Nelson Bunker Hunt has something that even a billionaire might find helpful: an influential friend in Washington.
That friend is Rep. Larry McDonald, a Georgia Democrat. The ties between the famous silver bull and the congressman include politics, money and just plain camaraderie: Both men are board members of the ultraconservative John Birch Society, Hunt is among McDonald's most enthusiastic campaign donors and "Larry is a close personal friend," Hunt says. "He eats dinner at my house."
But perhaps the strongest tie is silver. Despite the big silver market crash last March, Hunt and his brother W. Herbert Hunt, both of Dallas, still hold huge stakes in the market. McDonald is emerging as a leading congressional figure on federal silver policies, and his views often are the same as Hunt's.
The Hunt-McDonald association is an example of a mutually beneficial relationship between a businessman and a politician. And it illustrates how the frequently little-noted congressional deliberations on silver can spell profit or loss for investors.
Last year, McDonald spearheaded a successful effort in Congress to block sales of silver from the government's national defense stockpile. All of this stockpiled silver, worth $3 billion at current prices, is deemed surplus by the Pentagon. McDonald has said he wants to ensure that the nation has enough silver in case of war. But government sales also would dump millions of ounces of silver on the market, depressing prices and threatening Hunt's bullish investment strategy.
In addition, while the Hunts were quietly buying silver in anticipation of higher silver prices, McDonald in June 1979 introduced, and fought hard for, a bill to have the government buy an additional $500 million in silver for the national stockpile. Even the prospect of large government silver purchases, market analysts say, can push up prices, to the benefit of silver holders.
Hunt confirms that he and McDonald discuss silver at times: "I talk to everybody I know" about silver. But he says that he hasn't talked to McDonald about specific legislation. A spokesman for McDonald says the congressman hasn't been influenced on legislative matters by silver bulls who give him campaign contributions.
Clearly, though, some investors in the silver market are interested in McDonald's political welfare. Take Scott Dial, a silver trader from Dallas who says he is a friend of Bunker Hunt.
Dial was among the first to suggest that McDonald introduce the bill to buy silver. And at the congressman's invitation, Dial testified for the bill at a House hearing last fall, even though, after being invited, he had been disciplined by the Chicago Board of Trade for allegedly improper trading practices. (Later the staff of the federal Commodity Futures Trading Commission charged in an administrative complaint that Dial participated in a 1978 scheme to manipulate silver prices. Dial denies the charges, which are still pending before a CFTC administrative-law judge.)
After testifying, Dial stopped by McDonald's office and handed the congressman two campaign contributions: a $1,000 check from himself and another from his wife. Dial says the donations were unrelated to the silver hearings. He delivered them personally, he says, because he happened to be in Washington and he doesn't like to mail checks. "The only way I generally give checks to anybody is in person," he explains. Dial, recently recruited into the John Birch Society by Bunker Hunt, adds that McDonald is "the best up there" on Capitol Hill.
The Hunts agree. Under federal election laws, an individual can give a congressional candidate no more than $1,000 an election. But the Hunts are a large family, and many of its members give the maximum sum permitted by law when McDonald needs help.
In 1976, the year that the Georgian first became prominent in blocking silver sales, five Hunts each contributed $1,000 to him less than 48 hours before the first-term congressman's close reelection. The contributors included one of Bunker Hunt's daughters, then living in the Kappa Kappa Gamma house at the University of Alabama.
In 1978, another year of silver debates in Congress, McDonald had to campaign for an unexpected runoff election. Shortly before the election, three Hunts gave $1,000 each, and others in the silver industry gave $4,700. These gifts represented 20% of McDonald's campaign receipts for the runoff, which he won. A spokesman for McDonald says that contributions from people interested in silver aren't significant compared with the congressman's total campaign income since he came to Congress.
McDonald emerged from the 1978 general election in good shape. His campaign treasury at the end of the year showed a $17,000 surplus. Yet that winter, some 18 months before the 1980 Georgia primary, the Hunts stepped up their campaign giving. This time 10 Hunts each gave $1,000. An aide to McDonald says the congressman needed the money to gear up early for an expected primary challenge from President Carter's son Jack; young Carter eventually dropped out, giving McDonald an easy victory. j
The arrival of these latest contributions roughly coincided with the start of a silver-buying campaign by the Hunts on the U.S. futures markets, a campaign that eventually quadrupled the brothers' net purchase commitments to 121.8 million ounces. Buoyed by the Hunts' buying, which wasn't widely known until late summer of 1979, prices spurted more than eightfold before the market crash last March.
While the Hunts were buying, McDonald became the first member of Congress in at least a decade to submit legislation specifically intended to acquire silver for the national defense stockpile. His proposed $500 million purchase was intended as the down payment on an ambitious, five-year plan to add as much as 250 million ounces to the existing silver stockpile of 139.5 million ounces.
Hunt dismisses suggestions that he influenced his lawmaker-friend. He hopes he did, Hunt says facetiously; "I try to influence everybody." But he says he didn't even know about McDonald's silver-buying bill at the time. He says he can't recall why the Hunt family contributed to the congressman right after an election; perhaps the campaign gifts were made to honor a preelection pledge, he suggests.