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Discussing the book "Beyond greed: how the two richest families in the world, the Hunts of Texas and the House of Saud, tried to corner the silver market - how they failed, who stopped them, and why it could happen again"

BROADCAST: Apr. 30, 1982 | DURATION: 00:54:46


Discussing the book "Beyond greed: how the two richest families in the world, the Hunts of Texas and the House of Saud, tried to corner the silver market - how they failed, who stopped them, and why it could happen again." with the author Stephen Fay.


Tap within the transcript to jump to that part of the audio.


Studs Terkel You know, back in 1929 October, there was a day called "Black Thursday" when the market crashed and officially the Great American Depression began. While there was a similar day, it's called "Silver Thursday," it was March of 1980 and involved a comic figure, yet a figure of considerable power because of finance. Nelson Bunker Hunt, one of the sons of H.L. Hunt, oil, and his attempt you may recall to corner the silver market and the debacle that followed. Well, it's a comic story and yet people have been hurt, and particularly innocents can be destroyed by powerful, comic, grotesquely comic figures, and "Beyond Greed" is quite a remarkable book written by Stephen Fay, who's an excellent British journalist who covered almost every aspect of life, political and social for "The London Times," but found himself more and more interested in finances, and now is one of the most perceptive of financial correspondents around and about, and this is his book: "Beyond Greed," Viking the publishers, the subtitle "How the Two Richest Families in the World, the Hunts of Texas and the House of Saud Tried to Corner the Silver Market -- How They Failed, Who Stopped Them, and Why It Could Happen Again." So in a moment Stephen Fay and his reflections after this message.

Stephen Fay Well Studs, I would like to start by reading two quotations, both fairly ancient but both very relevant to this story. The first comes from Adam Smith, the great Scottish economist, who wrote an inquiry into the nature and causes of the wealth of nations, and one paragraph of his reads: "People of the same trade seldom meet together even for merriment and diversion. But the conversation ends in a conspiracy against the public or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary."

Studs Terkel You know, this is be-- before you go into the more ancient quote, the biblical one, let's stick with Adam Smith. He said this when, that these powerful boys meet seemingly for diversion and when they do invariably something is hatched, gypping or

Stephen Fay They want to screw us. That's, that's the message, really.

Studs Terkel Now when did -- he said that when? Eighteen

Stephen Fay Seventeen seventy.

Studs Terkel Seventeen seventy. And applicable so -- this is what we're talking about.

Stephen Fay Yes. I mean, in that paragraph you can trace a great deal of economic history if you care to. Smith of course was the, was the great philosopher of free markets and believed that there was no alternative to free markets. Well, in the 20th century and indeed since 1929 we have a slightly different view. But how fascinating it is to think that with all this regulatory

Studs Terkel By the

Stephen Fay way Fabric.

Studs Terkel Yeah, that this happens now.

Stephen Fay That this can still

Studs Terkel Adam Smith has been grossly misinterpreted by those who use his name, don't they? He was a fairly quiet progress-- at that time progressive and enlightened.

Stephen Fay Oh, he was the most radical economist ever in a way in that he formulated the sort of precepts of capitalism if you like, he's as significant as Marx.

Studs Terkel But it's the misuse of him today by those, by predatory sort of figures. Now we come to the more ancient quote from Isaiah.

Stephen Fay Isaiah 56, chapter verses ten and, ten to twelve: "His watchmen are blind. They are all ignorant. They are old dumb dogs, they cannot bark. Sleeping, lying down, loving to slumber. Yea, they are greedy dogs which can never have enough, and they are shepherds that cannot understand. They all look to their own way. Everyone for his gain from his quarter. "Come ye," they say, "I will fetch wine and we will fill ourselves with strong drink. And tomorrow shall be as this day and much more abundant."

Studs Terkel Well, Isaiah really called the shot, didn't

Stephen Fay He did, that to me describes so many of the players in the markets.

Studs Terkel Greedy dogs.

Stephen Fay Greedy dogs, dumb dogs.

Studs Terkel Now, your book is called "Beyond Greed," and so we come to a case, don't we? Within our time.

Stephen Fay We do, and it's beyond greed for two reasons. One general. The first that in 1973 when the oil price quadrupled in '77 when it doubled again it went from what? Two or three dollars a barrel to thirty dollars a barrel in less than a decade. This created enormous private wealth. It created public wealth, too, that's what we were first concerned with, but we tended to overlook the private wealth that this created. It created it here among people who had new oil and the Hunts obviously had plenty of it, they had plenty of all varieties, old and new, and of course it totally changed the face of Arabia. And this story is the coming together of these two. I tried, Studs, to find a word, a sufficient superlative for "rich," to describe these people and I couldn't do it. There isn't one in the language.

Studs Terkel Funny. At the, in the prologue you you call upon F. Scott Fitzgerald, "The rich are like us but different," but there's a difference now between the old rich and the new.

Stephen Fay Quite so.

Studs Terkel The Hunts obviously of the new. Now, what is that difference?

Stephen Fay You see, remember that what Hemingway said when the -- when Scott Fitzgerald said that the rich were different from us, Hemingway replied, "Yes, they've got more money." Now, I believe that the difference is more substantial. I'm on Scott Fitzgerald's side rather than Hemingway's. If we consider the old concept of greed, what do we think of? We think of caviar for breakfast. We think of Dom Perignon as a nightcap, of gold faucets in the bathroom, of servants, yachts, houses in the country, big houses in the country. That's what the old rich spent

Studs Terkel Sybaritic living.

