[Senate Hearing 107-638]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-638
 
   CHALLENGES AND ACHIEVEMENTS OF THE SACAGAWEA GOLDEN DOLLAR PROGRAM
=======================================================================

                                HEARING

                                before a

                          SUBCOMMITTEE OF THE

                      COMMITTEE ON APPROPRIATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            SPECIAL HEARING

                      MAY 17, 2002--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations



 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate

                                 ______








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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina   THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland        CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada                   MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota        JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California         ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois          BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE DeWINE, Ohio
                  Terrence E. Sauvain, Staff Director
                 Charles Kieffer, Deputy Staff Director
               Steven J. Cortese, Minority Staff Director
            Lisa Sutherland, Minority Deputy Staff Director
                                 ------                                

            Subcommittee on Treasury and General Government

                BYRON L. DORGAN, North Dakota, Chairman
BARBARA A. MIKULSKI, Maryland        BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana          RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              MIKE DeWINE, Ohio
ROBERT C. BYRD, West Virginia        TED STEVENS, Alaska
  (ex officio)                         (ex officio)

                           Professional Staff

                              Chip Walgren
                             Nicole Rutberg
                         Pat Raymond (Minority)
                    Lula Edwards (Minority)
                           deg.









                                C O N T E N T S

                                  ----------                              
                                                                   Page
Opening statement of Senator Byron L. Dorgan.....................     1
Prepared statement of Senator Byron L. Dorgan....................     3
Statement of Amy Mossett, Sacagawea Researcher, Three Affiliated 
  Tribes of North Dakota.........................................     4
    Prepared statement...........................................     6
Statement of Henrietta Holsman Fore, Director, United States 
  Mint, Department of the Treasury...............................     7
David Pickens, Head of Sales and Marketing, United States Mint, 
  Department of the Treasury.....................................     7
Prepared statement of Henrietta Holsman Fore.....................    10
Statement of Louise L. Roseman, Director, Division of Reserve 
  Bank Operations and Payment Systems, Board of Governors of the 
  Federal Reserve System.........................................    15
    Prepared statement...........................................    16
Statement of James C. Benfield, on Behalf of the Coin Coalition..    17
    Prepared statement...........................................    19
Bankers Assail Mint for Deal with Wal-Mart.......................    22
New Coin's Golden Years?.........................................    24
Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions    25
Prepared statement of Senator Ben Nighthorse Campbell............    46
Prepared statement of the International Carwash Association......    47
Questions submitted to Henrietta Holsman Fore....................    49
Questions submitted by Senator Byron L. Dorgan...................    49
Questions submitted by Senator Ben Nighthorse Campbell...........    53
Questions submitted by Senator Jack Reed.........................    54
Questions submitted to Louise L. Roseman.........................    54
Questions submitted by Senator Byron L. Dorgan...................    54
Questions submitted by Senator Ben Nighthorse Campbell...........    56
Questions submitted to James C. Benfield.........................    57
Questions submitted by Senator Byron L. Dorgan...................    57
Questions submitted by Senator Ben Nighthorse Campbell...........    58


   CHALLENGES AND ACHIEVEMENTS OF THE SACAGAWEA GOLDEN DOLLAR PROGRAM

                              ----------                              


                          FRIDAY, MAY 17, 2002

                           U.S. Senate,    
                   Subcommittee on Treasury and    
                                General Government,
                               Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:31 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Byron L. Dorgan (chairman) 
presiding.
    Present: Senator Dorgan.


              opening statement of senator byron l. dorgan


    Senator Dorgan. This is a hearing of the Subcommittee on 
Treasury and General Government, Senate Appropriations 
Committee. My name is Senator Dorgan. We wish to welcome all of 
you here.
    This morning, we are holding a hearing to discuss the 
Sacagawea Golden Dollar. My children are now teenagers, but 
when they were younger, we used to play a little game with 
books that they had called ``Where's Waldo.'' I have outgrown 
``Where's Waldo'' and so have my children, but these days I ask 
the question, where is the Sacagawea Golden Dollar?
    Frankly, since the Golden Dollar was unveiled by the U.S. 
Mint nearly 2 years ago, I have never received one in change 
anywhere in the United States. It seems to have nearly 
vanished, and I regret that. It appears to me that at this 
point, the use of the Golden Dollar and the introduction of the 
Golden Dollar has been a failure. The question is why and what 
can we do about that?
    We are coming up on the bicentennial of the Lewis and Clark 
expedition, one of the great expeditions in human history in my 
judgment. Unfortunately, when we unveiled the coin with the 
Mint, the new Sacagawea dollar coin, all of us were interested 
and pleased at the prospect of this coin becoming common usage 
in our country and we had high hopes for it. Well over $60 
million was spent on an awareness campaign and an advertising 
campaign.
    I believe nearly 1.5 billion coins were minted. I believe 
slightly over 500 million of those have never been moved in 
circulation. They rest at the Federal Reserve Board or the 
Mint. Around 900,000 are in circulation, but apparently put in 
places that have obscured their view from at least this Senator 
and most others who I have asked over the recent months. When 
you ask the question, have you ever received a Sacagawea Golden 
Dollar in change, almost everyone says to me, ``No, I never 
received one in change.'' Some people do not know what it is 
and it certainly is not in common use at this point.
    So the question is why. What has happened? What can we do 
about it?
    I asked Amy Mossett, who is a North Dakotan, a historian, a 
member of the Three Affiliated Tribes, and someone who travels 
around the United States interpreting the wonderful legacy of 
Sacagawea in a way that is quite extraordinary to join us. I 
asked if she would come and open the testimony here today.
    Then we are going to hear from the Director of the U.S. 
Mint, Henrietta Holsman Fore; the Director of the Division of 
the Reserve Bank Operations and Payment Systems, Louise 
Roseman; and the Executive Director of the Coin Coalition, Jim 
Benfield.
    Let me just provide a few moments of history. On July 8, 
1998, the Secretary of the Treasury accepted the Dollar Coin 
Design Advisory Committee's recommendations that the new dollar 
coin authorized in the $1 Coin Act of 1997 bear the image of 
Sacagawea. Sacagawea remains an honored historical figure 
throughout the United States. Arguably, she played the pivotal 
role in the success of Lewis and Clark's corps of discovery and 
the opening of the West.
    She was married to French Canadian trader Pierre 
Charbonneau when Lewis and Clark hired him to accompany the 
expedition in the fall of 1804. Sacagawea's invaluable 
contributions to that journey included knowledge of edible 
plants, recognition of land forms, and the ability to translate 
Shoshone and communicate with other Western Indian tribes' 
language.
    On October 13, 1805, Captain Clark recognized Sacagawea's 
significant role in the journey when he wrote in his journal, 
``The wife of Charbonneau, our interpreter, we find reconciles 
all the Indians as to our families, as to our friendly 
intentions. A woman with a party of men is a token of peace.'' 
And now, of course, her contributions have been commemorated on 
U.S. currency.
    But this is not just about the circulation of a coin. The 
reason I recite that is it is also to me the story of 
Sacagawea, a story that nearly every American knows.
    In June of 1999, I hosted a presentation of the Sacagawea 
Golden Dollar to the North Dakota Indian Tribes at the Mandan 
Onislant village at the mouth of the Heart, near the 
intersection of the Heart and Missouri Rivers in North Dakota. 
Then-Director of the Mint, Phil Deal, came to North Dakota. He 
came to the site of a Mandan village, which was the site of 
Chief Sheheke Big White, who came to Washington, D.C., a couple 
of years following his introduction to Lewis and Clark and met 
with President Thomas Jefferson. It is quite a historic place.
    The Golden Dollar was unveiled at this event and I was 
proud to be associated with the Sacagawea Golden Dollar 
campaign and with the initial announcement. I am still proud of 
that.
    But what troubles me is this coin has largely disappeared 
since its minting and introduction. The question is why. What 
kind of promotion and advertising was done? What kind of 
research was done? What kind of focus groups were done that 
would tell us how to introduce this and what to introduce so 
that it would be in common usage in this country?
    I asked the Treasury Secretary, Mr. O'Neill, when he 
testified before this subcommittee a while back, ``Mr. 
Secretary, have you ever received a Sacagawea Golden Dollar 
coin in change?'' He said, ``No, I have not. I had to ask for 
one to get one.'' So the United States Treasury Secretary has 
not seen a Sacagawea Golden Dollar coin, either.
    I am not expecting that the Golden Dollar coin would 
circulate in the same manner that a dollar bill would or in the 
same quantity that a dollar bill would, nor am I calling for 
the elimination of the paper dollar. I believe that both the 
Sacagawea Golden Dollar and the paper dollar can simultaneously 
and successfully circulate in this country and be used in this 
country.
    Let me say that my hope from this hearing is to do two 
things. One, I want to know what happened to the Sacagawea 
Golden Dollar. Why was the campaign, so far, not a success? Or 
said another way, why has the campaign been a failure, and it 
has, in my judgment, been a failure. Number two, what can we do 
to change things and allow it to succeed?
    So that is what we hope to get at this hearing. Let me 
thank Amy Mossett. Amy, we appreciate your being here. I asked 
that you lead off the hearing with a few comments, and as I 
have indicated, you are a historian at a college in North 
Dakota, but more important than that, representing the legacy 
of the Mandan Tribe, you are able to interpret Sacagawea's life 
in a manner that no one that I know of in our country can.


                           prepared statement


    So let me introduce Amy Mossett from the Three Affiliated 
Tribes in North Dakota. Amy, you may proceed. Your entire 
statement will be made a part of the record and you may 
summarize.
    [The statement follows:]

             Prepared Statement of Senator Byron L. Dorgan

    This morning we meet to discuss the future of the Sakakawea Golden 
Dollar. It is my hope that during this hearing we will learn what 
happened to the Golden Dollar after the initial flurry of publicity 
when this beautiful coin was first launched and how we can remove some 
of the obstacles to getting the Golden Dollar in general and active 
circulation.
    Today we will receive testimony from Amy Mossett, a North Dakotan 
and member of the X tribe who interprets Sakakawea--who was also a 
North Dakotan.
    Additionally, we are pleased to have testify the Director of the 
U.S. Mint, Henrietta Holsman Fore the Director of the Division of 
Reserve Bank Operations and Payment Systems, Louise Roseman and the 
Executive Director of the Coin Coalition, Jim Benfield.
    On July 9, 1998, the Secretary of the Treasury accepted the Dollar 
Coin Design Advisory Committee's recommendation that the new dollar 
coin authorized in the $1 Coin Act of 1997 bear the image of Sakakawea.
    Sakakawea remains an honored historical figure in North Dakota and 
throughout the Country. Arguably, she played a pivotal role in the 
success of Lewis and Clark's ``Corps of Discovery'' and the opening up 
of the West. She was married to French-Canadian trader Pierre 
Charbonneau when Lewis and Clark hired him to accompany the expedition 
in the fall of 1804. Sakakawea's invaluable contributions on the 
journey included a knowledge of edible plants, recognition of land 
forms, and the ability to translate Shoshone and communicate with other 
western Indian tribes.
    On October 13, 1805, Captain Clark recognized Sakakawea's 
significant role on the journey when we wrote in his journal: ``The 
wife of Shabono our interpreter we find reconciles all the Indians as 
to our families as to our friendly intentions. A woman with a party of 
men is a token of peace.'' Now her contributions have been commemorated 
on our U.S. currency.
    This is not only about the circulation of a coin. It is the story 
of Sakakawea--a story every American should know. In June of 1999, I 
hosted a presentation of the Sakakawea Golden Dollar to North Dakota 
Indian Tribes at the Mandan On-a-Slant village on the banks of the 
Missouri River. This village was noted by Lewis and Clark in their 
journals and the On-a-Slant village is only miles away from where the 
Corps of Discovery would spend its first winter. I was joined at the 
event by the former director of the Mint, Phillip Diehl. I was proud to 
be associated with the Sakakawea Golden Dollar campaign and the initial 
announcement of this beautiful coin was welcomed by the public 
throughout the country. It is clear to me that the initial public 
awareness campaign for the Golden Dollar was a success.
    What troubles me, however, is the sense that the Golden Dollar has 
disappeared.
    I recently did a non-scientific survey of my Washington DC staff. 
Only two people said they had ever received a Golden Dollar for change. 
One staffer received it through a New York City transit system machine. 
The other received it at his local 7 Eleven here in the District, but 
even the cashier was confused about what change he was supplying. At a 
hearing with the Treasury Secretary in April 2001, I asked him if he 
had ever received the coin in change. He replied, ``No. I had to ask 
for one.''
    This is reason for my calling this hearing today.
    I am not expecting that the Golden Dollar will circulate in the 
same volume as the dollar bill, nor am I calling for the elimination of 
the paper dollar bill. I believe that each can circulate simultaneously 
and successfully. The data I have seen suggests that there is a strong 
desire to see the dollar coin in routine circulation. This hearing is 
designed to have a meeting of the minds and launch new efforts to 
accomplish that goal.
    Additionally, there is a misconception that the Golden Dollar is 
not in circulation anymore and that it was just a promotional coin. It 
didn't help when the Mint announced earlier this year that it was 
halting production of the Golden Dollar and the media jumped on this a 
proof of the failure of the coin. This clearly indicates that the 
awareness campaign must be continued and that factually incorrect 
messages like this need to be nipped in the bud.
    I have also been told that many businesses would like to use the 
Golden Dollar and that they have requested them but received a majority 
of Susan B. Anthony coins instead.
    These are just a few of the obstacles that I know all of you are 
aware of and are working to address. I am hopeful that we can lay out 
the obstacles today and also put forth ideas to resolve them.
    I want to thank all of the witnesses for coming to testify at 
today's hearing. I look forward to your testimony and your responses to 
our questions. More importantly, I look forward to resolving these 
obstacles and to getting the Sakakawea Golden Dollar in full 
circulation.

STATEMENT OF AMY MOSSETT, SACAGAWEA RESEARCHER, THREE 
            AFFILIATED TRIBES OF NORTH DAKOTA
    Ms. Mossett. Thank you. Good morning, Chairman Dorgan. My 
name is Amy Mossett and I am Mandan and Hidatsa. I am a member 
of the Three Affiliated Tribes of North Dakota. Two hundred 
years ago, my ancestors lived along the Knife River near 
present day Stanton, North Dakota, in a village called Awatixa. 
That was the same village from which Sacagawea joined the Lewis 
and Clark expedition and it was the same Hidatsa village that 
she returned to after that expedition came back through North 
Dakota in 1806. I am pleased and honored to be here today to 
provide testimony on the Sacagawea dollar coin.
    For the past 15 years, I have researched the oral and 
written histories of Sacagawea and I present various aspects of 
that research to audiences all along the Lewis and Clark Trail, 
audiences of all ages. People are still so mesmerized and 
fascinated with the story of Sacagawea, this young woman who, 
as a teenager, a wife, and a mother embarked on an expedition 
which is now viewed as one of the greatest epic adventures in 
American history.
    Sacagawea's life remains a mystery in the minds of so many 
and it is that element of mystery that has made her story so 
compelling. Over the years, I have studied so many aspects of 
her life and she has become so familiar to me and she has 
become such an important part of my life, but today, there is 
only one mystery concerning her that remains in my mind and 
that causes me to question, what has happened to the Sacagawea 
Dollar coin?
    As I visit audiences across the country, I am quite 
surprised and perhaps more dismayed that so many people have 
never touched a Sacagawea dollar coin. They certainly know that 
the coin exists, but they have never had a Golden Dollar coin 
in their hand and they have never had a Golden Dollar coin in 
their pocket.
    I was traveling over here just now in a cab and the cab 
driver was asking me questions about my dress, and when I 
tipped him with the Golden Dollar coin, he looked at it and 
said, what is this? I told him it was the Sacagawea dollar 
coin. It is the first time he had ever seen one.
    I was really quite startled just recently when I received 
some e-mails from friends along the Lewis and Clark Trail that 
said that the U.S. Mint was halting production of the Sacagawea 
dollar coin. I now know that that is not true, but I also know 
that I have made purchases at very few places where I received 
the dollar coin as change.
    In January of 2003, this Nation will be commemorating the 
200th anniversary of the Lewis and Clark expedition. When you 
look at the cast of characters among the Lewis and Clark story, 
Sacagawea is undoubtedly the biggest star. She is certainly the 
leading lady of this American epic and she has left a lasting 
imprint in American history because of her courage and her 
selflessness, her selfless contributions as an interpreter, a 
guide, a food gatherer, and most importantly, as a symbol of 
peace for the Northwest Corps of Discovery.
    Today, there are more landmarks, statues, monuments, 
rivers, parks, schools, women's organizations, Girl Scout 
organizations, businesses, products named in honor of Sacagawea 
than for any other woman in American history. All of these 
memorials and tributes bear an image of Sacagawea that we can 
carry in our hearts and in our minds. The Sacagawea dollar coin 
bears an image of Sacagawea that we can carry in our hearts, in 
our minds, and in our hands.
    As we near the kickoff of the Lewis and Clark bicentennial 
commemoration next January, it would be unfortunate if we 
missed this one major opportunity to promote the dollar coin 
and to celebrate this young Native American woman who 
exemplifies the character and spirit of a true American hero. 
She demonstrated and now symbolizes courage, tenacity, 
resourcefulness, wisdom, and strength.
    I hope to see more of Sacagawea on the dollar coin as I 
continue my travels along the Lewis and Clark Trail and beyond, 
and I thank you, Senator Dorgan, for inviting me and allowing 
me this opportunity to present testimony on behalf of my Native 
American friends and relatives from across the country, on 
behalf of women across the country, on behalf of American 
teenagers--Sacagawea was a teenager, on behalf of the Three 
Affiliated Tribes and my fellow North Dakotans, and most 
importantly, on behalf of Sacagawea. Thank you very much.
    Senator Dorgan. Ms. Mossett, thank you very much. Let me 
just say that North Dakota will have its second statue in the 
Capitol--each State is authorized two statues in the Capitol, 
and our second statue, which will be a statue of Sacagawea, 
will be placed in the United States Capitol within the next 2 
years or so and my expectation is that you will be here to be a 
part of that wonderful ceremony.
    As you were testifying, I was thinking that I believe the 
last living full-blooded Mandan Indian was Maddie Grinell, who 
came to Washington, D.C., at age, I believe, 104 to be 
participating in the Poor People's March a good many years ago.

