The Hunt Brothers Silver Corner: The 1980 Attempt to Buy Silver

A Telephone Call to Bache

At 10:42 a.m. New York time on Thursday 27 March 1980, Nelson Bunker Hunt picked up a telephone in a Paris hotel suite and told his principal Wall Street broker, Bache Halsey Stuart Shields, that he could not meet the margin call Bache had wired to him the previous evening. The call was for about $135 million, payable that morning in New York. It had been triggered by a 12 per cent intraday decline in silver. Bunker — the second of H.L. Hunt's three sons by his first wife, and the man who had carried the family into the silver market seven years earlier — told Bache to liquidate whatever positions it needed to in order to cover the shortfall. By the close of trading on COMEX five hours later, silver had fallen from $15.80 to $10.80 an ounce. Bache itself had absorbed losses of around $233 million on Hunt-related lending, a sum larger than its net capital, and its chief executive Harry Jacobs spent the evening on the phone with the New York Federal Reserve.

That day, which the press immediately called Silver Thursday, ended a corner that the Hunt brothers had been building since the price of silver still began with a one. It also began the end of the brothers themselves. The 27 March collapse and its aftermath cost them an estimated $1.6 billion in net losses, drove them through eight years of litigation, ended in a Commodity Futures Trading Commission manipulation finding and a lifetime trading ban, and rewrote the rules governing speculative position limits on every commodity exchange in the United States.

The Hunt Family and Their Oil Fortune

H.L. Hunt — Haroldson Lafayette Hunt Jr. — had built one of the largest private oil fortunes in American history out of the East Texas oil field he gambled his way into in 1930. By his death in 1974 his estate was reported to control producing leases in fourteen states, a network of trusts spread across his children from three separate marriages, and a long-running political project on the American right that operated through the Facts Forum radio programme and Life Line. The fortune was divided unevenly. The three sons by his first wife — Nelson Bunker, William Herbert, and Lamar — inherited the largest single share through the Hunt family trusts and through their direct stakes in Placid Oil Company and Penrod Drilling. By 1979 Forbes estimated Bunker Hunt's personal net worth alone at between $3 billion and $7 billion, depending on which oil and Libyan-concession assumptions one used (Fay, 1982).

Bunker was the financial activist of the three. Penrod Drilling and Placid Oil generated cash flow he could redeploy, and he had developed a particular geopolitical worldview after the Libyan revolutionary government nationalised his interests in the Sarir oilfield in 1973 — a $1 billion loss he experienced as direct evidence that hard-currency oil money was no longer safe from political risk. He read the Nixon Shock of August 1971, which severed the dollar from gold, as the second leg of the same trend. If the dollar floated and oil could be expropriated, the only assets worth holding were ones a government could neither print nor easily seize. He chose silver.

Building the Position, 1973–1978

Silver had been a monetary metal in the United States until 1965, when rising industrial demand and Treasury sales had pushed the Coinage Act through Congress and stripped silver out of the dime, quarter, and half-dollar. The Treasury maintained a residual silver stockpile and continued small open-market sales through the early 1970s, but by 1973 the metal had been demonetised in fact even where statutes had not yet caught up. The price was about $2 an ounce in early 1973. Bunker Hunt's first significant purchases — through Hunt International Resources and through nominee accounts with major bullion banks — began that year, and by late 1974 he had accumulated some 35 million ounces in Swiss vaults (Hieronymus, 1977).

The accumulation accelerated through the second half of the decade. Bunker brought his brother Herbert into the position, and to a smaller extent his half-brother Lamar. The brothers added to silver during periods of weakness — for example through 1976 and into the first half of 1977 — and added paper exposure during periods of strength through COMEX and Chicago Board of Trade futures. By the spring of 1979 their combined position, taken across personal accounts, family trusts, and the offshore vehicles that managed the Swiss bullion, was already among the largest in the market. Spot silver had moved from $2 an ounce in early 1973 to about $6 an ounce in early 1979. The Hunts had financed roughly half of the position with cash flow from oil and the other half with margin lending from a syndicate of Wall Street firms — Bache, Merrill Lynch, ContiCommodity, E. F. Hutton, and Shearson.

