cryptogon.com

A gold depository must be the most boring business on earth. They charge a small monthly fee to store 100oz. standardized bars of gold in an insured vault. It is an industrial-sized version of a safe deposit box.

The owner of a 100oz. bar owns a specific chunk of gold. It has a manufacturer, a serial number, and an exact weight measured to the 1/100th of an ounce. A written depository receipt — similar to an old-fashioned paper share certificate — shows the exact date the bar entered the depository, and the entire chain of ownership since that date; they often change hands without leaving the depository. You can request to withdraw the bar from the depository, and you should receive exactly the bar indicated.

Interest in precious metals as an investment has been heating up, and some fund managers have begun to take very large positions. Demand for Comex gold bars has been increasing — especially as they are significantly cheaper per ounce than alternatives like 1oz. bullion coins or the kilogram bars popular in Europe.

Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.

Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.

Another possibility is that the bar indicated on the warehouse receipt does not actually exist. The implications of that are rather dire.

This would not be so troubling if there were not already a series of very odd things happening down at the Comex. Delivery delays have been chronic. This could be a symptom of an overworked staff. Or, it could be a purposeful stalling tactic. In any case, it should not take weeks and possibly even months, and sometimes dozen of inquiries, to get the gold you already own out of the warehouse.

The Comex itself, however, has been reporting that business at the warehouse is very slow. The daily reports of warehouse movements show almost nothing happening, day after day. So which is it, busy or not busy?

As futures contracts expire, a certain number of holders elect to pay cash to receive the physical gold. The number of delivery notices has been very high since autumn of last year. For example, in May, investors requested the delivery of 20 million ounces of silver, against a dealer inventory of about 64 million ounces. Since then, there has been no record of anywhere near that amount of silver leaving dealer inventory, being delivered into the warehouse, entering customer inventory, or leaving the warehouse. Another 17.45 million ounces of silver were requested in March, evidence of which was nowhere to be seen in the warehouse reports.

In April, delivery notices were sent on a whopping 1.5 million ounces of gold, against 2.5 million ounces of dealer inventory. That month, Deutsche Bank alone delivered 850,000 ounces. This coincided, rather suspiciously, with a sale of 1.14 million ounces of gold by the European Central Bank that month, suggesting that Deutsche Bank was being bailed out in a big way. Nothing of this size turned up in the warehouse reports. Nothing followed similarly large deliveries in December 2008. By Comex rules, all physical deliveries must go through the warehouse. What happened? Until investors receive an explanation from the exchange, which has thus far been silent, we must regard it as being very suspicious. Very, very suspicious.

Community Bank of West Georgia, in Villa Rica, Georgia; Neighborhood Community Bank of Newnan, Georgia; Horizon Bank of Pine City, Minnesota; MetroPacific Bank of Irvine, California; and Mirae Bank of Los Angeles were closed yesterday by state regulators, according to statements from the Federal Deposit Insurance Corp. The FDIC was named receiver of the four banks.

Wilshire Bancorp’s Wilshire State Bank will take over all of Mirae’s $362 million in deposits, and will purchase $449 million of assets, the FDIC said in a statement.

Sunwest Bank of Tustin, California, acquired most of MetroPacific’s $73 million in deposits and $80 million in assets, the FDIC said. Stearns Bank of St. Cloud, Minnesota, bought Horizon Bank’s $69.4 million of deposits. Stearns will purchase $84.4 million of Horizon’s assets, the FDIC said.

The FDIC didn’t find a buyer for Community Bank of West Georgia, and said it will mail checks to reimburse insured depositors. The bank has deposits of $182.5 million. Charter Financial Corp.’s CharterBank will assume Neighborhood Community Bank’s $191.3 million of deposits and purchased some assets in a loss-share agreement with the FDIC, according to the agency.

“The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector,” the FDIC said. “The agreement also is expected to minimize disruptions for loan customers.”

One week and counting. An unprecedented number of states have only days left to pass their fiscal 2010 budgets.

At least 19 states are still hammering out their spending plans as the recession wreaks havoc with their finances and sparks fights between governors and lawmakers. If spending plans aren’t approved, state workers may not receive their paychecks and some government offices may shut down.

“If you buy something — a stock or a bond — in the morning, and you sell in the afternoon, the tax probably ought to be 80 percent,” said Gerstner, also a former chairman of Carlyle Group, the world’s second-largest private equity firm.

“If you hold it for six months, maybe it ought to be 60 percent,” Gerstner told Bloomberg Television.

Selling an investment after five years should carry a zero rate “to try to get the incentives for investment to go back to being a true investor and not a trader,” he said.

Gerstner acknowledged that such a change would be “controversial” yet argued it is necessary to encourage investors to think about the longer term. The top tax rate on gains from investments sold within one year is now 35 percent.

