[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




                    DESIGN AND SECURITY OF CURRENCY

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                 DOMESTIC MONETARY POLICY, TECHNOLOGY,
                          AND ECONOMIC GROWTH

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 24, 2001

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 107-38

                  U.S. GOVERNMENT PRINTING OFFICE
74-334                     WASHINGTON : 2001

____________________________________________________________________________
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa                 JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice      BARNEY FRANK, Massachusetts
    Chair                            PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska              MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama              LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware          NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma             KEN BENTSEN, Texas
ROBERT W. NEY, Ohio                  JAMES H. MALONEY, Connecticut
BOB BARR, Georgia                    DARLENE HOOLEY, Oregon
SUE W. KELLY, New York               JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                MAX SANDLIN, Texas
CHRISTOPHER COX, California          GREGORY W. MEEKS, New York
DAVE WELDON, Florida                 BARBARA LEE, California
JIM RYUN, Kansas                     FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama                   JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina      CHARLES A. GONZALEZ, Texas
DOUG OSE, California                 STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois               MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
GARY G. MILLER, California           WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia                STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York       MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania         
SHELLEY MOORE CAPITO, West Virginia  BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
             Terry Haines, Chief Counsel and Staff Director

         Subcommittee on Domestic Monetary Policy, Technology, 
                          and Economic Growth

                   PETER T. KING, New York, Chairman

JAMES A. LEACH, Iowa, Vice Chairman  CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          BARNEY FRANK, Massachusetts
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
RON PAUL, Texas                      BERNARD SANDERS, Vermont
STEPHEN C. LaTOURETTE, Ohio          JAMES H. MALONEY, Connecticut
DOUG OSE, California                 DARLENE HOOLEY, Oregon
MARK GREEN, Wisconsin                MAX SANDLIN, Texas
CHRISTOPHER SHAYS, Connecticut       CHARLES A. GONZALEZ, Texas
JOHN B. SHADEGG, Arizona             MICHAEL E. CAPUANO, Massachusetts
VITO FOSSELLA, New York              RUBEN HINOJOSA, Texas
FELIX J. GRUCCI, Jr., New York       WILLIAM LACY CLAY, Missouri
MELISSA A. HART, Pennsylvania        MIKE ROSS, Arizona
SHELLEY MOORE CAPITO, West Virginia


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 24, 2001................................................     1
Appendix
    July 24, 2001................................................    27

                               WITNESSES
                         Tuesday, July 24, 2001

Allen, Hon. George, a U.S. Senator from the State of Virginia....     4
Cantor, Hon. Eric, a Representative in Congress from the State of 
  Virginia.......................................................     3
Ferguson, Hon. Thomas A., Director, U.S. Bureau of Printing and 
  Engraving......................................................    13
Snow, Daniel G., Special Agent in Charge, Counterfeit Division, 
  U.S. Secret Service, accompanied by Tony Chapa, Deputy Special 
  Agent in Charge, Counterfeit Division..........................    15
Students of Liberty Middle School and Patrick Henry High School, 
  Ashland, VA....................................................     6

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    28
    Cantor, Hon. Eric............................................    30
    Ferguson, Hon. Thomas A......................................    38
    Snow, Daniel G...............................................    43
    Students joint statement.....................................    33

 
                    DESIGN AND SECURITY OF CURRENCY

                              ----------                              


                         TUESDAY, JULY 24, 2001

             U.S. House of Representatives,
         Subcommittee on Domestic Monetary Policy, 
                   Technology, and Economic Growth,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:10 p.m., in 
room 2128, Rayburn House Office Building, Hon. Peter T. King, 
[chairman of the subcommittee], presiding.
    Present: Chairman King; Representatives Lucas, Ose, Green, 
Hart, C. Maloney of New York, and J. Maloney of Connecticut.
    Chairman King. The hearing will come to order. I want to 
welcome Senator Allen, and of course our colleague, Congressman 
Cantor. And I would just like to make a brief opening statement 
before we begin. This deals with the second part of our hearing 
today, but I doubt that many people consider the design of the 
money in their pocket. The design of our currency serves a very 
important purpose of security. All the precise lines and the 
special currency paper that are instantly identifiable by touch 
let us know that the bills in our pocket are genuine 
obligations of our Government.
    For more than 60 years, the changes to our bank notes were 
so minor, the average person never would have noticed them. But 
advances in photocopying technology and the computer scanners 
and printers gave counterfeiters easy access to cheap, easy-to-
use tools.
    While the fakes they produced weren't of great quality, 
they sometimes were good enough to pass. About 5 years ago, the 
Nation's security printer, the Treasury Department's Bureau of 
Engraving and Printing, or BEP, gave us a new series of bank 
notes which were harder to fake, and these help protect the 
security of our Nation's currency.
    But we are here today because the counterfeiters and their 
equipment have gotten better, and it is time to consider a new 
generation of bills, ones with more security features. And we 
are going to receive testimony from Thomas Ferguson, the head 
of the Bureau of Engraving and Printing; and Daniel G. Snow, 
the top anti-counterfeiting agent of the United States Secret 
Service, which, besides protecting the President and other top 
officials, is the anti-counterfeiting police arm of the 
Government.
    Director Ferguson and Agent Snow are here to tell us the 
state of our current anti-counterfeiting efforts and of our 
plans to deter fakes through the new generation of currency 
that we expect to be able to see within the next 2 years. They 
will also tell us a little about what they expect will happen 
with the introduction of the Euro currency next January. Euros 
were introduced in electronic form 2\1/2\ years ago. They will 
actually appear in physical form on January 1st. And the 
Europeans plan to exchange all of their existing marks and 
franks and lire and Irish pounds for Euros in a 2-month period.
    I know that Secret Service is working directly and closely 
with its counterparts in Europe and the rest of the world to 
stem the tide of counterfeits. I am studying legislation that 
could help that effort. Additionally, last week, I introduced a 
bill at the request of the Administration that would allow the 
BEP to print currency for other and smaller countries.
    But now the real pleasant business of the hearing today. 
And once we get counterfeiting out of the way, I just want to 
say how privileged we are to have Congressman Cantor and 
Senator Allen today, and some of their very special 
constituents who have a novel idea for redesign of U.S. bank 
notes. We have--I guess they are all sitting out here in the 
audience--a group of pupils from Liberty Middle School and 
Patrick Henry High School in Ashland, Virginia, to tell us 
about a very patriotic idea they have to put the Constitution 
on the backs of all our bank notes.
    They have worked very hard on this effort and their 
appearance today before this subcommittee is a tribute to their 
dedication. Congressman Cantor, as one of his first pieces of 
legislation, introduced it back in March of this year. I 
certainly don't want to steal their thunder, so I will let the 
students, and also Congressman Cantor and Senator Allen, 
explain the proposal themselves in a few moments. And I also 
want to thank Senator Allen for making a long trip over here to 
the House of Representatives. I know he was here a few years 
ago. It is great to have you back, and it is always great to 
have Congressman Cantor.
    Now I will yield to the gentlelady from New York, Mrs. 
Maloney.
    Mrs. Maloney. Thank you very much. It is my great honor to 
welcome Congressman Cantor and Senator Allen from the great 
State of Virginia, and I'd like to also welcome the young 
patriotic team that came up with the idea for the Liberty Bill 
Act of 2001. It is not surprising that you have come up with 
this idea. After all, Virginia gave our country more Presidents 
than any other State, and Virginia has often been called the 
birthplace of democracy in the United States. So I welcome the 
civic responsibility that the young authors have put forward 
and the cooperation that their Congressman and Senator have 
given them, and I look forward to hearing their testimony. And 
all I can say is God Bless America.
    But also, after this panel, we are going to be looking at 
some very important things, maintaining integrity as it relates 
to counterfeiting of the United States dollar, and that should 
be a priority. Maybe the Constitution on the back would make it 
harder for people to counterfeit. I guess we will find out in 
the next panel. I am looking forward to hearing how the Secret 
Service is working to maintain the integrity of the United 
States dollar.
    As the testimony will provide, we are seeing some increases 
in counterfeiting with a surprising increase of 41 percent in 
Colombian-manufactured counterfeiting. Also with the increased 
availability of technology, the challenges which face law 
enforcement will increase. That is why I feel this hearing is 
so important, and we need to keep on top of these issues.
    I am also pleased to announce the introduction of H.R. 2509 
as an original co-sponsor with Mr. King. I believe the bill 
provides an avenue for the Bureau of Engraving and Printing to 
lend their expertise and knowledge to smaller countries. The 
bill provides that the Bureau of Engraving and Printing be 
allowed to print currency and security documents, passports, 
stamps, for example, for other countries. As we value the 
integrity of our currency, let us also assist others in 
developing a high valued currency for their countries. I look 
forward to the testimony, and, again, I welcome all the 
participants.
    Chairman King. Thank you, Mrs. Maloney.
    I understand Congressman Lucas and Congressman Green do not 
have opening statements.
    Congressman Cantor, if you would lead off first.