                           PREPARED STATEMENT

    We thank you for being with us as a descendant of the 
Mandan Indians and thank you for your testimony. If you would 
be willing to stay around for the rest of the hearing in case 
the photographer would want to get a picture of you with the 
displays, I would appreciate that. Thank you very much. You are 
excused.
    Ms. Mossett. Thank you.
    [The statement follows:]

                   Prepared Statement of Amy Mossett

    Good Morning, Chairman Dorgan. My name is Amy Mossett. I am Mandan 
and Hidatsa and a member of the Three Affiliated Tribes of North 
Dakota. Two hundred years ago, my ancestors lived along the Knife River 
near present day Stanton, North Dakota. They lived in a Hidatsa Village 
called Awatixa. This was the Hidatsa village that Sakakawea called home 
before and after she was involved in the Lewis and Clark Expedition 
from 1804 through 1806. I am pleased and honored to be here today to 
provide testimony on the Sakakawea dollar coin.
    For over 15 years I have researched the oral and written histories 
of Sakakawea and I present various aspects of my research to many 
audiences of all ages at many points along the Lewis and Clark Trail. 
People are mesmerized and fascinated with the story of Sakakawea--the 
young woman who--as teenager, a wife, and a mother-embarked on an 
expedition which is now viewed as one of the greatest epic adventures 
in American History. Sakakawea's life remains a mystery in the minds of 
many and it is that element of mystery that makes her story so 
compelling. Over the years, I've studied many aspects of this young 
woman's life and she has become such a focal point in my life. But 
today, there is only one mystery concerning her that remains in my mind 
and causes me to question, ``What has happened to the Sakakawea dollar 
coin?''
    As I visit audiences across the country, I am quite surprised and 
perhaps more dismayed that so many people have never touched a 
Sakakawea dollar coin. They certainly know the coin exists but they 
have never had a Golden Dollar coin in their hand or in their pocket. I 
was quite startled by some recent e-mails from friends along the Lewis 
and Clark Trail who reported that the U.S. Mint was halting production 
of the Sakakawea dollar coin! I now know this is not true, but I also 
know that I have made purchases at very few places where I received the 
Golden Dollar coin as change.
    In January 2003, this Nation will begin commemorating the 200th 
Anniversary of the Lewis and Clark Expedition. Within the cast of 
characters of the Lewis & Clark story, Sakakawea is undoubtedly one of 
the biggest stars--she is certainly the leading lady of this American 
epic. She has left a lasting imprint in American history because of her 
courage and selfless contributions as an interpreter, guide, food 
gatherer, and most importantly, as a symbol of peace for the Northwest 
Corps of Discovery.
    Today, there are more landmarks, statues, monuments, rivers, parks, 
schools, women's organizations, girl scout organizations, businesses, 
and products named in Sakakawea's honor than for any other woman in 
American history. All of these memorials and tributes bear an image of 
Sakakawea that we can carry in our hearts and in our minds. The 
Sakakawea dollar coin bears an image of Sakakawea that we can carry in 
our hearts, our minds, and our hands.
    As we near the kick-off of the Lewis and Clark Bicentennial 
Commemoration, it would be unfortunate if we missed this one major 
opportunity to promote the Golden Dollar coin and to celebrate this 
young Native American woman who exemplifies the character and spirit of 
a true American hero. She demonstrated and now symbolizes courage, 
tenacity, resourcefulness, wisdom, compassion, generosity, and 
strength.
    I hope to see more of Sakakawea on the dollar coin as I travel 
throughout the Lewis and Clark Trail and beyond. I thank you for 
allowing me the opportunity to present testimony on behalf of my Native 
American friends and relatives, on behalf of women across this country, 
on behalf of American teenagers, the Three Affiliated Tribes, North 
Dakota, and most importantly, on behalf of Sakakawea.
STATEMENT OF HENRIETTA HOLSMAN FORE, DIRECTOR, UNITED 
            STATES MINT, DEPARTMENT OF THE TREASURY
ACCOMPANIED BY DAVID PICKENS, HEAD OF SALES AND MARKETING, UNITED 
            STATES MINT, DEPARTMENT OF THE TREASURY

    Senator Dorgan. Let me next call on the Director of the 
U.S. Mint, Henrietta Holsman Fore; the Director of the Division 
of the Federal Reserve Bank Operations and Payment Systems, 
Louise Roseman; and the Executive Director of the Coin 
Coalition, Jim Benfield.
    Let me thank all of you for being with us today. The Senate 
has a vote starting at 10:30 and that will extend perhaps until 
ten to or five to 11:00. My hope would be that we could 
conclude the hearing within the next hour, hour and 10 minutes, 
so that I can conclude the hearing before the end of the vote.
    Let me again state to the Director of the Mint, I 
appreciate your being here today. This Golden Dollar, of 
course, is the subject. I seldom ever see one. I certainly 
never get them in change. But the first question is, why has 
the campaign thus far failed, and at least that is my judgment. 
You are welcome to take issue with that. And then what can we 
do to make it succeed?
    Your entire statements will be made a part of the record. 
What I will do is ask all three of you to testify and then we 
will have questions. Ms. Fore, why do you not proceed.
    Ms. Fore. All right. We will hope, Chairman Dorgan, that 
you will get one in change soon.
    Thank you very much for inviting me to discuss the Golden 
Dollar program and the United States Mint's efforts to market 
the Golden Dollar, as well as discuss the challenges that lie 
ahead. I certainly appreciated Ms. Mossett's presentation and I 
look forward to our other panelists' presentations also.
    As you know, we temporarily suspended circulating dollar 
production because we have a sufficient number in inventory to 
meet demand. It is a practical discipline that we use to meet 
the requirements of monetary usage in the country. We regularly 
slow production in one denomination or another to meet the 
demands for coinage. This temporary suspension does not mark 
the end of the Golden Dollar program. In 2002 we have been 
producing to meet numismatic dollar coin demand, which has 
already exceed 12 million dollar coins.
    Senator Dorgan. Tell us all what that word means.
    Ms. Fore. It is for coin collectors and it means that it is 
something you can buy. It is a Golden Dollar, but it is 
packaged in a way that it is a proof coin or a collector's 
coin. We have a high demand this year for 2002 numismatic 
products.
    Senator Dorgan. All right.
    Ms. Fore. We have a good number of Americans that are 
collecting coins around the Nation, even in the 50 States 
Quarter Program, 139 million Americans. So there is a good 
market out there for coin collecting.
    One question keeps coming back to us, which is, how does 
one define success in a circulating dollar coin program? In the 
United States One Dollar Coin Act of 1997, we were mandated to 
put dollar coins in circulation. The Act also specified that 
the United States Mint adopt a program to promote the use of 
such coins by commercial enterprises, mass transit authorities, 
and Federal, State, and local government agencies.
    It was an unusual task for the Mint. Typically, we do not 
market circulating coins. However, knowing the public's 
reluctance to use dollar coins, the Mint created a market 
development campaign, including a business-to-business outreach 
and a public education and awareness campaign. It was designed 
to, first, integrate Golden Dollars into coin-operated transit 
and retail operations in an effort to create a reliable means 
for consumers to receive and use the new coin; second, to 
promote long-term acceptance by the commercial sector and 
consumers; and third, to support changes in consumer behavior 
and stimulate usage in commerce.
    Following the Golden Dollar's launch, the Mint entered into 
partnerships with specific retailers to stimulate everyday 
Golden Dollar usage. Eight business segments were identified as 
distribution outlets: Transit, banking, vending, retail, fast 
food restaurants, grocery stores, entertainment venues, and 
government institutions. We provided detailed descriptions of 
these efforts in our reports to Congress in 2001 and 2002.
    When I was sworn in as Mint Director in August of 2001, one 
of my first priorities was to take a hard look at the 
effectiveness of our Golden Dollar Program, assess our 
marketing strategies and determine what the next steps should 
be. We found that the advertising program was successful in 
reaching targeted audiences and in raising public awareness, 
but Americans rarely received the Golden Dollars in daily 
commerce.
    According to a January 2001 survey, 51 percent of Americans 
reported receiving a Golden Dollar in change, but only 37 
percent reported using it. A September 2001 poll found that the 
public is holding two-thirds of the Golden Dollars and not 
recirculating them.
    Following our review, we are still asking ourselves, how 
does one define success for a Golden Dollar Program? There are 
a number of yardsticks one could use to measure achievement. 
Does the American public like the Golden Dollar? Yes. Seventy-
two percent support its issuance and 83 percent of Americans 
are aware of the Golden Dollar.
    Is the Golden Dollar profitable for the United States? Yes. 
In the program's first 2 years, the Mint deposited $953.5 
million in revenues from seigniorage from the Golden Dollar 
Program into the Treasury General Fund. For the first 3 years 
of the program, we used the historical standard of measuring 
the number of coins shipped to the Federal Reserve as a measure 
of success. Using this standard, the Golden Dollar is 
successful. One-point-one billion have been shipped to Federal 
Reserve Banks since January of 2000. In comparison, it took 21 
years to ship 920 million Susan B. Anthony dollars to the 
Federal Reserve.
    However, we do not receive the Golden Dollar in change 
every day. We do not. Can you find it in every cash drawer in 
America? No. Does every bank in America stock Golden Dollars? 
No. When we compared it to the $7.5 billion notes used in daily 
commerce, the Golden Dollar represents at most 4 percent of the 
daily activity in dollar denominations. Because the Golden 
Dollar circulates with the dollar note, it is left to the 
public to decide how many Golden Dollars and how many dollar 
notes they use and how often.
    Therefore, we must look at how we define co-circulation. Is 
4 percent an acceptable portion of the overall market share? 
What can we reasonably consider successful? Is it 6 percent? 
Ten percent? Twenty-five percent? Or is it 50 percent? These 
challenges are not new to us and they were not unanticipated. 
However, we could not validate the full impact of our marketing 
strategies until they were implemented and tested.
    Many of the obstacles we encountered were in the 
distribution process. Typically, the Mint ships coins to the 
Federal Reserve in bags. While the vending and transit 
industries prefer to receive dollar coins in bags, retailers 
order coins in rolls. Armored carriers have been reluctant to 
invest in equipment that can handle Golden Dollars without some 
assurance of a return on their investment.
    Sometimes it is difficult to get a Golden Dollar at all. 
Many of the cash ordering systems do not provide for 
specification of a dollar coin versus a dollar note. As a 
result, dollar notes are provided.
    To address these issues, we have worked closely with the 
Federal Reserve Bank's Cash Product Office, and in January 
2002, they extended a program that they had begun the prior 
year in distributing Golden Dollars only when customers specify 
both coins and Golden Dollars as a preference in placing 
orders.
    The commingling of Golden Dollars and Susan B. Anthony 
dollars is a concern for business sectors. Retailers and the 
general public do not want Anthony dollars because they are 
easily confused with quarters. Since the Federal Reserve and 
armored carriers do not separate Golden Dollars from Anthony 
dollars, retailers cannot be assured that they will get only 
Golden Dollars. Therefore, they resist using dollar coins and 
request dollar notes.
    Another hurdle, financial institutions and retailers are 
charged fees by armored carriers for wrapping and delivering 
coins, but not for paper currency.
    We will continue to work with the Federal Reserve Banks, 
the financial institutions, and business owners to address coin 
distribution problems. We will continue to partner with the 
armored carriers and other major coin handlers to work on 
issues concerning fees, coin wrapping and bagging, and 
transportation to facilitate the more rapid distribution of 
Golden Dollars into commerce.
    We are also planning to have a study with the Federal 
Reserve Bank and the Bureau of Engraving and Printing to 
determine the feasibility of reducing the number of Anthony 
dollars in circulation or develop a process to automatically 
separate Anthony dollars and Golden Dollars. However, we are 
mindful that attempts to remove the Anthony dollars from 
circulation could be very costly. Demonetizing Anthony dollars 
could result in as much as $900 million in reversed 
seigniorage. Just the process of sorting and storing them could 
be expensive, but it would help retailers.
    The Mint is not advocating the elimination of the dollar 
note. We realize that we will not change consumers' spending 
habits overnight. It is clear we will need to look at the 
distribution challenges, fees, packaging, and ordering before 
we spend funds on media buys. Addressing these challenges 
requires working with our partners to determine an agreed-upon 
approach.
    We are proactively now using the product licensing program 
to place Golden Dollars in the retail market. We recently 
signed a licensing agreement with The Source International 
(TSI), the official licensee of NASCAR. TSI will be designing 
and racing cars featuring the Golden Dollar and 50 State 
quarter designs. Golden Dollars will be dispensed at a number 
of NASCAR racetracks across the country and it is projected to 
place $10 million into circulation. This agreement requires no 
outlay of funds by the Mint.
    We have also partnered with the U.S. Army Corps of 
Engineers in support of the bicentennial celebration of the 
Lewis and Clark expedition. Besides using the image of the 
Golden Dollar on event materials, we are pursuing opportunities 
to have Golden Dollars dispensed at retail areas along the 
expedition route and in association with the celebration.
    These are just two examples of strategies being pursued. 
Most importantly, the Mint will continue to work closely with 
Congress and the Administration to increase the Golden Dollar's 
use in daily transactions. Unfortunately, few, if any, Federal 
Government agencies distribute Golden Dollars. If defense 
installations across the country used Golden Dollars in their 
cash registers at base exchanges, commissaries, military banks, 
and credit unions, if State and local governments and transit 
authorities actively pursued its acceptance in transit, 
parking, and on toll roads, and if all domestic agencies used 
them in cafeterias and gift shops, an additional dynamic 
distribution channel would be created and the Golden Dollar 
would circulate more widely and be used more regularly. We look 
forward to working with Congress and the government entities to 
encourage use of the Golden Dollar.
    Mr. Chairman, the Mint is committed to the Golden Dollar 
and to improving its co-circulation in commerce. A Golden 
Dollar is important to save the Nation money, a Golden Dollar 
to remind Americans of their heritage, and a Golden Dollar to 
co-circulate. Thank you.
    Senator Dorgan. Director Fore, thank you very much.
    [The statement follows:]