“We do have a greed or an inefficiency that comes out of excessive focus on the short term,” said Gerstner, who bemoaned an investment climate driven by quarterly earnings and a 24-hour news cycle. He was an executive at American Express Co. and RJR Nabisco Inc. before joining IBM.

Gerstner, 67, also criticized compensation practices, saying “there’s been astoundingly unnecessary, excessive executive compensation in certain instances.”

Government Rules

He said the solution isn’t government rules or caps on pay.

“I despair of a government solution,” Gerstner said. “We’ve had governments attempt to control executive compensation for 40 or 50 years.”

Instead, Gerstner called for more disclosure and oversight of boards of directors by shareholders, “because ultimately the boards need to make these decisions.”

“The system can fix itself without rigid rules,” he said.

Gerstner, who approves of generous compensation for executives who add shareholder value, called for an end to golden parachutes for failed managers. “We have to see an elimination of pay for people who get fired and then wind up with these huge payments,” he said.

Gerstner acknowledged that Wall Street executives he knows wouldn’t like his plan for higher taxes on investment gains.

The FBI interrogations of the toppled tyrant – codename “Desert Spider” – were declassified after a Freedom of Information Act request.

The records show Saddam happily boasted of duping the world about stockpiling weapons of mass destruction. And he consistently denied cooperating with Osama Bin Laden’s Al Qaeda.

Of all his enemies, Iraq’s ex-president – who insisted he still held office during captivity – hated Iran most.

Asked how he would have faced “fanatic” Iranian ayatollahs if Iraq had been proven toothless by UN weapons inspectors in 2003, Saddam said he would have cut a deal with Bush.

“Hussein replied Iraq would have been extremely vulnerable to attack from Iran and would have sought a security agreement with the U.S. to protect it from threats in the region,” according to a 2004 FBI report among the declassified files.

Without Bush’s help, “Iraq would have done what was necessary,” he told FBI Agent George Piro in his Baghdad International Airport cell.

That didn’t mean an alliance of evil with Al Qaeda, he insisted months into what he called a “dialogue” with Piro.

The interrogations unfolded in 2004 after his capture the previous December at the same farm where he said he’d hidden after orchestrating a failed 1959 coup plot.

Saddam denied ever laying eyes on the “zealot” Bin Laden, bent on striking the U.S.

He said he “did not have the same belief of vision” as the terror kingpin.

Saddam never sought Al Qaeda assistance because he feared the terror group would turn on him. To protect his country, the more likely ally “would have been North Korea.”

Saddam also said the U.S. “used the 9/11 attack as a justification to attack Iraq” and “lost sight of the cause of 9/11.”

The U.S. “was not Iraq’s enemy,” just its policies, Saddam explained.

Asked about WMDs, Saddam insisted: “We destroyed them. We told you.”

Wherley’s wife, Ann, was also among the nine people killed when a train plowed into the rear of a stopped train during rush hour on June 22, Quintin Peterson, a spokesman for the Metropolitan Police Department, said in a telephone interview. Both were 62 and lived in southeast Washington.

Wherley was commander of the 113th Fighter Wing at Andrews Air Force base in Maryland during the September 2001 terrorist attacks and sent up aircraft with orders to protect the White House and the Capitol, according to the 9/11 Commission report.

“To avoid the inherent deficiencies of using sovereign currencies for reserves, there’s a need to create an international reserve currency that’s delinked from sovereign nations,” the People’s Bank of China said in its 2008 review released today. The IMF should expand the functions of its unit of account, Special Drawing Rights, the report said.

The restatement of Governor Zhou Xiaochuan’s proposal in March added to speculation that China will diversify its currency reserves, the world’s largest at $1.95 trillion at the end of March. Chinese investors, the biggest foreign holders of U.S. Treasuries, reduced holdings in April after Premier Wen Jiabao expressed concern about the value of dollar assets.

“Zhou Xiaochuan sees the current international financial system is flawed, putting too much emphasis on the dollar as a reserve currency,” said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. “The dollar should depreciate to address the global imbalance but because it’s a reserve currency it cannot.”

President Barack Obama needs the support of China as the U.S. tries to spend its way out of recession. The Dollar Index that measures the currency’s performance against six trading partners fell as much as 0.7 percent at 12:42 p.m. in London.

Mounting Tension

China, the biggest foreign holder of U.S. government, cut its holdings by $4.4 billion to $763.5 billion in April, the first monthly reduction since February 2008, according to U.S. Treasury Department data. At the end of 2008 the dollar accounted for 64 percent of global central bank reserves, down from 73 percent in 2001, according to the IMF in Washington.

“There may be signs here of tensions mounting between the PBOC’s economic concerns over China’s holdings of dollars and the Chinese government’s diplomatic reasons for doing so,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, wrote in an e-mail.