Editorial By Dan Shea
The clock’s ticking at the 30th Anniversary of the Machine Gun Ban & What would it mean to values...
19 May, 1986 - What a mess. What a sell-out. Absolutely unconstitutional, 100% against the Bill of Rights and Natural Law. That’s my opinion and that of many others.
However, it is the standing law in the US, upheld in the courts, and we have to deal with it. ATF has had the unfortunate task of trying to integrate this nonsensical law into regulatory action. No one is or was using registered machine guns in crimes. Everything was fine, there was no compelling reason to stop Americans from making new machine guns if they wanted. Although, 922.o was not nearly as inept as the stupid, silly, impotent and pointless “Assault Weapons Ban” of 1994, which was impossible to regulate due to the sheer stupidity of the basis of the law. However, the 1986 ban on further manufacture of machine guns for private ownership, the “Hughes Amendment,” “922.o” or whatever we want to call it, was a travesty. No matter how it happened, who did what when, Congress passed the act and President Reagan signed it into law. No amount of reverse word-parsing can un-ring that bell. We can only get Congress to get rid of it (unlikely at present) or have the Supreme Court nullify it (also unlikely at present).
In the first place, we need to have a common understanding about the history of these laws regarding NFA firearms. If you can’t understand the past, you can’t understand where you are, or where you may go. We fought against these laws for the entire time I have been in this community, and the newer people can’t understand what really happened from the pure bollocks in the rumor mill about what happened and when. Let’s start with the NFA 34- the National Firearms Act of 1934. It’s commonly referred to as an anti-gangster law, but, that’s just what was used to get control over the weapons in the popular media.
In those days, the Supreme Court had a tendency to actually rule on government actions according to the Constitutional authority the government had been granted. Government has no preceding Rights, in our American world, it is granted its authority by the people and this was codified in the late 1700s and modified by law ever since, with the supposed adult supervision of the Court.
In 1917, the Bolsheviks used machine guns and overthrew the Czar in Russia. This snapped the hell out of the governments of the rest of the world- this Communist thing was not only getting out of hand, they had just fought a real army and taken over a major country, using automatic weapons. A major government had fallen, and the Nations of the West were deconstructing how that happened while they tried to recover from The Great War. From that point on until the late 1930s, most Western countries adopted some form of gun control laws, especially regarding machine guns. England, Germany, many of them did.
There was a groundswell of sentiment in the US for some type of control over the gangsters of Prohibition and their “Tommy Guns” and the government played this up. “Thompson Guns” in the hands of Federal Agents under the FBI and Elliott Ness were “Good,” “Tommy guns” in the hands of hoodlums were “Bad.” The US was ready to make their move to ban ownership of machine guns.
In a parallel development, those nine guys in black robes kept insisting on judging things in a Constitutional manner. This kept the government from doing all kinds of things. In 1916 there was a mass groundswell against child labor, but the Supreme Court said “Not your place” to the federal government, until someone figured out that the products of that child labor passed in Interstate Commerce- enter the far-reaching tentacles of the “Commerce Clause”. Since these items were in interstate commerce, the government could ban them (Quickly overturned) or tax them as long as they were taxed equally between the states. Up until this point, Commerce Clause cases as activism had been rare. Things changed in 1919. Thus, the 1919 Child Labor Tax Law appeared, an excise tax paid on any items made with child labor. Eventually tossed out by the Supreme Court, this type of stretching of the Commerce Clause continued and was followed by many far-reaching tax acts, culminating with the 1937 Marijuana Stamp Tax Act which brought us not only the cult classic “Reefer Madness” but a really cool stamp for philatelists to chase. Right in the middle of tax mania, the federal government voted in the National Firearms Act of 1934, which basically applied prohibitive taxes on making and transferring Machineguns, Short-Barreled Shotguns, Short-Barreled Rifles, and for no apparent reason, (Poaching), Silencers. The category of “Any Other Weapons” initially included all handguns, but the collectors and shooters in Congress ended that quickly and defined this as “Smooth Bored Pistols” and a few other oddities. That is the root of our situation today in civilian ownership.
