By James Donahue

Most Americans know about a vast gold reserve strongly guarded by the U.S. Government at Fort Knox Kentucky, but few know about an even larger cache of bullion buried in a vault under the Federal Reserve Bank in Manhattan, New York.

After the 9-11 attack there were rumors about a vast treasure in gold stored in vaults deep underground in that area. We were never sure of the story, and just who owned all this gold until reporter Scott Mayerowitz did a recent report for ABC News that told all about it.

“Just a few blocks away from all the turmoil and panic of the stock market sits the world’s largest stockpile of gold,” Mayerowitz wrote. He said he was given a private tour of this vault where nearly $200 billion worth of gold “rests on bedrock five stories underground, 30 feet below the city’s subway system, inside the Federal Reserve Bank of New York’s vault.”

So what about all the gold at Fort Knox, the fabled stronghold for holding all of the nation’s gold reserves? A lot of it has been sold but the vaults in Kentucky still hold 143.3 million ounces of gold, and based on its current shifting value of about $900 an ounce, boasts a total worth of about $130 billion.

Where did all the gold come from?

Most of the gold in the Manhattan vault, said Mayerowitz, is owned by other countries. It was put there after World War II as nations looked for a safe place to keep their gold. The decision to locate the United Nations building and the World Trade Center there, thus making New York a world financial center, made it a convenient spot for stories gold reserves from other nations.

The vault that holds about 25 percent of the world’s gold reserves is about half the size of a football field. It was built in 1921, deep into the bedrock under New York, before the Federal Reserve Bank was completed in 1924.

That means it was finished about eight years before the United States Bullion Depository was completed in 1936 at Fort Knox. So why was this vault constructed and where did the gold come from that went into Fort Knox? It was seized by our government from the American people.

Here is how that happened.

Before the height of the Great Depression, when Franklin D. Roosevelt was elected to office in 1932, gold coins were circulating freely in the United States and legal money and banks and private citizens and businesses owned gold bullion. Gold was then, as it is today, a valuable commodity that can be exchanged for money. For many it was a hedge against potential bank failure, as happened in 1928 during the Great Depression.

Roosevelt called Congress into an emergency session in 1933, just one day after his inauguration. After this the House and Senate passed his proposed bill: “An Act to Provide Relief in the Existing National Emergency in Banking, and For Other Purposes.” The vague title did little to reveal the real content of this piece of legislation. Does this sound familiar?

The act made the ownership of gold illegal. It was suddenly a federal crime punishable by 10 years in prison and a $10,000 fine to possess physical gold coins or bullion. The government made it illegal for Americans to save a portion of their wealth in gold at a time when the world economy was in shambles.

The gold wasn’t actually seized, but rather exchanged for paper dollars at a fixed rate of $20.67 per ounce. People were allowed to keep gold jewelry, such as wedding rings and coins in collections. But everything else was turned over to government agents who melted it into gold bars. Those bars allegedly remain in storage at Fort Knox.

There has been a popular and recurring conspiracy theory that began circulating in the 1960s that the vault at Fort Knox was nearly emptied while the late President Lyndon Johnson was in office. The story claims that the U.S. Government moved it to Jerusalem, and also that it was sold to cover a national debt.

The story became so well known that in 1974 Senator Walter Huddleston of Kentucky, twelve congressmen and about 100 news reporters toured the vault and examined various cells. They reported the place filled with gold.

The conspiracy theory persists, however, with theorists saying gold was moved to the vault just for the public visit, and then taken away again.

Since this gold does not back up the value of our present currency, and since the vast treasure at Fort Knox is not assessable to the public, its existence there or not may be of little consequence. With our government running up debts now counted in the trillions of dollars, and our military spending billions of dollars fighting alleged terrorists in Iraq, the existence of a mere $130 billion in gold at Fort Knox no longer seems so impressive.