The Saudis Join In

The decisive structural change came in mid-1979, when Bunker and Herbert Hunt incorporated International Metals Investment Company in Bermuda jointly with three Saudi partners — Sheikh Khalid bin Mahfouz of National Commercial Bank, Sheikh Ali bin Mussalim, and Sheikh Mohammed Aboud Al-Amoudi — and the Brazilian Naji Robert Nahas. IMIC was capitalised to hold around 90 million ounces of futures exposure on COMEX and was funded by a consortium of dollar credit lines arranged through the Saudis' London relationships. The CFTC's later staff study described IMIC as the single largest unregulated long position ever opened on a US commodity futures market up to that time (CFTC, 1982).

The combined Hunt-IMIC position was now visible to anyone reading the COMEX large-trader reports. Spot silver, which had still been below $10 in mid-1979, broke $20 in early November as inflation expectations and Iranian-hostage-crisis premium pulled in retail buyers. Through November and December the position grew while the price ran. By mid-January 1980 silver had broken through $40, $45, and then $49.20 on the morning of 17 January. The intraday peak of $49.45 was set on 18 January 1980. Industrial silver users — Eastman Kodak, Engelhard, the silver tableware manufacturers — were paying multiples of their historical input costs and beginning to withhold scrap or accelerate substitution programs.

COMEX and the CFTC Respond

What stopped the rise was not a market change of mind but a deliberate intervention by the exchange and the regulator. COMEX's silver committee — which included floor traders who were short of silver against the Hunts and IMIC, a conflict the press later attacked at length — voted on 7 January 1980 to raise initial margin on silver futures and to impose a position limit of 3 million ounces per trader for new positions. On 21 January, with the price still elevated, the COMEX board went further and adopted Silver Rule 7, which placed all silver contracts on "for liquidation only" — meaning traders could close positions but could not open new ones. The Chicago Board of Trade had imposed similar restrictions a week earlier. Silver immediately fell from $44 to $34 in two trading days. The Hunts could no longer add to the position, and large industrial shorts could now exit at falling prices.

The CFTC had been monitoring the situation since the autumn of 1979, but its statutory authority over speculative position limits was contested at the time and its staff resources were thin — the agency had been operational only since 1975 and had not yet built the surveillance capability the Hunt position revealed it needed. Chairman James Stone briefed senior officials at the Federal Reserve through January and February that an orderly unwind of the combined Hunt-IMIC position would be impossible without coordinated regulatory action across exchanges, brokers, and the credit-providing banks. He proposed an aggregation rule that would treat all Hunt-related accounts as a single position for limit purposes — language that would later be codified through CFTC Regulation 150 and, three decades after that, in the position-limit framework of Title VII of the Dodd-Frank Act.

Silver Thursday

By mid-March silver had fallen to about $21 from the January peak. The Hunts' margin calls, which had been comfortable while the position was rising, became continuous and increasingly unmeetable. Bunker Hunt later told the House Subcommittee on Oversight and Investigations that he and Herbert were liquidating real-estate, oil, and racehorse assets to meet calls. On 25 March silver opened at $15.80. On Wednesday 26 March, Bache delivered a margin call to Bunker Hunt by overnight courier in Paris. He took the morning of 27 March to respond. The market read the silence and the price began to break before his telephone call to Jacobs even happened. Once Bache began liquidating, the cascade reinforced itself. Silver closed at $10.80, down 32 per cent on the session.

The systemic risk was not the silver price as such but the credit exposure of the brokers who had lent against the Hunt position. Bache's own capital was approximately $40 million; its unsecured exposure to the Hunts that afternoon was estimated by the SEC at over $230 million. Merrill Lynch, ContiCommodity, and E. F. Hutton had smaller but still material exposures. Paul Volcker, who had taken the chair of the Federal Reserve only seven months earlier and was in the middle of his fight against inflation through the aggressive monetary tightening of 1979–1982, spent the weekend of 28–30 March in continuous contact with the major banks, the SEC, and Treasury. Bunker and Herbert Hunt were summoned to Washington and met with Volcker on Sunday 30 March.

The arrangement that emerged from those meetings was a $1.1 billion syndicated loan from a consortium of thirteen banks, secured against the Hunts' remaining oil and silver collateral and structured to allow the orderly liquidation of the silver position over several years. Volcker insisted, against opposition from Treasury Secretary G. William Miller, that the loan be made by the private banks rather than directly by the Fed, and that its proceeds be used only to retire the Hunts' margin debt — not to fund any further speculative activity. The loan was announced on 7 May 1980. The major brokers survived; silver stabilised in the mid-teens through the summer; the immediate financial-stability crisis was contained.