There have been a number of laws passed since then, and no, I won’t go off on them, other than the two most critical- the GCA-68, and 922.o. The Gun Control Act of 1968 was again based on the Commerce Clause, and stopped interstate trading of firearms without a license. That was the end of mail order firearms that participated in the Jack Kennedy, Bobby Kennedy, and Martin Luther King, Jr assassinations. Congress required an Amnesty period because provisions of the NFA-1934 were declared unconstitutional by the Supreme Court in 1968 in U.S. v. Haynes. Criminals got out of jail because of the decision in Haynes and pending prosecutions under the NFA were thrown out. Congress thought it only fair to allow citizens to register their firearms during an Amnesty period because of the confusion caused by the decision and so that as many firearms as possible could get into the registry and be traded legally. GCA-68 added the category of Destructive Devices. Several corollaries happened- importation of machine guns for private ownership was ended, the “Dewat” category became embedded in stone as requiring registration as machine guns, receivers were considered machine guns, ammunition sales had to be recorded.
About three years downstream, in 1971, Class 3 Dealer and Importer Ed Klein worked out an importing program with the ATF so that the “Dealer Sales Samples” could be imported for government demonstrations. Machine guns imported from that point on up until the 1986 law, are referred to as “Pre-86 Dealer Samples.” Also about three years downstream the ATF started really enforcing the FFL program that most people were not paying attention to, and things got pretty ugly.
In the period between 1968 and 1986, a lot of parsing was going on. As I mentioned, Ed Klein worked out the “Dealer Sales Sample” program, but there were hundreds of people all around the US who were working to sell to police and the US government, but also were enthusiasts. Those people who had Federal Firearms Licenses, and paid the Special Occupational Tax were called “Class 3 Dealers” or “Class 2 Manufacturers” or “Class 1 Importers” and we paid $200 per year in tax. SOTs were identified by their “Four Digit” number which had gotten into five digits by the 1990s. Today, they use your EIN (Employer Identification Number). My old numbers were in the late two thousands and early three thousands, we had several. SAR has readers whose numbers were in three digits. The number of SOTs had grown to five-digit numbers before the switch to EINs.
By the mid-1970s, the MAC Corporation was selling M10s to the public, and by the early 1980s there was a lot of publicity for machine gun sales- SWD was all over the place with their advertising of machine guns for private ownership. It started to become a big deal, the profile was raised high. By 1986 there was a ground-swell against the firearms laws, and a triumphant law was passed- the McLure-Volkmer Act- the “Firearms Owners Protection Act”- the only act of Congress ever passed to protect US citizens from an agency of their government. Lest I be a firebrand, there was some serious trouble going on and this was needed. Two of the best things that came out of this were that we have the right to travel unmolested with our firearms if we are legal at start and finish of our trip, the firearms are locked away, and the trip makes sense- in other words, if your firearms are legal in Connecticut and you’re headed to Pennsylvania and they’re legal there, if you lock them in cases in the trunk of your car and drive through New York, you can’t be arrested for illegal possession in New York- unless you take them out and get caught. By the same token if you’re traveling from Nevada to Arizona, and you drive through California you probably won’t be protected if caught because there was no reason for you to take firearms into CA. Secondly, the damnable ammunition reporting requirement was taken out, although that was more of a paperwork reduction deal to the Congressmen. At the last possible minute, Representative Hughes threw in his amendment to ban the further manufacture of machine guns for private ownership.
That was the real start of today’s NFA community. Those of us who were knowledgeable and in the loop on this, had 45 days to make and register all the machine guns we could before 19 May, 1986. Some people were much more prepared to do this than others- and within the next year, everyone made as many suppressor tubes as they possibly could, fearing the same ban on manufacture for suppressors was coming. This really set into motion a series of events that made registered, transferable machine guns into collectable items with increasing value, the more people became aware, the more wanting the items, the more value increased.