Stephen Fay Very much. Leading in the end to the jetset life. Now, the Hunts are not interested in that for a moment. They live plain lives. Now, Bunker has some expensive hobbies, he buys a lot of expensive horseflesh, he buys a lot of gold coins. But his lifestyle is very plain. His favorite food is his hamburgers, followed by another course of

Studs Terkel He rides economy class.

Stephen Fay Washed down with Dr. Pepper. He rides an old Cadillac. A friend of mine once saw him broken down on the super highway outside Dallas, what a ridiculous sight. One of the richest men in the world

Studs Terkel And economy class in plane

Stephen Fay And economy class in aircraft. Of course, being different from us, when he wants to get somewhere quickly he can hire a private jet.

Studs Terkel But what is it then?

Stephen Fay It is something spectacular. I believe that the Hunts wanted to control the price of silver. Now, had they been able to do that, had they even held the price at the peak that was reached during this game, which was $52 an ounce, they would have been, they and their allies would have been worth 14 billion bucks. If they'd controlled the price, they would have been worth many more billions. Now, what do you do with that? You know what Bunker does with it? He feels great pride because that's how he keeps the score.

Studs Terkel So that's what [it is?], this is like a recurring theme: he keeps score. So the more money the billions, multimillions, billions is simply to sit on top and keep score. Has nothing to do with wild living or anything.

Stephen Fay Not much to do with wild living.

Studs Terkel So it has to do with a sense of power.

Stephen Fay Yes, and it it it it -- well, it isn't power in the sense in which you and I would think of it. It's not political power. He's a member of the John Birch Society. Now, anybody who is seriously interested in wielding political power in Washington doesn't join the John Birch Society. He -- it is as a kind of self-regard, really. A charisma I suppose he would -- he would like to have created about himself. The trouble is that people only admire a great wealth of that kind if if they wish to emulate it, and not very many people want to be multibillionaires, do they? They're satisfied with just plain ordinary greed.

Studs Terkel This is beyond greed. By the way, we're talking, should make it clear there's H. L. Hunt the patriarch, we'll come to him in a moment. We're talking about his large son Nelson Bunker Hunt, and his brother Herbert. There's a third, Lamar. There is

Stephen Fay There is Lamar is is in that wonderful phrase that the newspaper captions "a sportsman." He has a football team in Kansas City and play -- and runs World Championship Tennis, and got very late into this game, and my theory, unprovable, is that the reason he got in late was that he couldn't speculate during the football season.

Studs Terkel So that's it, but it's we're talking about primarily Nelson Bunker

Stephen Fay Yes, but let me tell you what the significance of H.L. Hunt is.

Studs Terkel Yeah.

Stephen Fay H.L. owned most of the East Texas oil field. The inheritance of Bunker and Herbert and indeed Lamar was not just cash, although there was plenty of that. Millions of dollars. It was a fundamentalist belief in the conspiracy theory. Now, the conspiracy that H.L. was absorbed by was the alleged international communist conspiracy to take over this country, and its agents in Washington. Men like Franklin Delano Roosevelt and his successors, who were

Studs Terkel And Nelson Rockefeller too.

Stephen Fay Oh, especially Rockefeller. There there, I mean he was he was the he was the Satan of the international conspiracy.

Studs Terkel So eastern, old eastern money as well as communists. This is crazy, became the enemy.

Stephen Fay Right.

Studs Terkel And they were united.

Stephen Fay Rockefeller was regarded as a communist remember. They didn't draw any subtle distinctions. Now, I have studied a few conspiracies. I don't believe in the conspiracy theory myself. I think any study of history suggests that the conspiracy theory doesn't work. I've in fact written about one successful conspiracy, but it was an aberration. So thinking about the conspiracy theory, I drew another conclusion, which was people who conspire are people who believe in a conspiracy theory. That the one begets the other.

Studs Terkel The mirror image of self.

Stephen Fay Exactly. And when I first heard of this story, on "Silver Thursday," in fact, I was convinced that there must be a truly remarkable tale behind it all. It had nothing to do with economics, Studs. The price had nothing to do with economics. The behavior of the markets had nothing to do with economics. It was being influenced wholly by a few men who were perverting it for their own ends. Now, curiously it's a story from which you draw fewer -- as many social conclusions as you do economic conclusions, I think, that's what certainly I tried to do in "Beyond Greed."

Studs Terkel But you start, it was "Silver Thursday" that got you. Well, let's go back. Well, that's the ending, near the ending. "Silver Thursday" is what? Was what?

Stephen Fay "Silver Thursday" was the day the bottom fell out of the silver market in New York. It had been building up for a week, week or so before. In retrospect you can see that it was inevitable that the Hunts -- you see, the Hunts to stay in the game as the price was falling, remember I told you, it had been 50 dollars in Chicago and New York in January.

Studs Terkel Fifty?

Stephen Fay Fifty dollars an ounce.

Studs Terkel What had it been before this splurge

Stephen Fay When the game began, and I date the beginning of the game at the first of August 1979, the proper beginning, the price was then nine dollars and 61 cents, so it had gone up 500 percent in five months.

Studs Terkel And the Hunts had cornered how many 100,000 ounces?

Stephen Fay They, they haven't exactly cornered it by, by their, by their purchases. I think they were about to corner it if the market hadn't changed the rules. The Hunts -- I calculated this and my wife gave me a calculator for my birthday and I was able to work it out. Silver -- silver comes in thousand-ounce bars, which are a foot long and two and a half inches high. I calculated that if they, if all the silver owned by the Hunts and the Saudis had been put on top of it -- all the blocks had been put on top of each other, they would have reached 81,666 feet into the stratosphere.

Studs Terkel It'd have been from one city to another. You

Stephen Fay Well, it would have gone from Boston to Providence if you'd lain them end to end.

Studs Terkel And it would have been worth at 50 dollars

Stephen Fay It would have been worth about 14 billion.

