the details of the security arrangements in place
    at these facilities, I can tell you that they are multilayered
    and include substantial physical barriers, armed guards,
    cameras, and metal detectors.
        In all, 42 compartments at these 3 hardened facilities hold
    699,515 gold bars with a fineness or purity ranging from 0.47
    to 0.9999, with an average fineness of 0.9006.
        As of September 30, 2010, the audited quantity of the gold
    reserves held by the Mint was over 245 million fine troy
    ounces, weighing over 9,300 tons, with a market value of $320.6
    billion. I might add that each gold bar weighs about 27 pounds
    and has an average value of about $0.5 million.
        In June 1975, the Treasury Secretary authorized and
    directed a continuing audit of U.S. Government-owned gold for
    which Treasury is accountable. Pursuant to that order, the
    Committee for Continuing Audit of the U.S. Government-owned
    Gold performed annual audits of Treasury's gold reserves from
    1975 to 1986, placing all inventoried gold that it observed and
    tested under an official joint seal.
        The committee was made up of staff from Treasury, the Mint,
    and the Federal Reserve Bank of New York. The annual audits by
    the committee ended in 1986 after 97 percent of the Government-
    owned gold held by the Mint had been audited and placed under
    official joint seal.
        It should be noted that during the entire period of these
    audits and up to today, no discrepancies of any consequence
    have ever been found.
        This is an example of the seal--and I have put pictures of
    these in my testimony. This is an actual seal that came off one
    of the compartments.
        My office began conducting annual audits of the gold
    reserves in Fiscal Year 1993. Since 2005, these audits have
    supported the annual audits of the Treasury Department's
    consolidated financial statements, which incorporate the
    balances of the gold reserves held by the Mint.
        The financial statement audit is performed by KPMG under
    contract with my office. KPMG has relied on our audits of the
    gold reserves when rendering its opinions on the Mint's and
    Treasury's financial statements. They have assured themselves
    as to the independence, reputation, and qualifications of my
    audit staff.
        In addition, they have satisfied themselves with the
    adequacy of the audit procedures performed. The audit work
    performed by both my office and KPMG is done in accordance with
    Government auditing standards established by the GAO.
        Since 1993, when we assumed responsibility for the audit,
    my office has continued to directly observe the inventory and
    test the gold. In fact, my auditors signed the official joint
    seals--such as the one I showed you--placed on those
    compartments, inventoried and tested in their presence.
        At the end of Fiscal Year of 2008, all 42 compartments had
    been audited by either the GAO, the Committee for Continuing
    Audit of the U.S. Government-owned Gold, or my office, and
    placed under official joint seals. There has not been any
    movement of inventoried gold since that time.
        Furthermore, in addition to observing the inventory of the
    gold for all of the audit periods, we selected and tested a
    statistically valid random sample of gold bars using a 95
    percent confidence level. We found, without fail, that any
    differences between the fineness reported by the Mint and the
    fineness based on our independently obtained assay reports were
    immaterial and negligible.
        For example, during our Fiscal Year 2008 audit, we sampled
    gold valued at $75 million. Based on the independent assay of
    those samples, we projected the dollar value of the difference,
    based on the assay report and the Mint's inventory records, to
    be $3,820, or 0.005 of 1 percent of the gold inventory.
        As discussed earlier, by the end of Fiscal Year 2008, all
    of the gold reserves in the Mint's custody had been 100 percent
    inventoried and audited.
        In closing, based on the work performed by my office and by
    my own personal observations, I can assure the subcommittee
    and, as you said, sir, the American people, that both the
    quantities and the value of the U.S. Government's deep storage
    gold reserves held and reported by the Mint are reliable and
    fully audited. I mentioned the American people because, as you
    said, sir, they own this gold.
        The reason we go through all of the procedures that I just
    mentioned is to give the American people the absolute
    confidence that the gold reserves are as represented. Fort
    Knox, for instance, isn't just a huge stockpile of gold. It is
    also a symbol of the stability and financial soundness of their
    Government.
        To create doubt about the value or the security or even the
    very presence of the gold reserves without reason contributes
    to the distrust in Government that seems to be a growing trend
    today.
        It is the obligation of every Inspector General to report
    to the Congress, and to the public, areas of concern that need
    to be fixed. But I believe it is also my obligation to report
    to you when something is being done right, and that is the case
    here today.
        That concludes my statement.
        [The prepared statement of Inspector General Thorson can be
    found on page 42 of the appendix.]
        Chairman Paul. I thank the gentleman, and we will proceed
    with Mr. Engel.

    STATEMENT OF GARY T. ENGEL, DIRECTOR, FINANCIAL MANAGEMENT AND
         ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE (GAO)

        Mr. Engel. Thank you, Mr. Chairman, Ranking Member Clay,
    and other members of the subcommittee. I am pleased to be here
    today to discuss H.R. 1495, the Gold Reserve Transparency Act
    of 2011.
        As of September 30, 2010, about 95 percent of the reported
    U.S. gold reserves were in the custody of the Mint, of which
    nearly all is deep storage gold. The remaining U.S. gold
    reserves were in the custody of the Federal Reserve Bank of New
    York.
        In 1974, in response to congressional interest and in
    conjunction with the Mint, GAO assisted in the planning and
    observed the inventory of U.S. gold reserves in the depository
    at Fort Knox. GAO selected and audited 3 of the 13 compartments
    at that depository.
        As part of this audit, GAO recommended that a cyclical
    inventory of the gold in Mint custody be performed annually to
    ensure that the gold in all compartments would be inventoried
    over a specified period of years.
        Acting on this recommendation, in 1975 Treasury established
    the Committee for Continuing Audit of the U.S. Government-owned
    Gold. Treasury OIG officials estimate that about 92 percent of
    the U.S. gold reserves have been audited by either GAO or the
    Committee for Continuing Audit as of September 30, 1986. Of
    this percent, GAO's audit in 1974 represented about 13 percent.
        More recently, the U.S. gold reserves have been presented
    in various financial reports and have therefore been subject to
    various audit efforts. For example, since issuing its audit
    report covering the Mint's custodial schedule for Fiscal Year
    1993, the Treasury OIG has annually audited the deep storage
    gold reserves in the custody of the Mint.
        For each of the fiscal years under audit, the Treasury OIG
    has issued a clean opinion on the Mint's custodial schedules.
