The Assistant Secretary of the Treasury (Gilbert) to the Assistant Secretary of State (Dearing)
Dear Mr. Dearing: As requested by you at our conference yesterday, I am writing to indicate the position of the Treasury Department with respect to Russian gold.
The Treasury acts in purchasing gold at United States Mints and Assay Offices under certain provisions of the Revised Statutes, particularly Sections 3519 and 3545. These statutes make it clear, first, that the transaction is not a mere minting operation but a purchase, [Page 765] and second, that the Treasury is only authorized to accept deposits made by “owners” of gold. The Treasury is, therefore, concerned with the question of title, and in ordinary course receives an implied warranty of title from the person presenting the gold. This does not mean that United States Mints and Assay Offices demand an abstract of title for each lot of gold presented, but gold of doubtful title and gold known to have been unlawfully acquired is, of course, refused.
In view of the actions and theories of the so-called Soviet Government and the fact that the Soviets had never been recognized by the United States as even a de facto government, tenders of Soviet gold immediately raised the question of title. Since it was felt that this question was largely an international one, former Secretary Houston wrote to the Department of State under date of October 9, 1920,69 stating that the Treasury Department did not care to purchase such gold unless absolutely satisfied as to title, and that no complications would arise by reason of its acceptance; and requesting advice as to whether there were any objections from the point of view of the State Department to the purchase of this gold by the Treasury, and further as to whether the Department of State would be prepared to assure the Treasury that the title to the gold in question, if purchased by the Treasury, would not be subject to attack internationally. The State Department replied in a letter from Mr. Merle-Smith to me, under date of November 8, 1920,70 that the State Department felt that it would be inadvisable in the present circumstances for any branch or agency of the Government to assume the responsibility involved in the possession of gold which on its face indicates Soviet origin; and that the State Department could not give assurances that the title to such gold would not be subject to attack internationally. In accordance with this advice, instructions were issued to the United States mints and assay offices to purchase no gold known or suspected to be of Soviet origin. A copy of these instructions69 was transmitted to the State Department. As to gold as to which a mere possibility of Soviet origin suggested itself, acceptance was authorized provided the gold was tendered by a responsible party accompanied by a certificate stating that the gold was not of Bolshevik origin and had never been in possession of the so-called Bolshevik Government of Russia, and warranting title to the United States.
Thereafter the question arose as to whether the Treasury Department would purchase gold bearing the official Swedish Mint mark, in view of information to the effect that the Swedish Mint has in [Page 766] some cases melted Russian rubles. I requested the advice of the State Department in the matter and Mr. Davis wrote me under date of December 16, 1920,71 stating that the State Department had no objection to the acceptance by United States mints and assay offices of gold under the coinage or mint mark of a friendly nation. Thereupon, the instructions to the mints and assay offices were modified to provide that gold bearing the official coinage or mint stamp of a friendly government would be considered as free from any suspicion or possibility of Soviet origin. A copy of these instructions was also transmitted to the State Department.72
On January 11, 1921, I wrote Mr. Davis73 stating that certain German gold marks shipped from Sweden had been tendered to the Assay Office and requested an expression of his views as to whether they might be considered as free from any suspicion of Soviet origin under the terms of his letter of December 16, 1920. Under date of January 14, 1921, he replied73 that there was no objection from the point of view of the State Department to the acceptance of these gold marks by the New York Assay Office.
On March 15, 1921, I wrote the Secretary of State71 making reference to the previous correspondence and requesting the views of the State Department as to whether gold bearing the Mexican coinage or mint stamp might be deemed free of any suspicion of Soviet origin. No reply has been received to this letter.
On the general question of the purchase of Soviet gold, I think it is necessary to add that since the removal of restrictions on transfers of credit and exchange transactions on December 20, 1920, there are no governmental restrictions whatever upon American merchants who desire to trade with Russia. Exchanges of commodities are permitted, and there are no restrictions on ordinary credit and exchange transactions. Transfers of credit based upon Russian gold may be also made from any one of a number of European countries, without actual shipment of gold to this country. The Treasury has received a large number of inquiries from American manufacturers who have desired to take in payment for their goods Russian rubles now on deposit in this country. Even this is possible, if American manufacturers are willing to take the risk involved in the acceptance of Soviet gold, for there are no restrictions upon the import of gold into the United States or its acceptance by American manufacturers. The Treasury enters into the situation only when the attempt is made to transfer this risk to the Treasury, by tender of Soviet gold to a United States mint or assay office.[Page 767]
The amount of Soviet gold in this country is comparatively small, probably not exceeding $10,000,000, and most of the inquiries from American interests have been traceable to agents of the Soviet Government in this country who, it is believed, have been seeking to arouse sentiment looking toward a recognition of the Soviet Government. In addition, various dealers have made efforts from time to time to sell rubles on deposit in New York (purchased at a large discount) to the mints and assay offices by various means. The continuance of inquiries relating to the same lots of Soviet gold, however, indicates that the Treasury has been successful in avoiding its purchase. Efforts of these dealers to export these rubles to Canada for reimportation into the United States appear to have been thwarted by the ruling of the Canadian Mint that payment for rubles deposited with it will be made only by check on the Canadian Treasury. So far as the importation of Swedish stamped gold for sale to the mint is concerned the Treasury is informed that, while certain shipments are now on the way from Sweden, the recent publicity relating to Swedish stamped gold has reduced the discount at which it could be purchased there from 8 per cent to 1 per cent with the result that the transaction is no longer profitable to speculators and may not be repeated.
The Treasury desires to have the advice of the State Department as to whether the rulings previously made are still in, accordance with the views of the State Department. I should also like to have the opinion of the State Department as to the following three questions:
- Can the State Department give the Treasury Department any assurance that the title to Soviet gold, if purchased by United States mints or assay offices, will not, by reason of its Soviet origin, be subject to attack internationally, or by any new Government of Russia, or by creditors of the old Russian Government?
- In the opinion of the State Department should the Treasury Department consider gold which bears the official coinage or mint stamp of a friendly nation as free from any suspicion or possibility of Soviet origin?
- If so, should it consider German gold marks and bars or coin bearing the official Mexican stamp as likewise free from any suspicion or possibility of Soviet origin.
Very truly yours,
P.S. Since writing you the above, a Mr. B. Brasol has called upon me stating that he represented an association of 10 or more American individuals or corporations who had claims against the Czar’s Government represented by Treasury certificates or bonds, which association [Page 768] had been formed for the purpose of enforcing their claims in the United States courts against Russian rubles and perhaps against Swedish stamped Russian gold now in this country.