Studs Terkel Fourteen billion. They and the Saudis, we'll come to the connection, the Arabian connection. Go back to the beginning. Now, there was an attraction -- he heard about silver in a way, Nelson Bunker, who had some bad luck. You called him accident-prone

Stephen Fay That's right. I think that Bunker has always been accident-prone, and this of course is his greatest accident so far.

Studs Terkel But prior to that

Stephen Fay But you have to go back, you're right, to go to the beginning, and the beginning is in Libya, a very unlikely place to begin a story like

Studs Terkel What was the Libyan aspect?

Stephen Fay Bunker wanted to show that he was a better oil man than H.L. Now, he couldn't do that in America, because at that time all the big fields in America had been found. He had to go abroad.

Studs Terkel One parenthetical point: H.L., whom Bunker and his brothers respected very much, had something of contempt for his own sons.

Stephen Fay Yes, he did have mild contempt for them. I think he had mild contempt for virtually everybody, don't you

Studs Terkel But so

Stephen Fay But including his sons, and it hurt them. They, you know, they wanted to be respected and admired by their father.

Studs Terkel So this was another Bunker strain. An impulse.

Stephen Fay Yes. Bunker went to Libya, having first gone to Pakistan where nobody has ever found oil, and he found the ninth biggest oil field in the world. I claim that he's been notionally the richest man in the world twice, the

Studs Terkel first Notionally.

Stephen Fay Notionally, because it was -- if you were able to extrapolate the value of things that he held at a particular time, there was nobody else with that much money. Although it wasn't cash in the bank, it was under the ground. Bunker has never minded that. He developed the field with British Petroleum who he believed were also trying to screw him, with a little justice. You know, Bunker, Bunker's accidents are sometimes provoked by people. And there was another provocateur there, none other than Colonel Gadhafi. Colonel Gadhafi wanted the oil. He offered Bunker a deal where he would take 51 percent and Bunker would take 49

Studs Terkel -- So he'd nat--

Stephen Fay Bunker was outraged at that.

Studs Terkel Nationalize the oil, however Bunker could retain 49 percent.

Stephen Fay But Bunker wasn't interested in that deal, it was his oil. Who is this man Gadhafi? He wanted the Marines to be sent into Libya when Gadhafi nationalized the oil. So he had before the nationalization taken out a great deal of money, and there he was, cut off without another penny. So he had to find somewhere else to play. Silver seemed like a very good bet. You know, I've been fascinated during, doing the research for this book to see the development of the newsletter, the investment newsletter business in this country. It's now very big business indeed, and one of the first investment newsletter writers is a man called Jerome Smith. He wrote a book called "Silver Profits in the Seventies," wonderful piece of gobbledygook whose basic message was very simple: that, that silver was in such scarce supply, and demand was growing so rapidly, that the gap existing between supply and demand would force the price up. Back to Adam Smith if you like.

Studs Terkel He called himself a libertarian.

Stephen Fay Yes.

Studs Terkel Jerome Smith.

Stephen Fay Yeah.

Studs Terkel One parenthetical point before we come to silver and Nelson and his -- although Bunker turned down Gadhafi's offer, in which he could retain 49 percent, Occidental Oil

Stephen Fay You bet!

Studs Terkel Accepted.

Stephen Fay Armand Hammer has been taking 49 percent

Studs Terkel And making

Stephen Fay Making billions of dollars, I

Studs Terkel So Bunker really screwed himself.

Stephen Fay Yes, he did. And of course hates Hammer with a living passion. And not just for that reason, for many others, but that the idea that this man who is in bed with the Russians, when I say he's in bed with Queen Elizabeth, Queen Mother as well, I don't mean that literally. But he's a great friend of -- he has a wide circle of friends. Doctor

Studs Terkel Doctor Armand Hammer plays all societies, all ideologies for money and power.

Stephen Fay Yes, I suppose that's a fair summary.

Studs Terkel But he -- in other words, Bunker, as you say accident-prone, also goofs up himself, too. He blew multi-millions, billions, by not taking the 49 percent.

Stephen Fay Right.

Studs Terkel Now we come, so now he is heard through Jerome Smith.

Stephen Fay He reads that book. He's persuaded by it. You know, he he he is in many ways a very simple man. The analysis doesn't have to be very deep, it just has to be immediately convincing. A matter of belief. So Bunker became a believer in silver, and he started to buy on a scale which nobody had ever bought before. Remember, he had quite a lot of money left over from the Libyan disaster. He made enough from Libya to satisfy you and me for the rest of our lives and a bit further beyond.

Studs Terkel Putting it mildly, yeah.

Stephen Fay Now, the trouble with the early purchases was that the price didn't go up the way Jerome Smith said it was going to go up. It did go up, Bunker helped it up a bit in 1974, but then it steadied up and Bunker thought this was all wrong. The price ought to be going up, and if it wasn't going up maybe he ought to give it a bit of a help. And what he decided, what what he needed to help the price up, was some allies. So where does he look for his allies? He obviously looks at the place where the, where the oil money is flowing. He starts in Tehran, but the Shah isn't interested. The Shah by this stage has gone beyond belief, never mind beyond greed. He was going -- this is in '75, he wanted to go to Saudi Arabia then, but King Faisal was murdered, he had to forget about that. During the interim when when things were not moving for him in Arabia, he tried to corner the soybean market in Chicago and succeeded.

Studs Terkel But there's a difference, isn't there, between the soybean market and the silver market in what you can do in speculation?

