Texas Governor Rick Perry is supporting legislation that would create a bullion depository in the State and bring home $1 billion in gold, currently housed by the Federal Reserve in a New York vault, for State-level protection under the aegis of a new bank that would be created for the purpose.
If the idea sounds like something former Congressman Ron Paul of Texas would have come up with, that’s because he did. Although not officially involved in the current legislation, Paul told the Texas Tribune last week it’s a sound idea:
“If you think gold is a hedge, or a protection, you always want it as close to the individual and the entity as possible,” he said. “Texas is better served is it knows exactly where its gold is, rather than depending on the security of the Federal Reserve.”
Perry also sounded very much like a leader who doesn’t think the United States is immune from a banking debacle similar to the ongoing crisis in Cyprus. Perhaps in mind of Cypriots who can’t get their own money out of failing, thieving banks, Perry went on national radio last week to drive the point home, saying: “If we own it, I will suggest to you that that’s not someone else’s determination — whether we can take possession of it; bring it back or not.”
The idea behind the bill, sponsored by Republican legislator Giovanni Capriglione, isn’t to put the State into a secessionist position by stockpiling a new State bank with bullion and creating its own monetary standard.
Rather, he explained, it’s to ensure Texas is viewed by residents, businesses and anyone considering any type of investment in the State as the kind of place where leaders are serious about fiscal responsibility as they prepare to weather a broader financial crisis.
There’s more than a little concern that the Federal Reserve wouldn’t easily part with Texas’ 6,000-plus gold bars, mainly because of its practice of rehypothecation, in which gold collateral held in a depository is used as collateral yet again by the Feds on leases it makes to bullion banks. In other words, Texas’ gold may be spoken for because the Federal Reserve has encumbered it to make a speculative profit. Until that encumbrance clears, the Feds could tell Texas, “IOU.”
“We don’t want just the certificates,” Capriglione told the Tribune. “We want our gold. And if you’re in the State of Texas, you should be able to get your gold.”