              Prepared Statement of Henrietta Holsman Fore

    Chairman Dorgan, Senator Campbell, members of the Subcommittee, 
thank you for inviting me here today to discuss the Golden Dollar 
Program, the actions the United States Mint has taken in marketing the 
dollar coin, and the challenges that lie ahead.
    We have suspended circulating dollar production temporarily as 
demand has slowed during the recent economic slowdown and because we 
have a sufficient number of coins in inventory to meet demand. Contrary 
to some erroneous news reports, this temporary suspension does not mark 
the end of the program. We are producing 2002 Golden Dollars to meet 
numismatic demand in rolls, bags, proof sets, and uncirculated sets 
which has already exceeded 12 million coins. We regularly slow 
production of one denomination or another based on demand. However, one 
question has been raised recently that needs to be examined: How does 
one define the success of a circulating coin program?
    Having experienced the public's lackluster acceptance of the Susan 
B. Anthony dollar, the United States Mint knew that the next dollar 
coin needed to be different--both in its appearance and in its 
introduction to the American people. When The United States $1 Coin Act 
of 1997 became law, it was mandated that--upon the depletion of the 
Government's supply of Susan B. Anthony dollars--the Secretary of the 
Treasury place into circulation $1 coins that are ``golden in color, 
have a distinctive edge, and have tactile and visual features that make 
the denomination of the coin readily discernable.''
    Congress passed the legislation authorizing a new dollar coin 
because inventory of the Susan B. Anthony dollar, at that time, was 
nearly depleted due to increased demand for dollar coins in a strong 
economy.
    For the coin's design, Sacagawea, the young Shoshone woman who 
assisted Lewis and Clark on their expedition to the West Coast, was 
chosen for the obverse. Mr. Chairman, I understand there are numerous 
spellings and pronunciations of Sacagawea's name. I know that in North 
Dakota ``Sakakawea'' is preferred. To keep things simple, I am going to 
refer to the coin as the Golden Dollar.
    The $1 Coin Act also specified that the United States Mint, ``adopt 
a program to promote the use of such coins by commercial enterprises, 
mass transit authorities, and Federal, State, and local government 
agencies.''
    This was an unusual task for the United States Mint. Typically, the 
agency does not market its circulating coinage. However, knowing of the 
public's reluctance to use dollar coins in the past, the Mint looked 
for opportunities to encourage use of the new coin in commerce and to 
build positive awareness and generate public acceptance of the Golden 
Dollar.
    The Mint created a market development campaign for the Golden 
Dollar Program that included business-to-business outreach and a public 
education and awareness campaign. These campaigns had several key 
objectives:
  --Integrate the new coin into coin-operated industries, transit, and 
        retail operations in an effort to create a reliable means for 
        consumers to receive and use the new coin.
  --Generate positive awareness of the program among consumers.
  --Promote long-term acceptance of the coin by the commercial sector 
        and consumers.
  --Support changes in consumer behavior and stimulate usage of the 
        Golden Dollar in commerce.
    Based on market research, the Mint recognized that in order for 
consumers to use Golden Dollars, they must have a reliable means to 
receive them and opportunities to spend them as they would other coins. 
Therefore, the Mint began a campaign to encourage coin-operated 
businesses to convert their equipment to accept and dispense Golden 
Dollars. To make the conversion easier, the Mint created a new alloy to 
use in the manufacturing of the coin that met the statutory requirement 
that it be golden in color, but also matched the electromagnetic 
signature of the Susan B. Anthony dollar. This feat meant that vending 
machines that were capable of accepting Anthony dollars could accept 
Golden Dollars without causing operators to spend large sums of money 
to upgrade and retrofit their machines.
    In addition, the Mint worked with retailers in an effort to 
encourage them to order Golden Dollars as they do other coinage.
    When the Golden Dollar was launched, a number of public events were 
held to generate awareness. In addition, a $40 million media campaign 
was designed to help promote acceptance of the dollar coin's use by 
informing the public that Golden Dollars are legal tender and that they 
could be used along with the $1 note. The program was designed to reach 
85 percent of adults between the ages of 18 and 49 nationally at an 
average frequency of 15-18 times over the course of the campaign. These 
efforts yielded encouraging results. In July 2000, the target of 85 
percent was surpassed--91 percent of Americans polled said they were 
aware of the Golden Dollar and nearly 72 percent supported its 
issuance. Another poll was taken in December 2001, approximately 6 
months after the ad campaign concluded, and while 72 percent of 
Americans still supported the Golden Dollar's issuance, public 
awareness was at 83 percent.
    Following the Golden Dollar's launch, the Mint moved from its 
market development program toward creating partnerships with specific 
retailers in an effort to stimulate use of the dollar coin in everyday 
transactions. As part of this program, eight business segments were 
identified as distribution outlets: transit, banking, vending, retail, 
fast food restaurants, grocery stores, entertainment venues, and 
government institutions.
    A few of these business segments regularly use dollar coins--in 
fact, prefer them to $1 notes. They include transit authorities, 
vending machine operators, and the U.S. Postal Service. Seventeen of 
the 20 largest transit systems in the United States distribute and 
accept the Golden Dollar, and a number of major cities across the 
country have converted parking meters to accept dollar coins. They 
include: Chicago, New York City; Philadelphia, Pennsylvania; Dallas, 
Texas; San Francisco, California; Fort Worth, Texas; Albany, New York; 
Wilmington, Delaware; Minneapolis/St. Paul, Minnesota; Portland, 
Oregon; Toledo, Ohio; Arlington, Virginia; Cincinnati, Ohio; New 
Orleans, Louisiana; and Pittsburgh, Pennsylvania. Vending machine 
operators not only champion the use of the Golden Dollar; they took an 
active role in its development.
    Many of the Mint's partnerships received much media attention--
Safeway, General Mills, and IHOP Restaurants, to name a few--and they 
achieved some success. The partnership with Wal-Mart resulted in the 
early distribution of 94.3 million Golden Dollars. However, these 
efforts alone were not sufficient to sustain the use of the dollar coin 
in daily commerce.
    When I was sworn-in as Director of the United States Mint in August 
2001, one of my first priorities was to take a hard look at the Golden 
Dollar Program and assess which strategies were or were not working, 
and determine what our next steps would be.
    What we found was the advertising campaign was very successful in 
reaching targeted audiences and raising public awareness of the Golden 
Dollar but many Americans rarely receive Golden Dollars in daily 
commerce. But, according to the Coinstar National Currency Poll 
released in January 2002, while 51 percent of Americans reported 
receiving a Golden Dollar in change when making a purchase, only 37 
percent said they actually used the coin to buy something. Some studies 
have shown that the public is holding onto two-thirds of the Golden 
Dollars and not re-circulating them back into the economy.
    We also discovered that many of the partnerships, although 
initially fruitful, had a limited impact on sustained Golden Dollar 
circulation. Consumer interest in the dollar coins was piqued during 
the promotion's run, but continued use of Golden Dollars in retail 
transactions following these promotions has yet to be consistently 
demonstrated. Instead, Golden Dollars were considered by the public to 
be rare, unusual, and worth collecting. Most of these coins remain in 
the public's private collections and do not circulate.
    Following our review, we were still asking ourselves the question I 
posed earlier: How does one define success for the Golden Dollar 
Program?
    The program generates significant revenue. The United States makes 
88-cents in revenue from seigniorage on each dollar coin produced. The 
seigniorage is deposited in the Treasury General Fund and is used to 
reduce the amount of outstanding interest-bearing public debt. The Mint 
deposited $2.3 billion in the Treasury General Fund in fiscal year 2000 
and $1.5 billion in fiscal year 2001. In the program's first 2 years, 
the Mint deposited $953.5 million in revenues from seigniorage on the 
Golden Dollar alone. In addition, these coins represent a considerable 
capital investment in the resilience of the Nation's circulating money 
supply. Over their life span--which is estimated to be at least 15 
times longer than paper notes once the coins circulate fully--these 
coins will yield tremendous savings attributable to their durability 
and utility.
    If one uses public awareness as the yardstick, the program was 
successful by July 2000 when 91 percent of American adults polled said 
they were aware of the Golden Dollar--6 percent higher than our target. 
Seventy-two percent of those polled supported the issuance of the 
dollar coin.
    For the first 3 years of the program, the Mint used the historical 
standard of measuring the number of coins shipped to the Federal 
Reserve to determine achievement. Using this measure, the Golden Dollar 
is very successful--1.1 billion have been shipped to Federal Reserve 
Banks since January 2000. It took 21 years to ship 920 million Susan B. 
Anthony dollars to the Federal Reserve.
    However, when compared to the more than 7.5 billion dollar bills 
that are used in daily commerce, the Golden Dollar represents 4 percent 
of daily activity of $1 denominations. Because the Golden Dollar 
circulates with the $1 note--in accordance with long-standing Treasury 
Department policy and the program's authorizing legislation--it is left 
to the American public to decide how many Golden Dollar coins and $1 
notes they use and how often.
    Based on General Accounting Office studies, ``Australia, Canada, 
Japan, and the major Western European economies all now use a coin for 
their country's denomination which is closest to the dollar for 
monetary transactions, at and in many cases well above, the same level 
for which Americans use the paper dollar.'' However, all of these 
countries also eliminated the equivalent note.
    Because it is not our government's policy, we must look at how we 
define ``co-circulation.'' Given the traditional attitudes and 
behaviors of Americans about their money, we need to ask ourselves, 
``Is 4 percent an acceptable portion of the overall market share?''
    Clearly we are not satisfied with 4 percent. The Golden Dollar is a 
circulating coin and should be used regularly in commerce. However, 
what can we reasonably consider successful? Is it 6 percent? Ten? 
Fifteen? Twenty-five?
    As I mentioned, there are a number of challenges we have identified 
that have inhibited the distribution and circulation of the Golden 
Dollar. As you have read in our Marketing Plan, we have developed a 
strategic approach to increase the potential distribution and use of 
the Golden Dollar. The challenges we studied were not new to us, nor 
were they unanticipated. However, we could not validate the full impact 
of these strategies until after our marketing strategies were 
implemented and tested.
    Many of the obstacles we have encountered occur in the distribution 
process. Typically, coin distribution from the Mint to the Federal 
Reserve is in bagged form. While those in the vending and transit 
industries prefer to receive dollar coins in bags, retailers order 
coins in rolls. Armored carriers have been reluctant to invest in high-
speed rolling equipment that can handle Golden Dollars without some 
assurance of a return on investment.
    Not only can it be difficult to get rolls of Golden Dollars; 
sometimes it is difficult to get Golden Dollars at all. Many of the 
cash ordering systems do not provide for the specification of dollar 
coins versus dollar bills and generally, by default, $1 notes are 
provided. In addition, many bank teller systems do not easily 
accommodate the processing of dollar coins, thereby adding to the 
amount of time it takes to process a transaction and increasing the 
possibility of inaccuracies.
    To address these issues, the Mint has worked closely with the 
Federal Reserve System's Cash Product Office (CPO). In January 2002, 
the CPO extended the practice begun in March 2001 of distributing 
Golden Dollars only to meet dollar coin demand at customers' request. 
Customers can specify ``Golden Dollars only'' when placing their 
orders.
    When the Golden Dollar was launched, the Mint established a toll-
free phone number to assist businesses in securing Golden Dollars by 
facilitating dialogues among the Mint, the Federal Reserve Banks, 
financial institutions, and business owners. The Mint will continue to 
facilitate this type of interaction among its customers. We also plan 
to collaborate with armored carriers, large financial institutions, and 
other major coin handlers to work on issues concerning fees, coin 
wrapping and bagging, and transportation to facilitate the more rapid 
distribution of Golden Dollars into commerce.
    Another area of focus is on commercial users--coin operated 
industries, retailers, and other businesses that accept and distribute 
currency. What we discovered was even if these businesses had access to 
Golden Dollars, they were not necessarily using them.
    The issue of commingling Golden Dollars and Susan B. Anthony 
dollars also is a concern for some business sectors. Retailers--and the 
general public--do not want Anthony dollars because they are easily 
confused with the quarter. Since the Federal Reserve and armored 
carriers cannot mechanically separate Golden Dollars from Anthony 
dollars, retailers cannot be assured they will get rolls that only 
contain Golden Dollars. Therefore, they resist using dollar coins at 
all and instead request $1 notes. Another hurdle: financial 
institutions and retailers are charged fees by armored carriers for 
wrapping and delivering coins, but not for paper currency. They were 
charged even when the Mint paid for the wrapping of all Mint-issued 
Golden Dollars from August through December 2000.
    We have also heard that, although there are five coin compartments 
in coin drawers, the perception of retailers is that there is no room 
for dollar coins in their cash drawers or that they have little space 
to store coins. Others, such as some convenience stores and fast food 
restaurants, have special coin and currency security dispensing systems 
that do not accommodate dollar coins.
    In an effort to overcome these barriers, the Mint will be 
conducting targeted research this year to find ways to improve 
distribution of Golden Dollars to these businesses. We are also 
planning to conduct a study with the Federal Reserve Bank and the 
Bureau of Engraving and Printing to determine the feasibility of 
reducing the number of Susan B. Anthony dollars in circulation and/or 
develop a process to automatically separate Anthony dollars from Golden 
Dollars. However, we are very mindful of the fact that attempts to 
remove Anthony dollars from circulation could be very costly. 
Demonetizing Anthony dollars could result in as much as $900 million in 
reverse seigniorage. Just the process of sorting Anthony dollars and 
storing them would be costly.
    Another obstacle we face is overcoming public perception about 
dollar coins and changing human behavior. To this end, the media also 
has had an impact on the dollar coin's success. The focus of news 
stories about the Golden Dollar has shifted dramatically from favorable 
to erroneous declarations that the Mint is no longer producing Golden 
Dollars and that it is another Susan B. Anthony dollar.
    While the Mint is not advocating the elimination of the $1 note, we 
are realistic in understanding that the coin is unlikely to circulate 
in parity with the dollar bill. We also realize we will not change 
people's spending habits overnight. However, because public awareness 
is high, we are not planning to spend more money on awareness 
advertising. We have also determined that we need to resolve the 
distribution channel challenges before any funds are spent on media 
buys. Instead, in addition to our research efforts, we are developing 
promotional efforts that we will utilize to meet the following 
objectives: (1) Increase sustained circulation of Golden Dollars in 
focused market segments. (2) Support commercial users' efforts to 
obtain Golden Dollars and promote their use to customers. (3) Increase 
knowledge about the Golden Dollar.
    Among the ways we will meet these objectives is to identify 
businesses that are likely adopters of the Golden Dollar and encourage 
their support in using dollar coins. We can do this by providing point 
of purchase materials, offering informational materials to educate 
employees about the Golden Dollar, and facilitating sustained access to 
Golden Dollars from the Federal Reserve Banks and local financial 
institutions.
    We also are planning to use the Mint's product licensing program to 
place Golden Dollars in the retail market. We recently signed a 
licensing agreement with The Source International (TSI), the official 
licensee of NASCAR. TSI will be designing and racing cars featuring the 
Golden Dollar and 50 State Quarters coin designs. TSI also will sell 
die-cast replica racecars and other NASCAR memorabilia and the United 
States Mint will receive royalty payments from the sale of this 
licensed merchandise. This agreement requires no outlay of funds by the 
Mint.
    TSI also is a global master licensor and key corporate partner in 
the National Grand Prix that will be held here in Washington July 19-
21. Through our agreement with TSI, the Golden Dollar will be the 
``Official Coin'' of the race and Golden Dollars will be distributed by 
concessionaires. The pace car for the races will feature the Golden 
Dollar and the United States Mint has been invited to participate in 
the race ceremonies. The Mint also will host a sales booth at the 
Armory with numerous other exhibitors.
    Golden Dollars also will be dispensed at a number of NASCAR 
racetracks across the country in 2002 as part of the TSI agreement. We 
expect that 10 million Golden Dollars or more could be circulated.
    In addition, we are moving forward with our existing agreements 
with vendors and businesses. For example, in 2001, we entered into an 
agreement with nine minor league baseball teams to dispense the Golden 
Dollar at concession stands at their ballparks. We also have partnered 
with the U.S. Army Corps of Engineers in support of its bicentennial 
celebration of the Lewis and Clark Expedition. Besides using the image 
of the Golden Dollar on event materials, we are pursuing opportunities 
to have Golden Dollars accepted and dispensed in retail areas 
associated with the celebration.
    In our efforts to further educate the public about the Golden 
Dollar, we will continue to distribute, upon request, promotional 
materials developed prior to the March 2000 advertising campaign. In 
addition, we will continue to seek opportunities to inform the media of 
favorable news regarding circulation of the Golden Dollar and 
businesses that are successfully using it in commerce. This involves 
working with trade press and attending key industry meetings and 
conferences hosted by financial, retail, transit, and coin-operated 
businesses.
    In the longer term, once distribution channels have been addressed, 
advertising targeting consumer groups will be pursued to encourage use 
of the coin; what venues readily accept it, such as vending and mass 
transit; and how they can contribute to its ready circulation.
    Most importantly, the United States Mint will continue to work 
closely with Congress and the Administration to increase the Golden 
Dollar's use in daily cash transactions.
    The General Accounting Office, in its April 7, 2000, report about 
the dollar coin, noted that ``sustained administrative and 
congressional support would be necessary'' in order to have a 
successful dollar coin program.
    Unfortunately few, if any, Federal government agencies distribute 
Golden Dollars. If every defense installation across the country used 
Golden Dollars in their cash registers at base exchanges, commissaries, 
military banks and credit unions; if State and local governments and 
transit authorities actively pursued its acceptance in transit, parking 
and on toll roads; and if all domestic agencies used them in cafeterias 
and gift shops, an additional, dynamic distribution channel would be 
created and the Golden Dollar would circulate more widely and be used 
more regularly.
    Mr. Chairman, the United States Mint is committed to the Golden 
Dollar and to improving its co-circulation in commerce. We continue to 
research and study the economy, consumer behavior, and our customers' 
needs to establish an efficient and effective way to increase its use 
in commerce.
    That includes developing and executing a sustainable marketing 
effort that includes the cooperation and support of commercial and 
financial institutions, the Administration, and Congress.
    We look forward to receiving approval of our marketing plans from 
the Appropriations Committees--per the 2002 report language--in order 
to make the Golden Dollar the workhorse it was intended to be: A dollar 
coin to save the Nation money, a dollar coin to remind Americans of 
their heritage, and a dollar coin that will co-circulate.
STATEMENT OF LOUISE L. ROSEMAN, DIRECTOR, DIVISION OF 
            RESERVE BANK OPERATIONS AND PAYMENT 
            SYSTEMS, BOARD OF GOVERNORS OF THE FEDERAL 
            RESERVE SYSTEM
    Senator Dorgan. Next, we will hear from Louise Roseman from 
the Federal Reserve Board. Ms. Roseman, thank you. You may 
proceed.
    Ms. Roseman. Mr. Chairman, thank you for this opportunity 
to report on the Federal Reserve's activities supporting the 
Golden Dollar coin. Before I discuss our experience with the 
Golden Dollar, I thought it may be helpful to first provide a 
brief overview of the Federal Reserve's role in coin 
distribution.
    One of the Federal Reserve's responsibilities is to ensure 
that enough currency and coin are available to meet the 
public's needs. In that role, the Federal Reserve provides cash 
services to over 11,000 of the Nation's 20,000 banks, savings 
and loans, and credit unions. The depository institutions that 
choose not to obtain their cash directly from the Federal 
Reserve obtain cash services through correspondent banks.
    Reserve Banks order coin on a monthly basis and the Mint 
pays to transport the coin from its production facilities to 
Reserve Bank offices and to the more than 100 coin terminals 
that are operated by armored carriers acting for the Federal 
Reserve. These coin terminals handle nearly 80 percent of the 
Reserve Banks coin volume and help create an efficient coin 
distribution system by reducing duplicative processing and 
transportation between the Reserve Banks and their customers.
    Let me turn now to our experience with the Golden Dollar. 
The Federal Reserve and the Mint worked together to meet the 
public's strong initial demand for the Golden Dollar following 
its introduction in early 2000. To support this introduction, 
the Reserve Banks changed their normal practice of first paying 
out circulated coin and using new coin to meet the demand once 
the inventory of previously circulated coin is depleted. 
Instead, the Reserve Banks paid only Golden Dollars from their 
introduction in January 2000 through the end of 2001.
    Net payment of dollar coins by the Fed to depository 
institutions peaked at nearly $95 million in March 2000. Demand 
remained strong throughout 2000, but declined to an average net 
payment of $16 million per month in 2001 and is averaging 
slightly less than $10 million a month so far this year.
    The Reserve Banks returned to their normal practice of 
first paying out circulated coin this January. They have 
continued to accommodate, however, the request of any 
depository institution for Golden Dollars only. The Reserve 
Banks will continue filling requests for Golden Dollars until 
their inventories of the new coin are depleted, which could be 
within months.
    Most major dollar coin customers, such as the transit 
authorities and the U.S. Postal Service, however, have been 
satisfied by shipments of commingled Golden Dollars and Susan 
B. Anthony dollars.
    As you know, legislation requires that the Golden Dollar 
and Susan B. Anthony dollar have similar metallic properties 
and be the same size. Because the Reserve Banks and armored 
carriers do not have processing equipment to distinguish 
between these two similar coins, excess coins returned to the 
Reserve Banks cannot be mechanically segregated between the 
Golden Dollars and the Susan B. Anthony dollars. As the public 
continues to return its excess dollar coins, the Reserve Banks 
are accumulating considerable amounts of commingled inventory.
    At the end of April, Reserve Banks had sufficient 
inventories to fulfill all dollar coin orders for nearly a 
year, assuming demand stays at its current level, even without 
taking into consideration all the future dollar coin deposits 
that will be returned to the Fed from the banking industry. 
This inventory of slightly more than $200 million consists of 
about 70 percent commingled dollar coins and 30 percent new 
Golden Dollars that have not yet been paid out to depository 
institutions.
    Normally Reserve Banks strive to maintain about 30 days' 
payable inventory of coins of all denominations. Because the 
Reserve Banks are holding such a large inventory of dollar 
coins, they have not ordered new Golden Dollars since January 
but will once again begin ordering new dollar coins when their 
inventories reach levels that they would typically hold.
    I appreciate this opportunity to discuss these issues and 
would be happy to answer any of your questions following the 
remaining panelist.
    Senator Dorgan. Thank you very much.
    [The statement follows:]

                Prepared Statement of Louise L. Roseman

    Thank you for this opportunity to report on the Federal Reserve 
System's activities supporting the Golden Dollar coin. Before I discuss 
the Federal Reserve's experience with the Golden Dollar coin, it may be 
helpful to describe briefly the Federal Reserve's role in coin 
distribution.
    One of the Federal Reserve's responsibilities is to ensure that 
enough currency and coin are available to meet the public's needs. In 
that role, the Federal Reserve provides cash services to over 11,000 of 
the 20,000 banks, savings and loans, and credit unions in the United 
States. The depository institutions that choose not to obtain their 
cash directly from the Federal Reserve obtain cash services through 
correspondent banks. As of March 31, 2002, coin in circulation 
represented $32 billion, or about 5 percent of the total $642 billion 
of U.S. currency and coin in circulation.
    The U.S. Mint is responsible for manufacturing an adequate volume 
of coin to meet the public's demand for transactions. It determines 
annual coin production and monitors Reserve Bank inventories to 
identify trends in coin demand. The Reserve Banks order coin on a 
monthly basis and the Mint pays to transport the coin from its 
production facilities to Reserve Bank offices. In addition, the Reserve 
Banks use more than one hundred coin terminals to handle nearly 80 
percent of the Reserve Banks' coin volume. These coin terminals are 
operated by armored carriers, acting for the Federal Reserve, and help 
create an efficient coin distribution system by reducing duplicative 
processing and transportation between Reserve Banks and their 
customers.
    The Reserve Banks primarily act as wholesalers by providing coin to 
depository institutions in minimum quantities of two thousand pieces or 
more, depending on the denomination. Independent of their role as 
Federal Reserve coin terminal operators, armored carriers often provide 
coin in smaller increments and also provide wrapped coin for a fee to 
depository institutions and retail customers. Depository institutions 
order coin from the Reserve Banks to meet their customers' demand. 
Reserve Banks normally fill these orders from their inventories by 
first paying out circulated coin, and once the inventory of previously 
circulated coin is depleted, using new coin to meet demand.
Golden Dollar Demand
    The Federal Reserve and the Mint worked together to meet high 
public demand for the Golden Dollar during the first months following 
its early 2000 introduction. To support the introduction, Reserve Banks 
changed their normal practice of first paying out circulated dollars 
and paid only Golden Dollars from January 2000 through December 2001. 
Net payments of dollar coins to depository institutions peaked at 
nearly $95 million in March 2000. Demand remained strong throughout 
2000 but declined to an average monthly net payment of $16 million 
during 2001.
    The Reserve Banks returned to their normal practice of first paying 
out circulated coin in January 2002, reflecting their general practice 
of treating all designs of circulating coin as interchangeable to 
satisfy requirements for the public's transactions. They have continued 
to accommodate, however, the request of any depository institution for 
Golden Dollars only. Reserve Banks will continue filling requests for 
Golden Dollars until their inventories of new coin are depleted, which 
could be within months. Most major dollar coin customers, such as 
transit authorities and the U.S. Postal Service, have been satisfied by 
shipments of commingled Golden Dollars and Susan B. Anthony dollars. 
Chart 1 at the end of my testimony illustrates the Reserve Banks' 
dollar coin payments and receipts since 1976; chart 2 shows net 
payments since 1998.
    Because legislation requires that the Golden Dollar and the Susan 
B. Anthony dollar have similar metallic properties and the same 
diameter, and because the Reserve Banks and armored carriers do not 
have processing equipment to distinguish between the two, excess coins 
returned to Reserve Banks cannot be mechanically segregated between 
Golden Dollars and Susan B. Anthony dollars. As the public continues to 
return its excess dollar coins, the Reserve Banks are accumulating 
considerable amounts of commingled inventory. At the end of April, 
Reserve Banks had sufficient inventories to fulfill all dollar coin 
orders for more than a year, assuming demand stays at its current 
level, without taking into consideration future dollar coin deposits 
that will be returned to the Federal Reserve from the banking industry. 
This inventory consists of approximately 70 percent commingled dollar 
coins and 30 percent new Golden Dollars that have not yet been paid out 
to depository institutions. Normally Reserve Banks strive to maintain 
about thirty days of payable inventory of coins of all denominations. 
Because Reserve Banks are holding such a large inventory of dollar 
coins, they have ordered no new Golden Dollars since January 2002, but 
will begin ordering new coin again when their inventories reach levels 
they would typically hold.
    I appreciate the opportunity to discuss these issues with you and 
would be happy to answer your questions.