Stephen Fay There is a fundamental difference. You can buy as much silver as you can afford. In soybeans you can only buy three million bushels, the crop is something like 60 million bushels a year. So what Bunker did with Herbert buy positions as they're called in soybeans, three billion, three million bushels for himself, for Herbert, but also for his children and Herbert's children. Indeed, as somebody in Washington pointed out to me, everybody in the family had a position except the dog.

Studs Terkel Oh, so it's limited to certain number of bushels, but you can add different members of the family, an entourage buy

Stephen Fay Of course, the rules say

Studs Terkel This is a trick used in real

Stephen Fay The rules say that you can't have different members of the family doing it, but Bunker you know accepts some rules and he doesn't accept others when he doesn't like them, and he didn't like this one. Well, he was found out, and I think he only made a few million, a few million dollars in that little play. It was it was a diversion away from silver, something to be doing when when he was waiting for the time to strike in Arabia again, and that time came in '78. He was trying to find conduits to the royal family. And I have great sympathy with Bunker here, I tried to find conduits to the royal family too, and they're very, very difficult to come across, you have to expend a great deal of time and energy.

Studs Terkel By the way, in your book which is remarkable investigative work on your part and research, you actually traveled through various parts of the country, the world

Stephen Fay The world rather than the country, yes, I went -- I was fascinated when I first covered the story in Washington to discover that nobody was really looking into the European and the Arabian angles, and they are vital to the story, and the advantage I had really was being an Englishman. I was [sort of?] positioned between the two worlds in a way. So whilst everybody was beavering away in Washington and by goodness they were producing wonderful stuff in Washington on the Hill, I was able to go to Paris and Geneva and Zurich and eventually to get into Arabia to go to Saudi Arabia and Dubai. And it was there really that I was finding the story.

Studs Terkel Before we came into Arabia, the Arabian connection, who were these people? You had tips. It's a variety, speculators, a man named Theo Hook, who you called Theo Hook, others. Who were these? And then we come to a big question, ask you because you'd, the history of it. Why silver? What is it about silver and its history, and what distinguishes it say from gold and why -- this to me would be very fascinating. But first, who were these, you saw these different people.

Stephen Fay When I started doing the research for this book, I knew nothing about the futures markets at all. I was rather frightened by them. They were a foreign country, foreign language.

Studs Terkel Futures market means what?

Stephen Fay Now, let me tell you by analogy, because it's the only way I began to understand it. In the 1850s, California was opening up, rich land, lots of grain, but no need -- a much more grain than they ever needed in California. But there was no demand for it in the east, that was being supplied from around here. So you had grain in California and you had the hungry masses of developing, the industrial development, industrially developing Europe who wanted flour for bread. But there was no way that the farmers on the one hand and the flour millers on the other hand could finance that, could finance the trade. It took about three months to get around Cape Horn. The price might have changed utterly by the time it arrived. Now, I think this is one of the most acute creations of capitalism: they decided that they would have middlemen. Who would agree to buy and sell. In other words, to take the role of the farmer and the flour miller at some time in the future, three months ahead. Now, they were taking the risk that they were the speculators. Now, let's say you and I are in the game. I decide that the price of flour, the price of wheat is going to go down. So I sell a contract. You think the opposite, you buy a contract. One of us is right, the other is wrong. The one who's right makes the money, the one who's wrong loses the money. Now, from that very simple and clear beginning, these markets have expanded. First, they expanded into other commodities, into metals, coffee, sugar, as well as the grains which were the beginning of them. By the way, there is great dispute about where the first futures contract was written. I need hardly say that in Chicago they say that it was written in Chicago. In Liverpool they say that it was written in Liverpool, but it was much the same time.

Studs Terkel Here of course involving the pit. I'm thinking of the novels of Frank Norris and Dreiser.

Stephen Fay Oh, and the excitement of those stories, of the attempted corners in the wheat market late in the last century are marvelous, and it's a great pity we only discover them by accident. So what has happened and especially in the past 15 years, that the classic role of speculation has in my view been perverted, that the markets now are no longer to satisfy the demands of the producers and consumers and incidentally to allow the speculators to gamble. Speculation has become the obsession of the markets. And they're casinos, basically. They still have an economic function, but it's a very mild, a very slight, very slight part of the business.

Studs Terkel And you point out too that there's a rule here, there's a general pattern that the professionals, the sharp ones, the scholars of the game make it, and the amateurs blow it.

Stephen Fay Absolutely.

Studs Terkel This is invariably the

Stephen Fay The professionals are those who realize that fools and their money

Studs Terkel Soon parted. Soon

Stephen Fay Soon parted.

Studs Terkel And among them you met in your travels was someone Theo Hook.

Stephen Fay Yes. Theo Hook is a pseudonym. I agreed to use a pseudonym because he agreed to let me into his dealing room, I had spent days there.

Studs Terkel Dealing room.

Stephen Fay Now, that's where everybody sits behind monitors, consoles and they have direct lines to the pit. They have direct lines to Geneva, to London, to Hong Kong. Total instant world communication. All the world is in that one little room.

Studs Terkel Highly esoteric, this thing, I mean

Stephen Fay -- Very. Its own language, total language the term? long,short, bulls, bears. Now I finally worked out what all those meant. If if if you're the buyer, you're the long, and if I'm, I sell short. If you believe the price is going up, you're the bull, and if I think it's going down you're the, I'm the bear.

Studs Terkel And this is the were -- oh, selling short. This is what happened of course during the Depression, the crash, the sell short guys made a buck

Stephen Fay Of course they did.

Studs Terkel Including Joe Kennedy.

Stephen Fay Kennedy, Kennedy and Baruch.

Studs Terkel Baruch.

Stephen Fay And it was Baruch who paid for the republication of one of the greatest books on speculation which was written in London in 1840 called "Popular Delusions and the Madness of Crowds."