  STATEMENT OF HON. ERIC CANTOR, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF VIRGINIA

    Mr. Cantor. Thank you, Mr. Chairman. I thank you, and I 
thank Mrs. Maloney for holding this hearing today, and I am 
very pleased to be here to discuss H.R. 1021, the Liberty Bill 
Act of 2001. Many studies have demonstrated that most Americans 
have little knowledge about the Constitution of the United 
States. While we all enjoy the benefits of our democracy, fewer 
and fewer citizens of this great country can cite the basic 
rights of freedom guaranteed in this timeless document.
    To remedy this unfortunate trend, a remarkable group of 
students at Liberty Middle School and Patrick Henry High School 
in Ashland, Virginia, have proposed a way to give Americans a 
daily civics lesson.
    On their behalf, I introduced the Liberty Bill Act of 2001. 
This legislation is intended to celebrate our Constitution as a 
living American symbol, and integrate it into our lives on a 
daily basis by simply placing an abbreviated version of the 
Constitution on the reverse side of all U.S. paper currency.
    This bill would honor our system of law and Government and 
promote the teaching of democratic principles around the world.
    We as a Nation must be ever mindful of the ideals upon 
which the United States was founded, and this legislation would 
provide a prominent reminder of our Founding Fathers' vision 
for our Nation.
    My distinguished predecessor, Congressman Tom Bliley, 
recognized the value of this concept and garnered over 100 co-
sponsors of a similar bill during the 106th Congress, many who 
sit on this subcommittee. This bipartisan bill was introduced 
in the 107th Congress with the co-sponsorship of the entire 
Virginia Delegation, and support for the concept is growing 
here in the House.
    I also welcome the distinguished Senator, my friend from 
Virginia, Senator George Allen, who is the author of similar 
legislation in the Senate.
    I would also like to extend a welcome to members of the 
Hanover County school board, the Chairman, Sue Watson, as well 
as the Chairman-elect, John Axselle, who are both here from 
Hanover County, as well as Dr. Stewart Robinson, the 
Superintendent of Schools in Hanover.
    I would like to applaud Mr. Randy Wright, whose vision and 
leadership on this issue brought this concept to reality. Randy 
has been an energetic proponent of the Liberty Bill, and his 
hard work on this legislation has enabled his students to 
present their idea here in the House of Representatives, as 
well as at the White House.
    Randy has a true understanding of our democracy, and I 
commend him for his love of teaching. He is a model citizen, an 
enthusiastic teacher, and an excellent example for his 
profession. Randy is also joined by his colleague, Mr. Tony 
Santos, who is also a teacher at Liberty, as well as Patrick 
Henry. You will see from the presentation that follows that his 
students have excelled in their studies and promise a bright 
future for our country. They have travelled here today from 
Ashland, Virginia, to participate in our democratic process and 
present their idea to the subcommittee.
    I am honored to represent such fine young men and women, 
and am impressed by their patriotism and inspired by their 
potential.
    As a representative from the seat once held by James 
Madison, I am particularly cognizant of the contributions of 
our ancestors at the birth of this Nation. George Washington, 
Thomas Jefferson, James Madison, and George Mason, are not just 
names in a history book to these students from Liberty Middle 
School; they are shining examples of our democracy, and their 
memory embodies our heritage in Virginia and the United States. 
Men and women in this country and around the world are indebted 
to these patriotic Americans. We cherish their memory, and 
through this legislation, we work to preserve their 
accomplishments.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Hon. Eric Cantor can be found on 
page 30 in the appendix.]
    Chairman King. Thank you, Congressman Cantor. I want to 
thank you for bringing these students and teachers and 
community leaders and parents here. It really does speak 
volumes as to the outstanding people in your district, and it 
is really an honor for you to have brought them here.
    And now, the distinguished Senator from the State of 
Virginia, Senator George Allen.

 STATEMENT OF HON. GEORGE ALLEN, A U.S. SENATOR FROM THE STATE 
                          OF VIRGINIA

    Senator Allen. Thank you, Mr. Chairman, and Ranking Member 
Congresswoman Maloney. Thank you all, and all Members of the 
subcommittee for holding this hearing. And I agree with every 
single thing that my good friend, Congressman Eric Cantor, has 
said. He is an articulate strong leader, shares the values that 
I think all of us understand are at the foundation of our 
country and carrying forward into the future. Eric and I both 
agree this is a very creative idea and a great way, an 
innovative way to help spread, not just amongst the few that 
study our Constitution and our system of Government--about how 
our Government is organized; the separate branches; the 
amendments and so forth in the Constitution. Not just folks who 
pay attention to it all the time, but indeed, I think people 
would pick up one of these bills, and they would look on there 
and they would say that all right, the First Amendment protects 
freedom of religion, freedom of speech, freedom of the press, 
the right to assemble peaceably and the right to petition 
Government. People may not know all of that. I guarantee you 
most people probably forget the idea that the 8th Amendment 
prohibits cruel and unusual punishment, and you can imagine 
wisecracks about people--you know, they are saying--they are 
hanging around with you and driving down the road is an 8th 
Amendment violation. But nevertheless, it would be a way they 
would learn about it.
    You also learn through it the history of this country, 
where you see the beginning amendments and certainly how the 
Executive, Judicial and Legislative Branches work, and the 
organization of the States. They will see how the full 
blossoming of the promise of this country was not all in the 
Bill of Rights, which unfortunately, many people don't even 
know the first ten amendments in the Bill of Rights and how 
they protect us.
    But then you see how, over the years, that the rights were 
finally given to those who were African-Americans, how even 
later, those rights to vote and participate in Government were 
given to women. And how the Constitution, yes, it is our 
foundational document, but most importantly, it is not just our 
history and heritage. It is a living document that still 
applies, and when one thinks of how much and how often money 
goes through our hands, this is a great way, Mr. Chairman, and 
Members of the subcommittee, to help encourage and help educate 
our citizenry today. And to the extent that the American 
currency is put into circulation in various other countries, 
Panama, for example, uses United States currency as their 
currency.
    So it is something that I think is a great idea. It came 
from children, young adults, let us say, middle school students 
at Liberty Middle School, carried on by students at Patrick 
Henry High School. Most appropriately, I think, and it is 
something that is just a great way to teach Americans about 
their Government, their protected rights, spread our ideals 
around the world, educate Americans about the importance of 
this historic document and remind us daily of the rights and 
prerogatives and protections we have, but also the 
responsibilities that we all have as American citizens.
    So I hope that you, Mr. Chairman, and Members of the 
subcommittee will be--I am sure you will be as impressed and 
inspired by the wholesome presentation. I saw this presentation 
last February. I carried around a sample of the smaller version 
of the bill--it is now worn out--in my speech folder. They have 
improved it for 2001.
    This is a much better version than what you gave me. Of 
course, I wasn't elected yet. Once you get elected, you get 
better versions, I reckon. But nevertheless, I strongly support 
this legislation. Let me remind every American about our 
treasured heritage, the protections, the reason this Government 
was created, to protect our rights, our God-given rights and 
returning the Constitution to where it belongs, figuratively 
and literally, in the hands of American people.
    Thank you, Mr. Chairman, and Members of the subcommittee.
    Chairman King. Thank you very much, Senator Allen.
    Now Congressman Cantor, are you going to introduce the 
students or bring them up?
    Mr. Cantor. Mr. Chairman and Members, I present to you the 
students of Liberty Middle School and Patrick Henry High School 
of Ashland, Virginia, and their presentation of the Liberty 
Dollar Bill Act.

