The Hunts of Texas will be able to hold on to their vast hoard of silver and buy still more under terms of the $1 billion bail-out loan package they have negotiated with a group of the nation's biggest banks, it was disclosed in congressional hearings yesterday.
Part of the loan money will be used to buy silver under a contract the Hunts signed some time ago, Federal Reserve Board Chairman Paul A. Volcker told the Senate Banking Committee.
Since last June, the Hunts have purchased at least 106 million ounces of silver, it was revealed in a Commodity Futures Trading Commission report made public by Sen. Donald L. Stewart (D-Ala.)
The report is the first accounting of how much silver the Hunts collected in their silver-buying spree. It includes only their purchases on the U.S. futures market, and does not count silver bought overseas.
Under questioning by Stewart, Volcker admitted for the first time that the Hunts will be able to make at least one more purchase of silver using money from their controversial loan.
Volcker said the loan permits the Hunts to make good on a "forward contract" they signed to buy silver. He did not say how much silver the contract will give to the Hunts.
Volcker assured the banking committee that the loan agreement will prevent the Hunts from continuing to speculate in silver and will require them to sell off present holdings.
Volcker's testimony appeared to conflict with what Hunt attorney Roger Goldburg told reporters after Nelson Bunker and W. Herbert Hunt appeared before a House Agriculture subcommitteee.
Goldburg said the silver the Hunts already own "would be treated as an investment and dealt with in an orderly fashion." He said there is "no time limit to liquidate silver" in the loan agreement signed with a group of major banks.
The loan requires silver speculators Bunker and Herbert Hunt and their brother Lamar to transfer all their assets to a new partnership formed with Placid Oil Company. Placid is owned by Hunt family trusts.
Placid will also take over the Hunts' silver-speculating debts and pay them off with the billion dollars borrowed from the banks.
Representatives of First National Bank in Dallas and Morgan Guaranty Trust Co. of New York, the two lead banks on the loan, are scheduled to testify today before the Senate Banking Committee, chaired by Sen. William Proximire (D-Wis.).
At hearings yesterday before the House Agriculture subcommittee chaired by Rep. Ed Jones (D-Tenn.), Bunker and Herbert Hunt charged they were the victims, not the cause, of silver market manipulation.
The Hunts accused the directors of the nation's two major silver markets, the Chicago Board of Trade and New York's Commodity Exchange Inc., of changing their rules to benefit some exchange members.
Bunker Hunt called it, "a classic case of market manipulation."
When silver prices began climbing rapidly last fall, the two exchanges, at the urging of federal commodity regulators, imposed new rules to discourage speculation. They raised the amount the deposit speculators must put up to purchase contracts for future delivery of silver, and also put limits on the number of contracts any individual could buy.
The Hunts insisted the actions were taken to benefit exchange members who wanted silver prices to go down.
Asked about assurances that exchange members with a financial stake in silver had abstained from voting on the rules changes, Bunker Hunt replied, "they may have abstained, but it's a very small club."
Subcommittee Chairman Jones said later his panel will ask the two silver exchanges for information about the silver holdings of their directors and the part silver speculators played in the decision making.
The Hunt brothers agreed to give Jones' subcommittee detailed reports showing how many silver futures contracts they owned and how much silver bullion they bought for each of the last eight years.
The CFTC report prepared for Stewart showed that the two brothers and a company they control have taken delivery of 21,354 contracts since last June.
Each contract is for 5,000 ounces. The 106 million ounces of silver would be worth almost $1.4 billion at current prices of about $13 an ounce.
Meanwhile, the Illinois attorney general has accused the Hunts of swindling investors out of millions of dollars in a land-investment scheme, news services reported.
Attorney General William J. Scott sued the Hunts for damages yesterday in Circuit Court, saying that about 1,000 Illinois citizens were victimized by the Cochiti Lakes land development 25 miles south of Sante Fe, N.M. A spokesman for Scott said about 5,000 people elsewhere in the nation also were swindled.
Scott said the court ultimately will determine the amount of damages to Illinois investors but that it would amount to "at least $20 million."