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A gold-plated dud

Just a dumb story all around.

When state lawmakers decided in 2015 that Texas needed to be the only state to have its own precious metals depository, supporters said there were plenty of reasons the project would be a gold mine.

The University of Texas/Texas A&M Investment Management Co., which handles the schools’ endowment, owned hundreds of millions of dollars-worth of gold as an investment, stored for a fee in a New York City vault. A state-owned depository “will repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas,” Gov. Greg Abbott said.

Citizens, too, were clamoring for an independent-minded location they could trust with their valuables. “When I first presented this, to be honest with you, we got hundreds and hundreds of people from all over the world, really, who wanted to be able to put their gold in something that has the Texas banner above it,” said Rep. Giovanni Capriglione, R-Southlake, the bill’s author. “This doesn’t work in Wisconsin, it doesn’t work in Idaho.”

Best of all, because the state would find a private partner to build and own the physical depository, it would cost taxpayers nothing. The enterprise would even reap a big profit for Texas. “We estimate that we could raise tens of millions of dollars in fees,” Capriglione testified.

More than three years after the depository opened, none of those things has happened. Yet earlier this year state lawmakers quietly voted to let the state borrow millions of dollars to bail out a project created to fix a problem that didn’t exist, and which they had vowed would cost nothing.

“It’s ridiculous,” said Sen. Kel Seliger, R-Amarillo, one of only two senators to oppose the bill. “I don’t think the State of Texas should be in the commercial real estate business, or the gold bullion business.”

The UT/A&M investment company liquidated its gold more than a year ago without moving any bullion back to Texas. A spokeswoman said the agency currently owns no precious metals and so has no need for storage. No other state entity has metal at the Texas depository.

In the time since state leaders created the Texas facility, two large private competing depositories have also opened, in Shiner and Dallas. Officials said Texas Bullion Depository is currently less than 10 percent full. Taxpayers, meanwhile, have yet to see a penny from the enterprise.

Worse, the state’s partner, Lone Star Tangible Assets, recently revealed it is looking to sell the new facility, placing the state at risk of losing control of the entire enterprise. In response, two months ago legislators gave Comptroller Glenn Hegar permission to borrow up to $20 million to buy it.

How a project touted as a golden opportunity for taxpayers devolved into a bait-and-switch that could instead cost millions is a classic tale of government mission creep. It also raises new questions about the odd-couple partnership between the State of Texas and the high-volume precious metals sales industry, a sector that has inspired numerous warnings and enforcement actions from federal and state regulators, including the Texas attorney general.

“When I saw this, I thought, ‘This is going to be embarrassing for the State of Texas,’” said Paul Montgomery, a precious metals dealer and appraiser who has worked with regulators to bring cases against coin dealers who scam investors.

I don’t think you can claim that people were “clamoring” for this without citing some evidence of said clamor. There are enough gold bugs in the state that I can believe some people wanted this, but in the big picture that would be little more than a murmur. Be that as it may, here we are. I remember this as it was happening, and I definitely remember thinking it was deeply dumb, but I figured it was the mostly harmless kind of dumb. I never bothered to blog about it because once you link to the story and say “this is dumb”, there’s really nowhere else to go.

This will cost us a few million bucks, but in the grand scheme of things that’s a rounding error in the budget. Compared to Greg Abbott’s border wall extravaganza, this is peanuts. Everyone should mock Rep. Capriglione for the rest of his life because of this, but beyond that it’s not worth the effort. Honestly, in some ways this is almost charming, like the kind of old-school dumbassery that powered a million Molly Ivins bon mots. We’d be in a much better place if this were the biggest outrage of the 87th legislative session.

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3 Comments

  1. nick says:

    Every good king needs a strongroom filled with riches. You can see this in all the old movies with kings and strongrooms.

    I’ve always thought that was what *really* motivated our in-his-mind King Greggo I in this bull-ion foolishness.

    And follow the money trail: some rich supporters have been well paid off by this scheme.

    🙁

  2. David Fagan says:

    25 days and counting………

  3. Glen Tomkins says:

    Gee, the only thing that might save this enterprise from total disaster would be if the US govt defaulted. Gee, who controls whether or not that happens?