 STATEMENT OF STUDENTS FROM LIBERTY MIDDLE SCHOOL AND PATRICK 
                 HENRY HIGH SCHOOL, ASHLAND, VA

    [The following students, including those who spoke 
individually, participated in the recitation: Emily Ambler, 
Rina Amin, Whitney Arnold, Jill Beard, Kaitlin Bourne, Kay 
Breeze, Stacie Brown, Michael Bumbry, Lindsey Buraker, Sarah 
Carter, Morgan Cougot, Anne Duncan, Carmen Franck, Chesney 
Grizzard, Amy Harris, Karena Jackson, Tina Jackson, Lindsey 
Keiter, Caitlin Kelliher, Rachel Lynch, Jessica Nesselhauf, 
Matthew Nutter, Kari Roth, Stephen Sepe, Kate Taylor, Audra 
Vanderland.]
    Ms. Franck. Chairman King, Ranking Member Mrs. Maloney and 
Members of the Domestic Monetary Policy, Technology and 
Economic Growth Subcommittee, thank you for conducting this 
important hearing today. It is truly an honor to be able to 
speak to you on behalf of the Liberty Bill Act, a bill before 
Congress to place an abbreviated version of the Constitution on 
the back of $1 bills or possibly other currency.
    We represent Liberty Middle School and Patrick Henry High 
School, where the Liberty Bill originated nearly 3\1/2\ years 
ago, yet we merely speak for the many students of our school, 
other middle schools, high schools and now colleges that have 
joined our efforts. America's history and culture are full of 
examples of respect for our Constitution and our love of 
liberty. Lincoln's Gettysburg Address ends with:
    Mr. Bumbry. ``That this Nation, under God, shall have a new 
birth of freedom and that Government of the people, by the 
people, and for the people shall not perish from the Earth.''
    Ms. Franck. In the movie, ``Mr. Smith Goes to Washington,'' 
Jefferson Smith says:
    Ms. Duncan. ``Liberty is too precious a thing to be buried 
in books. People should hold it up in front of them every 
single day of their lives and say, `I am free to think and to 
speak.' My ancestors couldn't. I can. And my children will. 
People ought to grow up remembering that.''
    Ms. Keiter. Ancient Greece and Rome had forms of democracy, 
but these nations eventually fell apart, replaced by tyrannies 
and monarchies. For over a thousand years, governments ruled 
over the peoples of all nations. But in 1215, a candle for 
freedom and liberty was lit when King John was forced to sign 
the Magna Carta, and people began to challenge the relationship 
between citizens and their governments.
    From 1690 to 1789, many more candles were lit for freedom 
and liberty as the enlightenment philosophers questioned 
further the relationship between people and government, 
eventually believing government should answer to the people.
    Ms. Brown. The enlightenment philosophers produced mostly 
talk and writings. But in America, the talk became action. The 
Declaration of Independence stated that ``all men are created 
equal.'' That people have a right to ``life, liberty and the 
pursuit of happiness'' and that the Government should come 
``from the consent of the governed.'' We fought a war to win 
these rights and freedoms.
    In 1787, we illuminated the world when our Founding Fathers 
wrote what would become the model for all modern democracies, 
the Constitution. Our Constitution is a beacon of light for the 
world. The oppressed still stand up on occasion for freedom and 
liberty as they did in China's Tiananmen Square. Shouldn't all 
people be able to hold up our U.S. currency as a symbol of 
freedom of modern democracy, like a candle in darkness?
    Like a candle in darkness, shouldn't the Constitution be on 
the back of the U.S. currency?
    Mr. Bumbry. George Washington, President of the 
Constitutional Convention; James Madison, father of the 
Constitution; Ben Franklin, and many other great Americans met 
for four hot months in 1787 to ignite history's greatest light 
of Government. They argued, fought, compromised and gave their 
all to create a lasting democracy of liberty and freedom found 
in the Preamble, the Articles, and the Amendments of our 
Constitution.
    They protected this philosophy and these ideals by 
separating the power of Government into three branches--
Legislative, Executive and Judicial. And creating checks and 
balances among these branches of Government. They further 
divided the Government with divisions of power between the 
Federal and State governments.
    While our currency celebrates some of the men who first 
wrote the Constitution, it doesn't celebrate their most noble 
achievement, the living document which they put their lives 
into. Shouldn't the greatest of American achievements be in the 
hands of all Americans to be preserved, protected and defended? 
Shouldn't the Constitution be on the back of the U.S. currency?
    Ms. Cougot. A survey by the National Constitution Center, a 
body created by Congress in 1988, found that 75 percent of 
Americans say that ``The Constitution is important to them, 
makes them proud, and is relevant to their lives.''
    However, the survey found that 94 percent of Americans 
don't even know all of the rights and freedoms found in the 
First Amendment, and 62 percent of Americans cannot name our 
three branches of Government.
    Six-hundred-thousand legal immigrants come to America each 
year. Many of these immigrants become American citizens through 
the naturalization process and must learn more about the 
Constitution than many natural-born citizens know.
    If America's most patriotic symbol, the Constitution, were 
on the back of U.S. currency, wouldn't we all know more about 
our Government? And shouldn't we?
    Ms. Buracker. What is the cost of telling the world about 
representative democracy, about freedom, about equality?
    The National Automatic Merchandising Association, which 
opposes the Liberty Bill if it places the Constitution on the 
back of the $1 bill, says that it will cost $420 million to 
update the 4.2 million vending machines to recognize new bills.
    Sounds expensive. It isn't. The cost is only $100 per 
machine for one year. That is less than 30 cents per machine 
per day. That's right. 30 cents a day for one year.
    If it is too expensive to update vending machines, then the 
Constitution could go on other currency. As more people are 
exposed to these essential rights, more nations will turn to 
our form of Government. Then they will also turn to our free 
market economy, opening additional markets for American 
businesses, which, of course, expands opportunities for trade 
and for income.
    Ms. Arnold. What is the cost of telling the world about 
representative democracy, about freedom, about equality?
    The United States Information Agency, which promotes our 
national interests abroad through educational programs and 
radio broadcasts, has a budget of over $500,000,000. Yes, half-
a-billion dollars to tell other people the ideals found in our 
Constitution. The Congressional Budget Office estimates the 
one-time cost of the design of the Liberty Bill to be $500,000.
    Could the half-a-billion dollar yearly expense of the 
Information Agency be reduced if we let our half-a-million 
dollar Liberty Bills carry our message around the world? Could 
we cut back on programs and taxes if we let our money do the 
talking?
    Ms. Amin. What is the cost of telling the world about 
representative democracy, about freedom, about equality?
    The Treasury Department's Financial Management Service 
reports that there are $558 billion of United States currency 
in circulation. Of that, $7.4 billion are circulated in $1 
bills. Two-thirds of our currency is in circulation outside of 
the United States. Imagine the impact of 7.4 billion $1 bills 
exchanging hands over and over each week with the 6 billion 
people in the world, each exchange being the opportunity to 
discuss and ignite a new or renewed passion for democracy.
    Once printed, the cost of exchanging the ideas of freedom, 
billions and billions of times each day, forever, is free.
    Ms. Jackson. What is the cost of telling the world about 
representative democracy, about freedom, about equality?
    The Center for Strategic and Budgeting Assessments 
estimates that the cost of the war in Kosovo for America was 
over $2 billion, and that the ongoing peacekeeping will cost as 
much as $3 billion a year.
    If the world were more aware and accepting of the religious 
freedoms we celebrate in our First Amendment, would there have 
ever been a war? If the government of Kosovo were challenged by 
a free press, would that government have been able to oppress 
its own people? If the Constitution were written on the back of 
U.S. currency, wouldn't it become the world's second 
constitution, and wouldn't there be less war?
    Ms. Brown. You ask, what is the cost of telling the world 
about representative democracy, about freedom, about equality?
    The Revolutionary War, the War of 1812, the Civil War, the 
Spanish-American War, World War I and World War II, the Korean 
War, the Vietnam War, Desert Storm, the War in Kosovo. These 
are the costs of the ideals we cherish found in our 
Constitution.
    Stand in front of any monument to our fallen heroes. Run 
your fingers across the names inscribed on the Vietnam War 
Memorial, or stand at the hallowed ground at Arlington National 
Cemetery. These are the real costs of the philosophy we love 
found in the Constitution.
    So, can anyone put a cost on mankind's highest 
achievements? Or are they priceless?
    Ms. Duncan. Perhaps with the exception of religious 
writings, the Constitution is the most important document ever 
written. The first three words say it all. ``We the people.'' 
It belongs to us.
    The Founding Fathers also wrote in the Preamble of this 
great document the words, ``our posterity.'' They wrote the 
Constitution for the generations that would follow them. It 
belongs to us!
    With Article VII of the Constitution, the Founding Fathers 
required that ratification for our Government come from the 
consent of the people. ``We the people'' gave our consent. It 
belongs to us.
    The Founding Fathers wrote in Article V the amendment 
process, knowing that future generations, ``their posterity,'' 
could alter the Constitution to meet the changing needs of the 
people. Twenty-seven times the Constitution has been changed by 
amendment. It belongs to us.
    We the people, posterity, ratification, amendments, the 
Constitution of the United States of America. Shouldn't it be 
in the hands of all Americans--on the back of U.S. currency? 
Because it belongs to us.
    Ms. Keiter. The Constitution is all the more beautiful, all 
the more important, when you see the history and growth of our 
great Nation as we matured and improved through the amendment 
process. The Constitution, unfinished, still being written, a 
living document for all Americans.
    Mr. Nutter. When the Constitution was first written, it was 
not written for African-Americans. African-Americans were not 
given equal rights in the Constitution, but the 13th, 14th, and 
15th Amendments changed our Nation. These amendments abolished 
slavery, defined citizenship, and guaranteed the right to vote 
