Because the people formulating the policy were primarily concerned with international monetary stability, comparatively little consideration was given to the question of encroaching on Americans’ rights. One Treasury official said, “we ought not forget this is an additional abridgement of personal liberties,” but then added that “perhaps only wealthy Texans are involved.” Even the Wall Street Journal editorial page, which opposed the extension of gold prohibition, framed its argument in terms of financial discipline and signals to international markets, rather than as an issue of the American citizen’s right to own gold.19
On January 14, 1961, President Eisenhower signed an executive order, making it illegal after June 1 for the vast majority of Americans to own gold as an investment, whether at home or overseas. Everyone, including those who supported the executive order, recognized that the broader issues would need to be tackled by a new administration. “We hope President-elect Kennedy has this problem high on his agenda,” said a New York Times editorial applauding Eisenhower for “Plugging a Gold Leak.”20
Not everyone, however, in the incoming administration shared the view that gold and the balance of payments should have been a top priority. An adviser to Vice President-elect Lyndon Johnson complained that Eisenhower officials were still meddling in several areas that were better left until the transfer of power had taken place; he noted in particular that Treasury Secretary Anderson had “seemed to be almost obsessed over the gold outflow situation.”21 But within weeks, the Kennedy White House would become consumed with the same obsession, and at the highest level.
Indeed much of the country seemed obsessed with gold in the late 1950s and early 1960s; arguably, the more the US government fretted publicly about the gold supply and moved to extend gold prohibition, the more fascinated the public became. In the fall of 1958, the Hughes Tool Company of Houston sought to celebrate its fiftieth anniversary by creating a life-sized, solid-gold replica of the first rock bit used by Howard Hughes Sr. to drill for oil. The sculpture required 2,400 ounces of gold, but the request to Treasury to construct it—which came through the office of Texas senator Lyndon Johnson—was denied.
Gold took on a special place in marketing and popular culture as well. In 1954, an advertising agency working for Quaker Oats hit on an unusual method to promote puffed rice and wheat cereals. To help sponsor the transfer of a popular radio show about Yukon adventures to television, the company purchased 19 acres of land in the Yukon territory for $1,000, near where the turn-of-the-century Klondike Stampede had attracted tens of thousands of would-be miners. With every box of puffed rice or wheat cereal, a customer would receive a “deed of land” to one square inch of land, and presumably to any gold wealth that lay beneath it. Quaker Oats did not anticipate the wild demand or the expense of actually registering 21 million deeds; the “Klondike Big Inch” company went bankrupt and the land was reclaimed by Canada. In the early ’60s, the A&P grocery store chain experimented with two Golden Key drive-in restaurants in New Jersey, each featuring a gold-shingled roof that shimmered in the sunshine. In the spring of 1960, when Floyd Patterson became the first boxer in history to regain the heavyweight championship, his manager Cus D’Amato rewarded him with a crown made of gold and studded with jewels, supposedly worth $35,000. Patterson’s crown seems to have inspired two representatives of the US Mint to survey the fanciest jewelry stores in Manhattan; officials at Tiffany and Van Cleef rattled off examples of expensive gold coffee sets and cigarette cases they had crafted by special request. In one case Cartier confessed to constructing a woman’s handbag containing 40 ounces of gold, but the customer never picked it up.22
The fascination with gold was more than merely anecdotal. As the increased demand on the London market suggested, nongovernmental gold consumption in the ’50s and early ’60s was growing dramatically. In the late 1950s, an official source put the value of private gold holdings internationally at between $10 billion and $12 billion, with perhaps half of that sum held in Western Europe and nearly a third of it in France alone (although one prominent economist scoffed at the figures, saying “such estimates can only be pulled from a magician’s hat”).23 And the fastest-growing location was the United States, where the estimated private absorption of gold during this period grew at an average of 15 percent per year. Much of that was industrial—the burgeoning electronics and aerospace businesses used plenty of gold—but collectible gold and gold jewelry were also increasingly popular.
