Gold and the Committee on Banking and Financial Services

  • Gold is purchased as a hedge against inflation, and is traded in the financial markets just like any other commodity.
  • Gold is a tangible asset, unlike stocks and bonds, that is considered by many to be a store of value.
  • Institutions and individuals use gold as a way to preserve wealth.

Gold is an investment that’s long been considered a good way to hedge against inflation. For many years, it was the primary way people hedged against inflation, mainly because there was still a lot of gold in the world.
But gold has fallen out of favor in recent years as people realized that there were other ways to hedge against inflation, like purchasing Treasury Inflation Protected Securities (TIPS).
Still, gold has its own allure for investors. As a way to store wealth, and as a way to diversify into an asset that isn’t as susceptible to inflation, gold is a simple investment that has attracted new investors in recent years.

What Is the Committee on Banking and Financial Services?

The Committee on Banking and Financial Services is a standing committee of the U.S. Senate charged with overseeing the nation’s banking system. The Committee was established on Jan. 3, 1932, by the act of Congress. Its jurisdiction is broad, covering all forms of regulation of banking institutions, excepting those concerning coin or currency.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Committee on Banking and Financial Services is responsible for supervising and regulating the U.S. financial sector.

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Understanding the Committee on Banking and Financial Services

The Committee on Banking and Financial Services was established in 1977, and the committee is currently chaired by Jeb Hensarling (R-TX). The committee is responsible for reviewing and proposing legislation and regulations related to financial institutions, markets, insurance, housing, and foreclosures.
The committee is also responsible for overseeing the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). The committee’s activities also include investigating possible wrongdoing at financial institutions.

The committee has jurisdiction over the following agencies:

  • The Board of Governors of the Federal Reserve System
  • The Securities and Exchange Commission
  • The Federal Housing Finance Agency
  • The Federal Deposit Insurance Corporation
  • The Office of the Comptroller of the Currency

History

The concept of gold-backed IRAs was first proposed in a 1975 report, “A Monetary System Based on Gold and Silver,” published by the Committee on Banking and Financial Services of the House of Representatives. The report proposed the creation of a public gold reserve that would be owned by the U.S. and backed by gold held by the Federal Reserve.

The gold reserve would expand in 5% increments each year until there was a 100% reserve. After the reserve reached 100%, the system would be transitioned to a gold-backed currency.

Key Accomplishments

2004: Introduced the American Gold Eagle Coin Act of 2004, which authorized the minting of 1-ounce, 1/2-ounce, and 1/4-ounce gold coins

2009: Introduced the American Gold Bullion Coin Act of 2009, which authorized the minting of 1-ounce and 1/2-ounce gold coins

Subcommittee Members
Representative:
Chairman: Jeb Hensarling
Ranking Member: Maxine Waters

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Oversight of Banks and Credit Unions

On Jan. 25, 2020, the Committee on Banking and Financial Services (Committee) published its first Oversight Plan. The plan, titled “Protecting Our Economy: Oversight of Banks and Credit Unions,” covers the following topics:

  • Oversight of Financial Institutions
  • Financial Crisis Response
  • Consumer Protection

Oversight of Securities Markets

The Committee on Banking and Financial Services oversees the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Stability Oversight Council (FSOC), the Office of the Comptroller of the Currency (OCC), the Financial Crimes Enforcement Network (FinCEN), the Federal Financial Institutions Examination Council (FFIEC), and the National Credit Union Administration (NCUA). The Committee also oversees the implementation of Dodd-Frank, the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Oversight of Consumer Financial Protection

Committee on Financial Services
Oversight of Housing and Insurance
Oversight of National Security and International Trade and Finance
Oversight of Securities Markets and Government Sponsored Enterprises
Oversight of International Monetary Policy and Trade
Oversight of Monetary Policy and Trade
Oversight of Global Financial Markets and Regulation
Oversight of Taxation, Social Security, and Medicare
Oversight of Financial Stability, Oversight of Financial Institutions
Oversight of Government Affairs
Oversight of Financial Institutions

Oversight of Community Reinvestment

The Gold IRA is overseen by the Committee on Banking and Financial Services, a subcommittee of the U.S. House of Representatives Financial Services Committee. This committee oversees banking, savings and loans, credit unions, insurance, securities, and other financial services.

The committee conducts hearings and investigations, prepares reports, and acts as an investigative arm of Congress. It is made up of 55 members, 22 of whom are Democrats and 33 of whom are Republicans.

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Special Considerations

In April 2009, the Government Accountability Office (GAO), the investigative arm of Congress, issued a report identifying several risks of investing in gold, including:

  • The gold market can reflect fraud.
  • There may not be sufficient liquidity if gold prices increase.
  • Gold prices are volatile and can be affected by environmental and economic factors.
  • Individuals may not be able to sell gold easily if prices decrease.
  • Gold’s value can decline over time.
  • Gold can be stolen and is susceptible to loss.
  • Gold is lobbying against legislation that may impede its accessibility.
  • Gold does not require the same regulatory protections as securities.
  • Gold is not backed by a government or central bank.

These risks prompted the Committee on Banking and Financial Services (Committee) to examine whether or how the government might address them.

The Committee’s final report, which was issued in December 2010, proposed several changes to existing law, including:
Disclosure requirements on gold and other precious metals;

Establishment of a government-backed gold depository;

Elimination of tax penalties on gold transactions;

Expansion of investment options in gold and other precious metals.

The recommendations of the Committee could have a significant effect on the precious metals market.

The Bottom Line

The harsh reality about gold is it’s a commodity. The financial world has treated it differently for many reasons, some of which still linger today. Investors should remember that when investing in gold, they’re buying a commodity, not an investment.

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