regardless of race. The amendments on the back of our currency 
show a part of African-American history woven into the fabric 
of the Constitution, a living document for all Americans.
    Ms. Franck. When the Constitution was written, women too, 
were treated as inferior. They were not allowed full 
participation in our Republic, but the 19th Amendment changed 
that. It said that women could vote. The 19th Amendment on the 
back of United States currency celebrates a part of women's 
history and the beauty of a Nation of change found in our 
Constitution, a living document for all Americans.
    Ms. Jackson. Perhaps Barbara Jordan, while a Member of the 
House of Representatives, said it best, `` `We the people. It 
is a very eloquent beginning. But when that document was 
completed on the 17th of September in 1787, I was not included 
in that `We the people.' I felt somehow for many years that 
George Washington and Alexander Hamilton just left me out by 
mistake. But through the process of amendment, interpretation 
and court decision, I have finally been included in `We the 
people.' My faith in the Constitution is whole. It is complete. 
It is total.''
    Ms. Arnold. In 1998, the students of Liberty Middle School 
and Patrick Henry High School in Ashland, Virginia, first 
proposed that Congress adapt an abbreviated version of the 
entire Constitution to be on the back of the United States 
currency. Congressman Tom Bliley and Senator John Warner agreed 
and introduced the Liberty Bill Act to the 105th and 106th 
Congresses.
    This year, Congressman Eric Cantor has presented, and 
Senator George Allen will soon present, the ``Liberty Bill 
Act'' to the 107th Congress. We just call it the ``Liberty 
Bill.'' While the results of this change will be many, we would 
like to tell you the six we think are most important.
    Ms. Amin. First, the Liberty Bill ensures that Americans 
have a deeper knowledge of the framework of their Government 
and a better awareness of where their liberty and freedom 
originate.
    Second, the Liberty Bill teaches the progress of American 
history as we amended the Constitution.
    Ms. Duncan. Perhaps that is why the Fleet Reserve 
Association said of the Liberty Bill, ``It should thrill all 
Americans.''
    Mr. Nutter. Third, the Liberty Bill spreads the philosophy 
of representative democracy and the freedoms we cherish around 
the world while saving millions and millions of dollars from 
Federal programs.
    Fourth, the Liberty Bill will expand the American economy 
by encouraging nations to become republics and open their 
markets to global trade and the global economy.
    Ms. Buracker. Maybe that is why the Wall Street Journal, 
who knows a little something about money, economics and 
business, said that when Members of the 106th Congress met with 
the students to listen to the Liberty Bill presentations, that 
it might have been their most ``glorious moment.''
    Ms. Franck. Cinco, los soldados alrededor del mundo podran 
sostener la moneda corriente de los E.E.U.U. Y explicar porque 
estan dispuestos a dar sus vidas para los mismos ideales que 
llevan con ellos en sus bolsillos Y sus corazones.
    And for those who don't speak Spanish: Fifth, American 
soldiers around the world will be able to hold up United States 
currency and explain why they are willing to give their lives 
for the very ideals they carry with them in their pockets and 
in their hearts.
    When Lieutenant Shane Osborn and his crew gave the Chinese 
some American money as souvenirs, imagine the power and message 
of our currency if it had had our Constitution proudly and 
boldly written on it.
    Ms. Jackson. The Military Order of the Purple Heart simply 
said, ``We cherish this idea.''
    Ms. Cougot. Sixth, the Liberty Bill celebrates the 
Constitution as an American symbol, and ensures that we 
continue to preserve, as James Madison said, ``The hope of 
liberty throughout the world.''
    Ms. Buracker. Members of the Domestic Monetary Policy, 
Technology and Economic Growth Subcommittee, that must be what 
the Topeka Capital-Journal meant when it said, the Liberty Bill 
``May be the greatest idea ever originated in any school 
system.''
    Ms. Keiter. Following the Constitutional Convention, Ben 
Franklin was asked what kind of Government the Founding Fathers 
had given to the United States. He replied, ``A Republic, if 
you can keep it.'' The Constitution on the back of our currency 
not only celebrates this great Republic, it deepens people's 
knowledge and understanding of where our Republic comes from, 
what it means, and it helps us ``keep it,'' as Dr. Franklin 
challenged.
    Mr. Nutter. And there are other reasons.
    The Liberty Bill promotes human rights around the world as 
people are exposed to Amendment 1, which protects freedom of 
religion, freedom of speech, freedom of the press, the right to 
assemble peaceably, and the right to petition Government.
    Ms. Amin. The Liberty Bill promotes human rights around the 
world as people are exposed to Amendments 4, 5, 6, 7, and 14 
that ensure all people equal treatment and the same due process 
under the law, including fair, speedy and public trials, trials 
by jury, and the right to a lawyer.
    Ms. Cougot. The Liberty Bill promotes human rights around 
the world as people are exposed to Amendment 8 that forbids 
cruel and unusual punishments.
    Mr. Bumbry. The Liberty Bill promotes human rights around 
the world as people are exposed to Amendment 13 that forbids 
slavery.
    Ms. Duncan. Thus, the Liberty Bill increases the acceptance 
of diversity and equality around the world as the Liberty Bill 
becomes the tangible symbol of human rights.
    Ms. Brown. In the 106th Congress, over 100 Representatives 
co-sponsored the Liberty Dollar Bill Act, including the 
Majority leader, the Majority Whip, eight committee Chairmen 
and three Ranking Members. It was one of only five bills in the 
House co-sponsored by both the House Speaker and the House 
Minority leader.
    Now, in the 107th Congress, the Liberty Bill has been 
introduced by Congressman Eric Cantor. It currently has more 
than two dozen co-sponsors. Congressman Cantor, thank you for 
sponsoring the Liberty Bill.
    Ms. Keiter. Our deep American philosophy is sometimes taken 
for granted in the everyday business of making laws. Yet, no 
country can survive that forgets its philosophical bearings. 
The Constitution on the back of the $10, the $5, the $2, or 
hopefully the $1 bill, where it will be seen by the most 
people, will remind all the world of the freedoms and liberties 
of our American culture, based in the Constitution. The 
ideological light that gives substance, value, and meaning to 
the laws by which we live.
    Ms. Arnold. Chairman King, Ranking Member Mrs. Maloney, and 
Members of the Domestic Monetary Policy, Technology and 
Economic Growth Subcommittee, we hope you will vote in favor of 
the Liberty Bill Act and send it to the House. Of course, we 
hope the vote is unanimous. Send a clear, strong message to the 
world that we are proud of our Constitution, and what it stands 
for.
    The peace and good will of the Constitution will cast a far 
greater light if all Americans and citizens of the world have 
it in hand, so that it can be read and the philosophy of 
American freedom and democracy shared.
    We know there will be opposition. People will tell you 
reasons why the Liberty Bill should not pass and cannot be 
done, but we believe that those reasons are weak when compared 
to the reasons for why it should pass.
    Many times, we have been told to stop dreaming the 
impossible dream. Standing here today is proof that Congress 
does listen to the people. People not yet old enough to vote, 
people who have little influence and little money. Yet, you 
have listened. We carry the impossible dream, and we are proud 
to stand here today with you, the most democratic body of 
Government in the world, and say that, yes, in America, the 
impossible dream is possible.
    Thank you for listening to us today, and now we present to 
you the Constitution.
    [All students recite the Bill of Rights.]
    All Students. Amendment 1: Freedom of religion, freedom of 
speech, freedom of the press, right to assemble peaceably, 
right to petition.
    Amendment 2: The right to bear arms.
    Amendment 3: Do not have to quarter soldiers during 
peacetime.
    Amendment 4: No unreasonable searches and seizures.
    Amendment 5: Rights of the accused.
    Amendment 6: Right to a fair trial.
    Amendment 7: Right to a trial by jury in civil cases.
    Amendment 8: No cruel and unusual punishments.
    Amendment 9: Unenumerated rights go to the people.
    Amendment 10: Reserves all powers not given to the national 
Government to the States.
    Written in 1787, ratified in 1788, the Constitution, a 
living document, took effect in 1789.
    Chairman King. Well, thank you very much. As the Chairman, 
I will take the prerogative to ask everyone to give a round of 
applause to these students. I also must say I feel a bit sorry 
for our two witnesses who are going to follow them. It is a 
very tough act to follow. But I can certainly now see why 
Congressman Cantor is so proud of this middle school and high 
school and teachers and community leaders, because this was a 
tremendous presentation you made today, very moving, very 
informative, and Congressman Cantor, do you have any questions 
you think should be asked?
    Mr. Cantor. Mr. Chairman, Mrs. Maloney, I just want to 
thank you again. I think you have seen some of Virginia's best 
and brightest engaging in what I see as the world's greatest 
civics lesson with the proposal to spread that throughout our 
land and to continue to help preserve the establishments of our 
Founding Fathers.
    So I have no further comments, Mr. Chairman. Just thank you 
again, and thanks to the students for their terrific 
performance.
    Chairman King. Thank you, Congressman Cantor. Thank you, 
Senator Allen, very much and thank all of you. It was very 
educational experience for all of us, and again I want to 
commend you for the great job you have done. Thank you very 
much.
    Also out of my own curiosity, will Randy Wright please 
point himself out, Randy Wright? OK. This is the gentleman that 
apparently deserves all the credit for this. So congratulations 
to you for a job truly well done.
    [The prepared statement of the students can be found on 
page 33 in the appendix.]
    Chairman King. And now I will ask the witnesses of our 
second panel to come forward.
    Good luck to you two guys.
    Mr. Ferguson. Yeah. Thank you, Mr. Chairman.
    Chairman King. I want to welcome Thomas Ferguson, who was 
already introduced, and also Daniel Snow. I appreciate you 
being here today. It is obviously a very important matter you 
are going to be testifying on, a matter that is very critical 
to our Nation's security, and I would ask if Mr. Ferguson would 
begin with his statement, and I would ask Congressman Lucas 
just to preside briefly while I leave the room.

