Three investors who lost small fortunes when the silver market collapsed last year complained on Capital Hill yesterday that neither Congress nor federal regulatory agencies have yet explained why the silver bubble burst.
Testifying before a House agriculture subcommitee headed by Rep. Ed Jones (D-Tenn.), the silver losers called for new federal investigations to determine whether silver market insiders profited when prices plunged from $50 an ounce to $10.80.
They urged the committee to order the Commodity Futures Trading Commission to "reconstruct" all silver transactions in late 1979 and early 1980 and to make public the silver investments of the officers and directors (and their associates and relatives) of the Chicago Board of Trade and Commodity Exchange Inc. in New York.
"If the loss I have sufferred is a result of my own honest stupidity, I will quietly disappear," said Cole Stephens, a California ophthalmologist. "However, if the losses I have suffered are the result of breach of a fiduciary responsibility, insider trading, conflict of interest and/or market manipulation, then I want to see the hide of the responsible persons nailed to the wall."
Earlier in the day, Securities and Exchange Commission member Philip A. Loomis Jr. testified that the SEC also believes insider dealings warrant "further exploration." Loomis said the SEC disagrees with the conclusions of a Commodity Futures Trading Commission report that gave the exchanges a clean bill of health. "We continue to believe that the silver report may not attach sufficient significance to the regulatory actions of the boards of trade," Loomis said.
The collapse of silver prices was triggered when the CBOT and Comex changed the rules of silver trading to avert what they claimed was an attempt to corner the market by the Hunt family of Texas and a group of foreign investors. The Hunts and others who lost money when profits plunged claim the exchanges' actions benefited the personal investments of exchange officials.
Jones said his subcommittee has obtained some information about the holdings of exchange officials, but would have to hold an executive session to discuss whether it has the legal authority to make the data public.
At the urging of Rep. Byron Dorgan (D-N.D.), who said "we need to know who made the money and who didn't," Jones agreed to ask the CFTC whether it is feasible to "reconstruct" the silver crisis.
Jones said the subcommittee also would seek answers to other questions raised by Stevens and two other witnesses, S.E. Poirot, a Missouri farmer who blames the CBOT for his million-dollar silver loss, and Brian Walsh, a Massachusetts investor who heads a group of some 200 silver market losers.