    Also, the Treasury OIG did not report any material weaknesses
    in internal control over financial reporting relating to these
    schedules for those fiscal years.
        H.R. 1495 provides for the Secretary of the Treasury to
    conduct and complete a full assay, inventory, and audit of the
    U.S. gold reserves, and an analysis of the sufficiency of the
    measures taken for the security of such reserves. In
    considering the provisions of H.R. 1495, it will be important
    to consider the cost, benefit, and timing of actions needed to
    implement the proposed requirements.
        H.R. 1495, if enacted, may result in duplication of certain
    past and current efforts. Nevertheless, GAO would be capable of
    reviewing the results of Treasury's actions as called for in
    the bill, should it be enacted. GAO's review would include
    visits to the facilities where the gold reserves are held to
    selectively observe the inventorying and the auditing of the
    gold. We would also examine various documentation supporting
    the required assay, inventory, and audit.
        H.R. 1495 also provides for GAO to transmit to the Congress
    not later than 9 months after enactment of the Act a report of
    GAO's findings from such review and the results of Treasury's
    efforts. According to Treasury officials, because of the
    enormous quantity of gold that would need to be inventoried and
    assayed, it is unclear whether Treasury can complete such
    actions within the 6-month period provided for in H.R. 1495.
        If Treasury's efforts are not completed within this period,
    there would be limitations on the scope of GAO's work if GAO
    were still to be required to report out within the 9-month
    period.
        GAO stands ready to work with the subcommittee on
    developing changes to the provisions of H.R. 1495 that would
    most efficiently utilize the results of past and current gold
    reserve assay, inventory, and audit efforts.
        Mr. Chairman, and Ranking Member Clay, this concludes my
    prepared remarks. I would be pleased to answer any questions
    that you may have.
        [The prepared statement of Mr. Engel can be found on page
    30 of the appendix.]
        Chairman Paul. I thank the gentleman.
        I will start off with yielding 5 minutes to myself for
    questions. I wanted to ask both of you this question. It has to
    do with what is happening in New York, because that has been a
    little more difficult to understand.
        There is a lot of uncertainty surrounding who has
    responsibility of the gold reserves held at the New York Fed.
    You did mention it in your testimony, but conversations with
    the Mint and the Office of the Inspector General, the main
    Treasury and the New York Fed, have all resulted in one or the
    other of these entities saying to check with the other, so we
    never got a full answer.
        The OIG has stated that it does receive financial
    statements from the New York Fed attesting to the gold held in
    storage there for purposes of their financial statement audits.
    However, there seems to be no definite answer as to who has the
    responsibility for the New York Fed gold, and no one seems to
    know the last time it was assayed or inventoried.
        A common rejoinder has been that it is just a small part of
    the gold reserves; it is only 5 percent. But when you look at
    the total amount of gold we have, 5 percent is pretty
    significant, because it is more than 13 million ounces of gold.
    And at $1,500 an ounce, we are talking about $20 billion that
    seems to be floating around out there and we just really can't
    pin it down. I know we are used to talking in trillions, but
    this just seems like poor governance.
        Could either of you comment on the New York Fed-held gold,
    whether it has been assayed or inventoried, and whether it
    deserves to be thoroughly examined, as the legislation calls
    for?
        Mr. Engel. My understanding is that the gold reserves in
    the Federal Reserve Bank of New York have not been assayed.
    That is just based upon my reading of reports, not from work
    that GAO has done. But it is also my understanding from reading
    a Treasury OIG report from back in 1987, that pretty much 99.9
    percent of the gold reserves that were in the Federal Reserve
    Bank of New York at that time--and I think that the amounts of
    fine troy ounces, when I looked, has not really changed to what
    it is now--were being audited over periods of time by the
    Federal Reserve examiners, and that those inventories had been
    observed by members of the Committee for Continuing Audit that
    we spoke of earlier.
        Because it had not been assayed and because it is not under
    the control of that committee, they have not considered that as
    audited. But, there have apparently been inventories of it, and
    there have been observations of that inventory. The last report
    that I saw that said that was from back in 1986. So, I don't
    know what has been done since then.
        Chairman Paul. Thank you.
        Mr. Thorson?
        Mr. Thorson. You are correct that we don't audit that. It
    is done by a third-party confirmation, which is an accepted
    practice under audit. But it is the Treasury's gold--5 percent
    of it is there and it is really at this point is immaterial to
    the statement and the total numbers.
        Chairman Paul. It is immaterial?
        Mr. Thorson. As an auditing term, I mean. It is not
    included in what we listed in the statements.
        Chairman Paul. But it is a relevant amount of gold,
    obviously?
        Mr. Thorson. Right.
        Chairman Paul. Since this is held at the New York Fed, and
    the New York Fed is obviously very much involved in
    international arrangements during the financial crisis,
    essentially every single transaction to the tune of trillions
    of dollars that they transacted involved foreign central banks.
    And over the last decade or two, central banks have been very
    much involved in gold swaps and loaning gold and selling gold.
        And to date, of course, we have no evidence that our
    Government has ever been involved. But it seems to me that if
    there was ever one place where they might have gotten involved,
    since the New York Fed is involved in international
    transactions with--you probably don't have the answer on
    whether or not they did or did not--but could it be conceivable
    that they could have done it without your knowledge?
        Mr. Thorson. I don't believe so, no. And as far as any
    encumbrances other than the gold certificates that are held by
    the Fed, we did ask that question before coming here. What I
    was told was as far as encumbrances, ``Not one troy ounce is
    encumbered.''
        Chairman Paul. Okay.
        I yield back, and now I yield 5 minutes to Mr. Clay.
        Mr. Clay. Again, thank you, Mr. Chairman, for conducting
    this hearing. And let me thank both witnesses for your
    testimony today.
        According to the U.S. Mint, which is the custodian of
    nearly 95 percent of America's gold reserves, the time required
    to move, weigh, assay, and re-store the bars of gold averages 6
    minutes per bar with a team of 19 people. Now, the Mint points
    out that extrapolating that to 700,000 bars, as the legislation
    requires, would require nearly 1.3 million manhours of
    incremental labor.
        Therefore, to complete the inventory of just the gold
    bullion bars within 6 months, as this proposal specifies, would
    require approximately 1,280 individuals. And we know that since
    this is a domestic issue that, Mr. Chairman, your leadership
    would require an offset, so we would have to find the money to
    do this since this is a domestic issue, and we have to pay for
    all of those things.