The rapid growth in private gold consumption presented a tremendous challenge to federal law enforcement and to the very policy of gold prohibition. It seems axiomatic that the more gold that was bought, sold, held, or used in private hands, the more blatantly illegal activity there would be. A common scheme in the 1950s was for an individual or company to obtain a license to handle gold legally, buy gold through the Treasury or other means, and then find ways to divert the gold onto the black market (which usually involved smuggling the gold out of the country, because officially there was no market for domestically owned gold). One prominent and colorful example was Salvatore Sollazzo, a licensed jewelry manufacturer who was convicted for fixing college basketball games. In 1951, he was also charged with gold smuggling. An associate of his was trying to ship a two-door Buick out of the country on the Queen Elizabeth when an official noticed that its back end was sagging onto the ground; stuffed inside the car body was $200,000 worth of gold. Some prosecutors in the 1950s charged that hundreds of millions of dollars’ worth of gold were seeping out of the country every year, although Treasury never confirmed such a figure.
While smuggling per se rarely has outright advocates, some in the 1950s were more or less openly flouting the law as a form of financial civil disobedience. The prohibition against individual American gold ownership enacted in 1933 was never conceived as a long-term policy, and in the relative prosperity of the postwar world it seemed anachronistic at best. And of course, the ability to own gold held out the possibility that it could make its retail owners rich, an extra incentive to turn a blind eye to legal barriers. One popular character was a publisher and financial adviser named Franz Pick, dubbed by the Saturday Evening Post as “The Black Marketeers’ Best Friend.” Pick was frequently cited in monetary articles throughout the 1950s. His authority stemmed from the fact that he published monthly and annual almanacs showing in painstaking detail the trading value of dozens of currencies, including many—such as those behind the Iron Curtain—whose worth was opaque. He spouted data about global gold holdings that the IMF couldn’t confirm and were perhaps dubious; one Treasury memo warned that Pick was “generally regarded as an unreliable source.” At the same time, Pick claimed to have the ear of prominent bankers and businessmen throughout the world.
Pick cultivated an aura of whimsy tinged with doom; the walls of his two-room office in lower Manhattan were covered with paper bills that had become worthless, a fate he implied that all paper money would eventually meet. He claimed that he’d convinced the landlord of his apartment on Manhattan’s Upper East Side to accept rent payments in collectible gold coins. Pick presented gold as a kind of moral monetary campaign; he dedicated one edition of his Black Market Yearbook to “the legislators of sixty countries who, in order to maintain the fictional values of paper money, government bonds and gold, are the real promoters of black markets.”24
Some Americans were clearly seduced by such messages, and the increasing ease of international commercial transactions made it possible for them to find ways around the law. While there may have been no way to know how much gold sold on the London market was to or from American hands, the Eisenhower administration was not wrong to focus on Canada, a close neighbor which in the late 1950s was second only to South Africa in annual gold production. Canada had legalized the buying and selling of gold in 1956, and Canadian banks began a sideline business in buying and storing gold bullion for clients. By 1958, two market innovations were introduced that caught the attention of some wealthy Americans. One came
from the Bank of Nova Scotia, which began selling “paper gold”—negotiable certificates for bars of gold that were kept in the Bank’s vaults—that was far simpler for non-Canadians to hold than the metal itself. Still more enticing was a scheme, hatched by a brokerage firm called Doherty, Roadhouse & Co., allowing customers to buy gold using an installment plan. With a down payment of as little as $34, plus annual payments of $63, buyers could purchase a 1-kilogram bar of gold worth about $1,100, which could be kept in a Doherty vault for a fee. Although an investor would actually lose money (through interest payments) as long as the value of gold remained the same, the installment plan was an instant hit. Doherty took orders for 4,000 ounces of gold on the first day, a majority of which came from the United States. As word of the unique offer spread—the New York Times, Time magazine, and U.S. News & World Report all covered it—more US citizens snapped up the bars; by mid-1959, it was estimated that between $3 and $4 million of these Canadian gold bars had been sold to American citizens (who, it turned out, would legally be required to liquidate those holdings two years later).