Studs Terkel Wow. And so into this world entered Nelson Bunker Hunt, But we're going to take a pause that -- well, you going to say.

Stephen Fay I was going to say that I must tell you about silver, why silver.

Studs Terkel I'm going to come, we're going to open the second half with that, because now we come to -- this has always fascinated me, I always wondered about it. What about William Jennings Bryan's speech? What did he mean by that, the cross of gold, the crown of thorns and cross of gold and crucify mankind on it and gold, silver, who benefits, who what? This always -- why silver and the world, the strange arcane world of Nelson Bunker Hunt with lots of money entered and greed. And my guest as you can gather is very, more than well-versed on the subject, eloquent on it and an excellent journalist, British journalist Stephen Fay, who, who's an old acquaintance of mine and from his other works as well. And "Beyond Greed" is this particular book, this study, Viking the publishers of the attempt to corner the silver market and what happened. It reads, by the way, it reads like a developing detective and mystery story. It's a very, it's a suspense story, and more of this in a moment with my guest Stephen Fay after this message. [pause in recording] And so resuming with Stephen Fay and "Beyond Greed." Silver. And now we go a bit into the history of silver.

Stephen Fay Well, as you know, it's been part of American mythology for a long time. You mentioned Bryan. Well that was a dispute about the coinage. As you know, there was a great deal of silver discovered in the West and rather as paper money devalued the coinage and in the 1970s with inflation, the amount of silver available from the Western mines tended to devalue silver and its relationship with gold. And this is the key thing. For centuries, the relationship between silver and gold was this: one ounce of gold was worth 15 or maybe 16 ounces of silver. When there was just a single metal backing the currency, which the governments in in 1873 decided must be done because because of the devaluing nature, because the devaluation of silver, that was the gold standard, the single metals standard, and that's what Bryan thought was so wrong, because obviously it was impairing the development of the Middle West and the West. After that, silver languished in the doldrums. The greatest corner in the silver market was created by Roosevelt, by the administration then in an attempt to protect the Western mines, it agreed to buy silver, all silver produced anywhere in the whole of the world for a guaranteed price. I think it was 79 cents an ounce. Now by the end of the war, the American government had three million ounces of -- three million, I don't mean three million at all. I mean three thousand million ounces of silver. They had

Studs Terkel Billions.

Stephen Fay Three

Studs Terkel Billion.

Stephen Fay Right. They had more silver than anybody had earned in the whole of the world. Now, this is a terrible embarrassment. They used some of it in the Manhattan Project, by the way, where they had the most expensive piping system anybody

Studs Terkel And so silver was developing, you just hit something.

Stephen Fay Right.

Studs Terkel A new kind of industrial use.

Stephen Fay That's it. We'd always thought of silver in the past as beautiful objects, family heirlooms, the family silver. That's what we think of it at.

Studs Terkel Tiffany's.

Stephen Fay Right. Now, the fact is you cannot make a photograph without silver. I mentioned the Manhattan Project; the advanced engineering industry was a massive consumer of silver. So what happened after the war was that the proportion of silver being used in the traditional sense, making the family silver, was falling all the time, and the use in the photographic industry and the engineering industry growing all the time. Now, for years this silver was supplied out of the American stockpile at a fixed price. One dollar and 29 cents. Year after year after year, wonderful bonanza for Eastman Kodak and various other companies like that. Well, that began to run out in the early '70s. And as I said earlier, people like Jerome Smith (a) saw that it was running out, (b) saw that the demand for silver wasn't falling off, and (c) saw that the production from the mines wasn't growing. Now, we have to differentiate between silver and gold. Gold has remained the metal that backs international currency. Although we're off the gold standard and have been for many years, America since 1973, the central banks of the world like to have bullion in their vaults to back their currency. So gold -- the use, the industrial and even the artistic use of gold covered no more than eight to 10 percent of the gold mined in every year. That's the difference.

Studs Terkel And so therefore with the growing industrial use of silver, the lower-rated of the metals, the precious metals, a new -- it seemed now hey, if a guy could corner this, and so reading Jerome Smith, now Nelson Bunker Hunt has found something. Now, he needs -- why does he need these allies?

Stephen Fay Well, first I should say the Bunker -- one of Bunkers myths, one of the things that so delights him, one of the beliefs. He believed that the relationship should be as it was in the 19th century, one to 15. Now, that was going to push up the price if if of course that that could be established, and as I say Bunker was always willing to give things a little bit of a help when when when the market wasn't behaving as he thought it ought to behave. Now then, one of the things taught me by Theo Hook, if you're going to try and move a price up in a market, the most felicitous way of doing it is to have two buying groups: one of them buying publicly well-known in the market, and the Hunts of course were extremely well-known in the market, and another in collaboration buying privately, so the market doesn't know where the money's coming from. There is so much money coming in that the market can't believe that the price can keep on going up the way it is. So they sell short, all the professionals sell short. My friend Theo Hook sold short in August 1979 and lost four hundred thousand dollars.

Studs Terkel He lost for selling short because he Because

Stephen Fay -- Because the price was going up.

Studs Terkel Was going up

Stephen Fay And he was betting that it was going to go down.

Studs Terkel So he didn't know about that.

Stephen Fay He knew nothing about the Arabs, and he as a most experienced market professional says that it was beautifully done.

Studs Terkel What was it that that Bunker had that much imagination, or was there somebody around and about?

Stephen Fay No, I think, I think it's, I think it's that -- if it's simple, Bunker can grasp it. The reason he can take it further than anybody else is we go back to the title of the book, "Beyond Greed." It's very difficult for us to understand. When he decides to do something he's going to do it on a scale that nobody else has ever done it before. So he had his vast purchases and then the Saudis started to purchase and he got deep into the royal family.