    Senator Dorgan. Finally, we will hear from Mr. Jim 
Benfield. He is the Executive Director of the Coin Coalition. I 
note in your resume, Mr. Benfield, you were previously a 
founder of the Daylight Savings Time Coalition, so it seems to 
me you are coalition-minded.
    Mr. Benfield. That is right.
    Senator Dorgan. Let me ask you to present your testimony, 
following which we will have some questions.
STATEMENT OF JAMES C. BENFIELD, ON BEHALF OF THE COIN 
            COALITION
    Mr. Benfield. Thank you very much and thank you for holding 
this hearing. Again, my name is Jim Benfield and I am speaking 
on behalf of the Coin Coalition, which is a group of trade 
associations and companies who are enthusiastic supporters of 
the Golden Dollar.
    The Golden Dollar is rarely seen in everyday retail 
transactions and, thus, is perceived as a failure, but in this 
case, failure is not reality.
    In the mid-1990s, the annual business demand for dollar 
coins was about 60 million per year. Last year, that demand 
tripled to 180 million. That is a success by any manufacturing 
measure.
    Where are they circulating? In Goshen, Indiana, where Matt 
Jerlecki's Northern Pride Carwash consumes between 20,000 and 
30,000 dollar coins per week. That is well over a million per 
year.
    And in Reading, Pennsylvania, at Goodman Vending, where 
owner Bill Buckholz needs 1.3 million coins per year to keep 
his full-line vending and cafeteria operation humming.
    Jim Opitz owns two Subway restaurants in Wisconsin. He 
loves Golden Dollars. They reduce his shortages because coins 
do not stick together like bills do, and it reduces transaction 
time at his cash registers. Jim pays out about 200,000 dollar 
coins a year.
    Joe Jacobson operates amusement games, like pool tables and 
vending machines, in 400 taverns in Wisconsin and he has been 
converting his machines to accept dollar coins over the past 
year. All the bartenders, of course, give change in dollar 
coins, partly because tip revenue goes up.
    These are not isolated examples. The word is getting around 
that dollar coins work. Wall lockers made by American Locker 
Security Systems are found in amusement parks and ski resorts 
all over the country, including, I think, Disney World, and 
they accept dollar coins. They dispense dollar coins in change 
machines and then those drive the wall lockers.
    And there are other industries that, with the slightest bit 
of encouragement, will jump on board. One untapped market is 
public pay phones, some of which allow you to call any country 
in the world for $1, or any city in the United States for 25 
cents per minute. The Mint should study these examples and 
build on them.
    But in most of these examples I have just given, a dollar 
coin replaces not the dollar bill, but rather four quarters. 
This means less weight to handle for consumers, fewer coins to 
process for the businessman, and the cost of minting a dollar 
coin is less than the cost of minting four quarters, so it is a 
win-win-win.
    One area where the Mint should not waste its resources is 
on the cash retail sector. I have a chart. I do not want to 
spend too much time on that, but if it was the intention to 
have coins circulate heavily, then the dollar bill should have 
been removed. That was the experience of all European countries 
and every country. We are the only country to ever attempt it 
with the Susan B. Anthony, and we have tried it twice in a row 
now. Why? Because retailers do not have room for both cash for 
the dollar bill and dollar coin in their cash registers. If you 
look at the design and you study when you spend money, they 
really do not have a place for the dollar coin. And if a 
retailer does not stock dollar coin in the morning, you are 
never going to get it in the afternoon.
    We do not expect the dollar bill to be pulled anytime soon, 
but we continue to hope.
    Public opinion is interesting on this subject. When asked, 
``Do you support replacing the dollar bill with the dollar 
coin?'' you will get a resounding ``No,'' I think maybe 75 to 
80 percent. But when told that the government would save over 
$500 million per year if this were done, then the majority 
supports the idea, and the GAO estimates these savings at $522 
million per year.
    Many banks refuse to inventory the Golden Dollar even 
though there are lots of them in Federal Reserve Banks in 
inventories. This problem needs to be addressed, and there is a 
very complex set of reasons why the banks are not crazy about 
this.
    The major barriers right now, the biggest problem, the most 
phone calls I receive from angry potential users is the mixed 
Susan B. Anthony. This is not a concern, this is a deal killer, 
and Ms. Fore addressed this in some detail, so I will skip over 
those sections. But the SBA should be taken out of circulation 
either by exporting them to countries that have dollarized 
their currencies--Ecuador, by the way, just released five 
million dollar coins on April 15 into their economy--or by 
melting them down, and the scrap metal from the Susan B's are 
worth more today than the cost of making them 30 years ago, or 
25 years ago. So the government will actually make a profit on 
melting them down. They will take a loss on the seigniorage, 
but they will make a profit from the scrap metal.
    Another problem, once again addressed by the Mint Director, 
is packaging. Pennies, nickels, dimes, and quarters are usually 
paid out by cash retailers. Dollar coins today are paid out by 
machines and the user, whether it is mass transit or a car wash 
operator, used to get them in these bags of 2,000 and he would 
just go to the hopper and pour these guys in. Now, he has to 
get dozens of little rolls of 25 and break them open, being 
very careful not to have any paper shards wind up in his 
machine or it will gum up the works. So this is not only an 
inconvenience but it is an added cost, so this should be 
addressed.
    To summarize, the dollar coin is extraordinarily convenient 
for many transactions and its use will continue to grow. The 
Mint must find ways to provide dollar coins free from Anthony 
dollars in packaging and quantities that are convenient for its 
customers. The Mint must learn from the successes that I have 
talked about and build on them. With a targeted marketing 
effort, the Mint can double the annual use to almost 400 
million coins per year, I believe within the next 2 years, and 
redouble the usage every 2 years thereafter.
    A couple of weeks ago, some reporters declared the dollar 
coin dead. They are wrong, and like it or not, the Golden 
Dollar is not going away. Thank you very much.
    Senator Dorgan. Mr. Benfield, thank you very much.
    [The statement follows:]

                Prepared Statement of James C. Benfield

    My name is James C. Benfield, and I am speaking on behalf of the 
Coin Coalition, a group of 30 trade associations and companies who are 
strong believers in the Golden Dollar. I am a partner with the 
consulting firm of Bracy ``Tucker'' Brown, and I have served as the 
Coalition's executive director since its founding in 1987.
    The Golden Dollar is rarely seen in everyday retail transactions 
and, thus, is perceived as a failure. But in this case, perception is 
not reality. The coin is a qualified success. If it was the intention 
to have the coin circulate heavily, then the $1 bill should have been 
removed.
    Failure to Remove the $1 Bill.--In other parts of the globe, where 
the central banking and/or the treasury function are not subjected to 
legislative oversight, the smallest denomination of currency has been 
successfully replaced by a coin similar to the Golden Dollar. These 
countries include all of western Europe (except Italy), Japan, New 
Zealand, Australia and others. The Golden Dollar would be a tremendous 
success if the Treasury would take a different position.
    Why must the $1 bill be removed? Retailers do not have room for 
both a $1 bill and a $1 coin in their cash registers. And if the 
retailer does not stock $1 coins in the morning, they will never enter 
circulation later in the day. Had the $1 bill been pulled in 1979, the 
Anthony dollar would have circulated. It might have been unpopular, but 
it would have circulated.
    We don't expect the $1 bill to be pulled anytime soon, but we 
continue to hope.
    Public opinion polling is interesting on this subject. When asked 
``Do you support replacing the $1 bill with a $1 coin?'' you will get a 
resounding ``no.'' But when told that the government would save over 
$500 million per year if this were done, then a majority supports the 
idea.
    The General Accounting Office, using an economic model developed by 
the Federal Reserve, estimates the savings to the government of 
replacing the $1 bill with a coin to be $522 million per year.
    The following three quotes succinctly capture the essence of the 
importance of removing the $1 bill.

    ``No one can possibly understand many social phenomena unless he 
constantly bears in mind the force of habit and social conventions. 
This is strikingly true in our subject of money. Over and over again in 
the course of history, powerful rulers have endeavored to put new coins 
into circulation or to withdraw old ones; but the instincts of self 
interest or habit in the people have been too strong.----W. Stanley 
Jevons, Money and the Mechanism of Exchange, 1875
    ``The experience of this country with the Anthony dollar and the 
experience of other countries with the introduction of large 
denomination coins indicates that a successful change in coinage 
requires broad public acceptance, withdrawal of the equivalent value 
note, and the government's commitment to a long-range plan for its 
currency structure.''----(draft) The One Dollar Coin Proposal: Impact 
on Treasury Operations, Department of the Treasury, Office of Planning 
and Management Analysis, June 30, 1988.
    ``. . . the experience in every foreign country which has 
introduced a high denomination coin has been that the circulation of 
the coin must be forced by eliminating the corresponding note. The 
element of choice must be removed for a coin to succeed. However, I 
want to reemphasize that the Treasury Department does not endorse the 
elimination of the dollar bill.''----Mint Director Donna Pope before 
the Senate Banking Committee, June 20, 1990
    ``As our theory of coin/note substitutions shows, even a well-
designed coin is unlikely to succeed unless the government orchestrates 
the transition. In fact, because of the failure of the Anthony dollar, 
people will be particularly skeptical of the success of future efforts. 
Such skepticism will increase resistance to paying any transition costs 
until businesses and individuals are convinced that the new dollar coin 
will become widely used. Consequently, future attempts to introduce a 
dollar coin will likely fail, unless the government organizes a 
concerted switch to the new currency by a large segment of the economy. 
The simplest way to do this is to withdraw the dollar bill from 
circulation.''----John F. Caskey and Simon St. Laurent, Journal of 
Money, Credit, and Banking, The Ohio State University Press, August 
1994.

    Angry banks.--The Golden Dollar got off to a robust, but troubled 
start in January 2000. Commercial banks wanted to wait until at least 
March 2000 to stock the new $1 coins because they wanted to focus on 
potential Y2K problems, not on a new coin. In December 1999, the 
Federal Reserve and Mint were almost out of Susan B. Anthony $1 coins 
and were faced with the prospect of minting even more in January 2000, 
unless Golden Dollars could be released. The Mint, in fact, did strike 
and place into circulation 41 million 1999--dated Anthony dollars late 
in 1999.
    The banking community said they would order $1 coins as needed. The 
Mint, wisely, sought another avenue for distribution--Wal-Mart. That 
introduction received so much publicity, and the coin was so popular 
that initial demand could not be met. A marketer's worst nightmare 
resulted--huge demand, no inventory. Worse yet, the banks were furious 
at being left with no Golden Dollars to meet consumer demand.
    Today, many banks refuse to inventory the Golden Dollar, even 
though there are plenty of them in Federal Reserve and Mint 
inventories. This problem needs to be addressed.
    Hoarding of Golden Dollars?--This is a non-issue. The public has 
been hoarding upwards of 500 million 50-State Commemorative quarters 
every 10 weeks, and there is not a shortage of quarters in circulation. 
Whatever Golden Dollars have been collected has little bearing on the 
failure of the retail sector to use them.
    Commingled Anthony $1 coins.--The main issue blocking increased use 
of the $1 coin is the continued presence of Susan B. Anthony $1 coins 
in circulation. Over half the $1 coins received by many self-service 
carwash operators and vendors consist of SBA $1 coins.
    Consumers hated the Anthony dollar 20 years ago, and they continue 
to hate the coin today. Many self-service carwash operators are 
considering shifting back to quarters in their operations. And what few 
cash retailers are using the Golden Dollar likely will stop unless they 
can receive only Golden Dollars.
    A few months ago, the MTA New York Transit subway system received 
500,000 previously uncirculated Anthony dollars. They came in rotting 
cotton bags covered with rat feces. Those coins continue to sit in the 
MTA's vaults unopened.
    Unless the SBA problem is addressed in a strong, substantive 
manner, any marketing effort to increase the use of Golden Dollars in 
the retail sector would be a total waste of time and money.
    Consideration should be given to taking the SBAs out of circulation 
by either exporting them to countries that have dollarized their 
currencies to some extent (Ecuador placed 5 million Golden Dollars into 
circulation on April 15, 2002) or by melting the SBAs down, and 
recovering their metal value, which is worth more now than when the 
coins were struck. That metal can be recycled into to other circulating 
coinage.
    The aforementioned 1988 Treasury ``recommends an exchange of one 
dollar coins so that the new one dollar coins would replace the Anthony 
dollars in inventory. The Anthony dollar would be melted down. The 
exchange would be handled as an accounting entry. Seigniorage realized 
from the minting of the new one dollar coins would be used to offset 
any seigniorage loss resulting from the melting of Anthony dollars. 
This is the same procedure used in accounting for the melting of coins 
of the other denominations which are no longer current.''
    When the Bureau of Engraving & Printing began issuing new currency 
a few years ago, they had a plan for removing old currency. The Mint 
needs to study that plan.
    Packaging.--Another problem is packaging. Most $1 coins enter 
circulation as change from a bill changing machine, a subway ticket 
vending machine, a Postal Service stamp vending machine, or a 
foodservice vending machine. Many of these machines have hoppers into 
which one pours loose coins. Until recently, the Mint shipped all $1 
coins in bags of 2,000. This worked very well. But now the Mint has 
standardized the shipping of coins in bulk bags. The armored carriers 
break these large bags, which hold 140,000 $1 coins and weigh 2,500 
pounds, down into wrapped rolls of 25 coins each.
    So the first thing a businessman has to do is break open the rolls, 
being careful to remove all the scraps of paper. The coins are then 
ready for use in the machines. This additional step adds costs and 
inconvenience to using $1 coins.
    The Mint must ship coins that are ready to use and cost efficient 
for its customers. I have attached two letters from carwash operators 
who explain this problem in detail.
    Mr. Chairman, now for the good news.
    In the mid-1990s, the annual business demand for $1 coins was about 
60 million per year. In 2001, the demand was about 180 million. In 
other words, the demand for $1 coins has tripled since the Golden 
Dollar's introduction. That is a success by any measure.
    Dollar coins are being used in large volumes in subway transit 
authorities, the Postal Service, full-line vending and self-service 
carwash operators. At least 16 major cities, including New York, 
Chicago and Philadelphia have or are in the process of fitting on-
street parking meters to accept $1 coins.
    Cities using or planning to use $1 coins in parking meters: Albany, 
NY; Baltimore; Chicago; Cincinnati; Clearwater, FL; Dallas; Fort Worth; 
Minneapolis; New Orleans; New York; Philadelphia; Pittsburgh; Portland, 
OR; San Francisco; St. Paul, MN; Toledo, OH; Wilmington, DE.
    Bartenders in hundreds of taverns are making change with $1 coins 
for use in pool tables, amusement games and vending machines.
    Dollar coins are being dispensed for use in wall lockers at 
amusement parks and ski resorts.
    Even a few retailers have discovered that using $1 coins reduces 
errors and shortages because they don't stick together like $1 bills, 
and transaction time is reduced at the counter.
    With a highly targeted, low cost marketing effort, I believe the 
Mint can double the annual usage of $1 coins to almost 400 million 
coins within the next 24 months and redouble the usage every 24 months, 
thereafter.
    One New Market.--Many public pay phones now allow you to call any 
country in the world for 3 minutes for $1. Or to call any city in the 
United States for 25-cents per minute. With phones adapted to accept $1 
coins--and placed where they circulate, like the taverns and ski 
resorts I just mentioned--the quickly dying public telephone industry 
could be reenergized.
    To summarize, the $1 coin is extraordinarily convenient for many 
transactions and its use will continue to grow. The Mint must find ways 
to provide Golden Dollars--free from Anthony dollars--in packaging and 
quantities that are convenient for its customers. The Mint must learn 
from the successes where the coin is circulating, build on these 
successes, and develop plans to exploit new market sectors.
    To all those reporters who declared the Golden Dollar dead a couple 
of weeks ago, I have news for you. You got it wrong. Like it or not, 
the Golden Dollar coin is not going away.
    Finally, in the interest of full disclosure, I want to note the 
following: At various times from November 1998 until September 2001, I 
served as a paid consultant to Oxford Associates (now MarketBridge), 
Double Eagle Market Development Company and Fleishman Hillard, Inc., 
all of whom were consultants to the United States Mint for promotion 
and marketing of the Golden Dollar.
                                 ______
                                 

              [From the Wall Street Journal, Feb. 9, 2002]