I’ve been hung in effigy for saying that machine guns are not an investment, but I can’t in good conscience not tell the truth on this. In the last 38 years, Debbie and I had way over 20,000 transferables pass through our companies, let alone all the other firearms, so that is a significant part of the national inventory we’ve handled. I have opinions, based on my experience and education, and frankly, I think they are relevant and people should have a chance to understand these opinions as they consider spending large amounts of money on these items. I want them to get other opinions, there are plenty of smart people out there, but these are mine.
Let’s talk a bit about two things in economics- Liquid and Illiquid markets, and finite and replaceable supply source.
A liquid market is simply one where you have enough buyers for all the products you have for sale. In an illiquid one, you don’t. There are patterns of behavior you can observe in each case. Let’s apply this to collectables in two categories.
First, Depression glassware, the old green glass. In the 1960s this glassware became collectable and soon books were written about it, and collectors specialized, and values went up. Since there was only a small amount on the market, the prices escalated due to rarity or perceived beauty to the collectors. Soon, the collectors outnumbered the pieces available and prices reached a point that made people take notice, and the search through barns and attics began. Before too long there was a lot of this glass, everywhere, more than there were interested collectors, and then the prices plummeted. A classic liquid and illiquid market in collectables due to finite supply turning to (Apparent) infinite supply- more product than buyers. It’s also important to note that no one really needs this Depression glassware, they either simply liked to collect it, or were “Speculating.” While people may have called it “Investing” it was no more investing than going in a casino with your cash.
Another example- while I was in New Hampshire as a 15 year old, I worked off school hours on a farm or in an antique shop barn. People were buying odd looking glass insulators that came off of electric poles, and using them as doorstops or curios. It turned out there were quite a few manufacturers, and some were quite beautiful, having been done in Carnival Glass during the 1930s. Those Carnival Glass insulators started to sell for $25, $50 and finally $75 each. At that point, every kid in the countryside headed out down the old railroad tracks and started scrounging insulators- you could make serious money on an early Saturday’s adventure. Before long, there were so many of these insulators in the stores, no one bought them, and prices dropped until you could barely give them away. Again, no one needed these, they were simply “Collectables” and once the supply became too large for demand, prices dumped.
Now, let’s get to transferable machine guns. In the first place, in the civilian market, no one “Needs” these. We don’t generally use them to earn a living, we don’t use them to get food, they are not generally our self-defense weapons. They are curios. These are collectable firearms, extremely historic in some cases, and a lot of fun. These are needed for the Constitutional purposes of the Unorganized Militia, but, are they “Needed” in most people’s minds? In the back of many of our minds, many keep an M60 or a ‘Sixteen just in case (I know I do)… but a 1913 Parabellum? An 07/12 Schwarzlose? It’s entirely an historical collectable. J. Curtis Earl sold a lot of machine guns as “Investments” with his chart that showed the continuing upward value of transferable machine guns. All very true and 40 years later still continuing.
In the 1980s, machine guns were relatively inexpensive, inflation taken into account, and an SWD M11 that sold for $125 back then, today will bring $6000 pretty quickly. This is the effect of finite supply- the artificially imposed lack of new machine guns- there are about 182,000 transferable machine guns in private hands, plus or minus, lacking a radical change in the law, that quantity will never change significantly. No more can be made. We all spent years shaking the bushes to find large caches of guns and bring them to market, and the more that came out, the more people talked, the more people wanted them, and prices went up. The market finds a level of what people are willing to pay, and that price has continually gone upwards with a few plateaus and backsteps. This was driven also by easy credit, increased home value for people to access to buy toys, and of course, the Internet. A bubble developed- not because of the addition of “Infinite supply”, but because of the prices getting ahead of themselves and superheating. People entered into the collecting field who had no experience in it, and really couldn’t afford the items they were buying, they thought they were “Investing” and that prices will always go up. That never happens. There are always plateaus, downslopes and drops in values.
