The Wild, Wild Debt: The Hunt Brothers Silver Scam

Silver Thursday: The Day the Silver Market Collapsed

On the morning of March 27, 1980 – referred to as “Silver Thursday” – chaos broke out on New York’s commodities exchange floor. Silver prices were collapsing, dropping more than 50% in one day (learn.apmex.com). Silver had been selling for around $21 an ounce earlier in the day; by the afternoon, it had plummeted to around $10. Brokers yelled into telephones as billions of dollars in value melted away. At the eye of this tempest were two Texas billionaire brothers, Nelson Bunker Hunt and William Herbert Hunt, who had appeared invincible as the kings of the silver market just weeks before.

The Hunt Brothers: Oil Fortune and Silver Obsession

Bunker and Herbert Hunt were the beneficiaries of one of America’s grand oil fortunes, the sons of the fabled wildcatter H.L. Hunt. By the 1970s, they had already accumulated an enormous wealth. But Bunker, the older of the two brothers, distrusted paper money, believing that runaway inflation and economic instability would devalue the dollar shortly (washingtonpost.com).

Building a Silver Hoard: The Start of a Market Manipulation

In 1973, when silver sold for around $2 an ounce, the Hunts secretly started accumulating as much precious metal as they could. For them, silver was a more secure wealth repository than bank money. Bunker even had apocalyptic anxieties based on his religious beliefs that paper money would eventually be useless during a worldwide calamity. A vault containing silver bullion would be the best insurance policy if that day arrives.

The Strategy Intensifies: Futures Contracts and Physical Delivery

In 1974, their father passed away, leaving the brothers a new source of capital (his wealth was estimated at $2–5 billion). Empowered by their immense wealth, the Hunts redoubled their efforts to corner silver. During the late 1970s, they continued buying, expanding their strategy beyond bullion bars and coins to invest heavily in silver futures contracts. Notably, they decided not to play by the traditional commodity-trading rules; rather than closing their futures trades for cash, the Hunts insisted upon the physical delivery of each bullion bar they had contracted for (investopedia.com).

Cornering the Silver Market: A Global Impact

They warehoused the metal in storage facilities and Swiss bank vaults, pulling a constant supply of silver off the open market. Every delivery reduced the supply for all others, pushing prices upward. By 1979, this hoarding tactic had ballooned into a blatant effort to corner the world’s silver market. Their buying was almost incomprehensible in its scope. The Hunts and their investors, said to include some wealthy Saudis, had accumulated about 200 million ounces of silver by 1979, representing about one-third of the world’s total supply of tradable silver.

Silver Mania: Soaring Prices and Public Hysteria

Silver was trading at about $6 an ounce in early 1979; in January 1980, it would reach an all-time high of $48.70. At that height, the Hunts’ stash was worth an estimated $10 billion on paper. The mania spread well beyond Wall Street. With prices soaring, everyday Americans began rummaging for any silver they could unload. Families dug up heirloom silverware and antique tea sets to be melted down for cash. Thieves started breaking into homes to steal sterling candlesticks and flatware. Even physicians felt the pinch as the price of X-ray film, which was silver-coated, soared.

Public Backlash and Market Tension

The hysteria reached such absurd proportions that Tiffany & Co., the famous New York jeweler, took a full-page newspaper ad condemning the Hunts. “We believe it is unconscionable for anyone to accumulate several billion, yes billion, dollars’ worth of silver and thereby bid the price up so high that others have to pay artificially high prices for silver articles,” the ad staunchly asserted. The Hunt brothers’ personal crusade was twisting the price of everything from medical equipment to forks to jewelry, and individuals were beginning to get upset.

The House of Cards: Leverage, Margin, and Regulatory Action

For a while, the Hunts seemed to have staged one of the greatest market plays in history. But their position was as risky as it was massive. By early 1980, the brothers had borrowed massively to continue purchasing more silver. Their empire was built on a shaky base of margin loans – funds borrowed by brokers and banks hungry to profit from the silver boom. The Hunts’ great influence had also drawn the attention of market regulators and the U.S. government.

Silver Rule 7: The End of the Silver Speculation

In January 1980, as the silver frenzy was nearing its peak, the Commodity Exchange (COMEX) in New York acted forcefully. The exchange introduced “Silver Rule 7,” which suddenly restricted the rules on speculative silver trades, essentially banning most new silver purchases on margin. The Hunts suddenly could not use any more leverage; if they wanted to buy more silver, they would have to put up 100% cash in advance. No more borrowing to magnify their bets. At the same time, Federal Reserve Chairman Paul Volcker quietly encouraged banks to stop lending to anyone speculating in precious metals. The signal was clear: the Hunts’ silver binge had to be stopped.