               Bankers Assail Mint for Deal with Wal-Mart

    Bank tellers at First State Bank in Middlebury, Ind., have recently 
been going to unusual lengths to fill their coin drawers. While on 
lunch break, they would sprint to the local Wal-Mart store to buy the 
government's newly minted $1 coin.
    When a bank goes to Wal-Mart to get its money, something odd is 
going on. In this case, it's a new strategy the U.S. Mint adopted when 
it issued the new golden-colored dollar, featuring the image of Native 
American heroine Sacagawea, at the end of January. Prompted by the flop 
of the Susan B. Anthony coin 20 years ago, the Mint crafted an 
agreement with Wal-Mart, the Nation's largest retailer, allowing it to 
essentially have first dibs over most banks on the new coin.
    The U.S. Mint says it shipped the coins to 3,000 Wal-Mart and Sam's 
Club stores and the 12 regional Federal Reserve Banks on the same day, 
Jan. 27. But it mailed the coins to Wal-Mart, while it sent the coins 
to the Fed branches by truck. Many community banks are reporting a 5-
week wait for the coins that they have ordered from the Federal 
Reserve. Copyright Dow Jones & Company Inc Feb 9, 2000
    Bank tellers at First State Bank in Middlebury, Ind., have recently 
been going to unusual lengths to fill their coin drawers. While on 
lunch break, they would sprint to the local Wal-Mart store to buy the 
government's newly minted $1 coin.
    ``We thought if we could get 50 or 100 coins, then maybe we could 
give them to our customers,'' says Sara Baker, the bank officer that 
organized the tellers.
    When a bank goes to Wal-Mart to get its money, something odd is 
going on. In this case, it's a new strategy the U.S. Mint adopted when 
it issued the new golden-colored dollar, featuring the image of Native 
American heroine Sacagawea, at the end of January. Prompted by the flop 
of the Susan B. Anthony coin 20 years ago, the Mint crafted an 
agreement with Wal-Mart, the Nation's largest retailer, allowing it to 
essentially have first dibs over most banks on the new coin.
    The U.S. Mint says it shipped the coins to 3,000 Wal-Mart and Sam's 
Club stores and the 12 regional Federal Reserve Banks on the same day, 
Jan. 27. But it mailed the coins to Wal-Mart, while it sent the coins 
to the Fed branches by truck. Many community banks are reporting a 5-
week wait for the coins that they have ordered from the Federal 
Reserve.
    The delay has caused a furor among some bankers, who are 
embarrassed that they have to send coin-seeking customers to Wal-Mart, 
and among some business owners, who complain they can't get the coins 
from banks.
    ``Wal-Mart doesn't need any more advantages over a little business 
like mine,'' said Bill Taylor, owner of Boiling Springs Hardware & 
Rental in South Carolina, who tried unsuccessfully to get some dollar 
coins from his local banks.
    The American Bankers Association has fired off an angry letter to 
the U.S. Mint on behalf of its members, protesting the agreement with 
Wal-Mart and asking the Mint to speed delivery to community banks of 
the golden coins. Dubbed the Golden Dollar by the Mint, the new coin is 
actually made of an alloy of manganese, brass and copper.
    ``The U.S. Mint has done an end run around the whole banking 
system,'' says Anne McKenna, vice president for finance at Tioga State 
Bank in Spencer, N.Y. ``It's very disappointing.''
    In fact, the Mint planned the Wal-Mart agreement as a way of 
encouraging U.S. banks to order the new Golden Dollar coin in larger 
numbers than their orders for the Susan B. Anthony. And it has worked. 
The demand for the new coin has reached 200 million in the first month. 
It took the Susan B. Anthony 4 years to reach that level.
    U.S. Mint Director Philip Diehl says he doesn't mind the 
controversy as long as the coin is a success. ``I'd rather have a noisy 
success than a quiet failure,'' he says.
    Mr. Diehl says the U.S. Mint got a lukewarm response from most 
banks when it first approached them about potential demand for the coin 
last summer. In response, he says, the Mint decided to talk to some 
retailers about putting the coin into circulation. Only two retailers 
showed interest: Wal-Mart Stores Inc., of Bentonville, Ark., and 7-
Eleven Inc., of Dallas. At the same time, the Mint also crafted an 
agreement with General Mills Inc. to distribute the coin in selected 
Cheerios boxes--11 million in all--beginning last month.
    Because of the logistical difficulties of distributing coins to its 
stores, 7-Eleven dropped out of the agreement, says Dana Manley, 
marketing communications manager for the convenience-store chain. 
However, Wal-Mart was willing to buy 100 million coins and promote them 
nationally in its stores.
    Wal-Mart spokeswoman Laura Pope says the company was excited to 
work with the Mint. ``Our goal is to offer customers something unique 
that they can only find at Wal-Mart and Sam's Club stores,'' she says. 
Wal-Mart promoted the new coin in a mailing distributed to 90 million 
customers at the end of January.
    The Mint's Wal-Mart strategy seems to have worked, helped by the 
coin's golden color, to make the new dollar more popular than its 
Anthony predecessor. Most banks in search of the coin have started 
referring their customers to Wal-Mart. Even Ms. Baker eventually gave 
up on her quest to buy coins from the local Wal-Mart for her bank 
branch.
    After 2 days of buying a few coins at a time (each Wal-Mart has its 
own policy of how many coins it will give out at one time), her tellers 
rebelled. ``Some employees went out and said, `I could only get three 
coins and I'm keeping them,' '' she says. ``Frankly, now we're telling 
customers to go to Wal-Mart.''
                                 ______
                                 
                                 
                                 
                                 ______
                                 

               [From the Washington Post, Jan. 13, 2001]

                      The New Coin's Golden Years?

    Each week, when I take money out of my bank account, I ask for $10 
in the new Golden Dollar coins, and then I spend those coins instead of 
saving them. The Jan. 1 news story ``New Dollar Coin Hard to Find'' 
pointed out some hurdles to the coin's success: low demand, hoarding 
and people's conservative approach to change.
    But although the U.S. Mint has learned some lessons from the failed 
Susan B. Anthony, (a golden color, not silver; a smooth edge, not 
ridged like the quarter), it seems to be implementing a policy that 
will hamper the success of the Sacagawea.
    When attempting to fulfill my weekly routine of buying 10 of the 
new dollars for use this week, I was given five Sacagawea dollars and 
five Susan B. Anthony coins. The teller said that the coin rolls had 
begun to arrive loaded with the old dollar mixed in, and the bank was 
forced to distribute the Susan B. Anthony coins with the Sacagawea 
coins.
    Lots of things have to happen before the Golden Dollar becomes a 
fact of America's everyday expenses. Vending machines, Metro card 
machines, etc., will need updating, and the paper dollar may even need 
to be phased out. But until such grand overhauls can be implemented, 
the Mint should not undercut its own strategy for promoting use of the 
new dollar by forcing Americans to accept what it has already rejected.
    People will not use the new Sacagawea or any other dollar coin 
until they are forced to for lack of an alternative. Putting the new 
``Golden Dollar'' in cereal boxes and buying expensive ads is a waste 
of the taxpayers' money.
    If the authorities really want to put this coin in circulation, 
then let them do so aggressively and at the same time phase out paper 
dollars. Nothing less will ever work.
                                 ______
                                 
                                   Hi-Performance Car Wash,
                               Denver, Colorado, February 26, 2002.
Hon. Henrietta Holsman Fore,
Director, U.S. Mint, Washington, DC.

Anthony Dazzo,
Cash Products Office, Federal Reserve Bank of San Francisco, Los 
        Angeles Branch, Los Angeles, CA 80015.
    Dear Ms. Fore and Mr. Dazzo: Hi Performance Car Wash operates about 
100 self-service car wash bays at 18 locations in the Denver area. Soon 
after the introduction of the new Sacagawea Golden Dollar in January 
2000, we began to convert our coin operated equipment to dispense, and 
accept $1 coins.
    We now use the $1 coin at nine locations and are in the midst of 
converting the other locations. Currently, we need to replace 12,000 $1 
coins per week (or about 600,000 per year) from Bank One which is 
served by Loomis Fargo armored carrier. When we have completed 
converting all locations we anticipate our annual demand to be 1.2 
million $1 coins.
    Sadly, this business model is being placed at risk because, with 
the expiration of the December 31, 2001 moratorium, the Federal Reserve 
is placing SBA $1 coins into circulation. Our customers confuse them 
with quarters and generally have a visceral dislike for these coins. 
Our staff is spending hours of valuable time separating the SBA's from 
the coin shipments we receive.
    Additionally, in our last shipment of 12,000 $1 coins, we received 
35 pieces of foreign coins, tokens and other U.S. coins. This was an 
effective surcharge of $35 against $11,965 worth of $1 coins.
    I am writing to both the Mint and the Federal Reserve, as you know 
that many of our issues are handled by one or the other institution--or 
are shared.
    We have learned through Jim Benfield, a consultant to the 
International Car Wash Association, that the Mint plans to stop 
shipping $1 coins in bags of 2,000 and, instead will ship $1 coins in 
bags of 140,000. This is a potential further inconvenience to how we 
handle $1 coins. We prefer to obtain coins in 2,000 coin bags. We have 
been told that most if not all armored carriers likely will feed the 
bulk coins directly from a hopper into wrapping machines. When we 
receive $1 coins wrapped, we must destroy the wrappers before the coins 
are emptied into our change machines. Thus, we are paying for a wrapped 
product, which reduces the productivity of our operation.
    Has the Mint or Federal Reserve queried vending operators to learn 
if they; prefer wrapped, or loose coin. The Mint and Fed may be 
surprised to learn that the $1 coin is unique, in that most current 
users prefer loose $1 coin. It appears that most $1 coins are dispensed 
mechanically rather than by hand.
    Although we would prefer to receive loose coin, our top priority is 
to be able to obtain the Golden Dollar, without the SBA. The wrapped 
coins are an inconvenience; the SBA dooms our conversion effort to 
fail.
    Many self-service carwash operators I have spoken to have also 
undertaken the investment of converting their operations to the $1 
coin. We all agree that the Mint launched a wonderful campaign to 
promote the Golden Dollar, but we feel that the government has 
abandoned this effort. Many other countries of the world have had 
success with a dollar coin. If the SBA is taken out of the picture, I 
believe the Golden Dollar will be a success in this country.
    The business argument for using the $1 coin in the self-service 
sector is extremely strong. Yet, the Mint and Federal Reserve seem to 
be sabotaging this success story by forcing a product (the SBA $1 coin) 
upon a public that has resoundingly rejected it.
    What plans is the Mint making to help our industry? With monthly 
demand for $1 coins falling, and with ever increasing numbers being 
consumed by our industry, we feel self-service carwash is one of the 
best things going for the Golden Dollar movement at this time. We were 
surprised to see that our industry was not even mentioned in the Mint's 
report to congress last year.
    Please tell me how we can work together to keep the Golden Dollar 
available. 1 can be reached at (303) 934-4970. I look forward to 
hearing from you.
            Sincerely,
                                          Eugene J. Miller,
                                                             Owner.
                                 ______
                                 
                                   Scotch Super Wash, Inc.,
                            Oakland, California, February 29, 2002.
Hon. Henrietta Holsman Fore,
Director, U.S. Mint, Washington, DC.

Anthony Dazzo,
Cash Products Office, Federal Reserve Bank of San Francisco, Los 
        Angeles Branch, Los Angeles, CA 90015.
    Dear Ms. Fore and Mr. Dazzo: I am the owner of Scotch Super Wash, 
which owns and operates seven self-service car washes located in 
Oakland, Concord and San Ramon, California.
    In the Spring of 2001 we converted our entire operation to use the 
new Golden Dollar only. Until the Fall of 2001 I was receiving the $1 
coins in bags of 2,000. Our operation generally must replenish $1 coin 
inventories at a level of about 10,000 per week.
    Now we can get our $1 coins only rolled. I understand that the 
local Federal Reserve Terminal receives the coins bulk and then rolls 
them. They are then delivered to our bank (United California bank) via 
Brinks in rolls. We then have to unroll them for our use.
    We like using the $1 coin and we put many into general circulation. 
However, receiving them rolled is a waste of time and money for us. I 
have talked to other operators who have converted to the $1 (and some 
who are planning to do so). Receiving the Golden Dollar rolled is a 
cloud on the feasibility of this change.
    It seems that a local armored carrier could easily package some 
coins in $1,000.00 bags and make a run of $1,000,000 to $2,000,000 and 
have them on hand for specified accounts. This would be much easier 
than rolling $200,000. I would appreciate your considering the needs of 
large bulk users in the packaging of the Golden Dollar.
            Respectfully,
                                                       Paul Lipkin.
                                 ______
                                 

       [From the Journal of Money, Credit & Banking, August 1994]

 The Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions
                 (John P. Caskey and Simon St. Laurent)
    No one can possibly understand many social phenomena unless he 
constantly bears in mind the force of habit and social conventions. 
This is strikingly true in our subject of money. Over and over again in 
the course of history, powerful rulers have endeavored to put new coins 
into circulation or to withdraw old ones; but the instincts of self 
interest or habit in the people have been too strong . . .----(W. 
Stanley Jevons 1875, p. 77)
    On July 1, 1979, the U.S. government introduced the Susan B. 
Anthony dollar coin. The government expected to realize long-run cost 
savings from replacing dollar bills with dollar coins and it believed 
the new coin would better serve many private-sector transactions. It 
expected, for example, the public to discover that the coin would speed 
small retail transactions and would enlarge the range of services and 
goods available through vending machines. Accordingly, the government 
predicted that within a few years the coin would replace the dollar 
bill in many transactions and eventually might totally replace it.
    The public, however, refused to use the coin and the media soon 
dubbed it the ``Susan B. Edsel.'' 857 million of the coins were 
produced between 1978 and 1980, but only 430 million are currently in 
the public domain. A small fraction of these coins circulate; most lie 
hidden in drawers as souvenir pieces awaiting the distant day they 
might become valuable collector's items. Over 400 million Anthony 
dollars are in government storage, to be eventually circulated or, more 
likely, melted down.
    By any criterion, the government's attempt to introduce the Anthony 
dollar coin was a colossal failure. Because of this failure, the United 
States stands out among advanced industrialized countries for the 
unusually low purchasing power of its lowest denomination bill and its 
highest denomination circulating coin (see Table 1). Some policy 
analysts claim that this makes vending machine and small retail 
transactions awkward and wastes government funds, and they advocate 
that the government try again to introduce a dollar coin. Calls to try 
again make it imperative to review the Anthony dollar experience as 
well as the success of coin/note substitutions in other countries to 
determine where the U.S. government went wrong in its effort.

 TABLE I.--THE HIGHEST-DENOMINATION COIN AND LOWEST-DENOMINATION NOTE OF
                            VARIOUS COUNTRIES
------------------------------------------------------------------------
              Country                  Highest Coin       Lowest Note
------------------------------------------------------------------------
Australia.........................        A$2 ($1.56)        A$5 ($3.90)
Britain...........................      1      5
                                              ($1.69)            ($8.45)
Canada............................        C$1 ($0.87)        C$2 ($1.74)
Germany...........................        DM5 ($2.90)       DM10 ($5.80)
Japan.............................   500 ($3.65)  1000 ($7.30)
United States.....................     quarter ($.25)         $1 ($1.00)
------------------------------------------------------------------------
SOURCE: The Economist (2/25/89, p. 20). Exchange rates 8/15/91.

    The popular explanation for the public's rejection of the coin 
emphasizes that the new coin too closely resembled the quarter (see 
Figure 1). Another explanation faults the government for not being more 
aggressive in marketing the advantages of the new coin to the public. 
We argue, however, that the fundamental reason the Anthony dollar 
failed was that the government lacked a sound understanding of the 
economic theory underlying coin/note substitutions. The government 
believed that the Anthony dollar would better meet the transaction 
needs of the public. It therefore concluded that if it offered the 
Anthony dollar to the public, the public would learn of the coin's 
advantages and begin to use the coin in place of the dollar bill. This 
simple view of the coin/note substitution process ignores the presence 
of ``network'' externalities in a currency system, which mean that the 
benefit an individual attains from the use of a particular currency 
form depends on how many others are also using that currency form. For 
example, a new high-denomination coin can increase the range of vending 
machine transactions open to individuals, but only if vending machine 
owners convert the machines to accept the coin. Vending machine owners 
can increase sales from converting their machines to accept the coin, 
but only if the public commonly carries the coin. Similarly, retailers 
who learn to distinguish quickly the new coin can make small 
transactions more rapidly, but only if their customers have also 
learned to distinguish the coin quickly.


