Nelson was friends with and a financial supporter of white supremacists Senators Jesse Helms, of North Carolina and Strom Thurmond, of South Carolina. He was also a major financial supporter of the right wing John Birch Society. And he was famous for searching his couch cushions looking to recover lost change, his own and visitors.
Said a family member; “Sometimes he’s brilliant. The rest of the time you wonder whether he’s really there with you or not.” Said a business partner; “He doesn’t just want some of it. He wants it all.”
Said his father, legendary oil man and bigamist Haroldson Lafayette Hunt Jr. (above); “I could find more oil with a road map, than Nelson could with a platoon of fancy geologists”. Said Nelson himself; “Worrying is for people with strong intellect or weak character.”
But maybe the key to his personality was that Nelson Baker Hunt was born a second son. Nelson’s eldest brother - his father’s “run away favorite” - Hassie Hunt (above, left), was an oil wildcatter and “a millionaire in his own right by the age of 21.” And then this older, smarter brother developed schizophrenia and his desperate father decided to treat him with a lobotomy. Since that "Hail Mary Pass" of treatment, Hassie spent the rest of his life under 24 hour nursing care.
Thus Nelson (above) became the replacement son. But he was never his father’s favorite. And that may explain why one dark night in 1974 Nelson and a staff descended upon New York City in three charted 707 jets,. When the jets took off again, they flew 40 million ounces of silver to Nelson's leased vaults in Switzerland.
Now, silver is a commodity, like wheat or oil or steel. You can buy a commodity, and you can even sign a contract pledging to buy it at a set price some time in the future. These futures are a bet as to what the price of that commodity will be. The vast majority of futures traders never intend upon taking delivery of the actual commodity. They merely bet on the market, providing producers and buyers a hedge against price fluctuations of the actual commodity. People who buy gold on TV ought to remember that.
In most cases, these bets stabilize the market, which is good for everybody. And to encourage trading in futures, buyers have to put down only a small percentage of the total price, called a “margin”. But Nelson was willing to suffer the expense of transportation, storage and insurance, by actually taking delivery on his silver, because he believed in a doomsday fundamentalist theology, that sooner or later the world’s financial markets were going to collapse. Paper money would become worthless. And if all that happened, a commodity like silver would still have intrinsic value. Not like, food, you know. Just intrinsic, some how.
In 1974 the world wide production of new silver was 245 million ounces, while annual consumption was 450 million ounces. The imbalance (67%) was made up through recovery of “scrap silver”, everything from recycling industrial applications to melting down family heirlooms.
But that imbalance also meant the control of a tiny percentage of the world’s silver could swing the price. This meant that every ounce of silver that Nelson bought and now stored in his Swiss vaults was another ounce removed from the market. And that drove the price of the remaining silver up. As the price went up, the silver in Nelson’s vaults increased in value. Thus, on paper, he was getting richer by the day.
Nelson Bunker Hunt (above) cashed in on that increase by using it as collateral for loans, which he used to buy more silver and silver futures. Which took even more silver off the market. Which made Hunt's silver even more valuable. He was gambling that the price would always go up, and he seemed to have enough control of the game, called leverage, to insure that it did.
The price rose from $6.22 per ounce in November of 1971 to $11.00 per ounce by the end of 1979. Nelson now controlled 1/3 of all the silver in the world not sitting in various government vaults.
But Nelson’s manipulations had not gone unnoticed. Tiffany and Company made money selling silver art (above) to consumers. They took out a full page ad in the New York Times naming Nelson, and stating, “We think it is unconscionable for anyone to hoard several billion, yes billions, of dollars worth of silver and thus drive the price up so high that others must pay artificially high prices for articles made of silver.” What the retailer meant, of course, was Tiffany was having to pay more.
By the end of December 1979 the price of silver had risen to over $50 an ounce. Five years after that first late night silver flight, Nelson (above, right) and his younger brother (above, left) had earned between two and four billion dollars in paper profit from the (by then) 100 million ounces of silver they had in their Swiss vaults, And they had future contracts to buy much more at even higher prices.
