Steve Quayle News Alerts

July 27, 2002

Gold rose sharply a week ago Friday and was poised to take out massive resistance at $330. Morgan Stanley’s Barton Biggs put out a research report talking about $500/$1,000 gold that day and it created quite the stir. This past Monday he conveniently showed up on CNBC saying he really doesn’t understand gold. Horse crap. He understands it very well. He was told The Gold Cartel was going to take gold down and he didn’t want to come across as Humpty Dumpty to The Wall Street world.

Looking at the gold chart, you would think it was a chart of "new crop gold" and it rained all week.

You would think the news that affects the gold price was very negative. But, we all know the exact opposite was true. The news does not get much better. The most important bank in the U.S., J.P. Morgan Chase, was near collapse. The stock market practically collapsed midweek. The Mid East news worsened. Stock markets tanked round the world. Yet, gold is slaughtered.

If gold were a free market and there was no Gold Cartel, it would have rallied as much as it tumbled.

The good news is that we really are closer to the big move to $800/$1,000 than we were last week. I say that because of the coming banking crisis. J.P. Morgan Chase is in big trouble. The action of their share price reflects how dire the situation really is. Yesterday, it fell to $21, before coming back with the orchestrated DOW rally. The DOW was weak all day, but the Working Group on Financial Markets took it up near the close of the trading session. That helped the Morgan shares, but it still finished at $22.25, down 10 cents.

At the same time there is a banking crisis in Germany, according to the CEO of Dresdner Bank. How many German banks are Morgan's derivative counter party?

The heat on Morgan AND Gold Cartel member, Citigroup, is intensifying:

Citi, Morgan execs questioned

WASHINGTON (AP) _ A senator leading an investigation into big investment banks' ties with now-bankrupt Enron Corp. has asked the heads of Citigroup Inc. and J.P. Morgan Chase & Co. to answer questions on their use of offshore companies in deals with Enron.

Sen. Carl Levin, D-Mich., sent letters Thursday to Citigroup chairman and chief executive officer Sanford Weill and J.P. Morgan Chase president and CEO William Harrison, setting a Monday deadline for them to personally provide the information.

Levin heads the investigative panel of the Senate Governmental Affairs Committee. At a hearing of the panel Tuesday, a committee investigator testified that the Wall Street investment banks, including Citigroup and J.P. Morgan Chase, gave Enron multimillion-dollar loans that helped the company disguise its true financial condition. In some cases, the investigator said, the banks knew Enron was using deceptive accounting for the loans.

Officials of Citigroup and J.P. Morgan Chase denied any wrongdoing in testimony at the hearing.

The letters to the bank executives from Levin, also signed by Sen. Susan Collins of Maine, the subcommittee's senior Republican, cited "troubling factual issues" that emerged at the hearing.

Spokesmen for the two financial companies couldn't be reached for comment Thursday night.

In a memo sent to Citigroup employees, Weill said Citigroup's transactions with Enron were legal, met accounting standards and reflected industry practices.

"And our people, relying on the advice of independent legal and accounting experts, believe they were doing the right thing," Weill said.

Harrison delivered a similar message to the investment community Wednesday, saying that the J.P. Morgan Chase acted "properly and with integrity" in all of its dealings with Enron, while also assuring investors that the bank itself was financially sound.

The bipartisan investigative subcommittee also found that some banks actively aided Enron in its deceptive accounting in return for big fees and favors in other deals.

Enron made a secret oral agreement in 1999 with Citigroup, the nation's largest financial institution, that disguised the company's improper accounting for a $125 million loan known as Roosevelt, according to committee investigators.

The banks used complex financial transactions to boost Enron's anemic cash flow to match its profit growth on paper, according to the investigators. Enron, an energy-trading company, recorded the money from the bank loans - said to total $8 billion - as prepaid trades of natural gas and other commodities with an entity based in the Channel Islands off Britain.

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