    Had the government recognized these network externalities, it would 
have fundamentally altered its view of the currency substitution 
process. In the presence of network externalities, an individual who 
doubts that a new coin will become widely used by others will see 
little to gain from adjusting to use the coin. Even if an individual 
believes others will eventually begin to use the coin, he may decide it 
is better to wait for others to switch before switching himself. If 
everyone behaves this way, the coin will fail. Thus, it is not 
sufficient for a government simply to make available a new coin that it 
believes better serves the transaction needs of the public and expect 
it to be adopted. Rather, the government may need to provide an 
incentive for a large block of the public to initiate the conversation 
to the new coin or, alternatively, the government may need to force the 
use of the coin by withdrawing the competing bill from circulation.
    In this paper, we examine the failure of the Anthony dollar and 
develop a theory of coin/note substitutions based on the existence of 
network externalities. We begin, in the following section, by reviewing 
the relative advantages of coins and bills. In the second section, we 
outline the failed attempt to replace the dollar bill with the Anthony 
coin, and we examine the lessons that have been drawn from other 
countries' successful coin/note substitutions. In the third section, we 
present a theory explaining why governments must sometimes actively 
induce the private sector to make a currency substitution even when the 
private sector stands to gain from the change. We conclude with a brief 
review of lessons for any future attempt to substitute a coin for the 
dollar bill.
                           bills versus coins
    A government must consider the relatively advantages of bills and 
coins in deciding what form a particular currency denomination should 
take. The main advantage bills have over coins is that they are lighter 
and more compact, and therefore are easier to carry. Coins, on the 
other hand, are far more durable than bills, which can bring long-run 
government budget savings. U.S. coins, for example, have about a 20- to 
30-year life span while one dollar bills last only about 1.4 years. 
Consequently, although $1 bills are cheaper per unit to produce than $1 
coins, the additional costs of destroying and replacing them at 
frequent intervals are high enough so that the government could save 
about $318 million annually by replacing 75 percent of $1 bills with $1 
coins and 25 percent with $2 bills (U.S. GAO 1990). Coins are also 
easier to sort manually than are bills, making small transactions using 
coins quicker than transactions using bills (U.S. Senate 1990, pp. 90-
91). This advantage is most important for retail stores that make 
frequent small transactions. It also benefits their customers waiting 
in lines to make purchases. Moreover, because coins are differentiated 
by weight and electromagnetic properties, bulk sorting of coins is 
faster than that of bills (Buetow and Rubin 1991). Coins are also 
better for automated transactions. Mechanical coin acceptors easily and 
rapidly differentiate various coins and reject counterfeits, or 
``slugs,'' using weight, size, edge, and electromagnetic properties. 
Although bill acceptors now allow vending machines to take bills up to 
$20, the cost of the acceptors, the need to dispense coins as change, 
and the generally poor quality of low-denomination currency combine to 
make them expensive and impractical relative to coin acceptors (U.S. 
Senate 1990, p. 91).
    Because of the different relative advantages of bills and coins, 
businesses and individuals who use coins and bills in different 
circumstances can disagree over whether a particular currency unit 
should be produced as a coin or bill. Vending machine operators favor 
coins, while those in the money transporting business tend to favor 
bills. Governments prefer to produce coins for small denominations 
because of the favorable fiscal impact. Among consumers, even women and 
men, who often carry coins differently, may differ in their preferences 
for coins relative to bills.
    After considering the relative advantages of coins and bills, major 
contemporary countries have chosen to produce low-denomination currency 
units as coins and higher denominations as bills. Low-denomination 
currency units circulate rapidly, making durability and speed of use 
paramount. Higher-denomination units are used less often, so the light 
weight and compact form of bills become more important.
    Governments tend to keep currency structures relatively stable over 
time, presumably because events that alter the optimal currency 
structure are relatively rare or develop gradually. Moreover, there can 
be significant transition costs associated with changing the currency 
structure. The longer an established currency structure remains 
unaltered, the greater these transition costs are likely to be, because 
a physical payments infrastructure tailored to a particular currency 
form and the public's familiarity with that currency develop over time.
    Inflation is the primary factor that changes a country's optimal 
currency structure. Following sustained declines in the purchasing 
power of a currency, countries have often sought to substitute coins 
for low-denomination bills. A decline in the purchasing power of a bill 
increases its speed of circulation, as it is more commonly used in 
smaller transactions.\1\ For such transactions, the durability and 
sorting speed of the currency become important, characteristics in 
which coins have a relative advantage.
---------------------------------------------------------------------------
    \1\ A very high inflation rate can lower the relative advantage of 
coins. In a hyperinflation, new higher-value currency units must 
frequently be introduced and older lower-value ones removed as they 
become worthless. When this process is frequent, the durability of a 
new currency unit is not important. Consequently, in a hyperinflation 
coins usually cease to circulate and new currency units are created as 
bills.
---------------------------------------------------------------------------
        the susan b. anthony dollar and the canadian ``loonie''
    Between 1935 and 1975, the purchasing power of the U.S. dollar fell 
by 65 percent, and by 1975 the dollar was commonly used in even the 
smallest transactions. Consequently, in the mid-1970s, the U.S. 
government decided the time had come to produce a dollar coin, 
expecting it would eventually replace the dollar bill. That effort 
failed, and today the Anthony dollar is an insignificant part of the 
U.S. currency system. Responding to similar developments a decade 
later, the Canadian government successfully replaced its dollar bill 
with a coin, popularly known as the ``loonie'' because of the image of 
a loon on its face. This section briefly examines these experiences in 
an attempt to identify the key factors differentiating the Canadian 
success from the U.S. failure.
The U.S. Experience
    Toward the end of the Ford Administration, the U.S. Treasury 
Department and the Federal Reserve began to argue that inflation had 
lowered the purchasing power of the dollar to such a degree that a 
dollar coin would better serve the transaction needs of the economy 
(Simon 1977).\2\ Early in the Carter Administration, the Treasury 
argued that a ``conveniently sized [dollar] coin would be acceptable to 
the general public and would ultimately gain widespread usage as a 
circulating medium of exchange'' (Blumenthal 1978). The Treasury also 
calculated that the replacement of the $1 bill by a $1 coin could 
reduce government costs over the long run by up to $50 million per year 
in 1979 dollars (U.S. House 1979, p. 47).
---------------------------------------------------------------------------
    \2\ In 1976, the Treasury Department introduced a $2 bill, intended 
to displace some one dollar bills. Because this new bill was 
unfamiliar, lacked any place in retailers' cash drawers, and faced 
severe competition from an unchanged quantity of $1 bills, the $2 bill 
never circulated widely. Moreover, for the public, the difference 
between a $2 bill and a $1 bill was apparently too insignificant to 
warrant the additional denomination (Hough 1978).
---------------------------------------------------------------------------
    In 1975 the Treasury Department commissioned a private research 
group, the Research Triangle Institute (RTI), to undertake a 
comprehensive review of the U.S. currency structure and issues linked 
to the introduction of a dollar coin (RTI 1976). At the same time, the 
Mint began technical studies on a possible dollar coin. Both the Mint 
and the Treasury knew that a badly designed coin would not be used 
voluntarily by the public. Few Kennedy half-dollars circulated, and 
most of the public had never used an Eisenhower dollar in transactions. 
The govemment attributed the unpopularity of these coins to their 
relatively large size and weight.\3\ The Mint believed that the public 
would find a new, smaller, and lighter $1 coin convenient for many 
transactions. It was confident that such a coin would be accepted by 
the public and it did not ``feel the expenditure of funds for a full 
public opinion survey would be justified'' (U.S. Senate 1979, p. 
20).\4\
---------------------------------------------------------------------------
    \3\ The Eisenhower dollar coin was introduced in 1971, but the 
government created the coin only to sell it to the casino industry, 
which was using its own dollar tokens in slot machines (Rochette 1986). 
The government never intended the coin for general public use. The 
Kennedy half-dollar was introduced in 1964, primarily as a 
commemorative coin honoring the assassinated President. Little concern 
was given to whether it would circulate or not.
    \4\ A branch bank of the Federal Reserve Bank of Chicago did 
commission a marketing study of the attitudes of consumers and 
retailers toward a new dollar coin. Claude Martin (1980 and 1981), the 
principal researcher in this study, reported that most of the public 
and retailers did not perceive a need for the coin and were doubtful 
that the public would use it. This report, however, was completed after 
production of the coin was underway and it had no impact on the design 
or marketing of the coin.
---------------------------------------------------------------------------
    In planning the new $1 coins design, both the Mint and RTI gave 
primary attention to the needs of vending machine manufacturers. Since 
a major advantage of the coin would be its potential use in automated 
transactions, the coin would have to be compatible with the industry's 
electrical and mechanical coin sensors. Although the Mint and RTI asked 
representatives of other economic sectors heavily involved in money 
handling for opinions on the coin's design, their responses had little 
effect on the coin's final form. However, the desire to produce a coin 
suitable for the visually impaired led to the adoption of the eleven-
sided ridge on the interior of the coin. An eleven-sided coin had been 
considered initially, but vending machine manufacturers objected that 
such a design would make it more difficult to distinguish between coins 
and slugs (U.S. Mint 1978, p. 8).
    The Mint and Federal Reserve gave little thought to how the dollar 
coin would become integrated into the currency system. Because they 
were confident that the public would use it if it were made available 
to them as a currency option, the Mint and the Fed devoted most of 
their efforts to arranging for the distribution of the coin. They each 
allocated $300,000 for promotional pamphlets and the employment of a 
public relations firm. Most of the marketing efforts were aimed at 
banks and retail businesses, which were expected to play a critical 
role in distributing the new coin to the public (U.S. GAO 1990, pp. 20-
21). Ultimately, however, the Fed and the Mint believed that the 
success of the coin depended on the individual choices of consumers. 
This viewpoint was succinctly enunciated by Federal Reserve Board 
Governor Phillip Coldwell, who explained, ``If the American public 
doesn't find it a useful piece of currency or coin, then it will not 
circulate. If they do find it useful, it will circulate'' (U.S. House 
1978, p. 30).
    In presentations to Congress prior to the introduction of the coin, 
Mint and Federal Reserve officials predicted that initially only a 
small percentage of the public would use the coin, but that its use 
would grow over time as more people became accustomed to the coin and 
began to see its advantages (U.S. House 1979, pp. 32-33). They 
estimated that it would probably take 3 to 4 years to achieve 
widespread circulation.
    Congress considered the advisability of the dollar coin over the 
summer of 1978. After bitter feuding over whom the coin should honor, 
Congress passed legislation providing for the Anthony dollar and 
President Carter signed the legislation on October 11, 1978. Production 
of the coin began 2 months later in Philadelphia. The Mint released the 
coin with ceremonies and publicity on July 1, 1979. There was such an 
initial surge of demand that many banks briefly ran out of the coin 
(Klemesrud 1979).
    The honeymoon was short. Despite the Mint's emphasis on designing a 
coin suitable for vending machines, most machines were not recalibrated 
to accept it. Vendors had begun updating their machines before the law 
passed, but only 250,000 of 4 million machines accepted the coin by 
July 1979 (New York Times, ``Machines'' 1979; U.S. House 1979, p. 161). 
The cost for updating old coin acceptors ranged from $25 to $350 per 
acceptor. Given these costs and doubts about the coin's success, most 
vendors preferred to wait to see if the coin would become widely used 
before converting their machines (Reiter 1980a).
    The media, the public, and retailers criticized the coin for 
looking like a quarter, making it hard to distinguish rapidly. Although 
the Anthony dollar weighs 43 percent more than the quarter, has almost 
the same size relation to the quarter that the quarter has to the 
nickel, and has distinctly different engraving than the quarter, none 
of these differences seemed to matter. Consumers and retailers 
complained of the coin's similarities to the quarter in size, color, 
reeded edge, and thickness. Because many customers did not want the 
coin, cashiers rarely offered it as change. In fact, some businesses 
had their cashiers drop the coins into a safe under the register to be 
returned to the bank, but never used as change (U.S. House 1979, p. 
11). Consumers declined to accept the coin from retailers as change, 
merchants returned the coins to the banks, and the banks, unable to 
redistribute them to merchants and facing high storage costs, sent them 
back to the Federal Reserve and did not order resupplies.\5\
---------------------------------------------------------------------------
    \5\ The failure of the Anthony dollar emphasizes the limited 
applicability of Greshman's Law in an economy where the form of the 
money stock is determined by public demand. The central bank readily 
exchanged the dollar coin and the dollar bill at the same face value. 
Since people preferred to hold the dollar bill, they returned the coin 
to banks which in turn returned it to the Fed. This process took the 
coin out of circulation. The ``bad'' money did not drive out the 
``good,'' rather the bad money disappeared from the economy.
---------------------------------------------------------------------------
    Congress held hearings in September 1979 to investigate why the 
dollar coin was failing. Mint, Treasury, and Federal Reserve officials 
testified before a hostile Congress that the coin was not yet the 
failure the public thought it was, and argued for more patience. Stella 
Hackel, Director of the Mint, defended the coin before Congress, 
saying:

    We knew it would take time for the American people to get adjusted 
to a new coin. It is the first change in the size of coinage in 122 
years . . . Whenever we reach in our pocket now and find anything 
larger than a nickel, we assume it is going to be a quarter . . . . But 
in fact, Congress realized from the committee reports that it would 
take 3 to 4 years, and it is taking some time. (U.S. House 1979, pp. 
49-50)

    A Treasury Task Force recommended that the dollar bill be removed 
from circulation in order to force the public to use the coin, but 
Congress believed that such a move would be highly unpopular and 
soundly rejected the proposal (U.S. House 1979, p. 78).
    By January 1980, only 291 million of the 750 million dollar coins 
produced were in circulation. In March 1980, the Mint stopped 
production as a ``temporary measure.'' The Mint's Assistant Director 
for Technology claimed that ``in no way are we abandoning the coin. . . 
. We're simply shifting gears a bit. . . . We intend to resume 
production'' (Reiter 1980a). U.S. Post Offices and Defense Department 
Post Exchanges, in the United States and abroad, tried to place the 
coin in circulation but, despite these efforts, the coin's circulation 
spread only slightly (New York Times, ``Metal'' 1980; ``Troops' Use'' 
1980).
    The Mint did not give up for another year. In November 1980 it had 
a new design ready to try. It proposed changing the color of the coin 
from silver to bronze and replacing the eagle on the reverse side with 
a distinctly raised ``1'' (Reiter 1980c). With the arrival of the 
Reagan Administration, however, a new Director of the Mint was 
appointed who promptly dropped the Anthony dollar from the proof set 
and suspended all research to redesign the coin (Reiter 1981).\6\
---------------------------------------------------------------------------
    \6\ It is rumored that people in the Reagan Administration viewed 
the coin unfavorably because they thought it endorsed a feminist 
ideology.
---------------------------------------------------------------------------
The Canadian Experience
    Canada's more recent experience in substituting a coin for its 
dollar bill differs from that of the United States in several respects, 
but also has significant parallels. In response to the declining 
purchasing power of its $1 bill, Canada introduced the ``loonie'' 
dollar coin on July 1, 1987. Conscious of the rejection of the Anthony 
dollar by the U.S. public, the Royal Canadian Mint (RCM) devoted 
considerable attention to the design of the coin, with an eye to 
minimizing both the conversion costs for vending machines and the 
learning costs for the public. The Mint decided to make the coin the 
same size as the Anthony dollar to facilitate compatibility with U.S.-
made vending machines. However, unlike the Anthony coin and other 
Canadian coins, the Canadian dollar coin has a distinctive eleven-sided 
outer edge and is gold-colored. The outer edges of the coin are 
slightly arched so that the coin will not skip or slide in vending 
machines. It was such behavior that led the U.S. vending machine 
industry to object to the U.S. Mint's initial plan to produce an 
eleven-sided dollar coin.
    In launching the coin, the Canadian govemment heavily marketed its 
advantages to the public. Despite these efforts and the distinctive 
appearance of the coin, the public was slow to adopt it. While it co-
circulated with the dollar bill, the coin was used in less than 15 
percent of all non-machine cash transactions (RCM 1989a, p. 7). The 
Canadian Mint had expected this and had argued even before legislative 
approval of the coin that it would not succeed unless the dollar bill 
were removed from circulation. Following this advice, the Bank of 
Canada announced in 1988 that it would begin gradually withdrawing the 
$1 bill from circulation starting in June 1989. Vending machine owners 
and transit authorities, believing that the note would be removed, 
quickly converted their machines--110,000 of 170,000 by May 1989 (RCM 
1989a, pp. 5-11).
    The announced phasing out of the $1 bill brought complaints from 
some banks and small businesses (Underwood 1989, pp. 44-45). However, 
following the Mint's extensive marketing efforts, opinion polls showed 
that committed opponents of the transition to the coin among the 
general public were in the minority: one-third opposed the new coin, 
one-third supported it, and one-third had no feelings either way. 
Facing a divided public, the government was able to fulfill its promise 
to withdraw the dollar bill from circulation. Today the ``loonie'' is 
the only circulating dollar in Canada.\7\
---------------------------------------------------------------------------
    \7\ To overcome the objection that carrying several dollar coins 
would be too heavy, the Canadian government also introduced a $2 bill. 
About 75 percent of the $1 bills were replaced with $1 coins and the 
remainder with $2 bills. In the United States, contemporary proposals 
to replace the $1 bill with a $1 coin generally also include a 
provision to promote the $2 bill (U.S. GAO 1990). After the $1 bill is 
removed from circulation, retailers can place $2 bills in the cash 
drawer slot currently occupied by $1 bills.
---------------------------------------------------------------------------
    In 1990, the U.S. General Accounting Office investigated the 
successful efforts of Canada and five other western industrialized 
countries to replace low-denomination bills with coins. As part of the 
study, the GAO asked monetary authorities in the six countries what 
lessons they had learned from their experiences in converting to coins. 
According to the GAO (U.S. GAO 1990, p. 23), they offered the following 
lessons (number of countries indicating lessons learned in 
parentheses);
  --Notes must be eliminated. (6)
  --Have a public-awareness campaign. (5)
  --Government must expect public resistance and be strong in its 
        campaign to convert. (4)
  --Ensure sufficient coins are available. (4)
  --Coins must have a distinct appearance. (4)
                 the theory of coin/note substitutions
    With hindsight, it is clear that the U.S. government should have 
more clearly differentiated the Anthony dollar from the quarter and 
more extensively marketed its advantages to the public. However, the 
experience of other countries shows that even a well-designed and well-
marketed coin will generally fail to replace a circulating low-
denomination bill, unless the government actively induces the public to 
switch to the new coin. in this section we offer a theoretical 
explanation for this observation.
    The theory is based on the idea that there are significant network 
externalities in a currency system. These arise from two principal 
sources. First, there is an externality that arises from the public's 
familiarity with the most commonly used currencies in a society. Over 
time people learn to distinguish commonly used currencies very rapidly 
with only a casual glance. If both parties in a transaction are 
intimately familiar with the currencies used, the payment is likely to 
be rapid and accurate. There is an externality, however, because it is 
not sufficient for only one party to have this familiarity. If the 
other party needs to examine closely the currencies to verify the 
accuracy of the payment, the transaction will be slowed. Someone 
choosing a currency for common retail transactions has an incentive, 
therefore, to choose currencies with which others are familiar.
    A second externality arises from the physical payments 
infrastructure, including cash registers, money-counting and- wrapping 
machines, and automated vending machines. A payments infrastructure 
tailored to a particular currency system speeds payments and increases 
the range of transactions permitted by the monetary system. This 
creates an incentive for individuals to use currencies compatible with 
this infrastructure and for those designing the infrastructure to do so 
around the currencies widely carried by the public.
    Figure 2 illustrates the effect of these network externalities on 
the benefit to an individual from choosing to use a $1 bill or $1 coin 
for transactions. The percentage of the public commonly using a dollar 
bill for transactions is measured across the horizontal axis from left 
to right. The percentage commonly using a dollar coin is measured from 
right to left. To reflect positive network externalities, the benefit 
to the individual from using either currency form increases as the 
percentage of people also using that currency form increases.\8\
---------------------------------------------------------------------------
    \8\ The benefit function can be nonlinear, but we assume the 
benefit to an individual from using a particular currency form is a 
constantly increasing function of the percentage of the public also 
using that currency form.
---------------------------------------------------------------------------
    In explaining the implications of network effects, we initially 
assume for simplicity that everyone in the economy has the same benefit 
function. Under this assumption, Figure 2 illustrates a case where 
society's welfare would be maximized if the government produced dollar 
bills rather than dollar coins: the benefit individuals receive from 
using the note, assuming everyone else does too, exceeds the benefit 
they would attain from using the coin.


    As discussed earlier, inflation raises the average value of small 
retail transactions and increases the use of dollar bills. Because 
coins are more durable, more rapidly sorted than bills, and more 
convenient for vending machine purchases, the price increase can 
increase the relative benefit to producing a particular currency 
denomination in the form of a coin rather than a bill. The effect of an 
increase in the price level is illustrated in Figure 3 as shifting the 
benefit function for a coin up from its original position, 
Bcoin, to the new position B'coin. In the 
illustrated case, the price increase changes the optimal currency 
structure, whereas before the price increase, the greatest benefit 
would be attained if society opted to produce a $1 bill. After the 
increase, the coin would be optimal.