        Would either of the witnesses view this bill as a prudent
    use of taxpayer funds?
        Mr. Thorson?
        Mr. Thorson. The numbers that you quote are probably--just
    on my unscientific judgment having been there--pretty accurate.
    It is a remarkably small area. It is really surprisingly so
    when you are actually standing there with the compartments. You
    are going to be able to use very few people in that area. I
    think you gave the figure of about 1,200 people? That is almost
    laughable when you actually see the space.
        So that means it is going to take a great deal longer than
    what you would normally think. And if you could put 1,200
    people together, have them move the bars, it is going to take a
    very long time.
        I, obviously, as I said in my statement, don't see the
    benefit at any cost really. It is what we do; it is what we do
    every year. As I said, it almost loses its effect to stand
    there and actually see it all, because there is so much of it.
    It is there.
        Mr. Clay. Thank you for that response.
        Mr. Engel, is this a good use of taxpayers' money, if this
    bill becomes law?
        Mr. Engel. I think, as I said in our testimony, that we
    would be willing to work with the subcommittee on possibly
    building off of the assays, the inventories and audits that
    have already been done to address concerns that there may be
    things within these vaults that are no longer there.
        I agree that they have been through an audit process.
    Auditors have checked these seals. But if the subcommittee
    wanted to have something done there, I would think we would be
    talking, rather then a full assay, maybe some sort of sampling,
    if you wanted to just get a feel that nothing has happened over
    the years since those vaults were sealed. But outside of that,
    it seems quite a bit redundant with what has already been done.
        Mr. Clay. All right.
        I thank both witnesses for their responses.
        And Mr. Chairman, I yield back.
        Chairman Paul. I thank the gentleman.
        I yield 5 minutes to Mr. Jones from North Carolina.
        Mr. Jones. Mr. Chairman, thank you very much.
        And Mr. Engel, it is nice to see you. I had a very pleasant
    business relationship with Mr. Thorson on a number of issues.
    And I thank you for always being there to be helpful.
        I think the reason that I wanted to be here to listen to
    the witnesses, and certainly my colleagues on both sides, is
    that as a Member of Congress, one of my biggest concerns is not
    so much the gold, whether it is there or not there. But it is
    the Americans' distrust of all of us in Congress, quite
    frankly.
        And I was reading--my staff got for me this--I will read
    it. It has nothing to do with this hearing, but it will lead to
    something in a moment:
        ``The Federal Reserve Bank of New York is refusing to tell
    U.S. Government investigators how much money it sent to Iraq
    during the first years of the American invasion. The Iraqi
    officials suggested the missing and possibly stolen funds from
    that era is more than $18 billion.''
        And there is Stuart Bowen--a wonderful Inspector General
    who has always exposed all the lost American money--going to
    the New York Fed, and they won't meet with him. And I think
    that is the reason that maybe this bill has been introduced,
    and maybe not. It is for other reasons as well.
        But, if the American people could just regain a little bit
    of confidence in Washington, whether it be an agency or the
    Congress itself, it would really, I think, help the environment
    of America.
        And I was wondering, I was thinking when Mr. Clay was
    suggesting, and Mr. Paul, the chairman, kind of agreed, does it
    make any sense for there to be a congressional delegation of
    five people, three people, six people, that every so often when
    you do the audit--I think you said once a year, or I might have
    missed that in the testimony, you may have to correct me--but
    is it already in the guidelines or the statute that there would
    be a couple of Representatives from the Senate and the House
    who would be able to accompany the inspectors when they go to--
    or the auditors, not the inspectors, the auditors?
        To me, this is about--there is so much--if I could change
    one thing in America and Iraq, or I--if I could control one
    thing, it would be the Internet. There is more misinformation
    on the internet than there is accurate information. And all
    there has to be is some person who is challenged--I am going to
    be careful about this--who puts on the Internet that you cannot
    find the gold at Fort Knox. Then all of a sudden, thousands or
    millions of people are seeing that. They are not hearing what
    you are saying.
        So I just wonder, if it makes any sense, if it is in your
    regulations, or if it needs to be in the statute, that there
    would be a team of two Senators or two Representatives who
    would have the option of accompanying your inspectors to one of
    the sites?
        Mr. Thorson. Actually, that has happened under a situation
    very similar to this one in 1974.
        In September of 1974, I believe it was Congressman
    Rousselot took a delegation which included, I believe, one
    Senator, Senator Huddleston, and they went down with, I assume
    permission probably would have come from either the Secretary
    of the Treasury or the White House, and did tour the gold and
    there were pictures taken and there are video clips of that.
        I think that is exactly what you are describing. And it was
    done in 1974. Obviously, I don't think either one of us have
    any authority to say anything about such a visit. But it
    certainly is something that the committee can make a request
    for, because there is a precedent for having done it.
        Mr. Jones. I appreciate you sharing that. And I will close
    in just one second. But I think in the world we live in today,
    there is such distrust that it would be I think for at least
    during this deep recession that we are in, that if that could
    be accomplished, it would help, I think, with the public's
    trust.
        Not so much that they should believe Members of Congress,
    but I think that if this was an announced group meeting and
    Members, then it gets some publicity, and maybe there could be
    a news conference after this.
        I don't know. I think there is validity in why we are
    having this hearing today, and I just wanted to share those
    thoughts with the panel and you, Mr. Chairman, and my
    colleagues.
        I yield back.
        Chairman Paul. I thank the gentleman.
        I now recognize Mr. Luetkemeyer from Missouri for 5
    minutes.
        Mr. Luetkemeyer. Thank you, Mr. Chairman.
        In your testimony, I didn't hear any comments about the
    golds that we use to mint coins. Is that held separately, or is
    that not included in this report, or am I missing something?
        Mr. Thorson. You said the Federal Reserve gold is separate?
        Mr. Luetkemeyer. Okay, the Federal Reserve has a separate--
    of gold they use to mint coins. Is that the same?
        Mr. Thorson. Right. It is all part of Treasury's gold, but
    it is not reported on the Mint's financial statement. It is
    reported on the Treasury's consolidated financial statements.
        Mr. Luetkemeyer. Okay, so they are the ones then that will
    mint the coins and they don't have anything to do with the gold
    that we are talking about here today?