This is why I have always told people that buying machine guns is not an investment, it is speculating. Buying T-bills, Utilities, CDs, that is generally termed an “Investment” that has a rate of return… machine guns are clearly “Speculating” and if you can’t afford to lose the value, don’t buy it. Buying a machine gun for personal ownership should probably be done to satisfy your urge to collect it, that you want it, and you can afford it even if the value drops. There is no way I am saying “Don’t buy a transferable machine gun” I am saying have your eyes wide open when you do. These aren’t really an “Asset.”
Let’s define that. An asset is something that makes you money in some manner, that you can count on. A liability is something that costs you money. Let’s say I have a transferable 1928 Thompson that is a rental gun, turning $500 a week in rental fees. Now THAT’s an asset. Sitting in the safe, going up or down in perceived value, it’s simply a potential asset- you don’t make money until you sell at a profit. If you miss that opportunity, it’s not an asset by my definition. Most people think of their home as an asset, but in fact it’s usually a liability- it costs them money. If they sell it at a profit, then it really was an “Appreciating asset” but look what just happened to all those “Assets” all over the US in the recent housing crash. If you rent it out and it produces income, then it’s an asset. That’s just my way of looking at it.
Good quality guns, I think will always go up in value, as long as the buyers have expendable income. Example- an MG42 that sold for $300 in 1968, and again for $2000 in 1986, could sell at $40,000 in 2007. I had seen them in the $25,000 range in 2010. That’s a hell of a drop. Now it’s back to about $40,000. Cherry Colt Thompsons were reaching really high numbers, and exceptional pieces still do.
It’s amazing what happens when someone in a position like mine says something like “Possible Amnesty” or “Prices are dropping (They’re not).” To understand what we can do, and what we can’t, takes a lot of serious study and suspending wishful thinking. That’s truly hard to do. As soon as you say “Amnesty” people start having visions of registering thousands of HK sears, Drop In Auto Sears, Sten Tubes, you name it. Unfortunately the laws we have in place stubbornly and legally preclude that. I’ve beaten my head against the wall of the GCA-68 and the 1986 ban for the entire time, and have learned certain things.
The real problem is, that (in my opinion) the 1934 tax act was unconstitutional, and so was the GCA-68, and damn sure the 1986 ban was, but until we either have a Supreme Court willing to stand up for the Constitution, or 67% of the Congress and Senate (To override a Presidential veto) willing to back private ownership of machine guns, we don’t have much recourse. The Heller decision should have been a 9-0 no-brainer constitutionally, but it was a 5-4 squeaker, with two justices effectively saying “As long as this doesn’t include machine guns.” Regarding Congress and Senate, we have one out of 535 that would vote with us. We’re stuck. One hope is an Amnesty, and there is a provision for future Amnesties in the 1968 law.
Without going through every melodrama we’ve been through, the hundreds of thousands of wasted dollars, the broken hopes, the disappointment, getting sacrificed on the alter by big gun organizations who think we’re an acceptable loss, let me define the possibilities I have come to understand.
In the first place, the ban on further importation for private ownership, the addition of “Dewat” and “Destructive Device” categories, etc, were part of the 1968 Gun Control Act. Because of U.S. v. Haynes in 1968, Congress had to address the issue and people had to have an opportunity to register machine guns, and there was general Amnesty called for where people could register Title II firearms. The date called for is generally referred to as “the month of November, 1968,” technically it was 2 November through 1 December 1968. There were about 54 filings on 1 November, numerous ones in October 1968, quite a few later than 2 December if they were able to show hardship in filing, and the registration and processing of forms continued on into the 1970s- one particular case I was told of was a CIA field agent who had been in ‘Nam from early 1968 until 1971, and he forced the issue so that his collection was registered under the Amnesty. Numerous firearms have been added to the NFRTR ever since, when human error has shown the owners properly registered but the government did not have a record. Section 207(d) of the GCA-68 allows for the Secretary of the Treasury to establish Amnesty periods by publishing notices in the Federal Register. That authority is generally acknowledged as having passed to the Attorney General of the United States.