Minpeco and the Manipulation Verdict

The legal aftermath ran on a different and longer clock. Minpeco SA, the trading arm of the Peruvian state copper-and-silver mining sector, had been short silver throughout 1979 and 1980, hedging its physical output. Its losses on the squeeze ran to approximately $80 million. In November 1981 Minpeco filed suit in the Southern District of New York against the Hunt brothers, IMIC, and a long list of US broker counterparties, alleging market manipulation under the Commodity Exchange Act and antitrust violations under the Sherman Act. The case took six years to come to trial.

On 20 August 1988 a jury found Nelson Bunker Hunt, William Herbert Hunt, IMIC, and Naji Nahas liable for manipulation of the silver market and returned a verdict of $134 million. With interest and attorneys' fees added, the total exceeded $200 million. Both brothers filed for personal bankruptcy in September 1988. The CFTC's parallel administrative proceedings, brought against both brothers individually, resulted in a settlement in December 1989 under which they accepted civil penalties of $10 million each and an order finding that they had manipulated silver in 1979 and 1980 — a finding that carried with it a lifetime ban from US futures trading. They also surrendered control of the family trusts that had financed the original purchases.

A passage from the trial transcript, much repeated afterwards, captured Bunker Hunt's defence. Asked by Minpeco's lead counsel whether he had intended to corner the market, he said, "A billion dollars isn't what it used to be." The line — meant lightly, in the manner of a Texas oilman who had spent a decade insisting that he was hedging rather than speculating — became the title of one of the popular accounts of the case (Eichenwald, 1989).

A Regulatory Template

The Hunt episode was not the first commodity corner in American history. The Chicago wheat corners of the late nineteenth century, the Great Northern stock corner of 1901, and the maize squeezes of the 1920s had each generated their own legal and regulatory adjustments. What was different in 1980 was the combination of three structural factors: the size of the position relative to the world's above-ground supply of the metal, the cross-exchange nature of the position across COMEX and CBOT, and the credit exposure of the brokerage system to a small number of related accounts. None of the existing regulatory tools had been designed for any of those three dimensions, and the CFTC had to invent the response on a six-month timetable while the corner was still unwinding (Williams, 1995).

What emerged became a template. The first piece was an explicit aggregation rule, codified through the early 1980s under CFTC Regulation 150 and refined through the agency's manipulation jurisprudence, requiring that accounts under common control or with the same beneficial owner be treated as one position. The second was a hard speculative-position limit, set across exchanges rather than at each exchange separately. The third was an expansion of large-trader reporting so that the CFTC saw the cross-exchange position before the position became systemic. The Hunt-driven framework was extended through the 1990s to other metals — copper after the Sumitomo squeeze of 1996, aluminium and zinc after later LME episodes — and then to energy and agricultural commodities through the 2010 Dodd-Frank Act.

The brothers themselves did not recover. Bunker Hunt's estate, which had been valued in the billions in 1979, was settled in bankruptcy at around $10 million by the early 1990s, after the IRS took a substantial cut on top of the civil judgments. Herbert Hunt rebuilt a smaller fortune through Petro-Hunt LLC in Dallas. Lamar Hunt, who had been only peripherally involved in the silver position, continued his career in professional sports — he founded the American Football League and the North American Soccer League — and avoided the financial ruin that took his brothers. He died in 2006. Bunker Hunt died in 2014 in Dallas, and Herbert in 2024 at the age of ninety-five. Their father's Texas oil fortune had built itself in one generation and unwound itself in another — through a single bet on a metal one of them had decided, in 1973, was the only thing a government could not print.

The Vault in Zurich

Most of the physical bullion the Hunts had bought through 1973–1979 remained in Swiss vaults through the early 1980s while the brothers negotiated its release with their lenders. The Federal Reserve's Long-Term Capital Management workout in 1998 borrowed directly from the Volcker playbook of March 1980 — a private bank consortium, an orderly liquidation timeline, a regulator standing behind the room rather than in it. The vault in Zurich was sold down over six years to industrial users and to the Comex warehouse system, and by 1986 the metal had been entirely re-dispersed back into the global supply chain that the Hunts had spent a decade trying to remove it from.