        Mr. Engel. No, there might be a misunderstanding. In the
    Mint locations, they have basically two types of gold. They
    have the deep storage gold, and then they have working-stock
    gold. I believe what you are talking about is the working-stock
    gold. Yes, there is working-stock gold that is kept in the
    different Mint locations. I think at the end of last year, it
    was about 3 million fine troy ounces. About 1 percent of the
    total is working-stock gold. And that is the kind that is used
    for minting coins, medallions, things like that.
        Mr. Luetkemeyer. Okay, so is that audited as well, I
    assume, as part of--
        Mr. Engel. Yes, that is part of the Mint's financial
    statements. That is not part of the custodial schedules, but it
    is part of the Mint's financial statements.
        Mr. Luetkemeyer. Okay, so how do you replenish that stock
    then? Are you just using existing stock, or do you get new gold
    shipments in that you use up? Or how do you continue to be able
    to mint new gold coins?
        Mr. Engel. I am not involved with it. But my understanding
    is that they replenish that by purchasing stock, you know
    purchasing from the outside--
        Mr. Luetkemeyer. --just on the open market somewhere?
        Mr. Engel. Yes.
        Mr. Luetkemeyer. Okay. That is kind of interesting. I was
    listening to the discussion here of my colleagues with regards
    to the congressional review of the actual gold. And I think it
    might be a good idea to do that from the standpoint of also
    looking at the protection and procedures--all the stuff that
    goes into it from the standpoint of, again, some reassurance
    that there are adequate procedures in place for protection of
    it. So it is kind of interesting to listen to that debate.
        Along the same lines, with regard to the amount of gold
    that we have, according to testimony in the documents that I
    have been reading here, we are carrying it on our books at $41,
    $42.22, I believe. Is that correct?
        Mr. Engel. That is the per fine troy ounce statutory value.
        Mr. Luetkemeyer. Okay. And you evaluated a while ago at
    about $320 billion, is that right?
        Mr. Engel. At market.
        Mr. Luetkemeyer. At the current value today?
        Mr. Thorson. That was September 30th of last year. And
    yesterday, we pulled it up, it would be $1,552 an ounce and
    $300 and--roughly--let us see, we don't have the--roughly $340
    billion.
        Mr. Luetkemeyer. Okay. Mr. Chairman a while ago asked the
    question with regards to using and swapping it out with regards
    to other things. It is not used as collateral for anything
    either right now, is it, other than the gold certificates?
    There is no--
        Mr. Engel. I am not aware of anything--
        Mr. Luetkemeyer. --in any other way--
        Mr. Engel. --especially in financial statements, there is
    nothing--or in the Department-wide--there is nothing disclosed
    about--
        Mr. Luetkemeyer. So, it is just sitting there right now,
    right?
        Mr. Engel. Yes, it is a reserve.
        Mr. Luetkemeyer. Right, the reserve.
        Mr. Thorson. Right, it is--and I would back up his
    statement as far as we are not aware of anything like that.
        Mr. Luetkemeyer. Okay, what would happen--there is some
    discussion about going back to the gold standard. I don't know
    if we have a will, or if it is a good idea, a bad idea. But if
    we would, how would that change your operation?
        Mr. Engel. I cannot speak to the gold standard and how it
    would change--
        Mr. Thorson. On the gold standard issue?
        Mr. Luetkemeyer. Yes, if we went back to the gold standard,
    how it will it change the operation of what you do?
        Mr. Thorson. I am not sure how--
        Mr. Luetkemeyer. But we have to have some more--would it be
    some transactions going on with regards to how you take care of
    it? Would it be that we would have to raise and lower the
    amounts that we have all the time, or things like that? Or how
    would we do that?
        Mr. Thorson. I would have to tell you, as far as any
    discussion regarding returning to the gold standard, that is--
    you are really getting into a much more a policy issue. We
    are--both of us, we are auditors, we will--
        Mr. Luetkemeyer. Okay.
        Mr. Thorson. We will certainly be able to look at any
    process or procedure or plan if that ever happened. But as far
    as commenting on that as a policy as to whether it is a good
    idea or a bad idea, that is really out of our realm.
        Mr. Luetkemeyer. Okay.
        Thank you, Mr. Chairman. I appreciate the opportunity.
        Chairman Paul. I thank the gentleman, and we will go on and
    have a second round of questions, if you care to.
        It seems that a portion of the Mint and the U.S. gold
    reserves were audited in an assay between 1993 and 2008, as you
    acknowledged. The Mint estimated that as much as one-third of
    the gold reserves were examined during this period. The other
    two-thirds, however, have not been inventoried--that is
    according to my understanding--or assayed since somewhere
    between 1975 and 1986. Do you think it would be worthwhile, at
    least, to inventory and assay this portion of the Mint-held
    gold?
        Mr. Thorson. By--I forget which date it was, I believe by
    1986, we--hold on just one second here, I got it.
        It basically covered--by 1986, 97 percent of the
    Government-owned gold held by the Mint had been audited and
    placed under joint seal. So once you have done that, and that
    seal remains unbroken, then I am not sure what other benefit
    there would be to going back into it at that point. But by
    1986, you had 97 percent was audited--
        Chairman Paul. But it just seems like, it is quite a bit
    different the way you described audits compared to, I think a
    general understanding of audits. They don't audit small
    portions over 20 and 30 years. An audit, I thought, was
    supposed to be audited as quickly as possible.
        Mr. Thorson. I think it is a little different. Because what
    you have as opposed to, for instance, if I am auditing
    inventory of a company, product goes out, product comes in, it
    is replaced, etc., etc. In this case, there is no movement.
        Those doors are not opened. There is nothing there that can
    happen, because once those doors are sealed--and I have given
    you a couple of show-and-tell examples here--it is very obvious
    if those seals are ever broken. And it is not like, and as I
    mentioned in a normal audit, where product is moved out and I
    replace it and I move on. That is not what happens here.
        There is no movement. Those doors are not opened, if they
    are and a seal is broken, then those people who did--it is
    replaced, the seal is put in place.
        So I guess, it is hard to imagine what benefit there would
    be, if in fact the seals that cover those doors are unbroken.
        Chairman Paul. It just seems like it doesn't conform to my
    idea of what an audit is all about. But let me go on to another
    question dealing with the audits.
        There has been a lot of speculation as to the condition of
    the gold reserves. As I mentioned in my opening statement, it
    was not until legislation was introduced and a hearing
    scheduled that information surrounding assays and inventories
    conducted by the Mint and the Office of the Inspector General
    was forthcoming. And your offices have been very accommodating
    in the process.
