Presidential Executive Order 11,110 is quite infamous among conspiracy buffs. Jim Marrs, author of Crossfire: The Plot that Killed Kennedy, writes that the order instructs the Treasury secretary to issue about $4.2 billion in silver certificates as a form of currency in place of Federal Reserve Notes.1 Written by John F. Kennedy, Marrs also speculates this order was part of a larger plan by Kennedy to reduce the influence of the Federal Reserve by giving the Treasury more power to issue currency. The order wassigned June 4, 1963. A few months later, of course, Kennedy was killed, and conspiracy theorists hypothesize a link between the murder and E.O. 11,110. They argue that the Federal Reserve was somehow involved in the assassination to protect its power over monetary policy.
The executive order modifies a pre-existing order issued by Harry Truman in 1951. E.O. 10,289 states "The Secretary of the Treasury is hereby designated and empowered to perform the following-described functions of the President without the approval, ratification, or other action of the President..." The order then lists tasks (a) through (h) which the Treasurer can now do without bothering the President. None of the powers assigned to the Treasury in E.O. 10,289 relate to money or to monetary policy. Kennedy's E.O. 11,110 then instructs that
SECTION 1. Executive Order No. 10289 of September 9, 1951, as amended, is hereby further amended (a) By adding at the end of paragraph 1 thereof the following subparagraph (j):
'(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12, 1933, as amended (31 U.S.C. 821(b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of an outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption,' and (b) By revoking subparagraphs (b) and (c) of paragraph 2 thereof.SECTION 2. The amendments made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue anymay be enforced as if said amendments had not been made.John F. Kennedy, THE WHITE HOUSE, June 4, 1963.To understand exactly what Kennedy's order was trying to do, we must understand the purpose of the legislation which gave the order its underlying authority. The Agricultural Adjustment Act of 1933 (ch. 25, 48 Stat 51) to which Kennedy refers permits the President to issue silver certificates in various denominations (mostly $1, $2, $5, and $10) and in any total volume so long as the Treasury has enough silver on hand to redeem the certificates for a specific quantity and fineness of silver and that the total volume of such currency does not exceed $3 billion. The Silver Purchase Act of 1934 (ch. 674,48 Stat 1178) also grants this power to the Treasury Secretary subject to similar limitations. Nowhere in the text of the order is a quantity of money mentioned, so it is unclear how Marrs arrived at his $4.2 billion figure. Moreover, the President could not have authorized such a large issue because it would have exceeded the statutory limit.2
As economic activity grew in the fifties and sixties, the public demand for low denomination currency grew, increasing the Treasury's need for silver to back additional certificate issues and to mint new coins (dimes, quarters, half-dollars). However, during the late fifties the price of silver began to rise and reached the point that the market value of the silver contained in the coins and backing the certificates was greater than the face value of the money itself.2
To conserve the Treasury's silver needs, the Silver Purchase Act and related measures were repealed by Congress in 1963 with Public Law 88-36. Following the repeal, only the President could authorize new silver certificate issues, and no longer the Treasury Secretary. The law, signed by Kennedy himself, also permits the Federal Reserve to issue small denomination bills to replace the outgoing silver certificates (prior to the act, the Fed could only issue Federal Reserve Notes in larger denominations). The Treasury's shrinking silver stock could then be used to mint coins only and not have to back currency. The repeal left only the President with the authority to issue silver certificates, however it did permit him to delegate this authority. E.O. 11,110 does this by transferring the authority from the President to the Treasury
E.O. 11,110 did not create authority to issue new silver certificates, it only affected who could give the order. The purpose of the order was to facilitate the reduction of certificates in circulation, not to increase them. In October 1964 the Treasury ceased issuing them entirely. The Coinage Act of 1965 (PL 89-81) ended the practice of using silver in most U.S. coins, and in 1968 Congress ended the redeemability of silver certificates (PL 90-29). E.O. 11,110 was never reversed by President Johnson and remained on the books until 1987 when there was a general cleaning-up of executive orders (E.O. 12,608, 9/9/87). However, by this time the remaining legislative authority behind E.O. 11,110 had been repealed by Congress with PL 97-258 in 1982.2
In summary, E.O. 11,110 did not create new authority to issue additional silver certificates. In fact, its intention was to ease the process for their removal so that small denomination Federal Reserve Notes could replace them in accordance with a law Kennedy himself signed. If Kennedy had really sought to reduce Federal Reserve power, then why did he sign a bill that gave the Fed still more power?
Marrs also makes some other factual errors in his conspiracy tale that suggest he is not very familiar with the Federal Reserve or the financial system. He writes that a source of tension between the Federal Reserve and the Kennedy Administration was the Treasury's desire to allow banks to underwrite state and local government bonds, thereby weakening the "dominant" Federal Reserve banks. However, such a move, which was later permitted by Congress, would not have affected the Federal Reserve system because it had never been involved in underwriting bond issues. Marrs also claims that Kennedy signed a bill that changed the backing of small denomination currency from silver to gold to "add strength to the weakened U.S. currency." This is completely false. U.S. currency has not been on the gold standard since 1934, and silver certificates, as their name suggests, had never been redeemable in anything but silver. In addition, U.S. currency was not "weak" during Kennedy's time: There had not been any significant inflation since the late forties, and the exchange rate value of the dollar was fixed according to the Bretton Woods agreement.
In the introduction to his book, Marrs advises the reader not to trust his book. This appears to be good advice.
1. Marrs, Jim (1989), Crossfire: The Plot that Killed Kennedy, New York: Carroll & Graf Publishers.
2. Woodward, G. Thomas (1996), "Money and the Federal Reserve System: Myth and Reality," Congressional Research Service.
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