Texas wants its gold back from the Yankees, wherever they’re keeping it.
Governor Greg Abbott signed a law last week to build a depository for its 5,600 bars of the precious metal and, as he said in a statement, “repatriate $1 billion of gold bullion from the Federal Reserve in New York.”
The gold, it turns out, isn’t at the New York Fed -- it’s in a rented vault in midtown Manhattan -- and is worth about $650 million. Regardless, Texas aims to bring it home.
“We want to show off our strength and resilience,” said Giovanni Capriglione, the Republican lawmaker who sponsored the repatriation bill. “This is to be able to say, ‘Hey, listen, Texas is unique, it’s stable, it’s strong and we can show that by letting other states and individuals know that, yes, Texas has a billion dollars worth of gold. Does your state have a billion dollars worth of gold?’”
Informed that the value is about $350 million short of that, Capriglione said he was no less proud.
The gold in question isn’t the property of the state itself but of the University of Texas Investment Management Co., which oversees the second-largest academic endowment in the country.
That isn’t likely to diminish what Philip Diehl, a former director of the U.S. Mint, called “a wonderful marketing opportunity” for the state, where the electorate leans right.
For the governor and lawmakers, repatriation “makes a lot of political sense,” said Diehl, president of U.S. Money Reserve, an Austin company that sells gold. “It’s a very reasonable response to their constituents.”
Bruce Zimmerman, chief executive officer of the endowment fund, said it would be pleased to have a Texas safe for its ingots so long as the state doesn’t charge more than what the fund’s paying to lease the New York vault space, which is less than $1 million a year.
There are details to be worked out. For one, where to put the depository, a task given to the Texas Comptroller of Public Accounts. One possible candidate is behind a bullet-proof door in the basement of a Travis County office building, where a long-gone bank used to store safe-deposit boxes.
“When you’re talking about gold, people’s eyes light up,” said comptroller spokesman Chris Bryan. “But when you’re talking about what you need to do to house that gold, from a logistics standpoint it’s very complicated and one that we don’t have a whole lot of experience with.”
No state does; Texas would be the first to have its own gold reserves storage unit.
It might also be the only one to own physical gold, according to Diehl, the former mint director. The endowment fund began buying it in 2008 as a hedge against what Zimmerman said was excess monetization by central banks.
There was little opposition to repatriation voiced during legislative debate.
“We’re not changing our currency, right?” Democratic Senator Juan “Chuy” Hinojosa asked. He was assured the greenback would still be legal tender, and voted yes.
Kirk Watson was one of four Democrats in the Senate to go the other way. Why? “Cause it’s weird,” he said.
The Senate voted 27-to-4, and the House 140-to-4.
Abbott, the Republican governor, declined to be interviewed. Neither he nor Capriglione are known as gold bugs, the detractors of central banks and governments that issue money without promising to exchange the cash for gold or silver.
The two did come up the ranks in Texas with support from the Tea Party, which has a gold-themed monetary policy. And the law does set up a framework for a system under which Texans could ultimately execute financial transactions backed by gold in the depository, including buying a house or paying taxes.
But Capriglione, who represents suburban Fort Worth, said it “isn’t some back-door way to create a Texas dollar or Texas currency.” He said getting the gold back to the Lone Star State was about security.
“Whenever you look at these economic collapses, it’s always based on consumer confidence,” he said. “It does make people feel more secure to have the gold here. It just does.”
Texas has a distrust of the federal government that befits a state that was once a country. Former Governor Rick Perry activated its National Guard last year to secure the Mexican border, saying Washington was doing a lousy job. Abbott directed state forces to monitor a U.S. military training exercise called Operation Jade Helm 15 that will take place this summer in Texas and other states. Conspiracy theorists contend it’s a scheme to round up political dissidents, impose martial law or both, claiming tunnels under Wal-Mart stores are somehow involved.
Now, in addition to keeping invaders at bay, the state will have to get ready to guard against a gold heist.
“There’s absolutely no reason to believe the state of Texas cannot protect gold as effectively as any of the other large commercial vaults around the country,” said Diehl, the former mint director. “After all, we have the Texas Rangers.”
For more, read this QuickTake: The Rise and Fall of Gold