STATEMENT OF HON. THOMAS A. FERGUSON, DIRECTOR, U.S. BUREAU OF 
                     PRINTING AND ENGRAVING

    Mr. Ferguson. Thank you, Mr. Chairman, Congresswoman 
Maloney and Members of the subcommittee for inviting us here 
today and for holding this hearing on this very important 
topic.
    I appreciate the opportunity to report on the initiatives 
of the Bureau of Engraving and Printing, (BEP), particularly on 
our anticounterfeiting program.
    The Bureau is the security printer for the United States. 
It produces a number of products that require special printing 
processes and techniques to protect against counterfeiting and 
fraudulent alteration. The Bureau uses capital systems, state-
of-the-art high-speed presses, electronic inspection systems 
and other sophisticated equipment, in combination with the 
exceptional technical competence of our workforce, who 
efficiently produce billions of Federal Reserve notes, postage 
stamps and other U.S. security printing.
    The Bureau's operations are financed through an industrial 
revolving fund. So we do not receive annual appropriations from 
Congress. Instead, we are reimbursed directly by our customers 
for the products that we produce. Our two largest clients are 
the Federal Reserve System and the United States Postal 
Service.
    The Bureau works cooperatively with the Federal Reserve 
System, the Department of the Treasury and the United States 
Secret Service to improve the security of Federal Reserve 
notes. Our goal is to incorporate cost-effective security 
features to deter counterfeiting, as well as to help the public 
easily authenticate their money as genuine U.S. currency. It is 
vital that we keep pace with the evolving methods of 
counterfeiting in order to maintain the integrity of, and the 
public's confidence in, our monetary system.
    In the mid-1990s, the Bureau introduced the first major 
redesigned currency in over 65 years. The design changes were 
needed to combat the emergence of a new breed of counterfeiters 
who increasingly used computers, scanners, color copiers and 
other emerging technologies to replicate notes.
    All notes, with the exceptions of the $1 and $2 bills, were 
redesigned and introduced into circulation by the year 2000. 
The new design incorporated a number of security features, 
including a large off-center portrait, an embedded security 
thread that glowed under ultraviolet light, color shifting ink, 
watermarks, expanded use of micro-printing and moire patterns 
that do not copy accurately.
    The redesigned currency has been effective in combatting 
counterfeiting by making it more difficult to produce a high 
quality counterfeit note. Today, most of the counterfeit notes 
produced in the United States are made by using computer and 
inkjet technology and are below average quality, which means 
that they can be detected with proper visual scrutiny.
    The percentage of counterfeit currency appearing worldwide 
remains extremely small, approximately 5/100-of-1-percent of 
the approximatly $550 billion of genuine currency in 
circulation. In fiscal year 2000, the United States Secret 
Service reported that approximately $40 million in counterfeit 
U.S. currency was passed on the American public. The odds that 
an American citizen will ever encounter a counterfeit note in 
the course of his or her lifetime are extremely low, and it is 
our goal to keep it that way.
    While the redesigned currency has been successful in 
staying one step ahead of the counterfeiters, rapid computer 
and other technological advances will not afford us the luxury 
of waiting another 65 years before augmenting the design of our 
Nation's currency. In fact, we anticipate the need to change 
the design of our currency every 7 to 10 years.
    To prepare for the production of the next generation of 
currency, the Bureau is testing an array of anti-counterfeiting 
features that involve various types of papers, inks, embedded 
security features, as well as offset and other printing 
technologies. Additionally, we have initiated a Bureau-wide 
training program to enhance the skills of our employees who 
will be required to utilize these new techniques.
    Recently, we began an expansion of the Bureau's Western 
Currency Facility in Fort Worth, Texas, and the modernization 
of the DC facility to accommodate the additional production 
steps that are anticipated for future currency designs.
    Treasury has submitted a legislative proposal to Congress 
that would authorize the Bureau to produce security products on 
behalf of foreign governments and States of the United States 
on a reimbursable basis. Presently, the Bureau's authority to 
print security document applies to Federal Government agencies 
only.
    Periodically, foreign governments request assistance from 
the Bureau to design and/or produce currency, stamps or other 
security printing products. The bill's limited authority could 
allow the Bureau to develop new and innovative security 
features outside the current traditions of U.S. currency 
design, for possible application to future generations of U.S. 
currency.
    The authority in the legislation is limited to times when 
the demand for U.S. currency, postage stamps or other products 
is below the Bureau's production capacity. The measure 
precludes the Bureau from producing products on behalf of a 
foreign government, unless the Secretary of State determines 
that such production is consistent with U.S. foreign policy. 
And our use of this authority will be consistent with the 
Administration's competitive sourcing initiative and its 
commitment to public-private competition.
    This concludes my opening remarks, Mr. Chairman, and I will 
be happy to respond to questions by you or other Members of the 
subcommittee. Thank you.
    [The prepared statement of Hon. Thomas A. Ferguson can be 
found on page 38 in the appendix.]
    Chairman King. Thank you, Mr. Ferguson.
    Mr. Snow.

     STATEMENT OF DANIEL G. SNOW, SPECIAL AGENT IN CHARGE, 
COUNTERFEIT DIVISION, U.S. SECRET SERVICE, ACCOMPANIED BY TONY 
   CHAPA, DEPUTY SPECIAL AGENT IN CHARGE OF THE COUNTERFEIT 
                            DIVISION