1- Absolute Amnesty: This is the one that everyone wants for private ownership. This would allow any Sten tube, sear, whatever you wanted, to be made over a 90 day period, and be transferable. The general view of this apparent from the government side is that this would also nullify the convictions for possession or manufacture of unregistered machine guns since 1968, and would basically grandfather all those unregistered guns illegally made since 1968 that were not registered, and it would jeopardize at least 7000 open cases about illegal Title II firearms. This would also be completely counter to the intent and language of the 1986 ban on further manufacture for private ownership as stated by Congress. Let’s just say the opportunity here would be “Vigorously opposed” with little hope of getting support in Congress, ATF, or the Judiciary.
2- Amnesty to “Correct” the NFRTR: This was big catch-phrase in the 1990s, and a place where numerous factions in the pro-Amnesty group parted ways. I made a number of people very angry when I explained what the probable outcome of the “Amnesty to Correct the NFRTR” would be. It helped that I had a whiff of the planned reaction of anti-firearms people in the government. In essence, if you are going to force the ATF to “Correct” the NFRTR- we had already proven that the NFRTR was demonstrably inaccurate in 1994, 1996 and numerous other times- then they have to “Correct” it. In their view, “Correcting” it meant a full inventory inspection of the weapons registered in the NFRTR. In practice, this meant- stopping all transfers for the time it took to do a complete physical inventory and inspection of every firearm in the NFRTR. Basically, item by item, address by address. The estimate of time I heard was two years but I can tell you it would take more. The first six months would be training 200 agents to know all the models, to recognize anomalies like a MAC serial number on a different gun, to see that an MP40 tube gun was actually original, and call in Tech Branch on problems. It meant all the firearms not found would be nixed into limbo, and there are more than you might think that were registered in 1934, 1945, and have never transferred since. It meant everyone who had a Form 4 would get a home visit inspection. Then, someone has to pay for all of this, so the transfer tax was planned to go up to $2000, and the SOT to $10,000 per year. The point is, be damn careful of what you ask for, and be even MORE careful of what you force government agents to do against their will. (In fact, after the MAC serial number debacle in Arizona and Maryland, where hundreds of MAC SMGs had their serial numbers welded onto newly made, higher value machine guns, the ATF has been doing this- making every transfer match the original registration. It’s been a nightmare for all).
3- Veteran’s Amnesty: Now, here we’re talking. This is a great idea, and had lots of support. This one falls down in the implementation. Remember what I said about forcing the issue on the government. In a “Veteran’s Amnesty” it is only for firearms that could have been brought back from war before December 1968, by a veteran who provably served in that era. In my conversations with the people who would have to implement this, they said that by the wording of the proposed law, even though it precluded “Litmus tests,” they would be forced to have benchmarks- that the person filing would have to prove not only that they were either the veteran, or were legally related to the veteran to the satisfaction of the Act, and prove that the firearm was the veteran’s and came back from the war. The implication was that it just had to fit the profile. Example: Suzy Q has an MG/08 Maxim on a sled in the attic that was left from Uncle Frank who was not a vet, but bought it in 1945. Dad was a Vietnam Veteran from 1967. Both men passed away. She claims Dad brought it home. Well, that’s unlikely and would be bounced under the Act. If it had been a Chicom AK, a MAT-49, something likely to have been there in ‘Nam with her dad, it would have been registered. Likewise, if Pop was in North Africa and they had a Japanese Type 99, it wouldn’t pass muster. If the firearm was inspected and it was a reweld, it wouldn’t pass. The problem is, putting the requirement that it be a Veteran bringback leaves the anti-gunners a great big opening- in other words, if a guy was a vet and he bought a Sten dewat in 1962 and activated it, technically it couldn’t be registered- it’s not just about the guns he owned, it’s about his war trophies. At least that was the take I heard on it from insiders. Most government people were supportive until implementation routines were looked at.