        But it seems to me that all this information about the
    activities of the Mint and the IG have been engaged with
    respect to the gold reserves and the results of these
    activities should be gathered together in one place and made
    readily available, like it was mentioned on the Internet, maybe
    we could have it available to the public? That is what my bill
    proposes, assay and inventory the gold, evaluate whether it is
    encumbered in any transaction by the Treasury, have the
    Treasury issue a report.
        The GAO independently verifies that report as Congress'
    investigative arm. Could you comment on the reporting element
    of the legislation, as well as the GAO's independent review?
        Could you also comment on the extent to which the
    information already available could be published? Can we get
    the information a little easier instead of dragging it out?
        If, for no other reason, for reassurance, because the
    questions have been building over the years. And when you say,
    ``Well, but when was it fully audited?'' My understanding, a
    full audit of the gold, most people give me the date 1953. So
    what about the facilitating of information to give the American
    people the absolute reassurance that they are asking for?
        Mr. Thorson. I guess it would depend on what you wanted. We
    have published all of the audit reports on our Web site, they
    are public. You all asked for assay reports, which we certainly
    provided. We keep them for a while.
        There is really no secret about it. There was one thing, I
    guess, on the press release for this hearing that kind of got
    my attention when you said we were less than forthcoming, I
    believe, was the term. I don't understand that, sir, to be
    honest with you. We don't publish our work papers on the
    Internet. I don't think any auditor does that.
        But for the period which we have them, we keep them in the
    normal course of events. But this is an example of a public
    audit report on the gold. It is out there. And the assay
    reports, I believe your staff asked for, we provided them. The
    work papers, like I said, we don't normally do that. But I
    don't think any auditor in America does that.
        So whatever it is that we can do reasonably and under the
    proper rules of auditing, we are happy to do. Because I agree,
    transparency is our business. That is why we do what we do. If
    there are any suggestions, we are happy to listen to them.
        Chairman Paul. What we were looking for was to get--we
    thought we would see a list of the bars or the assay details.
    There were gross numbers, but not a list of the bars and the
    precise assay results.
        Mr. Thorson. Clearly, the results of them are published. I
    think in my statement which is there is nothing hidden were all
    in the statement. I mentioned the range of from the assay
    reports, I think it was 0.6 to 0.999, something like that. That
    is what the assay tells you and then we gave you an average.
        So, those numbers are out there. I am not sure I understand
    why there is some confusion about that.
        Chairman Paul. But I think it was incomplete and there
    weren't total numbers. I think we have a much smaller number in
    a single report. Anyway, we might be able to work that out and
    figure it out. But there is still some confusion there.
        My 5 minutes is up, and I yield to Mr. Luetkemeyer for his
    5 minutes
        Mr. Luetkemeyer. Thank you, Mr. Chairman. I just have a
    couple of follow-up questions.
        What is the annual cost to store and protect our U.S.
    holdings? Do you have an idea?
        Mr. Thorson. The cost? I am sorry?
        Mr. Luetkemeyer. The annual cost to protect and hold these
    holdings?
        Mr. Thorson. What it would cost to follow through on this
    bill?
        Mr. Luetkemeyer. No. Right now, we have the gold sitting in
    Fort Knox and Denver and--
        Mr. Thorson. We don't really, because we do audits--we are
    doing many audits at the same time and that sort of thing, I
    don't think we have really ever broken down what it costs to do
    this particular--at least, what it costs my office to do this--
        Mr. Luetkemeyer. Let me ask you what it costs--what is the
    cost to, I guess, the Government or the Mint or whomever pays
    the bill to protect the gold--
        Mr. Thorson. Oh, the security.
        Mr. Engel. I think that would probably be something that
    the Mint would be able to tell you--what that cost is. Neither
    of us I think would know that, but they would probably know
    what it costs for them to maintain the facilities and the
    depositories and things.
        Mr. Luetkemeyer. That is not in your report? You don't go
    back and check the costs for the procedures of maintaining
    the--
        Mr. Thorson. We are auditing the inventory of the gold, not
    the--that would be a separate job and it is something that if
    your committee or somebody asked us to do, we could certainly
    look at that.
        Mr. Luetkemeyer. All right.
        Mr. Thorson. But as you can see, that is really a different
    issue than how much gold is present at the locations.
        Mr. Luetkemeyer. I would think protecting the gold would be
    pretty important, being able to count the gold. If you don't
    have it protected, you can't count what is not there if
    somebody takes it from you.
        Mr. Thorson. Having gone there, I have never--I am former
    Air Force and been involved with everything from nuclear
    weapons--seen security like I saw in that vault.
        Mr. Luetkemeyer. That is great and wonderful on that. But
    my question is, what does it cost us?
        Okay, move on.
        The IMF has the fourth largest gold reserves in the world.
    And my understanding is that the members who belong to the IMF
    have contributed gold to it. I guess my question is, is the
    gold that we contributed, does IMF hold it, or do we maintain
    it here and just pledge it to the IMF? Or do you know?
        Mr. Thorson. State the last part, please, sir.
        Mr. Luetkemeyer. Okay. All of the people who are members of
    the IMF have contributed gold to their reserve. The United
    States is a member of the IMF.
        Mr. Thorson. Right.
        Mr. Luetkemeyer. When we pledged this gold, did we take it
    and physically move it to the IMF, or did we just have it
    pledged?
        Mr. Thorson. There are no encumbrances on that; there is no
    reason to move it. We have been assured that there is not one
    troy ounce that is encumbered; therefore--
        Mr. Luetkemeyer. Okay. So we have moved the gold to the
    IMF?
        Mr. Thorson. The gold. The encumbrances that I am aware of,
    the only ones are to gold certificates held by the Fed. And if
    they were to go to the physical side of it, what you are
    talking about is, if they were to redeem those gold
    certificates, they would be paid in currency. They wouldn't be
    paid in gold. The gold is collateral. It wouldn't be redeemed
    that way.
        Mr. Luetkemeyer. Okay. According to my resources here, it
    says there are 261 million ounces that are reported as U.S.
    Treasury-owned gold that are part of the IMF reserve. And so,
    we don't hold it ourselves. The IMF holds it in their reserve,
    wherever that is at? Do we count it as ours?
        Mr. Thorson. Not that I know of.