    Mr. Snow. Thank you. Mr. Chairman and Members of the 
subcommittee, it is my pleasure to speak with you today and 
discuss the counterfeiting of U.S. currency and its impact on 
the integrity of the financial system of the United States. 
With me today is Tony Chapa, Deputy Special Agent in Charge of 
the Counterfeit Division, and until very recently, Resident 
Agent in charge of our Bogota, Colombia office.
    Although best known among the public as the protectors of 
our Nation's leaders and visiting world dignitaries, the Secret 
Service continues its historic mission to suppress counterfeit 
activity, a mission that began in the 19th Century and 
continues into the 21st Century. Technological improvements 
with computers and reprographic equipment, coupled with the 
increasing expansion of international, organized criminal 
syndicates, has challenged the Secret Service to develop 
innovative and investigative techniques.
    Numerous worldwide and domestic counterfeit investigations 
conducted by the Secret Service indicate that counterfeiting 
U.S. currency has become a crime that has no territorial 
borders. Counterfeiting is a crime that is as likely to be 
committed by an organized criminal enterprise in Colombia, 
South America, as it is to be committed by a local street-level 
criminal in America. And counterfeiting is on the rise. 
Counterfeit U.S. currency passed in the United States during 
the first 8 months of this fiscal year increased 18 percent 
over fiscal year 2000.
    Today's counterfeiters are often criminals who, because of 
the relative ease of the crime, choose counterfeiting over 
other nonviolent crimes. But today's counterfeiters are also 
represented by ruthless offenders, involved in violent crimes 
such as narcotics trafficking and homicide.
    Staying ahead of the technologically-advanced counterfeiter 
of the 21st Century continues to be a challenge and a priority 
for the Secret Service. With reprographic equipment, computers 
and computer software continuing to become more sophisticated 
and affordable, counterfeiters have been able to increase both 
the volume and the quality of their product. Domestically-
passed counterfeit U.S. currency that has been manufactured 
utilizing digital technology rose from $174,000 in fiscal year 
1995 to over $18 million in fiscal year 2000. Currently, 94 
percent of the domestic counterfeit printing operations 
suppressed by the Secret Service in this fiscal year has been 
digitally-based. These significant increases are due largely to 
a growing number of criminals attracted to the seeming 
simplicity of the crime, made possible by today's technology.
    In response to this growth in digital counterfeiting, the 
Secret Service is pursuing legislative changes to 
counterfeiting statutes that clearly define the fraudulent use 
of digital images as a violation of law.
    The Secret Service is also staying ahead of modern 
counterfeiting operations through its involvement in the 
currency design process. The Secret Service enjoys a close 
working relationship with the Bureau of Engraving and Printing, 
as well as the Federal Reserve Board during the design phase of 
U.S. currency.
    Over one-third of the $40 million in counterfeit U.S. 
currency passed to the American public this past year was 
transported or ``muled'' into the United States from foreign 
countries, most often Colombia. But Colombian-manufactured 
counterfeit also poses a threat to the stability of the dollar 
in countries outside the United States as well as those 
countries that seek economic assistance by ``dollarizing'' 
their economies. For example, Ecuador officially ``dollarized'' 
its economy in April of 2000 in an attempt to slow inflation 
and the devaluation of its local currency.
    As the U.S. dollar became the ``coin of the realm'' in 
Ecuador, Colombian counterfeiting operations began targeting 
the country by flooding the region with counterfeit currency. 
The Secret Service response to the threats posed by Colombian-
based counterfeiting and ``dollarization'' follows our 
traditional methodology. The Secret Service pursued and 
received funding from ``Plan Colombia'' to increase our 
presence in Colombia and to fund Colombian law enforcement 
units that will, under the direction of the Secret Service, 
solely target counterfeit U.S. dollar operations. The Secret 
Service is also studying a plan that includes the creation of 
additional field offices in Central and South America to 
address the increasing challenges created by ``dollarization.''
    In closing, counterfeiting will continue, to some extent, 
as long as genuine currency is a medium of exchange. However, 
the Secret Service continues to pursue ever-changing tactics of 
the modern counterfeiter and to educate law enforcement, the 
financial community, and the public about the security features 
of genuine currency.
    Since our inception, the Secret Service has protected the 
security and stability of the dollar by stemming the flow of 
counterfeit. Without constant attention to this task, the 
modern counterfeiter could jeopardize the foundation of our 
financial system and our Nation's currency. The Secret Service 
will continue to aggressively pursue this goal, as it has for 
more than 135 years.
    Mr. Chairman, this concludes my prepared remarks. I would 
be pleased to answer any questions that you or Members of the 
subcommittee may have.
    [The prepared statement of Daniel G. Snow can be found on 
page 43 in the appendix.]
    Chairman King. Thank you very much, Mr. Snow. I have 
actually several questions.
    The first question is to Mr. Ferguson. Can you testify what 
is the raw cost of redesigning currency exclusive of the 
special security features and also as a follow-on to that, my 
understanding is that U.S. bank notes cost about 4 cents to 
make. Would new security features raise the cost and how much?
    Mr. Ferguson. OK. Thank you, Mr. Chairman.
    The cost of redesigning currency, exclusive of the security 
features, is very minimal. It would require just the 
reengraving of plates. We amortized those costs over a huge 
amount of product. So the incremental cost is in the hundreds-
of-a-cent per note.
    The major cost of redesigning, though, are the additional 
security features. As you add new and very exotic materials, 
new methods of printing, organize new production steps, you add 
to the manufacturing cost.
    When we changed in 1996, the incremental cost was 
approximately $1 per thousand or one cent per note. So we would 
expect around the 25 percent increase to change the cost of 
currency. The higher value notes now cost approximately 6 cents 
a note, adding approximately a penny-and-a-half to 2-cents a 
note.
    Chairman King. I realize that some of the design features 
in the new series of currency are yet to be developed and will 
remain secret in any case. What are some of the types of 
features that we might see?
    Mr. Ferguson. As both myself and Agent Snow testified, the 
largest threat to our currency at the moment appears to be 
coming from the digital explosion that is happening. The 
systems that we are looking at now for inclusion in currency 
tend to be things that would counter those kinds of systems, 
anti-digital things, things that would be able to encode notes 
so that computer systems would not copy those. Similar to 
things that are in the notes now that would prevent copiers 
from reproducing notes. We are also looking at the addition of 
authentication features that can be used by high-speed 
equipment and vending equipment, things that would allow the 
general public to be able to easily recognize and authenticate 
their currency. So a wide range of features that would attack a 
wide range of types of counterfeiting.
    Chairman King. I don't know if you mentioned H.R. 2509 or 
not. Actually, it is legislation that I have introduced to 
allow the Bureau to print foreign currency under certain 
conditions.
    Mr. Ferguson. Yes. And we thank both the Chairman and the 
Congresswoman for co-sponsoring that.
    Chairman King. How would passage of this legislation allow 
you to print currency, how would this benefit the American 
taxpayer?
    Mr. Ferguson. American currency has, for a number of years, 
been extremely traditional. We have produced it using virtually 
the same technologies and techniques for all of my career, and 
for all of the last 50 or 60 years. By being able to produce 
for other countries, we would be able to test and evaluate and 
develop the skills that are necessary to produce currency with 
new and innovative techniques, new materials, new technologies. 
It would allow us to generate these skills, test the equipment, 
determine how effective they are, especially within our 
operation. So that when we turn those on in production for the 
public on their currency, we would have already had the 
experience.
    Next to that, it would be, I believe, helpful to countries 
outside of our United States to be able to take advantage of 
some of the expertise that we have and giving them some advice 
and assistance that otherwise they may not be able to get.
    Chairman King. Agent Snow, is it necessary to redesign our 
currency as often as every 7 to 10 years?
    Mr. Snow. Mr. Chairman, yes, I agree with Mr. Ferguson. We 
have found that in order to stay on the cutting edge in the 
combatting of counterfeiting, it is now necessary, with the 
rapid changes in reprographic technology, to have that ongoing 
process of looking at potential security features, having the 
time to sufficiently evaluate those features and then deciding 
as to whether or not they will keep us one step ahead of the 
counterfeiter.
    Chairman King. One more question before I yield to Mrs. 
Maloney.
    The media often portrays digital counterfeiting as a 
nuisance crime, primarily committed by juveniles. Can you 
comment on the accuracy of that and how serious it really is?
    Mr. Snow. Yes. Thank you for that question.
    You are correct; the media often does portray digital 
counterfeiting as a kiddie crime. Sometimes in that process it 
is minimized. Whereas we do see a significant percentage of 
juveniles experimenting with this new reprographic equipment in 
the area of counterfeiting, it is important to know that the 
bulk of that $19 million that we expect to see in losses to the 
American public this year do not come from that group.
    A very small percentage of the juveniles who are actually 
participating in counterfeiting are manufacturing large amounts 
of counterfeit. It is the organized criminal groups that I 
mentioned in my testimony, many that have ties to organized 
crime, gang activity, drug activity, that are actually 
spreading the large volumes of counterfeit to the American 
public.
    We do believe that through our education campaign--and we 
do target juveniles in our education campaign, although we 
always take the counterfeiting extremely seriously regardless 
of who perpetuates it--we do believe that through a positive 
outreach to the juveniles, we can bring home the message that 
it isn't something that they should become involved in.
    Chairman King. Thank you, Agent Snow.
    Mrs. Maloney.
    Mrs. Maloney. Thank you very much.
    Mr. Ferguson, Mr. Snow mentioned that we need to redesign 
the currency periodically to protect our currency. Is there 