4- Amnesty for Curio & Relic NFA Firearms: We’re really starting to get somewhere here. Unfortunately, it’s not inclusive enough, there were machine guns made before 1968 that would not be allowed to be registered, although that magical “50 years old and it’s C&R” rule kicks into place in 2018.
5- Amnesty for any NFA type Firearm that existed in the US before December 1968. This means every NFA type firearm in the United States that could have been registered in the 1968 Amnesty. That means all M16s, AR18s, you name it, that were made before 2 December 1968, could be registered by anyone, no questions asked. Of course, ATF would be watching for fraud as in modern rewelds, smuggled guns, etc, but basically, this solves the problems. Original Sten sitting around in the attic? Amnesty. Maxim? Vickers? Any original Thompson? All good. The biggest thing is, this method completely meets the requirement of the original call for further 90-day Amnesties without getting hamstrung by ATF’s criminal cases concerns. That’s just my opinion, there are people in the ATF who believe that any Amnesty would affect previous cases and will be against it. It’s not an ideal solution, but considering we can’t get rid of that damnable 922.o, and we have so many people at risk with firearms in their possession that didn’t get registered in 1968, then this would be a great leap forward.
Maybe there could be a loss in the value of some collections, but there has never been a moment’s hesitation on my part, nor that of any of the other large collectors, dealers, etc in this community, to sacrifice that value to get our Rights back. Think this through as cynically as you like. We might not get our Rights back on this one, but we damn sure would get ahead for collectors and protecting heirs. How many fully transferable Colt Thompsons, MG42s, MG08s, Brass Maxims, etc would be added to the national inventory? Not as many as we might wish, but, it would affect values for a little while, until people realized they were still rare and desirable. As far as transferable HK sears, Registered Receiver guns, Drop In Auto sears, well, none were made before 1968, so those inventories remain the same and as soon as people realize that, values should maintain and rise.
Most of us want this to happen so that we have our Rights back and we could then all get what we want, inexpensively. Does anyone really think that it’s to the big dealers and manufacturer’s advantage to keep status quo? I made good, reasonable money before 1986. So did everyone else. 922.o effectively put most of us out of business, simply selling down our inventory or morphing into full time dealers and brokers riding the wave of possible increase in value- which did happen. It didn’t have to go that way, you know, it could have been the opposite. If we had an Amnesty for any pre-1968 firearm, we’d solve a lot of problems but wouldn’t fully return to Constitutionality. Same thing happened in 1989 to importers- you invest your life savings into importing legal firearms and then “Bam!” the President executes a process banning importation. You’re out of business, and the inventory you have is all that’s left of your future and your money, so you sell it at the prices people are willing to pay. That’s not “Gouging” that’s trying to survive.
The truth? The real hard truth is that if we got 922.o overturned, us old-timers would be making money, and so would many new people who have vision and want to take the risk in business. Ending 922.o would open up a whole new planet of firearms for private ownership. ATF and the government know that, and the ones afraid of a proliferation of privately owned machine guns are steadfastly against this kind of thing. Remember, there are a lot of different people in those agencies, and they don’t all think the same. It’s only a few radicals that want to stop firearms ownership, and are “Inside” working towards that- most of the people in the government are just doing jobs, and many are pro-Second Amendment.
Our defense industry would be much stronger then as well, as the funds that are necessary for research and development of small arms would be generated by civilian sales and the innovators could keep making a living.
In the end, an Amnesty under current circumstances, with the current administration, is unlikely. The NFATCA and others almost had the Type 5 Amnesty done- we had the support of the basic ATF groups, the NRA and others, we were so close. Then, the Obama administration snuffed it out. I believe that as long as we keep our focus, and bide our time, if the next administration is more sensible on these matters, we could win an Amnesty at that time. An Amnesty, as provided for in the law, would do a lot to take American citizens out of harm’s way on ownership of pre-existing Title II firearms, to help preserve our national history, and generally speaking, it’s the right thing to do.
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