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The OCC’s Response

I received a response, via my local congressman’s office, from the Office of the Comptroller of the Currency, to the concerns I raised about recent Quarterly Derivatives Reports for the OTC derivatives positions of US banks. As a refresher, my concerns were previously presented to subscribers on several occasions and most recently in this public article a month ago –

Before I reprint the OCC’s response in its entirety, I would remind you that in the wide range of how the agency might possibly respond, there was no way that it could ever openly acknowledge that Bank of America or other large US banks had done (or were doing) anything illegal, as it would be against the law for it to disclose such information before taking legal action against any of the banks involved. For sure, after summarizing my allegations accurately in the first paragraph, the OCC’s response was a blatant obfuscation of the issues, as fully expected.

On the other hand, were my allegations frivolous or without merit, I do believe the OCC would (and should) have shown no hesitation in pointing this out. Above all, the OCC’s response eliminated any possibility it could now claim it was unaware of the issues. After reading the OCC’s response, I’m more convinced than ever that it was, essentially, unaware what Bank of America had done and that BofA was as dumb as a bag of rocks for getting as heavily involved in precious metals (silver) derivatives as it had.

Therefore, the very best I could have hoped for would be for the OCC not to tear my claims apart and, instead, to neither confirm nor deny my allegations and, essentially, leave open the likelihood that it would pursue the matter with Bank of America and the other banks privately and in a more formal regulatory manner. To my mind, the OCC’s response was the epitome of confirming the legitimacy and seriousness of my allegations and its refusal to deny what I claimed was beyond my most optimistic expectations.  As always, I will let readers decide for themselves the true meaning of the OCC’s response.

April 28, 2022

The Honorable Brian Mast
United States House of Representatives
601 Heritage Drive, Suite 144
Jupiter, Florida 33458

Dear Representative Mast:

Thank you for the recent inquiry on behalf of your constituent, Mr. Theodore Butler. Mr. Butler contacted your office in reference to the Quarterly Derivatives Report issued by the Office of the Comptroller of the Currency (OCC). Specifically, Mr. Butler requested information on why U.S. banks would hold large derivates positions in silver and whether those positions are suppressing the price of silver and endangering the banks and financial system.

While silver in exchange, coin, and bullion form is a permissible national bank holding under OCC rules (12 CFR 7.1022) and the National Bank Act, a derivative with a precious metal like silver as an underlying asset is defined as a financial instrument and is therefore subject to the “Volcker Rule.” (The technical name of the Volcker Rule under the OCC’s rules is Proprietary Trading And Certain Interests In And Relationships With Covered Funds (12 CFR 44)). Most large national banks are subject to the Volcker Rule’s proprietary trading and covered fund restrictions, which generally prohibit national banks from engaging in proprietary trading, including in derivatives.

The Quarterly Derivatives Report is a high-level compilation of published data and is insufficient to ascertain whether a specific bank’s derivatives position in silver is outsized, unhedged, proprietary, or customer-driven. OCC examiners use this report, along with other sources, to assess the bank’s compliance with the Volcker Rule and other OCC rules. Such other OCC rules (12 CFR 7.1030) govern the derivative activities of national banks and specifically require national banks to conduct all derivative activities in a safe and sound manner. OCC examiners regularly review bank trading activities for impermissible proprietary trading, as well as to ensure banks operate precious metals and other trading activities in a safe and sound manner and in accordance with applicable rules and regulations, including the Volcker Rule and 12 CFR 7.1030.

We appreciate the opportunity to address Mr. Butler’s concerns.


Carrie Moore
Director, Public Affairs and Congressional Relations

The OCC’s response, to my mind, is quite similar to the CFTC’s response of a year ago to my allegations that the concentrated short position of the 4 largest traders in COMEX silver futures was instrumental in the continued price manipulation. The main difference was that the CFTC’s response followed decades of it denying that anything (and everything) I alleged about a COMEX silver manipulation was incorrect – marking an abrupt departure of denial by the agency.

In the case of the OCC, I had never contacted the unit of the US Treasury Department prior to this year. Remarkably, according to my read from both the CFTC’s and OCC’s responses, neither agency has offered any strong rebuttal to my allegations that the price of silver is being manipulated, effectively, by large and mainly US banks – both on the COMEX and on the OTC markets. This has the effect of confirming that I am looking at things in the correct manner.

This, of course, begs the question that if US regulators are neither confirming nor denying that a bank manipulation of silver is occurring – then why the heck is the price of silver still being manipulated? The answer, as appears clear to me, is that this latest downdraft in price could and should be the final cleanout to the downside before the long-awaited final liftoff takes hold. Therefore, if true, this is the last time to get fully onboard and hold on for dear life.

Reports that Barclays had unilaterally suspended issuance of new ETNs (exchange traded notes) on a wide variety of commodities also made the news. ETNs are similar to ETFs (exchange traded funds), except that ETNs are debentures whose returns are governed by the performance of the underlying commodity – whereas ETFs are more akin to direct ownership of commodities, including silver. I was asked by Ed Steer what this news about Barclays meant and I responded by sending him this link -

Expounding a bit further, it would appear that Barclays had too much on an exposure on the short side as a result of it issuing so many of these commodity-linked ETNs and (wisely) chose to limit its exposure by suspending new offerings. After all, commodity prices (not for silver) have been quite strong, meaning that Barclays was on the wrong side as the issuer of ETNs, effectively putting the bank short.

Some have maintained that the massive OTC precious metals derivatives position of Bank of America is due to the issuance of structured notes based upon silver (I agree that is likely, along with the position being the result of a lease and short sale on silver). The connection here is that just like Barclays has discovered (after the fact) that being too heavily short commodities as a result of its issuance of ETNs based upon commodities is not a wise thing, Bank of America may be about to learn (the hardest way possible) of the folly of being massively short silver in its OTC dealings. Certainly, nothing in the OCC’s response would detract from that conclusion.

Another news development of the past few days also points, indirectly to be sure, to this whole matter of Bank of America’s massive OTC precious metals derivatives position and how it necessarily involves not just the OCC, but the CFTC as well. The civil charges by the SEC and the criminal charges by the Department of Justice against the operators of Archegos Capital Management, were joined by related civil charges by the CFTC, since the accused was involved in swap derivatives contracts, as a means of perpetuating the scam against the banks involved.

Therefore, I would hope and expect that the CFTC would pay close attention to the OCC’s response above, as its refusal to deny and, effectively, confirm my allegations against Bank of America and other banks, are also very much in the CFTC’s wheelhouse.

Ted Butler

May 2, 2022

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