Studs Terkel Now, how did he -- now we come to something. His meeting certain members of the Saudi kingdom and power and glory.

Stephen Fay He dealt mainly through middlemen, through Saudi bankers who are close to the royal family. These are men from Jeddah. Saudi businessmen who had become very familiar over here.

Studs Terkel Naji Nahas.

Stephen Fay Now, Naji Nahas is a marvelous figure in this story. He's a coat-tailer. He's the most brilliant coat-tailor in the world. Just to tell you, just to give you an example of how a big position in a market can enhance your wealth all of a sudden, I calculated that on December 27th, 1979, the personal wealth of Naji Nahas increased by $29,714,000. And he was a small player!

Studs Terkel Yeah, he was a hanger-on, and I take it he was an -- someone called an arranger.

Stephen Fay That's right. He had in common with Bunker a love of horse flesh. So did one of the agents as it were of a very important Prince in Saudi Arabia called Prince Abdullah. He runs the National Guard, which is one of the internal armies. Nahas's friendship with the man I describe, a man called Mahmoud [Foustock?], was Bunker's way into the Abdullah entourage.

Studs Terkel And this was along somewhere at a racetrack.

Stephen Fay That was at Longchamp in Paris. When I wanted to meet Bunker, it wasn't easy for me to be -- to meet Bunker. I'd been to Dallas and he wouldn't see me there. I sought him out at the track in Paris, and of course there he was. It was predictable that

Studs Terkel At the track, so at the track

Stephen Fay -- This is some track, mind you, this is Longchamp in the middle of the Bois de Boulogne, a very pretty place.

Studs Terkel And but there is where the deals were being made.

Stephen Fay There

Studs Terkel Casually.

Stephen Fay There the idea was deposited in their heads, and it was the idea that a great deal of money could be made very quickly.

Studs Terkel May I read the opening sentence of your epigraph, the Adam Smith, in the very opening? "People of the same trade seldom meet together even for merriment and diversion, consider the race track. But the conversation ends in a conspiracy against the public or its contrivance to raise prices." But this is just perfect of course.

Stephen Fay Yes, it is. Bunker wasn't satisfied with one group, I mean he wanted to put together an amorphous but much more influential group than the one he could arrange in Paris. So he worked with the bankers, the Jedda bankers. He tried to interest some professional bullion dealers in Dubai. Dubai is a wonderful place, Studs, it's

Studs Terkel Dubai.

Stephen Fay Yes, it's the place where the smuggling trade in precious metals between India and the Gulf

Studs Terkel -- Did you go out there

Stephen Fay I did indeed. It's the most curious place. One side looks like one of the streets in Chicago, the other side looks like a little old Arab

Studs Terkel So what you were doing, you were in a sense a detective, weren't you? I mean you were a journalist investi-- but also this is kind of a detective story, isn't it?

Stephen Fay Well, I think all reporting is a detective story. I never use the word 'investigative journalism.' I think a reporter will do.

Studs Terkel Reporter.

Stephen Fay Anyway, I

Studs Terkel You're in Dubai.

Stephen Fay I talked to the professionals there. Bunker had preceded me in Dubai. He had been there a couple of years earlier trying to interest them in the game. They said they weren't interested. That's what they told me. But it was a vital moment in my researching this story, because it was evidence that Bunker had been going around Arabia. This wasn't gossip. This was first-hand evidence. I saw a picture of Bunker in one of the dealer's offices. It was first-hand evidence that he was going around trying to create this alliance. Now, although the Dubai dealers didn't come in with him, not formally anyway, I suspect that knowing what he was doing helped helped them decide their tactics, but he had persuaded the members of the royal family.

Studs Terkel So he did get that. By the -- you mentioned others. Who is Norton Waltwitch [sic]?

Stephen Fay Norton Waltuch is a dealer in New York, and he handled many of the Arab accounts. He had -- he was an experienced dealer. He'd done well in orange juice futures some years earlier. I love these futures contracts. Orange juice. Pork bellies, you know what pork bellies are? Bellies are bacon. Why don't they call it bacon?

Studs Terkel Oh, pork bellies, so bacon futures too.

Stephen Fay Right. And Waltuch was, Waltuch was their man in New York. Now, another thing you do when you're manipulating the price up, you create an excitement in the marketplace. What Waltuch would do, he would go into the pit and he would scream and shout and say, "Buy! Buy! Buy!" and he would buy everything that was thrown at him no matter what the price was, and people go on throwing at him, throwing, and he would be buying and buying!

Studs Terkel And so he became an ally.

Stephen Fay He would -- yes, he was the agent as

Studs Terkel He was the front, the man who created the actual excitement there. Visceral excitement.

Stephen Fay In the pit.

Studs Terkel In the pit. Now how did the royal family of Saudi Arabia do it?

Stephen Fay Ah, well, I mean, they were doing it through the middlemen who were themselves

Studs Terkel Through the

Stephen Fay Then buying in New

Studs Terkel So now it was working. Okay, now what went wrong?

Stephen Fay What went wrong was a very late act of self-defence by the markets. The Chicago market was more worried than anybody else. The Chicago market is the biggest grains market in the world. They believe that it's the last bastion of capitalism in the world. And they saw their market being possibly totally undermined by silver. They were very worried. They began to move to try and stop it. But in New York where so much of the action is silver and the Commodity Exchange, Comex, they were very unwilling to do anything to

Studs Terkel Is Comex a public -- Comex is a public agency, isn't it?

Stephen Fay No, it's like the Board of Trade in Chicago.

Studs Terkel Like the Board of Trade.

Stephen Fay You buy seats on it.

Studs Terkel Yeah.