another way that we can accomplish this without the expense of 
a complete redesign?
    Mr. Ferguson. I believe that any good currency system 
relies on three things. A very good solid currency design with 
good security features, an educated public and strict law 
enforcement. Without any one of those, you don't have a very 
good system.
    Certainly, we can help the American public greatly by 
putting out the word, by hearings like this, getting 
information into their hands about how they can authenticate 
their own currency, what to look at, how to recognize the feel, 
the look, the security features in a bank note that make it 
genuine.
    But with advances in reprographics out there, we are going 
to have to keep changing it from time to time in order to 
minimize the cost on society. The costs on the Government 
aren't that high; they tend to be higher on people having to 
change their systems.
    We are looking at trying to concentrate those changes on 
the higher value notes which tend to be counterfeited more, for 
example, not changing the $1 and $2 notes this last time 
around. But, unfortunately, in order to maintain a very secure 
currency system, we believe that it needs to be changed 
periodically.
    Mrs. Maloney. Is there a system in place, Mr. Ferguson, 
where the Secret Service keeps you apprised of new 
counterfeiting issues as they relate to law enforcement?
    Mr. Ferguson. Yes, there is, Congresswoman. We both, along 
with the Federal Reserve System, participate in the Advanced 
Counterfeit Deterrent Steering Committee that is chaired by the 
Department of the Treasury. And we meet periodically and go 
over the statistics, review the type of counterfeit notes that 
are being passed, where they are being passed, how they are 
being manufactured, how they are being detected at the public 
level or at the commercial level, so that we can take advantage 
of the good things in notes and correct those things that we 
need to.
    So we work along with the Federal Reserve, hand-in-hand on 
those operations, and share information regularly.
    Mrs. Maloney. Do you feel we are adequately addressing the 
availability of new technology as it relates to the counterfeit 
production of currency?
    Mr. Ferguson. By that, do you mean are we addressing what 
is available to the public to use?
    Mrs. Maloney. Yes. Are you on top of the changes daily?
    Mr. Ferguson. Well, the computer world out there is 
booming. The technology seems to be doubling in speed. And the 
price is getting cut in half every 6 months or so. We try and 
stay ahead of that. We feel very confident that the changes 
that we made in 1996 were very effective. The changes that we 
are studying now will be effective in the future.
    But it is, in fact, a very challenging battle for us to 
stay ahead of that kind of booming technology.
    Mrs. Maloney. Mr. Snow, you mentioned earlier that there is 
a surprising increase of 41 percent in Colombian-manufactured 
counterfeiting. Is that related to the drug trafficking and the 
drug cartels; is that what is happening there?
    Mr. Snow. We do see some correlations between drug 
distribution and counterfeit distribution. The increase that we 
are seeing this year in Colombian-based counterfeiting coming 
into this country is a reflection of some very organized 
criminal enterprises that we have identified and are working 
very closely with the Colombian law enforcement officials to 
address.
    One very positive note on that is that just yesterday a law 
went into effect in Colombia that raised the maximum penalty 
for counterfeiting of U.S. dollars from 6 years to 10 years. 
That, in essence, takes the crime out of what was a finable 
offense and raises it to the equivalent of our felony. From 
that we will see longer jail terms for Colombian 
counterfeiters. It will open up the possibility for extradition 
to the United States.
    We hope that that will help us to address this growing 
problem.
    Mrs. Maloney. Well, you more or less said that you are 
working with foreign law enforcement to address this issue and 
that they have literally changed, legislatively, the law to 
cooperate with this growing problem.
    Are there other areas for improvement legislatively, 
besides the one you just mentioned, of raising the fine?
    Mr. Snow. Well, the Secret Service believes that working as 
closely as we can with our foreign law enforcement partners 
throughout the world is our best approach. And we are going to 
be talking with the Administration about the possibility of 
increasing our presence in the areas in and around Colombia, 
the ``dollarizing'' regions of Central and South America.
    Mrs. Maloney. Finally, is there any area for improvement 
legislatively to address the counterfeiting here in the United 
States that we could put forward that would help you do your 
job?
    Mr. Snow. Again, I think we are exploring now the 
possibility of being very specific in the language that 
addresses the manufacturing implements of counterfeit currency, 
to identify the digital image of a dollar bill with intent to 
defraud, to use it to defraud, as a violation of law.
    Whereas in the past we had hard plates that were used to 
counterfeit, it was very clear, if you held a counterfeit 
plate, that it could only be used for counterfeiting. Digital 
images now can be captured off the internet, they can be 
improved digitally. That itself can become a product that is of 
value to potential counterfeiters.
    We are discussing at this point the possibility of that 
kind of legislation. And, again, we will be discussing that 
with the Administration.
    Mrs. Maloney. And, finally, what are your opinions of the 
Liberty Bill Act? Would that be possible to do? You know, they 
said it would cost $500,000 to do it, the technology. Could 
that be counterfeited easily? What is the practicality of 
implementing the very patriotic idea that was put forward by 
the young people on the first panel?
    I am sure you were here to hear them, weren't you? Is it 
possible to do what they are proposing, or would it be very 
simple to counterfeit it? What is the response to their 
proposal from a technology point of view?
    Mr. Ferguson. From the standpoint of the potential being 
able to produce it originally, instead of counterfeiting it, as 
with all text, could be engraved in the plate and printed onto 
the back of the notes.
    On the higher value notes, the current layout that they 
have would have to be changed in order to allow room for the 
watermark. But on the lower denomination notes, it would fit 
and could be produced on the note. It would have absolutely no 
counterfeit deterrent value. It can be reproduced by digital 
systems or other types of counterfeiting the same as other 
types of text on the note.
    It would not be, I would say, either better or worse as far 
as the counterfeit deterrent than other types of printing.
    Mrs. Maloney. Is it better to have images and pictures than 
the words to counter counterfeiting?
    Mr. Ferguson. Well, on the face of the note, certainly we 
believe very strongly that the portrait is the very best 
security feature that we have that is printed on the note. 
People are used to looking at people's faces. There is a lot of 
detail and a lot of texture in a human face. We are used to 
looking at those. So people tend to focus on that; they notice 
differences.
    We use a very elaborate hand-engraved process that gives a 
very lifelike image to the engraving. So a lot of counterfeit 
notes look flat and lifeless. On the back of the note, the text 
versus a building, I wouldn't know if one had any more 
counterfeit deterrent value.
    I would turn that over to Agent Snow.
    Mr. Snow. Thank you. I commend the students for an 
excellent presentation. It was very moving. And I agree with 
Mr. Ferguson that technically it provides no deterrence to 
counterfeiting. However, the Secret Service is constantly 
looking for anything that may dissuade the potential 
counterfeiter. If this, in fact, appeals to the integrity or 
the patriotism of a potential counterfeiter, we would salute 
it.
    Mrs. Maloney. My time is up.
    Chairman King. Congressman Lucas.
    Mr. Lucas. Thank you, Mr. Chairman.
    Mr. Snow, here in really only a matter of months the 
Europeans will be conducting an amazing exercise in converting 
in something like a dozen countries, their currencies that they 
have used for years, decades, centuries, over to the Euro.
    Have you been, or has the United States Government, been 
working with the European Central Bank in regard to how they 
address the potential for counterfeiters out there? And I say 
that in regard to, as these sums of money come out from under, 
in some cases, mattresses, there will be a deluge. Some of it 
will be U.S. currency that will be appearing in those banks to 
be converted for Euros.
    Have you been in touch, been working with those people as 
to how they address that challenge?
    Mr. Snow. Yes. Our understanding is that as the Euro is 
introduced, there may be an increased demand for U.S. dollars 
in Europe, that whenever that occurs there may be an increased 
opportunity for counterfeiters.
    But we are working with the European Central Bank and with 
Europol so that we can continue our close working relationship 
that we really have enjoyed bilaterally, with most of the 
European Union nations.
    But we are anticipating, for example, joint training 
exercises, something that will give us a basis for working 
together in what we anticipate to be the most likely attacks 
against the Euro and the dollar from the same operation.
    Mr. Lucas. Because clearly, the local banking authorities 
will recognize marks and they will know a counterfeit from a 
noncounterfeit franc, but as these sums come in, ultimately the 
dollars that they do exchange out for Euros may potentially 
wind up coming back to us. I can see where that is a good 
question.
    To follow up on Mrs. Maloney's questions, the comment about 
the challenges that we face in Colombia, I have been on this 
subcommittee now for my fourth term. And there have been 
different hearings conducted by you and your predecessors--
perhaps Colombia now, but at different times there have been 
hot spots, shall I say, around the world, where very organized 
counterfeit efforts have been massed against us using state-of-
the-art technology.
    Are there presently other places besides Colombia where we 
face those challenges?
    Mr. Snow. There are other places in the world that 
counterfeit the U.S. dollar, a variety of places around the 
world that counterfeit the U.S. dollar. But, as you mentioned, 
over the long haul, the Colombian situation really is at the 
top of that particular group.
    Certain areas, certain criminal organizations, will come 
and go. We have had some recent successes in Bulgaria, for 
example, where we have, through our Rome field office, 
successfully dismantled some printing operations of what were a 
fairly damaging operation.
    But I think it is safe to say that the Colombian issue, 
which has been with us for probably over 20 years, my entire 
career anyway, is probably the single most identifiable 
location where counterfeit U.S. dollars are produced.
    Mr. Lucas. And under present Federal statutes, do you have 
all of the necessary authority that you need to work with your 