    In deciding whether to switch from a bill to a coin, transition 
costs should also be taken into account. For consumers, the transition 
costs are learning to use the new coin quickly and accurately. 
Businesses also face this cost and in addition, costs associated with 
adjusting their payments infrastructure, such as converting vending 
machines to accept the new coin or restructuring cash registers. It is 
possible that once the transition costs are accounted for, it would not 
be beneficial for a society to switch to a coin. In Figure 3, the 
benefit from using the dollar coin after allowing for the transition 
costs (t) is shown as B'coin-t. In the illustrated case, the 
transition costs are small enough that it would still be optimal for 
the society to switch from using the bill to using the coin, that is, Z 
is greater than X.
    Even though everyone would gain in the illustrated case if the coin 
were to replace the bill, there is no guarantee that the coin would be 
adopted in a decentralized decision-making process. This is true for 
two reasons. First, individual decision makers may doubt that others 
will also adopt the coin, or, second, they may believe that others will 
eventually adopt the coin, but think the process will be so slow that 
it does not pay to switch early. Both of these points can be 
illustrated in Figure 3. Consider an individual starting out at point 
X. When she evaluates whether she should switch to the coin, she must 
form an expectation of how many others will also switch. If she expects 
no others to go along, then she would expect to move from point X to 
point Y if she were to switch to the coin, clearly an inferior 
position. As drawn, even if she expects 20 percent of the population to 
switch, it would be optimal for her to stay with the note. Only if she 
expects 40 percent or more of the population to switch, will it be 
optimal for her to switch as well. This process can lock a society with 
decentralized decision making into an inferior currency structure.\9\ 
If people doubt others will adopt the new currency, then it does not 
pay for them to do so either. If everyone thinks this way, the 
expectations will be correct because they are self-fulfilling.
---------------------------------------------------------------------------
    \9\ Farrell and Saloner (1985) present a formal model illustrating 
this idea with two actors. Postrel (1988) extends the model to cases 
with more than two actors.
---------------------------------------------------------------------------
    If the costs associated with switching to the new coin can never be 
recouped, then it is reasonable for individuals to wait to see what 
others do before deciding whether they should themselves switch. In the 
illustrated case, if less than 40 percent of the public switches, then 
such fence-sitters would stay with the bill. If enough people follow 
this wait-and-see strategy, the Nash equilibrium remains at point X 
rather than the social optimum Z. However, if for some reason 40 
percent or more of the public switches to the coin, then there will be 
a bandwagon effect where the fence-sitters follow in switching. In this 
case, the equilibrium will be the optimal point Z.
    Even if everyone in the economy believes that eventually everyone 
else will switch to using the new coin, it is possible for the economy 
to remain locked in to using the note. To see this, once again consider 
the decision facing an individual at point X. He can switch to point Y, 
knowing that as others eventually also switch the benefit he obtains 
from using the coin will gradually increase, illustrated in Figure 3 as 
a movement along the coin benefit schedule from point Y to point Z. If 
the move from Y to Z is expected to be very gradual, then those who 
switch early and start the process may end up as net losers. This is 
because they will experience an early loss as they jump from X to Y, 
which must be compared to the present value of the expected gains from 
moving to point Z. If the use of the coin is expected to grow very 
slowly, or if individuals have high discount rates, early losses could 
outweigh discounted future gains, and those starting the conversion to 
the coin would be net losers.\10\ Once the gains of later converts are 
taken into account, however, society as a whole might experience a net 
social gain.
---------------------------------------------------------------------------
    \10\ Farrell and Saloner (1986) develop a formal model illustrating 
this idea. People might expect a gradual coin/note substitution process 
for several reasons. Perhaps businesses will prefer to wait for their 
existing payments infrastructure to depreciate or require maintenance 
before converting it to accommodate the new coin. Moreover, consumers 
may need to use the new coin numerous times before they learn to 
distinguish it rapidly, and this learning process may spread through 
the economy at an uneven rate.
---------------------------------------------------------------------------
    If early converts to the coin are net losers, it will be optimal 
for individuals to wait for the transition to be well underway before 
themselves switching. If everyone adopts this strategy, the process 
will never begin and the economy would remain locked in to the inferior 
equilibrium X.
    If the economy is locked in to an inferior equilibrium, there are a 
number of noncoercive steps a government can take to try to attain the 
better equilibrium. If the inertia is caused by individuals' 
expectations that others may not switch, the government could use 
propaganda to attempt to change these expectations.\11\ Alternatively, 
the government might try to solicit pledges, committing all to switch 
at once. If the government is itself a significant proportion of the 
economy, it could try to start the bandwagon rolling by itself 
switching to the coin. The government might also try to identify other 
large economic sectors that could initiate the conversion process, 
perhaps in concert with the government.\12\ It might also start the 
process by subsidizing those that switch early.
---------------------------------------------------------------------------
    \11\ A marketing campaign may also aim to communicate to the public 
the benefits from switching to the new coin. Without such a campaign, 
the public might underestimate the gains because the full benefits from 
the new coin will occur only after the payments infrastructure has been 
altered, people have learned to use the coin, and the government begins 
to realize budget savings.
    \12\ In the case of the Anthony dollar, the government took some of 
these steps. For example, it encouraged vending machine owners to 
convert their machines early and it tried to initiate use of the coin 
by pushing the Anthony coin on soldiers, postal customers, and others.
---------------------------------------------------------------------------
    Such noncoercive means could be prohibitively expensive. They also 
might not work because, unless they completely eliminate individuals' 
doubts that others will switch, everyone may wait to see if others 
switch before switching themselves. Moreover, the government may be too 
small a part of the economy to initiate a bandwagon effect, even if it 
could find other large economic actors to join it in switching to the 
coin.
    A government can also use coercive means to attain the superior 
equilibrium. Specifically, the government could force the movement from 
equilibrium X to equilibrium Z by withdrawing the note from 
circulation. In doing so, the government might encounter resistance 
even if the public stands to gain from the change. Some people, for 
example, might doubt that the government can or will carry through with 
its promise to withdraw the note from circulation. Such individuals 
might resist switching for fear that they will switch, the government 
will abandon its policy, and others will not switch, leaving the 
switchers at or near point Y in Figure 3. In addition, even if the 
public does not doubt the government's ability or willingness to carry 
through with the policy, it might still resist because no one wants to 
switch first if the move from point Y to point Z will be slow. Finally, 
if we drop our assumption that everyone has identical benefit 
functions, then there could be individuals (such as money transporters) 
for whom the switch to the coin, even assuming everyone else switches, 
would lower their welfare. These individuals will nevertheless switch 
if others do and if network effects are strong enough. However, they 
would prefer that society stayed with the bill.\13\
---------------------------------------------------------------------------
    \13\ Because it would distract us from our main point, we do not 
analyze a general model with differing benefit functions. We should 
note, however, that such a model could produce a rich range of results. 
For example, if network effects were weak and society was composed of a 
group that benefiued from a $1 bill and a group that benefitted from a 
$1 coin, the two currency forms could cocirculate in equilibrium. 
Empirically, however, most cases of co-circulation are explained by 
restrictions on the availability of the preferred currency form.
---------------------------------------------------------------------------
    Forcing a new currency system on the public, of course, has its 
dangers. Governments that do so bear the responsibility of clearly 
demonstrating that the change benefits the economy as a whole. It is 
not enough simply to show that the change will result in government 
budget savings, for these savings could be at the expense of even 
greater costs in the private sector. A government must also decide on 
the speed of a forced coin/note substitution. A gradual change could 
lower transition costs. On the other hand, if the proposed change is 
too gradual, the public could doubt the government's resolve to follow 
through with the withdrawal of the bill and might resist initiating the 
conversion process.
                               conclusion
    The officials responsible for launching the Anthony dollar believed 
that the new coin would benefit society, and that over time the public 
would discover this and begin to use the coin in place of the dollar 
note. Their reasoning, however, failed to recognize and communicate the 
implications of network effects in the currency system. Consequently, 
even if they were right about the gains from a coin/note substitution, 
they did not realize that there would be little incentive for anyone in 
the private sector to begin using the coin without the assurance that 
others would follow. They also did not realize that the more slowly 
people expect the use of the coin to spread, the more likely it is that 
individuals would not want to initiate the transition process.
    To be fair, some governmental measures, such as efforts to place 
the Anthony dollar into circulation through post offices and to 
encourage vending machine owners to convert their machines early in the 
process, did show some implicit understanding of network effects. 
Moreover, some government officials, prior to the introduction of the 
coin and contemporaneous with its failure, did suggest that the coin 
would only succeed if the dollar bill were withdrawn from circulation. 
No one, however, explained in any detail why this was the case. This 
led some policymakers to conclude that the need to force the coin on 
the public through the withdrawal of the note proved the dollar coin 
did not benefit the public (U.S. House, 1979). Our theoretical analysis 
shows that this is not a necessary implication. However, because 
network externalities were neither understood nor explained by the Mint 
or Federal Reserve, it is not surprising that people drew such an 
erroneous conclusion. This misunderstanding assured that there was 
almost no political support for withdrawing the dollar bill.
    The low and declining purchasing power of the dollar bill as well 
as Federal Government budget pressures make it likely that there will 
be future attempts to replace the dollar bill with a dollar coin. In 
fact, a lobbyist group is currently pushing for such a change and 
several legislators have announced their support (Blau 1991). Although 
it is important not to repeat the design errors of the Anthony dollar, 
good design alone will not bring success to a future dollar coin. As 
our theory of coin/note substitutions shows, even a well-designed coin 
is unlikely to succeed unless the government orchestrates the 
transition. In fact, because of the failure of the Anthony dollar, 
people will be particularly skeptical of the success of future efforts. 
Such skepticism will increase resistance to paying any transition costs 
until businesses and individuals are convinced that the new dollar coin 
will become widely used. Consequently, future attempts to introduce a 
dollar coin will likely fail, unless the government organizes a 
concerted switch to the new currency by a large segment of the economy. 
The simplest way to do this is to withdraw the dollar bill from 
circulation.
                            literature cited
    Blau, Eleanor. ``The Penny Plague.'' The New York Times, December 
31, 1991, II-1. Blumenthal, W. Michael. Letter to the Speaker of the 
House of Representatives, April 17, 1978.
    Buetow, William, and Tom Rubin. ``A $1 Coin: Farebox and Cash Room 
Considerations.'' Passenger Transport, May 27, 1991.
    Farrell, Joseph, and Garth Saloner. ``Standardization, 
Compatibility, and Innovations.'' Rand Journal of Economics 16 (Spring 
1985), 70-83.
    ------. ``Installed Base and Compatibility: Innovation, Produce 
Preannouncements, and Predation.'' American Economic Review 76 
(December 1986), 940-55.
    Hough, John. ``The Selling of the Two-Dollar Bill.'' The New York 
Times, January 15, 1978, III-2.
    Jevons, W. Stanley. Money and the Mechansim of exchange. New York: 
D. Appleton & Co., 1875.
    Klemesrud, Judy. ``Suffragette Enshrined on the Face of a Dollar 
Coin.'' The New York Times, July 2, 1979, II-10.
    Martin, Claude R., Jr. ``The Susan B. Anthony Dollar: Hypotheses 
Regarding Consumer and Retailing Reactions.'' Developments in Marketing 
Science 1 (1980) 209-12.
    ------. ``The Situation Confronting the introduction of the Anthony 
Dollar.'' In The Situation in Government Marketing, edited by E. Permit 
and E. Mowka, pp. 186-98. New York: Praeger Press, 1981.
    New York Times, The. ``Machines Ready for Dollar Coin.'' May 12, 
1979, p. 27.
    ------. ``Metal Dollar.'' April 13, 1980, p. 41.
    ------. ``Troops Use of $1 Coin is Deplored by Proxmire.'' November 
11, 1980, IV-19. Postrel, Steven R. ``Bandwagons and the Coordination 
of Standardized Behavior.'' Manuscript, June 1988.
    Reiter, Ed. ``Down, But Not Out.'' The New York Times, March 16, 
1980, 11-46 (a).
    ------. ``Can the Anthony Dollar Still Win Acceptance?'' The New 
York Times, July 13, 1980, II-26 (b).
    ------. ``A Possible Reprieve for the Anthony Dollar?'' The New 
York Times, November 9, 1980, II-41 (c).
    ------. ``Is This Really the End of the Anthony Dollar?'' The New 
York Times, September 13, 1981, II-52.
    Research Triangle Institute. A Comprehensive Review of U.S. Coinage 
System Requirements to 1990. North Carolina: Research Triangle 
Institute, 1976.
    Rochette, Ed. ``The Rise and Fall of the Eisenhower Dollar.'' 
Antiques and Collecting Hobbies 90 (January 1986), 71-72.
    Royal Canadian Mint. ``Note to the Media.'' Press release, May 10, 
1989.
    ------. ``Mint Act to Help Prepare for Withdrawal of $1 Bank Note: 
Strategy Aimed at Those Who Order Cash.'' Press release, May 31, 1989.
    Simon, William E. ``The State of the United States Coinage.'' U.S. 
Treasury Department report, January 5, 1977.
    Underwood, Nora. ``A Loonie' Revolt,'' Maclean's 102 (June 5, 
1989), 44-45.
    United States Bureau of the Mint. Annual Report of the Director of 
the Mint. Washington D.C.: Bureau of the Mint, 1978 and 1979.
    United States Department of the Treasury. An Assessment of United 
States Currency and Coin Systems with Long-Range Planning 
Recommendations. Washington, D.C.: GPO, 1979.
    United States General Accounting Office. National Coinage 
Proposals: Limited Public Demand for New Dollar Coin or Elimination of 
Pennies. Washington, D.C.: GPO, May 1990.
    United States House of Representatives. Proposed Smaller One-Dollar 
Coin. Hearings before the 95th Congress, Washington, D.C.: GPO, 1978.
    ------. Susan B. Anthony Coin Act of 1978: Report, Together with 
Additional and Dissenting Views. Washington, D.C.: GPO, 1979.
    United States Senate. Susan B. Anthony Dollar Coin Act of 1978. 
Hearings before the 95th Congress, Washington, D.C.: GPO, 1978.
    ------. Reprogramming for the Susan B. Anthony Dollar Coin Program. 
Hearings before the 96th Congress, Washington, D.C.: GPO, 1979.
    ------. United States Coinage Report Act of 1989. Hearings before 
the 101st Congress, Washington, D.C.: GPO, 1990.