Stephen Fay They didn't want to do anything to stop this business because as you know the dealers are making money whether -- as long as the price is moving. The only thing they hate is an absolutely stable price, then they can't make any money. What happened was that in the end they changed the rules. They changed them brutally. Bunker felt a great sense of injustice and it's the moment at which I feel sorriest for Bunker, because it was his greatest accident, the rule change. They said that nobody could buy any more, they could only sell. Well, that's a peculiar market, isn't it, when you can only sell.

Studs Terkel Why, why did they do that? Were they scared that it was getting out of hand?

Stephen Fay Yes, they were scared that Bunker was about to corner them. Squeeze them dry. And that he was about to, by squeezing them dry he would destroy the market. So it was an act of sort of animal self-defence. There were other reasons. Let's not have any illusions about that. I think the rule change is the most important one. But you had this curious thing in that winter, the price went so high that people decided they'd rather have the cash than their family silver. You remember those lines outside bullion dealers of people taking in their pots and their silver and their knives and forks and melting it down? So there was more silver about to, to sell to the Hunts. That was also important. And there was chaos in the world. It was the time of the invasion of Afghanistan, the hostages were in the embassy in Tehran, the siege at the Great Mosque in Mecca had just finished. It was a very unstable time. The price -- if Bunker had done nothing, the price would have gone up probably to a level that would have satisfied him. It's just that he had to interfere to push it out

Studs Terkel He had to. "Beyond Greed."

Stephen Fay Correct!

Studs Terkel Now also there was a possible -- by something interesting. In -- there were some leftist Middle Eastern people who had a newsletter exposé that was fairly accurate.

Stephen Fay It was astonishingly accurate. That was published here in December some six weeks I suppose before the price collapsed, and that outlined in considerable detail that the Hunts were working with with Prince Abdullah, that they had the common interest in horses. Abdullah's great passion is to go to the Equestrian Club in Riyadh, a vast, empty palace with the finest stables and the finest horses. They had said that they were -- that they, that the silver was being shipped to Europe, which it was. There's a technical reason for that, it reduces the stocks, creates greater pressure in the marketplace here. I might say that the people who wrote that were rather nervous when I spoke to them later. They didn't deny that the story was true, but they didn't want to talk about it anymore.

Studs Terkel Why, it would endanger them.

Stephen Fay Well, they they publish in Beirut and there are plenty of Saudis there. I think they just were, started to look over their shoulder, but their story was too accurate.

Studs Terkel So this was happening now. And now the rules were changed. He was in a tight spot. Didn't Bunker Hunt have the idea possibly of switching to another market? Silver into sugar?

Stephen Fay I don't think so. That was one of the theories. I don't think so. I think he was absorbed by silver. He felt that that would do. If, if he'd succeeded, if he had controlled the price of silver, my belief is that he wanted to move out of the futures market into the mines themselves. He started buying in silver mines.

Studs Terkel Now, where were the mines?

Stephen Fay They're in the West, they're in Idaho and

Studs Terkel Oh, you mean here, the Colorado, Idaho silver mines in United States. Where are the silver mines outside the United States?

Stephen Fay They are mostly in America. It's not a strategic metal in the Americas is what I mean, there's a lot in Canada, a lot in the States, Mexico, and Peru.

Studs Terkel Peru.

Stephen Fay The source of most of the metal that reaches the markets, there's some in Australia, some in Russia. I think there's one point we must get on to, Studs, it's important. When the price went down, Bunker had to pay money back into the market to cover those losses. Now, his position was so huge that the money he was paying back was millions of dollars a day. One of the final days, the margin call, that's what it's called, the margin call, to the Hunts was $120,000,000 from one broker alone. Now, how did they finance that? They borrow. They borrow from the banks, their brokers borrowing on their behalf borrow from the banks, borrow $1.1 billion dollars. Now, if -- one of the questions that occurred to me throughout this whole story was, why did the banks lend them the money? I think I now know the answer. You and I I suspect have always thought of bankers as prudent people. I mean, prudent to the point of actually disliking them for being prudent. A prudent banker is a fairly rare animal now, they're falling over themselves to lend money as long as it can be lent in chunks of 100 million dollars. They're a little rather less interested in lending you and I 50,000 to buy a house.

Studs Terkel A tremendous so we can -- "Beyond Greed" again. So it's a question of, if it's an incredible sum, they'll gamble.

Stephen Fay Yeah. And the -- yes, the banks think that their gamble is rather smaller than anybody else's. And as they, as it has turned out, they were quite right. They had lent money recklessly. There were many people who did it, but among those who did was the First National here.

Studs Terkel Oh, the First National. Oh, that's where Robert Abboud figured in it.

Stephen Fay Quite.

Studs Terkel To some extent.

Stephen Fay Yup. But the Swiss lent and there was plenty of money in New York. If the price had collapsed further after "Silver Thursday," and that the margin demands grew, Bunker would not have been able to repay the loans. The brokerage houses that had lent heavily to them would have probably collapsed. That in itself would have started a serious run on the banks, because everyone would have started asking for their money back. There would have been no money for for for loans. That would have caused further pressure on the banks, and there are many people in Wall Street who believe, and I share their belief, that the system itself, the whole financial system was in great danger in those few days at the end of March and beginning of April. Now, the way they got over the problem was to reschedule the loan. At a time when Paul Volcker was saying there should be no loans for speculation of any kind, right, and an honorable man in my view, at the time when he was saying no, he had to consider this question: "If I say no in this case, will the consequences be so awful that my general policy will be upset?" So he decided that he would say yes. He would allow another group of banks to raise a billion, $1.1 billion dollars on behalf of the Hunts who could then pay it back to the banks and the brokers who were in trouble because they had lent to the Hunts.