But while Nelson had been buying silver futures “long”, betting that the price would go up, he was also squeezing the manufacturers - like Tiffany's - who needed silver today. They would have to pass their price increases to the millions of customers who used their products...
On 7 January, 1980, the five year old United States Commodity Trading Commission, which had oversight of all futures markets, issued “Silver Rule 7” which increased the margin required for silver futures. Just four days later the price of silver had fallen back to $25 an ounce.
As the value of Nelson’s collateral began to plummet, the brokerage houses and banks which had made him loans to buy silver futures, now issued a $100 million "margin call" on those loans. In effect, Nelson would either have to cough up that $100 million, or fulfill the contracts, and take delivery on and pay for $1.7 billion in additional silver he did not already own.
Early on the morning of Thursday 26 March, 1980, before the commodity markets opened, Nelson’s younger brother and partner, Herbert Hunt (above), placed a telephone call to the chairman of the Futures Commodity Trading Commission and asked him not to open the silver market. The reason given for that extraordinary request was that the Hunt brothers would not be meeting their margin calls that morning – “would not”, Hunt had said, not “could not.”
As John Bloom noted in an article he wrote for the magazine “Texas Monthly” “Here was one of the leading spokesman for unbridled free enterprise in America, asking a federal regulator to close a market. If the federal government would not do that, then he simply wouldn’t pay up.”
That day, the silver markets did open. And they immediately collapsed. The price of silver futures fell from $25 an ounce to $10.20 an ounce. The day passed into history as “Silver Thursday”.
As the Federal government attempted a postmortem, they discovered that Nelson Hunt had assets of $1.5 billion, and now owed $2.43 billion. In short he was bankrupt. In addition he owned 6.5% of one of the brokerage houses which had loaned him money on the Silver Futures, a fact never revealed to the Security Exchanges Commission, which was supposed to regulate those houses. That was illegal.
The feds also discovered that Federal Reserve Chairman Paul Volcker (above) had met with Nelson several times in an attempt to find funding to save him from bankruptcy., and allow him to continue to unbalance the silver market.
As Time Magazine noted, Volcker’s “continual monitoring of the situation was interpreted by bankers to mean that the Federal Reserve…favored some kind of bailout to keep the Hunts from going under…(which) showed that when big speculators lose millions, “telephone calls come to Paul Volcker for a quick fix.” Those banks put together a one billion dollar line of credit to save, not the Hunt brothers, but the brokerage house he had defaulted. Yes, it has all happened before. Several times.
The aftermath to Bunker Hunt’s silver manipulation is also informative. The banks went after the Hunt’s fortune, seeking return of another billion dollars lost in their game. Like all good defendants, Nelson countersued, accusing the banks of lending him money which they knew he couldn’t possibly pay back. It was an absurd argument, but it allowed Hunt’s fifteen lawyers to negotiate a reduction of the repayment. Yes, the rich really do live in a different world than average people.
In 1998 a federal jury found Herbert Hunt (above, left), Lamar Hunt (above, center) and Nelson Baker Hunt (above, right) guilty of fraud and conspiracy to monopolize the world's silver market. Nelson was banned for life from ever trading in futures again. And finally Nelson Bunker Hunt was personally forced into Chapter 11 bankruptcy.
Nelson was certainly not reduced to poverty. The extended family remains wealthy and politically well connected. A reporter for the Dallas Morning News found in March of 2009 the 83 year old living “in relative modesty in a North Dallas house with his wife of 57 years”. Nelson insisted he had no regrets.
In better times, Nelson Baker Hunt said, “People who know how much they're worth, aren't usually worth that much.” Stephen Susman, one of Nelson’s lawyers, said, “These people are gamblers. If you’re a gambler, you take your shot.” Except, of course, when these rich folks win their gambles, it's their money. When they lose, it's ours.
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