(CNSNews.com) – Texas Gov. Greg Abbott signed a bill last Friday that creates the nation’s first state-level gold depository.
The Texas version of Fort Knox will be used to store $1 billion in gold bullion the state plans to “repatriate” from the Federal Reserve Bank in New York.
“Today I signed HB 483 to provide a secure facility for the State of Texas, state agencies and Texas citizens to store gold bullion and other precious metals,” Abbott said in his signing statement.
“With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state."
Abbott said the gold depository “will serve as the custodian, guardian and administrator of bullion that may be transferred to or otherwise acquired by the State of Texas.” The Texas Office of the Comptroller of Public Accounts will administer the depository and submit an annual report to the governor and the Texas legislature.
The final version of the Texas Bullion Depository Act , which was initially filed by state Rep. Giovanni Capriglione (R-Southlake) in December, sailed through the Texas legislature, passing 27-to-4 in the state Senate on May 30 and clearing the House 140 –to- 4 the following day. It was sent to Gov. Abbott for his signature on June 1.
According to the new law, deposits made to the Gold Bullion Depository - which can be made by individuals, political subdivisions, school districts, businesses, non-profit charitable and educational groups, and financial institutions - are “not subject to legislative appropriation.”
Deposits of precious metals will be recorded “in units of troy ounces pure, and the records must also specify the type and quantity of each precious metal deposited,” according to the new law.
Withdrawals and transfers from the non-interest-bearing accounts will be made “on demand by the presentment of a suitable check, draft, or digital electronic instruction to the depository or a depository agent.” The depository is prohibited from engaging in any activity “having the effect of hedging or leveraging the depository’s holdings of precious metals.”
The Texas law also contains a provision that seeks to protect depositors from any future confiscation of gold by the federal government similar to the executive order signed by President Franklin Roosevelt on April 3, 1933 that prohibited “the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.”
“A purported confiscation, requisition, seizure, or other attempt to control the ownership, disposition, or proceeds of a withdrawal, transfer, liquidation, or settlement of a depository account…if effected by a governmental or quasi-governmental authority other than an authority of this state…in the course of a generalized declaration of illegality or emergency relating to the ownership, possession, or disposition of one or more precious metals…is void,” it states.
In 2011, the University of Texas Investment Management Co., which administers one of the nation’s largest endowment funds, took physical custody of 6,643 gold bars worth $991.7 million that were being stored in an HSBC Holdings warehouse in New York.
In 2013, Capriglione told The Texas Tribune that a gold depository would protect the state in the event of a future financial crisis. “For us to have our own gold, a lot of the runs on the bank and those types of things, they happen because people are worried that there’s nothing there to back it up. So I think this cures a problem before it can happen.”
Rick Cunningham, executive director of the Texas Center for Economics, Law and Policy, who drafted the first version of the law, testified in favor of a gold depository before the Texas House Appropriations Subcommittee on Budget Transparency and Reform on April 23, 2013.
Cunningham called the depository “a wholly unique solution” to “what nearly happened to the financial industry as a result of the 2008 collapse of the debt instruments and debt derivatives that lay at its heart.”
He explained that “an advanced, state-owned system of electronic payments and settlements, denominated in ounces of precious metals, barred from engaging in lending, leasing, speculating or derivative transactions, and always maintaining a 100% ratio of bullion reserves to account balances…not only could it sustain state and local government operations, it could potentially sustain large swaths of the Texas economy, even in the face of a national financial or currency crisis.”