Will wonders never cease? The Federal Reserve is proposing a new rule for financial institutions that hold gold bullion instead of currency.
Today, any firm that does this must discount it by 15%. Under the new rule, this discount will be removed.
The FED has asked for public comments on its proposed rule.
Here is the press release from the FED. It deals with new rules on bank capital.
The Federal Reserve Board on Thursday invited comment on three proposed rules intended to help ensure banks maintain strong capital positions, enabling them to continue lending to creditworthy households and businesses even after unforeseen losses and during severe economic downturns.
Taken together, the proposals would establish an integrated regulatory capital framework that addresses shortcomings in regulatory capital requirements that became apparent during the recent financial crisis. The proposed rule would implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“Capital is important to banking organizations and the financial system because it acts as a financial cushion to absorb a firm’s losses,” Federal Reserve Chairman Ben Bernanke said. “With these proposed revisions, banking organizations’ capital requirements should better reflect their risk profiles, improving the resilience of the U.S. banking system in times of stress, thus contributing to the overall health of the U.S. economy.”
There is no mention of gold here. But there is in another official document that has been jointly issued by the FED and the FDIC. On page 129, we read:
Assets not included in a defined exposure category. (i) A [BANK] may assign a risk-weighted asset amount of zero to cash owned and held in all offices of the [BANK] or in transit and for gold bullion held in the [BANK]’s own vaults, or held in another [BANK]’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.
Why is the FED considering this? Because new rules governing international banking have recommended this. This is part of a rule called Basel III. It is coming from the world banking community.
To the question, “Is gold money?” the answer is “yes, according to the international banking community.” It serves as their money.
It’s not the public’s money. It was around the world in early 1914, before World War I. It was in the USA before Roosevelt confiscated the nation’s coins.
The bankers officially dismiss gold as irrelevant. But it’s not irrelevant for them.
For a video on the gold rush by central banks, posted on the Wall Street Journal’s site, click the link.