1944 Gold Coin Treasury Memorandum (& other cool stuff)

The memo mentions that the Treasury has consulted with expert numismatists. It doesn't say whom or where - surely experts may have differing opinions. Moreover, the question of law would not be a matter for numismatists alone to decide. How laws would be applied would involve an interplay between numismatic experts and the courts. We see more uncertainty in the wording:

The fact that a coin is sold at a price well in excess of its bullion value would appear to be some evidence of its special value as a collector's item. ​

[...] a court would quite possibly give weight to such a factor [...]
​

What the memo shows us is that the government was somewhat benevolent to coin dealers, giving them the benefit of the doubt. Legal certainty as to what constitutes a numismatic coin did not come about precisely because the Treasury did not wantonly confiscate the gold coins as the Secret Service requested. Had the Treasury given a directive to the Secret Service to confiscate the gold coins mentioned in the memo, perhaps then, through the courts, given that a legal challenge would have been likely, could the precise definition of what constitutes a numismatic coin been ascertained. This is not something that the bureaucrats at the Treasury alone decide.

 

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There are what appear to be some contradictions. I'm not a lawyer, and the ability to determine what is "controlling" and what is "dicta" is key.

Section 20 cited above focuses on "recognized special (numismatic) value" with the exception of Quarter Eagles ($2.50 gold coins).

Section 20 is then said to NOT authorize any holdings which were not considered "rare" under the key Gold Reserve Dates of April 5th, August 28th, and December 28th 1933. The coin had to be "rare" at that time.

But.....the ending of the memorandum states a bunch of conditions for determining "rare" or "special value" as examined by collectors/numismatists....and ultimately... these coins are expected to sell at a premium to gold @ $35/oz.

It then sums up everything with: the Courts are going to want to see an INTENTION to violate the GRA....and if you have someone paying a premium you're going to have difficulty with intent. It cites a 1937 case "U.S. vs. 98 $20 United States Gold Coins" which I believe is the Israel Switt case where his briefcase full of $2,000 in double eagles was seized. The case said the government had to prove an INTENTION -- burden of proof on the feds.

Ergo....if someone paid a premium....the govt has an uphill battle and Treasury higher-ups are saying it's not worth it to go for forfeitures in this case.

Ergo....stay away from coin collectors, dealers, and numismatists transacting in premium-priced coins.

 

I've come full circle with the memo. At first I was dismissive ("it's just a government memo, folks"), then I was impressed as I read into it ("everyone is excited by this, I'm an idiot who of course was missing some important things, as is often the case"), and now I'm back to where I started ("I was right to be skeptical of a decades old bureaucratic memo"). I see this is a bureaucratic memo.

I think the subtext and context are important to understand the memo. Actually, much of the conversation in this thread gives us that context (people were scared of keeping their gold coins, and after the ban did not care to hoard gold and become potential martyrs to a gold cause, with some notable exceptions). There was a numismatic carve-out early on with the help of the Treasury Secretary Woodin. So the government gave coin dealers the kid glove treatment. Whether it was benevolence or simply a pragmatic focus, the government chose not to pick a fight with numismatists. So what coins could qualify as numismatic was never fully resolved. The Treasury chose a broad definition, as I see it, to avoid picking a fight with the courts. Had the Treasury prosecuted the coin dealers as the Secret Service seemingly wanted, they would not have had the final say in determining what constitutes a numismatic coin. However, they would have had endless resources to prosecute the case. But it's clear there were either good people in the Treasury or maybe they decided to just pick their battles more intelligently - using the lawyers on their staff with more precision in cases they knew were the strongest.

It sounds to me like the Treasury had some brains within their bureaucracy.

 

I can imagine what went down that led to this memo. The Secret Service perhaps got a tip that dealers were making money off of gold coins in New York City. I can imagine there was a beef between someone and one or a few of the dealers. Maybe it was a relative or in-law, or a disgruntled customer or former business partner. This is speculation, but I doubt the Secret Service proactively just targeted New York City coin dealers in an investigation. They then surveilled them, perhaps with some secret buys, and the Chief of the New York District office, perhaps a nerd who was shoved into a locker in high school, decided to show his male dominance years later and exact revenge against these coin dealers. The Secret Service had to get approval from the Treasury to take down these dealers and failed to get that approval. The late Treasury Secretary Woodin and the person who authored the memo, I believe an Ansel Luxford, deserve credit for preventing unnecessary pain and hardship to these coin dealers. I sense some malevolence in this take-down attempt that failed.

 

Maybe I am naive by thinking the Treasury was being benevolent to coin dealers. This memo was written during World War II, when government agencies were focused on the war and because of that there may have been shortages of staff or resources among agencies. Furthermore, the U.S. had just come out of the Great Depression, so the type of funding government agencies have come to be known for may not have yet kicked in. It may have been a matter of "we are spread too thin for this."

 

You make some good points, the note is pretty clear.

A simple paying of a premium is enough for Treasury to tell Secret Service to not waste their time. Not only are the courts likely to use any premium payment as de facto evidence of numismatic and special value....but you may have the force of a fact-finding by a court, backed up by professional numismatists, that these coins are of "special value" and that you can't prove intent based on the U.S. vs. 98 Double Eagles case.

The government may have won the battle (against Israel Switt) but lost the war (against legitimately licensed coin dealers and numismatists).

I doubt the government tries anything like the 1930's again because the numerical advantage it had then with minimal financial asset ownership, including gold, is today 10-20x as large. It would be like banning private home ownership.

 

You would think so....but in fact, the Secret Service was tracking down 1933 Double Eagles at the same time !

There was a war going on -- albeit I think we knew we'd win by this time -- but it's interesting that the Secret Service and elements of Treasury and the Mint were looking to stick it to folks who obtained 1933 DEs simply because they were now worth $500-$1,500 or so and they apparently resented political opponents of FDR reaping such a windfall. Most of these guys probably made salaries of $3,000 or so.