The very idea that a significant number of Americans would be buying and holding gold abroad was so novel that it’s not surprising that some of those responsible for it skirted the law. Doherty, Roadhouse, for example, was an important firm on the Toronto Stock Exchange; one of the company’s principals, D’Arcy M. Doherty, had been the president of the Exchange in the early 1950s and sat on its Board of Governors after that. Nonetheless, the firm’s ties to Canada’s mining interests had drawn the wrath of Canadian regulators. In 1957, the Toronto Stock Exchange discovered Doherty had failed to disclose that he had accepted stock options in a mining firm at the time it began trading on the Exchange. A flurry of trading several months after the firm—Aconic Mining Corporation, which had gold as well as other mining claims and projects—went public had caused the stock to plummet and its executive director to declare bankruptcy. The Stock Exchange’s Board of Governors declared Doherty “guilty of conduct detrimental to the interests of the Exchange and unbecoming a member,” and suspended him from the Exchange for three months.25
The chances are strong, however, that most Americans buying gold bars on 3 percent margin from Doherty, Roadhouse neither knew nor cared much about the firm’s other activities. Some were speculators betting that sooner or later the dollar-gold exchange rate would change in their favor; some wanted an ultraconservative investment, perhaps balancing out a portfolio with more aggressive holdings; some may have seen gold as insurance against a semi-apocalyptic crash of governments and finance predicted by right-wing newsletters since the Roosevelt days. Regardless of motivation, the gold buyers of the late 1950s represented the adventurous edge of a population that was beginning to romanticize gold ownership, and indeed advocate it. In contrast to those during the Depression, with its emergency atmosphere that gave rise to earlier gold prohibitions and a largely cooperative populace, the new generation treated gold ownership as a cornerstone of American citizenship—a fundamental right that trumped government abstractions like the balance of payments.
Even Treasury and law enforcement officials seemed to question whether every instance of private gold ownership would genuinely cause the world’s financial sky to fall. It was almost comical to hear international monetary justifications for chasing down gold peddlers—as if enforcing the written law was somehow insufficient rationale. For example, in 1962, undercover Treasury agents and the New York City police arrested two men in a Manhattan apartment after they had offered to sell up to 200 ounces of gold for $45 an ounce. (The men also hinted that they had access to far more gold near their hometown in Phoenix.) Trumpeting this arrest for what was, in the end, three bars of gold—a small fraction of what was sold legally in London every weekday—an assistant US attorney declared: “The government regards this as a most serious offense, particularly in view of the very serious situation this country faces regarding the gold situation.”26
In other instances Treasury officials openly acknowledged that their task bordered on the absurd. For decades, the government fought with an order of nuns in Indianapolis known as the Carmelite sisters. These nuns had proposed in the late 1920s to collect scrap gold—rings, bracelets, old coins—from the faithful and melt it down to create a sacred vessel called a monstrance. Treasury officials blocked their efforts, but the sisters, ever hopeful that the government would one day change its mind, continued to plead their case through the 1960s, all the while amassing gold in small amounts. When they finally relented—in 1970—Treasury authorized a firm to buy the 6 pounds of gold they had collected. An exasperated department veteran explained to his newly appointed boss: “After years of fruitless (and ridiculous) attempts to persuade the nuns to give up their project, the Treasury’s General Counsel made an informal decision to drop the whole matter. All of those originally involved are long since dead. In view of the Treasury’s past dilatory actions, I do not think it either just or politically wise to assess a $1200 penalty on these people at this late stage. They have already lost more than that in foregone interest.”27
But by far the most extreme example of the crackdown on private gold ownership—a case that required tens of thousands of man-hours from the Treasury and Justice Departments—originated in the Nevada desert. On a blazing hot afternoon in July 1960, three armed US marshals raided a casino lobby and proceeded to seize a golden statue of a rooster. Invited onlookers jeered and hissed as the agents confiscated the statue, whose attorney decried a “colossal miscarriage of justice.”