        Mr. Luetkemeyer. We don't count it as ours then? We count
    it as the IMF count it as theirs? Or we don't--it is just sort
    of an account. It is kind of like having a savings account with
    another bank?
        Mr. Thorson. No.
        Mr. Luetkemeyer. So, it is not our gold anymore? Is it
    IMF's, or is part of--is it ours as well?
        Mr. Thorson. I think what you are talking about is the
    three purposes the gold can be used for, and the third one is
    what you are discussing, of which we are not aware of any use
    in that category at all. I believe it says the third one is
    consistent with the obligations of the Government and the IMF
    on orderly exchange agreements and a stable system of exchange
    rates, etc., made with the approval of the President, and may
    deal in gold. We are not aware of any case where that is
    occurring.
        Mr. Luetkemeyer. You are saying we have never done this?
        Mr. Thorson. It is what?
        Mr. Luetkemeyer. You are saying that we have never done
    this?
        Mr. Thorson. Not that--
        Mr. Luetkemeyer. We have never transferred--
        Mr. Thorson. I am not aware of any time we have done that
    and, at least, certainly not that it affects the amount or the
    type of gold in the reserves--no.
        I think you were talking about physically moving them back
    and forth. That has not happened in recent history. Going back
    all the way to, at least, we cover the 70s and more. So, no, I
    don't believe it has.
        Mr. Luetkemeyer. Okay. Perhaps after the hearing today, we
    can get together and find out the answer to the question,
    because I am kind of concerned now that we don't know whether
    we have lost 261 million ounces. Either we gave it to, and have
    now an account with, the IMF, or we still have it in our
    possession and it is encumbered.
        Mr. Thorson. We know we still have it in our possession.
        Mr. Luetkemeyer. Or we still have it in our possession, or
    we do not know where it is at, and it is encumbered. One or the
    other.
        Mr. Thorson. I can say, there has been no physical removal
    of any of the gold during that time. I think what you are
    asking is, ``Is there any obligation or something that would
    cause that?'' In other words, ``Who owns that gold?'' is really
    what you are saying, and to our understanding, that has not
    occurred. And we can certainly get you a more definitive
    answer.
        Mr. Luetkemeyer. Okay. The information could be correct.
    But it is information that I would think would be correct. So
    it tells me that we would like a little more research to be
    done here. Thank you very much.
        Mr. Thorson. I guess my answer, to be really clear, was
    that we do not believe that has occurred.
        Mr. Luetkemeyer. Okay. Thank you.
        Thank you, Mr. Chairman.
        Chairman Paul. Thank you.
        I want to follow up on that, because you may have given the
    answer, but I still don't think it is very clear.
        Is it possible that the gold is counted twice--once in the
    IMF, and also on our balance sheet of the 261 ounces? Is the
    gold at the IMF part of the 261 ounces that we claim we own?
        Mr. Thorson. I don't think it is possible that it could be
    counted.
        Chairman Paul. So you don't--
        Mr. Thorson. Do we count it twice, is it that it would
    affect the statement? Is that what you are asking?
        Chairman Paul. We have pledged gold to the IMF. Every
    country has to put so much gold in the IMF. So, is it sitting
    over here in the IMF and we no longer own it, right?
        Mr. Thorson. We do not audit--obviously, we do not audit
    the IMF so I can't make any comment on that.
        Chairman Paul. Yes, but we are trying to figure out the
    accounting procedures on whether when you go and audit the
    gold, maybe you don't know that you audit and check the gold
    and look at these bars, but they really have been pledged to
    the IMF. Is that a possibility?
        Mr. Thorson. No. I don't believe--no. I am not going to
    comment on IMF or what they are doing, because we don't audit
    the IMF. But the statements that I have made regarding the gold
    reserves in the Mint, our Mint, our Treasury Department Mint,
    that is pretty absolute.
        And we know where it is. We know how much it is. And we
    know that it is there and none of it has been removed to, and
    nor do we believe there are any encumbrances it, other what I
    mentioned by gold certificates of the Fed.
        Chairman Paul. We have the certificates, the Fed holds
    certificates that are called gold certificates. The Treasury
    holds the material in gold. What if a law was passed and we
    instructed Treasury to sell $20 billion worth of gold?
        Mr. Thorson. Right.
        Chairman Paul. Can we do that, or do we have to get
    permission from the IMF? Maybe the encumbrance is to the
    Federal Reserve; maybe they are in charge and not Treasury.
    What can we do with that gold and who really owns it?
        Mr. Thorson. I think you are trying to back into the same
    question there, which I think if you wanted to do that, that
    would be a question that would go to the Secretary of the
    Treasury with consultation, I am sure, by the President, who
    could do that. I don't think they're going to have to get
    permission from the IMF to do that, because there is no
    encumbrance on that gold, other than the gold certificates held
    by the Fed.
        Chairman Paul. That would change the balance sheet of the
    Fed, because they count that. So, I don't know whether that
    would--the Fed is pretty secret, you know. Congress doesn't
    have much to say about what is going on over there. And they do
    a lot of hiding. So, I am not so sure the answer could be that
    helpful.
        Mr. Thorson. I understand you are asking the question. I
    have tried my best to reassure you that isn't the case. But, on
    the other hand, remember, if somebody did try and redeem those
    gold certificates--let us say, they were pledged to somebody.
    They brought them forward and they wanted to redeem them. They
    would be paid in currency at the statutory rate. They would not
    be paid in gold. The gold is collateral. It is not the method
    of payment.
        So, they would receive whatever the value is of those
    certificates. The gold would remain in the custody of the
    United States and would no longer be collateral for those
    certificates that were redeemed.
        Mr. Engel. I could maybe add something to that. As it
    relates to the gold certificates, the gold certificates do not
    represent that the Federal Reserve has ownership of that gold.
    There is a liability that is actually recorded in the financial
    statements for about $11 billion that represents what Treasury
    owes the Federal Reserve for those gold certificates.
        Now, if we were to go to sell some of that gold, my
    understanding is that Treasury would have to retire those gold
    certificates. And then I think, as Mr. Thorson was saying,
    there would be a reduction in the cash balance that Treasury
    has over at the Federal Reserve at $42.22 per fine troy ounce
    for whatever amount of the gold certificates you were
    redeeming.
        But there is an actual liability that is recorded currently
    and has been for years on the Government's financial statements
    for the amount that they owe the Federal Reserve for those gold
    certificates.
