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

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



                               BEFORE THE

                            SUBCOMMITTEE ON

                        DOMESTIC MONETARY POLICY

                             AND TECHNOLOGY

                                 OF THE


                     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


67-936 PDF                WASHINGTON : 2011
For sale by the Superintendent of Documents, U.S. Government Printing 
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                   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
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
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
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 J. DOLD, Illinois

                   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

                            C O N T E N T S

Hearing held on:
    June 23, 2011................................................     1
    June 23, 2011................................................    23

                        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


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,
                      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 
    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 
    And we will go ahead and proceed with the testimony of Mr. 


    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 
    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 
    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.


    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 
    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 
    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 
    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, 
    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 
    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 
    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 
    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 
    I yield back.
    Chairman Paul. I thank the gentleman.
    I now recognize Mr. Luetkemeyer from Missouri for 5 
    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 
    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 
    Mr. Luetkemeyer. So, it is just sitting there right now, 
    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 
    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 
    Mr. Thorson. What it would cost to follow through on this 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    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 
    Mr. Engel. I don't know.
    Mr. Schweikert. Any guess on the number of participating 
    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 
    Mr. Thorson. I am--like I said, I am still a little 
concerned about that particular question. So, but no, that is 
    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 
    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 
    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 
    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