law enforcement counterparts around the world on those kind of 
issues?
    Mr. Snow. Yes. We have currently the 18 USC 470, which gave 
us extraterritorial jurisdiction in violation of our 
counterfeiting statutes here domestically, anywhere in the 
world, and is just now coming in use. And it is a very 
effective tool.
    Recently, in the Miami district, a Colombian-based 
counterfeiter was indicted on counterfeiting charges. He was 
picked up in Ecuador, is now in a Miami jail, somebody who has 
been counterfeiting the U.S. dollar for over 15 years.
    Mr. Lucas. And to touch for one more moment on the concept 
that the Chairman and the Ranking Member have discussed, this 
potential for the redesigning of our currency on a regular 
basis, the 7-to-10-year figure being thrown out, looking at how 
technology has advanced and will continue to advance, is it 
fair to say this is something our fellow citizens are just 
going to have to get used to if we are going to maintain the 
integrity of our medium of exchange?
    Mr. Ferguson. It would certainly appear that way, Mr. 
Congressman. The changes are so rapid that our goal is to get 
ahead and stay ahead. And we don't know at this point anything 
that would get us 20 years ahead, because we don't know what is 
coming up.
    When we changed, we spent a lot of time in the 1980s 
worrying about copying machines and not so much worrying about 
individual ink-jet printers, which at that time were crude and 
big dots and blots. They now do photographic quality. You can 
buy a digital camera and make your own photographs at home. So 
the technology continues to advance at such a degree that I 
believe it will, in fact, require continuous change of our 
currency.
    Mr. Lucas. Thank you, gentlemen.
    Thank you, Mr. Chairman.
    Chairman King. Thank you, Mr. Lucas.
    Mr. Ose.
    Mr. Ose. Thank you, Mr. Chairman. I want to make sure I 
understand a couple of things here.
    Mr. Ferguson, I think your testimony said there is $550 
billion worth of American currency in circulation around the 
world?
    Mr. Ferguson. Yes, sir.
    Mr. Ose. Roughly. And that each year, the Bureau delivers 
about 7.5 billion different notes and 15 billion stamps to the 
Federal Reserve and the Postal Service, respectively?
    Mr. Ferguson. Yes.
    Mr. Ose. The currency that is delivered, like the $1 bills, 
the $2 bills, the $5 bills, what is their life span? Like, a $1 
bill lasts 6 months? A year?
    Mr. Ferguson. The current estimate for a $1 note is 18 
months, although some recent statistics would suggest it is 
probably closer to 20 months.
    And the higher denominations last longer. $5s and $10s last 
2- to 2\1/2\ years. The $20s last about 3 years; $50s and $100 
bills, the estimate is 8 to 10 years, and, in fact, most likely 
longer than that. It really depends of the velocity of 
exchange. It is really the number of transactions that a note 
goes through during its life.
    Obviously the $1s have the highest usage rate.
    Mr. Ose. OK. On the Federal Reserve notes that are 
delivered to the Federal Reserve system now, we are producing 
those in our own production facilities?
    Mr. Ferguson. Yes. In Washington and Fort Worth, Texas.
    Mr. Ose. How much of the current currency production 
capacity that we presently have is sitting idle?
    Mr. Ferguson. Well, the maximum capacity, and it is machine 
capacity not employee capacity, is about 12 billion a year.
    Mr. Ose. $12 billion or 12 billion notes?
    Mr. Ferguson. Notes.
    Mr. Ose. So we are at 7.5 billion notes versus 12 billion 
in capacity?
    Mr. Ferguson. Yes.
    That number is lower than normal. Our normal production is 
somewhere around 9 billion to 9.5 billion. We, in 1999, in 
order to get ready for Y2K, produced 11.3 billion notes to have 
currency available if people wanted to withdraw it. That 
inventory of currency is being slowly eroded so that our 
production rates for this year and next year are lower in order 
to allow that inventory to be utilized.
    Mr. Ose. There was a comment about the new materials and 
equipment that is available for the production of different 
currencies. As it relates to American currency, I presume that 
staff at the Bureau is staying current in all of the different 
types of security measures that are available at present?
    Mr. Ferguson. Yes, sir. We spend a great deal of time 
analyzing the different features that come out in currency 
meetings with our colleagues around the world, meeting with our 
security printers, meeting with people from universities and 
other organizations that are developing, researching different 
types of security features.
    We are also testing and evaluating all of these features. 
For the 1996 design we looked at over 125 security features. We 
actually bought and tested 25 different features.
    Mr. Ose. Would it be fair to say for the benefit of 
America's taxpayers that the Bureau is probably doing 
everything that it can to explore those different security 
features and the like to protect the value of our currency?
    Mr. Ferguson. I certainly would like to. That is absolutely 
true, sir.
    Mr. Ose. I think your testimony earlier was that the 
ability to print currency for foreign governments would allow 
the Bureau to test and evaluate skills with new materials and 
equipment, primarily focusing on the efficacy of such security 
efforts and educating our staff as to how best to use these 
skills to further protect American taxpayers; which begs the 
question, if you are doing everything that you can now, how is 
adding production going to improve what you are doing in 
everything you can now do?
    Mr. Ferguson. Good. We are keeping up with everything as 
far as the knowledge base. The great difference is that with 
United States currency, our volume is very, very high, 7 
billion minimum. In order to add a new manufacturing step, to 
bring in new equipment and to put it on the floor and to turn 
it on for that entire program, requires, in the case of adding 
one manufacturing step, perhaps five different pieces of 
equipment, three shifts a day. So you are talking 15 crews 
trained, ready to go.
    It would be beneficial to be able to get some real-life 
experience producing real products under production 
requirements as opposed to just testing. Testing is beneficial, 
it keeps us knowledgeably up, but it doesn't keep all of our 
work force ready and prepared to go, those 15 crews set to go.
    It would be very advantageous to us to have practical 
experience using those new techniques on a product that we have 
to meet quality requirements, cost requirements, delivery 
requirements and have that experience.
    Mr. Ose. Thank you, Mr. Chairman. I see my time has 
expired.
    Chairman King. I have no further questions.
    Mrs. Maloney advises me that she has none.
    Frank Lucas, do you have any?
    Mr. Ose.
    Mr. Ose. I have two, Mr. Chairman. May I?
    Chairman King. Mr. Ose is recognized.
    Mr. Ose. Thank you.
    Further questioning on the use of this technology. As I 
read the Chairman's legislation, H.R. 2509, I don't see any 
change in the methodology by which the Bureau goes about 
protecting the value of American currency.
    I see an expansion in terms of the products that the Bureau 
might be involved in.
    I am just trying to make sure that the American taxpayers 
aren't losing something with a diffusion of focus, if we add 
foreign government instruments to their charge.
    Could you respond to the question of, would any of the 
steps that you currently take now to protect the American 
dollar from counterfeiting, or security measures involved 
therein, would any of those change under H.R. 2509?
    Mr. Ferguson. Well, the potential would certainly be there 
to change. For example, if we were to be able to produce a 
product that had foil features like holograms, or kinograms 
which are being now utilized on the Euro, we would be able to 
produce that. It requires a different manufacturing step that 
we don't have, we don't utilize now at all. It would give us 
the opportunity to evaluate how our work force did that to get 
experience and training.
    If you look at the Euro that will be coming out, or a lot 
of foreign currencies, they have different types of security 
features that we currently don't use. It would be an 
opportunity for us to gain a great deal of actual production 
experience doing that.
    So I believe that, in the end, it would aid greatly to the 
value for the American public. We recover all of our costs, so 
there is not a cost implication for the American public. And I 
believe that any additional knowledge that we can gain, any 
additional experience that we can gain, can only serve the 
Americans in the future.
    Mr. Ose. I presume under these new security features that 
you just referenced, the foil features and the like, that if 
they were practical for use in American currency that we would 
use them; am I correct?
    Mr. Ferguson. If they were cost-effective and they were 
security-effective and met with all of the other requirements 
that we have, yes.
    Mr. Ose. And there is nothing in the current statutes that 
precludes you from investigating their efficacy in meeting our 
standards for use in American currency today?
    Mr. Ferguson. Correct. And we do investigate the efficacy. 
It is the practical experience and the manufacturing that we 
would gain, not the intellectual knowledge. It is the day-to-
day ability to crank out 8 or 9 billion of those pieces.
    Mr. Ose. We had this question come up in the predecessor to 
this committee last session, Mr. Chairman, where the question 
was actually somewhat a little bit different in the sense that 
the Treasury was being asked to engage in seigniorage for other 
countries. And I don't believe this is the concept here.
    This is merely production of foreign currency that would 
then be sold at cost to foreign governments. I think Mr. Snow's 
testimony talks about ``dollarization'' as opposed to printing 
dollars and selling them to foreign countries for use in their 
currency base. And I want to be very clear about the difference 
between what we are talking about here today as opposed to what 
we considered last go-around.
    So I thank the Chairman.
    Chairman King. Thank you, Mr. Ose.
    I want to thank Mr. Ferguson and Agent Snow for their 
testimony today. I would ask that you be available in case any 
Members have written questions to submit to you, and we 
certainly appreciate your answers. I want to thank you for your 
cooperation, for your assistance, the job you do, and also wish 
you the very best, because this is a very, very serious matter 
affecting our national security, and certainly we will work 
with you in any way we can.
    I know, on behalf of Mrs. Maloney and myself, we thank you 
for your efforts.
    I will just say that the hearing record will remain open 
for 30 days to allow Members to submit statements, questions or 
extraneous materials. And I would also ask that the individual 
names of all of the students from Liberty Middle School and 
Patrick Henry High School be entered in the record. The hearing 
is adjourned.
    [Whereupon, at 3:35 p.m., the hearing was adjourned.]

                            A P P E N D I X



                             July 24, 2001

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