The renegade fowl in question was a nine-and-a-half-inch-tall, 14-pound bird made of solid 18-karat gold. Prior to his arrest, his preferred roost had been in a lighted glass display case at the Nugget Casino in Sparks, Nevada, where he had taken up residence in 1958, helping to promote The Golden Rooster Room, a newly opened restaurant at the fast-growing Nugget, which served fried chicken as its signature dish.
The golden rooster had been hatched by Richard L. Graves, a street-smart Nevada entrepreneur who loved publicity stunts. Graves began his career in Idaho with restaurants that also featured slot machines, but when Idaho banned slots in the early 1950s, Graves moved his operations south to Nevada. In 1955, when he’d opened the Sparks Nugget, he offered a prize of up to $10,000 for anyone who could sit on top of a flagpole across from his casino for up to a year. Graves constructed a 65-foot pole with a 7-foot-by-7-foot platform on top in the shape of a golden nugget. A self-described professional pole-sitter named “Happy Bill” Howard took up the casino’s challenge and managed to stay aloft for 204 days, fortified by an unlimited supply of the casino’s celebrated “Awful Awful burgers.”
Such gimmicks were designed to lure travelers off Nevada’s Highway 40 to come spend some time and money at the Nugget. Today, the Nugget is a full-fledged resort with 1,500 guest rooms, but in the late ’50s it was, in the words of John Ascuaga, who worked with Graves and eventually bought the business, “more of a diner with slot machines.” With the golden rooster, Graves and the Nugget team got a little more publicity than they bargained for. Even before he was manufactured, the rooster’s legal status was tenuous. Initially, Graves and his attorney had reached out to Newman’s Silver Shop, a jeweler in Reno, Nevada, to build the bird. They produced a wooden model of the rooster and decided to contact the director of the mint in Washington, DC, because the statue was designed to be far heavier than the 50-ounce gold limit that Newman’s was licensed to cast.
The director of the mint, however, quashed the idea of sculpting the rooster. The Mint’s reasoning was straightforward and consistent with many previous rulings: it was illegal for the vast majority of Americans to own that much gold, whether in the shape of a rooster or in more traditional forms. The exceptions to the law—primarily for a product in which the craftsmanship provided some significant value beyond the value of the metal it contained, and for “customary industrial, professional or artistic uses” of gold—did not seem to apply. In considering the Nugget�
�s proposed sculpture, the Department of the Mint took the position that forming gold into the shape of a rooster was not customary, even if it might be artistic. Moreover, the Mint expressed fear that approving the statue would only set a precedent “which. . . . could be used by unscrupulous persons as a method of hoarding gold.”28 Hoping to appeal, Graves’s team reached out to Nevada’s two US senators. Even an appeal to Treasury Secretary Robert Anderson—who felt more than anyone else that the country’s gold supply was dangerously precarious—could not change the Mint’s position.
For most people, when a department of the federal government says “no,” that’s the end of the project. But Dick Graves was not most people, and so he tried to find someone else to craft his shiny bird. With an eye toward the law’s exception for artistic use, he commissioned Frank Polk, a thick-eyebrowed cowboy-turned-artist, to model the rooster. Polk had made a name for himself with bronze sculptures of bucking broncos and other western scenes, but was best known among casino crowds for kitschy slot machines that rendered literal the nickname “one-armed bandits”: life-sized statues of a black-hatted desperado with a pistol-holding arm, which gamblers pulled down to make the wheels on the bandit’s chest spin.29 Not terribly enthusiastic about the rooster project—Polk quipped, “all I ever did with chickens was eat ’em”—Polk charged only $50 for the design, a few days’ work. Graves had neglected to tell him that the final statue would be solid gold.
To cast the statue, Graves now turned to a downtown San Francisco jeweler called Shreve & Company, a firm with a past rooted in California’s Gold Rush, a place where nineteenth-century prospectors had brought in fresh nuggets in exchange for cash or diamond engagement rings. In contrast with its Nevada counterpart, Shreve told Graves that it would have no problem producing the sculpture, as its license allowed it to cast up to 300 ounces of gold. And indeed, a Shreve official sought and received permission from the superintendent of the San Francisco Mint to cast the casino’s prized rooster.
One Nation Under Gold Page 17
