The Office of the Comptroller of the Currency report on Bank of America’s (BofA) move into precious metals clearly indicates that BofA’s precious metals derivatives position increased by more than 100 times or 10,000% in a matter of 18 months. This is so extreme and unprecedented, it warrants a full explanation from the OCC and Bank of America. That explanation has not been forthcoming.
To some extent, it was a masterful selling job by JPMorgan, to get BofA to lease 800 million ounces of silver and 30 million ounces of gold from them which they would have to pay back someday. It also allowed BofA to get its hands on $70 billion from the sale of the borrowed metal, for use as it saw fit. Back at the time when I claimed that Bank of America borrowed and sold short massive quantities of gold and silver they had leased, the world and U.S. were in the throes of the developing Covid pandemic and the U.S. economy and stock market were in a free fall. The stock of BofA and most other stocks had fallen to multi-year lows and the government had not yet begun to inject the trillions of dollars it would provide to pump things up. Therefore, I can easily envision a need at the time for BofA to get a good chunk of cash in a hurry, making it highly susceptible to getting lured into a pitch to borrow metal to sell short to raise that cash.
In other words, had overall conditions been different from what they were in the spring of 2020 Bank of America would never have entered into this crazy leasing/short sale travesty. The times and circumstances played a role. Bank of America had no real experience in precious metals. They likely saw the depressed prices of gold and silver in the years leading up to the leasing/short-selling transaction as proof there was an abundance of gold and silver and it would be easy for it to secure the physical metal in the future to return and close out the transaction. What better proof of plenty than prolonged low prices? The thought that gold and silver prices were depressed because of an ongoing price manipulation didn’t occur to BofA. Besides, look at how easy it was for Bank of America to borrow hundreds of millions of physical ounces of silver and tens of millions of physical ounces of gold – how could that be if there wouldn’t always be an endless supply of physical metal?
So, sure, JPM hoodwinked BofA, but it can be argued that BofA allowed itself to be hoodwinked and that was a big part of the equation. Why was BofA the only bank to plunge headlong into the transactions I allege, transactions that are supported by OCC data? All the other major banks had prior experience with precious metals leasing 20 years ago and wanted no part of it. The last few years have seen an exodus of banks running away from precious metals dealings as a result of the non-stop regulatory and civil litigation they have had to endure. And here pops up Bank of America, the new kid on the precious metals block, diving headlong into an arena I’d bet dollars-to-donuts it deeply regrets now. Again, if the OCC and Bank of America have a radically different take on this, both should speak up. It’s likely that nobody is offering an explanation because of the enormity of the risk involved. A price explosion in silver, which I believe to be inevitable, would jeopardize the solvency of the short sellers. Neither the regulators or the banks want these facts to become widespread knowledge.
For subscription info please go to www.butlerresearch.com