Collapse: Margin Calls and the Fall of the Hunt Brothers

Abruptly denied the easy credit and leverage that had fueled their buying, the Hunts grew increasingly isolated. The demand side of the silver equation – which they had so wildly expanded – started to shrink. Then the unavoidable occurred: gravity took hold. Silver prices began slipping after reaching a peak near $50 an ounce in January. Initially, the drop was slow, but as soon as news got around that the party may end, other investors started scurrying for the exits. The Hunts attempted to prop up the price, but with no new buyers, their effort was akin to trying to stem the tide.

Silver Thursday: The Aftermath and Financial Ruin

In late March 1980, the bottom fell out. On Silver Thursday, with silver’s price plummeting, the Hunts were deluged with a barrage of margin calls – requests from their brokers for additional cash to secure the loans that had financed their trades. They could not pay. Within a period of one day, the Hunt fortune disintegrated. Approximately a $7 billion paper profit became a $1.7 billion loss. The price of silver, which the brothers had pushed to unprecedented levels, tumbled back to around $10 an ounce. Nelson Bunker Hunt tried to keep up an appearance of courage, even while he watched the gradual crumbling of his empire. “A billion dollars isn’t what it used to be,” he said with wry humor.

The Ripple Effect: Market Rescue and Legal Fallout

It was gallows humor: within a few months, the Hunts had moved from the wealthiest of the wealthy to quite possibly the biggest individual debtors in the world. The failure of the Hunts’ silver play rocked the financial system. For a time, it seemed their default could bring down others with it. Several Wall Street firms and banks that had lent the Hunts money were abruptly in danger of record-breaking losses. To avoid a chain reaction if the Hunts went completely bust, a group of banks quickly arranged an emergency rescue in the form of a $1.1 billion line of credit.

The Long Road Down: Bankruptcy and Lifetime Trading Ban

This lifeline was intended to keep the brothers solvent enough to prevent them from taking other financial participants down into bankruptcy with them. It was an unprecedented intervention – a private-sector rescue of two individuals whose own speculation had nearly destabilized markets. The bailout chased the wolves away for the time being, but it could only delay the day of reckoning, not avoid it. In the years that followed, the complete scale of the debacle became apparent. The brothers’ financial empire was in ruins. They spent most of the 1980s selling assets to pay their creditors. Bunker Hunt was forced to sell oil fields, a valuable coin collection, and even his cherished thoroughbred racing horses – some of which, in an irony not lost on observers, were named Extravagant, Goofed, and Overdrawn.

Final Reckoning: Lawsuits, Fines, and Lessons Learned

The formerly powerful Hunts, who had strolled through life as billionaires, were now humbled and short of cash. The legal fallout from their bold silver escapade soon closed in on them. In 1988, after years of investigations and civil suits, a federal jury concluded that Bunker and Herbert Hunt had indeed plotted to corner the silver market. As a result, the Hunts were directed to pay about $130 million in damages to settle claims by investors, including a Peruvian government-owned mining company ruined by the silver collapse. Both brothers sought personal bankruptcy protection that same year as debts and legal fees piled up. Finally, in 1989, the Hunts made an agreement with regulators. Each brother paid a $10 million fine and consented to a lifetime ban on commodity trading.

Legacy of the Hunt Brothers Silver Scandal

Their dazzling adventure in the silver market had finally reached its conclusion. The two men, who just a while back had been among the wealthiest people on earth, were now living far away from the halls of international finance. Bunker Hunt would later look back, with a hint of bitter modesty, that he was “just trying to get along on $10 million a month” after the collapse – a far cry from the heights he once experienced (time.com).

Despite their Texas swagger and great wealth, the Hunt brothers discovered a painful lesson: not even a fortune as vast as theirs could defy the fundamental laws of economics. Their daring bid to corner the silver market initially produced dazzling results, catapulting silver prices to record levels. But eventually, it created a bubble that burst with devastating force, wreaking havoc on the financial system in the process. The Hunts’ story is one of the most spectacular boom-and-bust stories of modern times. It’s a tale that investors and speculators continue to awe at today; how two men nearly cornered the moon, and then plummeted back to earth. It continues to be a warning to anyone foolish enough to think markets can be conquered through sheer will (or money) power alone – because as the Hunts discovered, what rises in a speculative boom will more or less certainly come crashing back down.

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