Studs Terkel So this is, he was finally -- he was able to pay back.

Stephen Fay He was able to pay back because he was so deeply in debt. If you and I are in debt, nobody, Paul Volcker doesn't intervene to see that the banks reschedule our loan.

Studs Terkel Then Bunker Hunt lost. Millions.

Stephen Fay He lost, the Federal Reserve has calculated it fairly exactly: $1.825 billion dollars. That was the family, not just Bunker.

Studs Terkel No, the fam-- now, the big question to ask. In that process, were there innocents who lost a great deal too, were caught in this web somehow or other?

Stephen Fay Yes, there were. There were people who were badly hurt by the rule changes. Now, my sympathy for them is -- yes, of course I feel, I'd feel sorry for anybody who's cleaned out. But you must remember that if they had not themselves been gamblers, and if they'd put their money into T-bills, Studs, the money would have been worth more than it was when they'd put it in. So, I mean that is a more conventional kind of greed. They suffer from that. Or as Galbraith never ceases to point out, and as we pointed out earlier, fools are always parted from their money. Or there's one born every minute.

Studs Terkel So this is basically that story, isn't it?

Stephen Fay It's, yes, it's -- I have learned a great deal about the way the world works merely by telling that story. The characters in it are riveting. Not people I'd want to go in the jungle with.

Studs Terkel But, by the way, this is -- this is a parable, isn't it? It's a true story but a parable at the same time, isn't it?

Stephen Fay I would put it differently. I just think that art is incapable of imitating life.

Studs Terkel Do you know something? I thought it was very poignant. I'll never forget this woman recalling a Bengal famine in India, this actress, and she she remembers this event in which this old lady walked to the auditorium with a cow in a -- it's a famine-ridden village in itself. And she wants to give the cow to the acting troupe that will distribute you know, the milk to the kids. And she said, "It's so remarkable. I mean, we are actors, acting these out. Art I'm afraid, art is very pale compared to life." Remember her phrase, "very pale indeed," you know, and that's what you're saying.

Stephen Fay Yes.

Studs Terkel These sound like, it sounds like obviously Sidney Greenstreet, Peter Lorre, "Maltese Falcon," Claude Raines. You sound like you're Humphrey Bogart.

Stephen Fay Well, thank you.

Studs Terkel But it does have that -- and yet it is telling you how power, power beyond itself works and it's sometimes

Stephen Fay It's about power now. This is new, this is a new business now. This is the post-'73 economy in which we find ourselves, an economy of great inflation, of great unemployment. A terrifying state in which we find ourselves, and we are all going to have to understand the language of economic policy, and that includes the language of the markets. This is not written as a textbook for a moment.

Studs Terkel No.

Stephen Fay But I have learned a great deal about the state of the world in which we live.

Studs Terkel You yourself have, yeah, because this was -- sin-- you have been a feature writer, you've written about the political scene, you've written about hoaxes.

Stephen Fay I've written about Chicago,

Studs Terkel You've written about Chicago, too. Your father was the Irish drama critic at Abbey Theatre. But you were learning in the work and working on this book "Beyond Greed," you were entering that arcane kingdom and realm of finance and speculation.

Stephen Fay But, but Studs, my claim is that we are all citizens of that kingdom, and our problem is that we haven't realized just how subject we are to it.

Studs Terkel So what is the lesson that Bunker Hunt learned, or is he on to something else now?

Stephen Fay Well, Paul Volcker of course made a condition of the billion-dollar loan, and that was that Bunker couldn't speculate anymore. Now, this of course hurt Bunker, speculation's in the blood. So he's out of the markets and is until his loan is paid off, and the interest on it is very brutal indeed. Just imagine the interest on $1.1 billion dollars. It comes to about 230 million a year at 20 percent.

Studs Terkel So had he succeeded with the Arabian connection help. What would that been had he succ-- in cornering the silver market? Had he succeeded?

Stephen Fay Had he succeeded in doing what I think he wanted to do, which was not just corner the market, that's a short-term thing. If he had succeeded in controlling the price of silver, he would have grown a money tree. Whenever he wanted money, he would just put the price of silver up, and in it would come.

Studs Terkel And that is why then say Walter Hoving of the world of arts and the humanities, Hoving, who was head of Tiffany's for a while, since Tiffany is that the genteel world of people, silver and fancy things, these the old rich or new rich wannabe part of old rich, he was furious and called it "unconscionable."

Stephen Fay "Unconscionable." An ad he put into "The New York Times" with a wonderful sense of timing, it went in the day before "Silver Thursday," Hoving of course suffered terribly. I mean, it was, his outrage was also that he saw his business disappearing

Studs Terkel Oh, of course, if Bunker could manipulate, could you control the price of silver, there goes Tiffany's.

Stephen Fay Well, they do sell a couple of other things besides silver, Studs, but it's a big part of their business.

Studs Terkel Well, the book is "Beyond Greed," and Stephen Fay as you can gather is a highly imaginative and exciting journalist, and the book is that indeed, Viking the publishers.

Stephen Fay I hope the, I hope the emphasis is on exciting rather than imaginative, Studs.

Studs Terkel Oh, no, imaginative

Stephen Fay All this is true!

Studs Terkel It's true, no, I mean imaginative in finding out the sources and all that. Absolutely. investigative. Or as you've put it, a reporter.

Stephen Fay Yeah.

Studs Terkel Yeah, we have a friend we both admire, James Cameron, he says "I'm just, it's just my trade." He says, "Just my trade." And "Beyond Greed" is the book by Stephen Fay, Viking the publishers, it's available. It's terribly gripping reading indeed. Thank you very much.

Stephen Fay Thank you, Studs.