        Mr. Thorson. Yes. And that is what I meant by the fact that
    if they were redeemed, obviously because it is a liability--if
    they presented those, there is an obligation to pay those. But
    it would not be paid in gold bars.
        Chairman Paul. I want to go back to asking for suggesting
    that we have more thorough reports in our request from you on
    these reports. We did get one assay report, which was given as
    an example. There were 86 bars involved and you showed the
    details on what you found. But, of course, there is a lot more.
        Why can't we get this list of each compartment, how many
    bars, what percentage, whether it is 0.999 or 0.90, and have
    the entire gold reserves that we have audited in that manner?
    So we see this one report, but we are asking--since there is a
    claim that all this has been audited and checked, couldn't that
    be all into one report, since we only got one assay report?
        Mr. Thorson. I think what you are describing is really what
    the Mint does as far as--remember, the Mint inventories and
    assays, we audit. And there is a difference there. What you are
    asking for, I believe, really you need to direct that to the
    Mint and they can probably satisfy you as to what kind of
    records you are really looking for there.
        Mr. Engel. The Mint should have records by bar and what the
    fineness is of each of those bars. I would think they would
    have records as to what has been assayed of those bars as part
    of the inventorying and all of that process. But, I think they
    are the ones that would have that type of detail.
        Chairman Paul. All right, okay.
        I see Mr. Schweikert has come in.
        Are you ready to ask a question at this time?
        Okay. I will go back to Mr. Luetkemeyer, if he asked all of
    them.
        Mr. Luetkemeyer. I just have one follow up here with regard
    to the last line of questioning. The more I think about it, the
    more concerned I am, because we need to know if the gold that
    the United States has contributed to the IMF is still counted
    as the U.S. gold reserve?
        In other words, if it is, then it is an encumbered amount
    of gold that we have sitting there and should be reported as
    such. If it is not, it should be reported like a savings
    account for an individual on their financial statement, and
    should be reported then on our financial statement of our
    Government as an asset sitting in the IMF.
        Mr. Thorson. I think what you are saying, clearly if it was
    encumbered or belonged to IMF or anyone else, that would need
    to be reflected on the statement, because we are representing
    that this is the Treasury's gold, and therefore, that would not
    be an accurate statement if it were encumbered.
        We have been assured that none of that is encumbered and,
    therefore, that is the total amount. And so I guess there are a
    number of theories you could put onboard as to how--
        Mr. Luetkemeyer. As the auditors of our gold, you should
    know whether that gold, if it is sitting in the IMF, is
    reported on our balance sheet somewhere for the Government.
        Mr. Thorson. And gold held by the IMF is--it would not be--
    like I said, we don't audit IMF, so I am not going to try and--
        Mr. Luetkemeyer. Yes, but aren't you auditing the gold?
        Mr. Thorson. --guess what is going on there. But if it
    were--what we do represent is the Treasury's gold, the U.S.
    gold reserves, which we know where they are and they are not
    held by IMF or controlled by IMF.
        Mr. Luetkemeyer. Who owns what is in the IMF then?
        Mr. Thorson. Who does?
        Mr. Luetkemeyer. Yes, who owns the gold--that is the United
    States Government's gold--who owns that then if it is sitting
    in the IMF? Do we not own that?
        Mr. Thorson. I want to make sure I give you an accurate
    answer, so I am going to defer until I can get you the proper
    answer that is absolutely accurate, because I can't give you an
    answer on that off the top of my head.
        Mr. Luetkemeyer. Okay. We are supposed to have 17 percent
    of the IMF, and if we own 17 percent of the 90 million ounces,
    that is a whole lot of money. And we need to know where it is.
        Mr. Thorson. Right.
        Mr. Luetkemeyer. But I certainly appreciate your
    willingness to work with us to find out, number one, is it
    counted among our reserves and we are not aware of it. And if
    we are not--out there--and if it is not, where does it appear
    on our balance sheet as an asset to the United States
    Government.
        Mr. Thorson. You asked a good question and that is why I
    said I don't want to give you an answer off the top of my head.
    I want a real answer.
        Mr. Luetkemeyer. I want to work with you to find out and
    make sure where it is at.
        Mr. Thorson. And I will get you one.
        Mr. Luetkemeyer. I appreciate it.
        I yield back. Thank you, Mr. Chairman.
        Chairman Paul. I thank the gentleman.
        Mrs. Maloney?
        Mrs. Maloney. Welcome.
        And thank you for this hearing, Mr. Chairman.
        I would like to ask both of the witnesses whether you
    believe this is a good use of your resources and funds,
    especially if it is true, as you testified, that it is
    duplicative of what you already have to do with respect to gold
    reserves.
        And I am mentioning basically Bill 1495. And in this the
    GAO wrote, ``Bill 1495, if enacted, may result in duplication
    of certain past and current efforts, especially with regard to
    inventorying and auditing the gold reserves of the United
    States.''
        And the Treasury's IG wrote, ``I believe that the inventory
    and audit requirements proposed in The Gold Reserve
    Transparency Act of 2011 (H.R. 1495) to be redundant of the
    work that my office and the Mint currently perform.''
        And basically, why should Congress pass legislation that
    both the IG and the GAO believe is not needed? That is my
    question.
        It is good to see you both.
        Mr. Thorson, would you begin first, and then Mr. Engel?
        Mr. Thorson. In our statement, we did say we believe it is
    redundant, because the things that are called for in the Act
    are things we believe we are already doing, and that is a
    proper audit and assay. We do assay to a statistical sampling.
    We don't assay every bar of gold, but we do it to a 95 percent
    confidence level. So I am not sure what it is that you would
    want us to do that we aren't already doing.
        Mrs. Maloney. Mr. Engel?
        Mr. Engel. The one area that we talked about a little bit
    earlier is that maybe if you wanted to have something looked
    at, it is the gold reserves that are over at the Federal
    Reserve Bank of New York.
        Now, there has been some audit of work that was done years
    ago by the examiners of the Federal Reserve and apparently the
    Committee for Continuing Audit had observed some of that. But
    that has not been labeled as audited per se, as I understood it
    by the Committee for Continuing Audit.
        So if you did want to have something done, I guess you
    could have some work done over on the Federal Reserve Bank of
    New York. In terms of some of the other, it would be very
    redundant of what has been already done.
        Mrs. Maloney. Can each of you comment on what you believe
    would be the cost to taxpayers of implementing H.R. 1495, since
    we are being very cautious about our deficit at this point?
        Mr. Thorson. I think both of us would agree. I think the
    Mint has worked up some numbers that are somewhere above $60
    million or more. It would be in that range, but I think that is
    a question you should probably direct to the Mint.
        Mrs. Maloney. Mr. Engel, do you have a comment?
        Mr. Engel. Yes. We do not know. We haven't heard from the
    Mint what the amounts are. It is our understanding they were
    working up what they would estimate it would cost.
        In addition to the cost of actually doing the inventorying
    and moving all the bars, when you assay it, you are taking a
    drill and taking a part of the bar to be tested, and that is
    basically destroyed, whatever that piece is.
        So there will be some loss of the gold from the bars
    through the assaying process if you do that for every single
    bar that is out there. So that would be a loss from that
    process as well.
        Mrs. Maloney. I have no further questions, so I yield back
    to the chairman.
        Thank you.
        Chairman Paul. I would like to address the subject of the
    cost, because our first estimate--oh, okay.
        I will yield 5 minutes to Mr. Schweikert from Arizona.
        Mr. Schweikert. You are kind, Mr. Chairman.
        And forgive me if this has already been discussed. I am
    curious, so please educate a freshman. The different places
    that U.S. gold assets are held, IMF, you were just saying with
    the New York Fed, the Treasury, any other places?
        Mr. Thorson. Not that I can see. No.
        Mr. Schweikert. So those three would cover it? Is any of
    that pledged to loan facilities that would be World Bank or
    anything else we also touched?
        Mr. Thorson. No, and to go back to the IMF a little bit,
    like I said, I would like to find a direct answer for that one
    as well.
        Mr. Schweikert. Okay. My understanding from listening for a
    moment, Mr. Chairman, was that it has been how long since both
    of the--was it the New York Fed which actually would handle a
    lot of international transactions so, therefore, they would not
    only hold our gold reserves for the United States, but a number
    of other member nations?
        Mr. Engel. I believe they do hold gold for other nations in
    their vault.
        Mr. Schweikert. Just for the fun of it, any guess what is
    there?
        Mr. Engel. I don't know.
        Mr. Schweikert. Any guess on the number of participating
    countries?
        Mr. Engel. No.
        Mr. Schweikert. Okay.
        Mr. Engel. That would be something the Federal Reserve
    would obviously be able to answer, but I don't know.
        Mr. Schweikert. Okay. So if we have functionally three
    places, two that you are telling me we already have some audit
    history, Treasury, we have an audit history on gold supply?
    Yes? No?
        Mr. Engel. Gold reserves, yes.
        Mr. Schweikert. And we are still a little fuzzy was it on
    IMF?
        Mr. Thorson. I am--like I said, I am still a little
    concerned about that particular question. So, but no, that is
    it.
        Mr. Schweikert. And in a previous question just a moment
    ago, didn't we just tell the gentlewoman from New York it was
    how much to do the audit?
        Mr. Thorson. To do the audit? The Mint's figure to do--the
    one that this bill would call for--was in the neighborhood of
    $60 million, but that was--you need to--that is a Mint number
    and you need to ask them that.
        And just to be clear, the ratio of money held by the Mint
    and held by the Fed is 95 and 5 percent, 5 percent is at the
    Fed. But as far as the cost of this bill to perform that, I
    believe your staff has already made an inquiry to the Mint on
    that. But that is really--we can certainly audit that as it
    plays out and that kind of thing. But it is their number.
        Mr. Schweikert. Okay. It is just that it seems stunningly
    high, and it is always fun when you are having to audit the
    audits where we feel like we are in some of this very unusual
    circle. And it would be fun to find out how much of that is
    just counting, and how much of it is doing assay work.
        And Mr. Chairman, I know you wanted to inquire more on that
    point, so I yield back my time.
        Chairman Paul. I thank the gentleman.
        I do have a few more short questions for you.
        Do you have any idea what the current audits cost? You do
    partial audits each year. What kind of expense does that
    involve?
        Mr. Thorson. No. As I mentioned, we use people on different
    audits at the same time and that kind of thing, so we have not
    really broken down per audit what this costs.
        Chairman Paul. Okay. Where do you get the $60 million?
        Mr. Thorson. It was--we asked the same questions that you
    did as far as what would it be from the Mint when we were
    wondering what their statement might be. And that was a rough
    number that we were told that off the top of their head it
    would be in somewhere in that vicinity.
        Chairman Paul. Of course, we have Treasury's statement that
    claimed that it would be $15 million, so we would like to--if
    you can enlighten us more maybe in writing about really whether
    it is $60 million or $15 million. That is a big difference.
        And to suggest that I might be participating in the not
    being careful with the taxpayers' money, I happen to be the
    most conservative Member of Congress when it comes to spending.
    But, we don't even need to appropriate money for this. The Mint
    could easily take care of this. When you have a monopoly, you
    tend to be able to make some money, and last year they made
    $400 million.
        So even if the high number was correct, we don't have a
    problem there. One of the few legitimate functions of
    Government is to check our ownership and be fiscally
    responsible to find out just what we own and whether it is
    really there. So I think the total amount is not, in comparison
    to other things, very much.
        Also, back to this request that we get more details on the
    thing, and you said defer to the--maybe I should ask the Mint
    that. And, of course, the Mint is in transition now and we
    couldn't get anybody over here from the Mint. But I believe it
    was your staff who told my staff that you got the reports and
    not the Mint, that you get the detailed reports on all these
    audits.
        Mr. Thorson. The assay reports, we do get the assay
    reports, sure. And I think we provided you some of those. The
    inventory of the bars, like you describe, as each one--that is
    definitely up to the Mint. As I said, we audit the work that
    they do and the records that they keep, so that would be under
    them.
        Chairman Paul. Of course, if you have an assay, but you
    don't know how many bars there are, you don't know where it
    applies to which. It seems like you have to have both, together
    and matched up.
        But anyway, I believe we will follow up on that and ask for
    some more details. But if the gentleman from Arizona has no
    more questions, I will go ahead and adjourn the committee.
        The Chair notes that some members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 30 days for members to submit written questions to these
    witnesses and to place their responses in the record.
        [Whereupon, at 11:27 a.m., the hearing was adjourned.]

                                A P P E N D I X

                                 June 23, 2011