    Senator Dorgan. Amy Mossett, why do you not pull your chair 
up in the middle of that table, if you would.
    Let me begin a series of questions to try to understand 
what we have heard and perhaps what we have not heard. Director 
Fore, how much money was spent on the promotion or advertising 
for the Golden Dollar coin?
    Ms. Fore. As you mentioned in your opening remarks, a 
little over $60 million, $62.3 million, was for three firms in 
four separate contracts covering a period of approximately 2 3/
4 years. The first one was a contract for market research and 
partnerships and advertising. It was a little over $4 million 
and it was to increase circulation in seven sectors: retail, 
fast food restaurants, grocery, transit, vending, 
entertainment, and banking.
    The second was the largest contract, $48 million, that 
included a $40 million advertising campaign with George 
Washington. It was to oversee public relations and promotions.
    The third contract was for $8 million and it was to develop 
and execute a sales and marketing plan for coin-operated retail 
and banking businesses.
    The fourth was $1.5 million to identify and prioritize 
means and opportunities for increasing circulation.
    To my right is David Pickens, the head of our Sales and 
Marketing area for the Mint. He has prepared a forward-looking 
marketing plan for moving forward in thinking through what the 
opportunities are for the future.
    Senator Dorgan. I will ask Mr. Pickens a question in a 
moment.
    First of all, Ms. Fore, we have, as I understand it, minted 
1.5 billion Golden Dollar coins. But I understand that roughly 
500 million-plus have not been put out into circulation and the 
Federal Reserve Board has how many in stock at this point, Ms. 
Roseman?
    Ms. Roseman. A little over 200 million.
    Senator Dorgan. Tell me, what does that mean, that the 
Federal Reserve Board has 200, 250 million coins? Where do you 
have them?
    Ms. Roseman. The inventory is largely in the Reserve Bank 
offices around the country and some of our coin inventory are 
actually located at various armored carriers that we contract 
with to act as coin terminals for us.
    Senator Dorgan. And so you respond to a request from a bank 
in Mott, North Dakota, or Devils Lake, North Dakota, or Toledo, 
Ohio, and you send currency out based on their request. If they 
request dollar bills, dollar coins, is the request that 
specific?
    Ms. Roseman. Yes. They would request either notes or coins.
    Senator Dorgan. And so the fact that you now have over 200 
million in inventory that is not out there in circulation, that 
is because people are not requesting it, is that correct, or 
the banks are not requesting it, member banks?
    Ms. Roseman. Yes, and I should clarify. The inventory we 
have is a combination of both Golden Dollars and the Susan B. 
Anthonys.
    Senator Dorgan. So it is not an inventory that is described 
as one coin versus another, it is commingled?
    Ms. Roseman. Part of it is commingled. About 70 million or 
so are Golden Dollars that we have gotten from the Mint that we 
have not yet paid out. The rest of it are coins that we have 
received back in from the banking industry, and when we receive 
it back in, they are commingled.
    Senator Dorgan. Okay. Now, I started this hearing saying I 
think it is a failure at this point because I have never 
received one in change. I do not know of many people that have 
ever received one in change. The Secretary of the Treasury has 
never received one in change. Amy Mossett paid a taxi driver 
today in a Golden Dollar coin and he had no idea what it was.
    So my contention is that this is a failure. Mr. Benfield, 
you say no, it is not a failure, and Ms. Fore, you say, well, 
how do you define success? So let us try to figure out whether 
this is a success or a failure because a marketing strategy 
that Mr. Pickens may want to employ certainly has to understand 
what has happened up to this point.
    Director Fore, do you think that what has happened so far 
is a success or a failure?
    Ms. Fore. I think it has been a success in some ways. 
People like the coin. I think it has been successful in terms 
of bringing in seigniorage into the United States Treasury.
    Where it is not a success is in circulation. It is not in 
everyday commerce and what we need to try to improve is that 
people have easy access to the coin, that they receive it in 
everyday transactions and that they have places to use it. 
Coins, after all, are to be used in everyday trade and commerce 
in this country. So that is what we need to get to for it to be 
a complete success. It is a partial success, but it is not a 
full success.
    Senator Dorgan. Mr. Benfield, you say it is a success and 
you describe some car washes and various things. I guess my own 
feeling is that you define success in large part with respect 
to the Mint if you are going to develop a new coin for 
widespread circulation, you define success by whether that coin 
becomes a part of widespread circulation. With respect to the 
Golden Dollar coin, the answer is, no, absolutely not. It is 
not part of widespread circulation. Am I wrong about that?
    Mr. Benfield. Well, my members would love customers to be 
able to walk in and have the coin already in his or her pocket. 
That is not the case. That is disappointing. But let me give 
you a little more of a picture of how the coin works.
    Jim Stansfield, LaCrosse, Wisconsin, and also Zog's Vending 
in Appleton, Jim Stansfield is in Toro, which makes the 
lawnmowers. That is where they are manufactured. He told me, he 
says, ``Jim, I love this coin. I make 30,000 dollar coin sales 
per week.'' I said, ``Wow, 30,000 sales per week. What is your 
replacement? What do you have to go replace from the bank?'' He 
says, ``Oh, 2,000 or 3,000.'' Well, I am disappointed because I 
like them to create more demand and more seigniorage and wish 
more of them were walking away, but if you contemplate the 
implications of what is going on there, it is fabulous.
    It means that people are putting a $10 bill into a bill 
changer. They will get eight dollar coins, eight quarters. They 
will buy their sandwich and a bag of chips and a soft drink. 
Then they go back to their work station and they will keep 
those dollar coins at their work station. They will not take 
them home and spend them. Why? Because when they go back in the 
afternoon for their candy bar, that dollar coin is fast, it 
works every time, all the time. They have a longer break 
because they are not standing in lines.
    Jim Stansfield, he is not going back to have to count 
boatloads of dollar bills in his cash room. He is taking back 
fives, tens, and twenties and he is not having to replenish 
quarters and deal with mountains of quarters. So he is dealing 
with dollar coins instead of mountains of quarters and he is 
processing five, ten, and twenty dollar bills instead of a 
dollar coin. He is a happy camper.
    Senator Dorgan. I understand that, but that is anecdotal. I 
could tell you of someone who loved the Edsel, just loved it, 
but that would not suggest the Edsel was a success. It was a 
failure. I guess my point is, if the Golden Dollar coin is a 
way to replace four quarters in someone's pocket, why are they 
not rushing to the system to say, get these four quarters out 
of my pocket and get me a Golden Dollar coin? You cannot find 
the Golden Dollar coin.
    Mr. Benfield, do you have a coin dish in your bedroom?
    Mr. Benfield. There are two kinds of people in the world. 
There are spenders and savers. I happen to be a spender and I 
personally have put about 8,000 dollar coins into circulation. 
I have never gotten one in change, either, because I never 
accept the dollar bill in change. I always make sure I have 
enough dollar coins to make that exact transaction.
    Senator Dorgan. I see. I was just curious whether you have 
one of those little dishes where at the end of the day you put 
your coins.
    Mr. Benfield. No little dish.
    Senator Dorgan. You do not?
    Mr. Benfield. No.
    Senator Dorgan. You are unusual.
    Mr. Benfield. I am a spender.
    Senator Dorgan. I understand that, but you cannot spend 
between the time you go to bed and wake up.
    Mr. Benfield. Oh, I see what you are saying. Actually, you 
caught me. You are a really good cross examiner. I do have a 
beer mug on a rail around our dining room. We live in a craft 
revival house, and it is a Chicago Symphony beer mug because my 
dad was in the Chicago Symphony and it says George Shulte and 
the coins go in there.
    Senator Dorgan. See, I knew you had that, and I have never 
visited your----
    We have not met before, have we?
    Mr. Benfield. No, no, no, this is not staged.
    Senator Dorgan. The reason I ask that question is that at 
lot of the coins we make, not just Golden Dollars, end up in 
somebody's dish or cup someplace and they cannot go to a bank 
to redeem them. I mean, they have got to go order some paper 
rolls someplace or go to a machine at a grocery store that 
takes a certain percentage. That is a different issue, but when 
people have all of this change moving around that they then 
take out of the system, you have to replace it because you need 
sufficient coinage of all types, right?
    Ms. Fore. Correct.
    Senator Dorgan. Now, Mr. Benfield says that one of the 
reasons that the Golden Dollar coin is probably not in great 
circulation is there is no place in the cash register for it. 
Did the Mint contemplate that? Or I wonder if Congress when it 
considered the legislation did. Did you talk to retailers about 
how they would deal with the cash register issue?
    Ms. Fore. Yes. The Mint did at that time. I believe that 
most cash drawers have a spot that they can put Golden Dollars 
in, dollar coins. What most cashiers do is put rolls of coins 
in that slot, so that slot is used to put their rolls in for 
breaking apart and filling up the other bins. So if we can get 
them to get in the habit of using that as their dollar coin 
slot, then we have gone a step forward here.
    Senator Dorgan. So let us assume that I am a retailer and I 
say, what I want to do is I want to use Golden Dollar coins 
routinely. I like them. I want my customers to feel good about 
getting a Golden Dollar. So in my business, I want to use 
Golden Dollar coins. How hard is that for me to do?
    Mr. Benfield. Let me answer. I mentioned this fellow, Jim 
Opitz. When I called him and when I first talked to him in 
Wisconsin, he says, ``I am never going back to dollar bills. 
This is fabulous.'' And I said, ``Will you talk to me? When 
somebody comes in and gives you seven or eight dollar bills, do 
you pay those out first and then use the dollar coin as 
reserve?'' He said, ``Oh, no, no, no, no. The dollar bills go 
under the cash register. I only pay out dollar coins. I deposit 
all dollar bills. That is where the efficiency comes, and I 
cannot ask my cashiers to pay dollar bills sometimes and pay 
dollar coins sometimes or they will get confused.''
    I talked to Southern Wisconsin Foods, a chain of 19 Burger 
Kings, and they allow their store manager to make the decision. 
About half of them use dollar coins. And I said, what about 
dollar bills? They are retired and deposited when they come in. 
So what they do is, this dollar bill, it does not go up here. 
They take this clip out. They put the spare rolls not here, but 
over here, and the fifth position is now used for dollar coins.
    Senator Dorgan. My question was more specific than that. I 
run a business in a small town someplace and I want to use 
Golden Dollars and I want to use a lot of them. How hard is 
that, because then I want to go to my local bank and I want 
them to contact Ms. Roseman and the Federal Reserve and I want 
a steady supply of Golden Dollars for my cash register. Some 
will say it is impossible.
    Mr. Benfield. I got a call yesterday from Galveston, Texas, 
a small--and I forget, Zigler, I think the guy's name is--who 
runs a small family-owned restaurant and he loves the Golden 
Dollars and he pays out about 6,000 or 7,000 per week, I think, 
or several thousand per week. He says, ``Jim, I cannot get 
Golden Dollars. When I get a box of 1,000, I get about 400 or 
500 Susan B.s,'' and that is what the numbers are, over half. I 
have had some guy say, ``I got 1,500 and I got 873 Golden 
Dollars.''
    Senator Dorgan. Ms. Roseman, why can you not separate them 
when you send them out? If the bank, reflecting the interest of 
a small business who says, ``I want Golden Dollars,'' the bank 
comes to you, to the Federal Reserve Board and says, ``I want 
Golden Dollars. I want a bag of 2,000.'' Why can you not 
accomplish that?
    Ms. Roseman. Well, today, the way we handle coin orders--we 
get the deposits in the bags that Jim had shown you, 2,000. We 
will weigh that bag to make sure it is within our tolerance and 
we will pay it out. We will not do any processing of the coins 
today at all. Now, if----
    Senator Dorgan. Why?
    Ms. Roseman. Because there is really no need to. We are 
trying to minimize the cost to the government of coin 
distribution.
    Senator Dorgan. Yes, but if you have commingled coins, 
Susan B. Anthony and Golden Dollar coins, and your member 
bank--the Fed serves its member banks, serves at the pleasure 
of its member banks.
    Ms. Roseman. Well----
    Senator Dorgan [continuing]. Wants a good number of Golden 
Dollars, why will you not separate them and send them the 
Golden Dollars?
    Ms. Roseman. Well, we currently have no technology or 
processing equipment that is capable of doing that.
    Senator Dorgan. Why do you not get it?
    Ms. Roseman. There has not been a demand thus far for that. 
I guess one issue that we would need to confront is if we did 
separate out the Susan B. Anthonys, what to do with them if 
they are not going to be used as circulating coin.
    Mr. Benfield. A Treasury study in 1988, in fact, suggested 
melting them down, so I am not making this up. This is 
something that existed in an internal Treasury study.
    Senator Dorgan. I understand that, but it is a different 
issue. The issue of retiring the Susan B. Anthony was not what 
I was asking about. If the Fed has an accumulation of coins 
which include Susan B. Anthonys and Golden Dollars and I am a 
business person and I go to my bank and my bank goes to the 
Federal Reserve Board, which is there to service the banks, and 
says, ``I want Golden Dollars,'' and all you have is commingled 
coins, my question is, why will you not satisfy the 
requirements of the local bank? They want Golden Dollars.
    Ms. Roseman. We have traditionally treated all designs of a 
particular denomination as pretty much interchangeable for 
transactional purposes. For the same reason, we do not try to 
segregate out different State quarters, where there are a 
number of people who are still looking for, say, the Delawares 
or whatever for their collection. We say that for that program, 
the same way we do with the Golden Dollars, when each new State 
comes out, we will issue only that State for a period of time 
to be able to meet the initial demand, but as we get them back 
in, they are all commingled and that is what we subsequently 
provide.
    We have taken that tact with all denominations of coins, 
that we will try to support initial introductions of either the 
State quarter or the Golden Dollar, but as we build up these 
inventories, assuming that they are all legitimate coins for 
transactional purposes, we just treat them as interchangeable 
for that respect.
    Senator Dorgan. I want to come back to that, but Director 
Fore, how many Susan B. Anthony dollars are in circulation? How 
many were minted?
    Ms. Fore. Nine-hundred-and-twenty-three million were 
minted.
    Senator Dorgan. So about two-thirds of the Golden Dollar 
were minted, right? The dollar coin are 1.5 billion, Susan B. 
Anthony represents about two-thirds of that?
    Ms. Fore. Yes, and the Susan B. Anthonys tend to be located 
in certain geographic areas in the United States, so they have 
concentrations.
    Senator Dorgan. How long has it been since you have 
received a Susan B. Anthony dollar in change?
    Ms. Fore. I am a Postal Service customer, so I am one of 
the lucky ones who has received Golden Dollars and Susan B. 
Anthonys.
    Senator Dorgan. But outside of the Postal Service?
    Ms. Fore. Maybe 5 or 10 years.
    Senator Dorgan. And that describes the fact that the dollar 
coin is not in great use and the Susan B. Anthony was largely 
described as a failure by everybody. Would most all of you 
agree the Susan B. Anthony was a failure?
    Mr. Benfield. Although technically, of all the dollar coins 
ever made by the United States Mint, the Susan B. Anthony was 
the most successful. It is far more successful than the 
Eisenhower dollar.
    Senator Dorgan. Mr. Benfield, you just have trouble with 
the word ``failure,'' do you not?
    But I think almost everyone believes that the reason we 
went to the Golden Dollar and tried to develop a new coin was 
the Susan B. Anthony coin was not working.
    Mr. Benfield. That is true.
    Senator Dorgan. It was not in circulation. It was too close 
to the size of a quarter, it looked like a quarter, and people 
did not use it. Am I wrong about that?
    Ms. Fore. That is correct.
    Senator Dorgan. All right. And if that is the case and we 
have 900 million of them having been minted somewhere out there 
in circulation and Ms. Roseman has them somewhere deep in some 
darkened vault commingled with Susan B. Anthonys and she's 
never ordered equipment to try to separate them if some 
business and bank wants them separated, then how do you create 
a success of this if Mr. Benfield says, this is a great thing 
for some businesses who want these coins, but you actually 
cannot get these coins in the way you want them? When you order 
Golden Dollars, you do not want to get from the Federal Reserve 
Board gunny sacks full of money that has some Susan B. 
Anthonys, some Golden Dollars. So----
    Mr. Benfield. As recently as the past year, though, when 
there were lots of Golden Dollars--Cross Sinclair is a cash 
manager for the NT and New York City Transit, and they, by the 
way, pay out four million per month, so they are a huge user. 
Occasionally, their armored carrier would call up, and you just 
could see the wheels turning. They had these Susan B. Anthonys 
sitting back gathering dust forever. Wow. Here is the 
opportunity to get rid of these guys after 20 years.
    They would say, ``Cross, we do not have any dollar coins 
handy right now, but would you mind taking some all Susan Bs?'' 
It is New York. He does not care. ``Sure, I will take them for 
you.'' So he was one of the chief minglers, if you will, in the 
country. The Fed and the armored carriers were still shoveling 
out fewer Susan B. As a matter of fact, within the past 6 
months, he got 500,000 pure Susan B's in rotting cotton bags 
like this, covered with rat feces.
    Senator Dorgan. From where?
    Mr. Benfield. From CDC. That is a nickname of a huge 
armored carrier in the New York City area. And he says, ``I 
have not asked my employees to touch those coins.''
    Senator Dorgan. Would an armored carrier have kept them in 
inventory? They would not have done that, would they?
    Mr. Benfield. The armored carrier, understand----
    Senator Dorgan. I mean, a carrier transports.
    Mr. Benfield. The armored carrier manages a coin terminal--
--
    Senator Dorgan. Oh, I see.
    Mr. Benfield [continuing]. For the Federal Reserve. So that 
was Fed coins.
    Senator Dorgan. Director Fore, was the decision early on 
the Golden Dollar to begin an exclusive marketing arrangement 
through Wal-Mart a mistake?
    Ms. Fore. I do not think it was a mistake. Since I was not 
in this position at that time, maybe I could turn to David 
Pickens, who was.
    Senator Dorgan. Mr. Pickens?
    Mr. Pickens. The Mint believes that it was not a mistake. 
The intent then was when you are introducing a new product to 
get it out quickly, and about $96 million in Sacagawea dollars 
were distributed through the Wal-Mart arrangement. We felt it 
got them out weeks ahead of when they may have been available 
through the Federal Reserve.
    Senator Dorgan. I am going to submit a few questions to you 
in writing on that subject.
    Let me ask the question of Director Fore, have you 
considered bringing the Susan B. Anthony coin back in and doing 
as Mr. Benfield suggests, melting them down and making some 
money, so that you have only one dollar coin left in 
circulation?
    Ms. Fore. Yes.
    Senator Dorgan. Have you studied that issue?
    Ms. Fore. We have, and we are working on it now as there 
are several options for how to do this. We have to separate 
them. We have to figure out where we are going to place them. 
Working with the Federal Reserve Bank, we would try to see what 
the options were and come up with something that might be a 
viable alternative.
    Senator Dorgan. Do you have a time on that analysis? Are 
you active in that study now and does that study include, if 
you decide not to pull the Susan B. Anthony out of circulation, 
to see if we can find a way to require the Fed to actually 
segregate those coins for distribution purposes?
    Ms. Fore. We certainly could look at all of that. Perhaps 
we could submit to you the questions that we would be looking 
into and see if you had any supplementals.
    Mr. Benfield. I know that you cannot back the Susan B's 
easily from a final user all the way back through the system. 
That is difficult. But a lot of vendors, car wash operators, 
cash retailers like the ones I have mentioned, when they get 
dollar coins, the first thing they do is they gather their 
family around. They throw them out on the table and they do all 
the sorting. They only use Golden Dollars. They put all the 
Susan B's back in a bag, take it back, deposit it to the bank, 
which then goes back to the armored carrier, and I have got a 
sneaking suspicion that the armored carrier throws them back 
into a big bin with other Golden Dollars, they rewrap them, and 
they send them right back with the next shipment back to that 
retailer again.
    So there is separation going on every day, if there could 
be a way that they could manage the separation exercise that is 
being done by private citizens.
    Senator Dorgan. Two questions. The minting of these Golden 
Dollars, the Sacagawea Golden Dollar, is at 10 million coins 
this year, is that correct?
    Ms. Fore. Right now, we are at 12 million. We will probably 
move above 13 million.
    Senator Dorgan. All right. With a coin that has had 1.5 
billion produced, you have reduced production levels--this 10, 
12, 14 million production level is not a robust level to 
increase circulation, is it?
    Ms. Fore. No. As you mentioned earlier, we have quite a few 
Golden Dollars in inventory, about 300 million. So we would 
first hope to run down those inventories. So if any orders come 
in, we are ready.
    Senator Dorgan. Director Fore, you also said in your 
testimony that it is up to the public how many they use, how 
often they use it, but it really cannot be up to the public if 
they cannot find them, would you not agree with that?
    Ms. Fore. Yes. The public has to be very proactive to get a 
Golden Dollar. They have to ask for it.
    Senator Dorgan. I am only one person, but if I had the 
opportunity to get a Golden Dollar in change today and use it 
later in the day, I would enjoy that opportunity and do it 
gladly, but I know that will not happen today. So when you say 
it is up to the public, it cannot be up to the public if this 
is not in wide circulation, and that relates to the structural 
issues that have been raised here today, going back to both the 
Fed--I think you have a quantity of coinage that does not 
readily lend itself to satisfying the order from a bank 
responding to a customer, is that not the case?
    Ms. Roseman. Well, if you look at what our experience has 
been to date, for the first 2 years, essentially, the Reserve 
Banks only paid out Golden Dollars, and even going into this 
year, where a depository institution explicitly asked for 
Golden Dollars, we will give them Golden Dollars as long as we 
still have any of them segregated in our inventory.
    Senator Dorgan. In rolls?
    Ms. Roseman. In bags.
    Senator Dorgan. In bags, 2,000?
    Ms. Roseman. Yes.
    Senator Dorgan. Okay.
    Ms. Roseman. And so I am not sure how much that issue has 
really affected the overall demand, because for the first 2 
years, we have only paid Golden Dollars. This year, if they 
ask, we will provide Golden Dollars and the demand has still, 
as far as our net payments, gone down dramatically since the 
initial introduction.
    Mr. Benfield. There is kind of a running joke among some 
coin insiders on how to deal with the Susan B. Anthony and one 
of them is to just simply announce that you are going to melt 
them down, melt down what is already readily identifiable, put 
out a press release and say, let us destroy all those Susan B. 
Anthonys, and let the public go hoard them as collectibles, and 
they will probably do half the job for us.
    Senator Dorgan. Mr. Benfield, we will consider that.
    Here is what I would like to do. A vote has just begun in 
the Senate and I will have to go vote at some point here.
    First of all, I would like to have the Mint provide for me 
a report, if you would within the next 30 days or so, prior to 
our work on our appropriations bill in which we will consider 
appropriations for the Mint, I would like you to provide for me 
a report on the future strategy with respect to the Sacagawea 
Golden Dollar coin. What is your marketing strategy, 
promotional strategy, how will you work with the various 
entities in our country to find a way to make this dollar more 
widely accepted and used? If you would submit that to me within 
30 days, that would be very helpful, and we will be able to 
consider that.
    I would also like, if I could from the Federal Reserve 
Board, to get a report with respect to your coinage inventory, 
the kind of orders you are getting from banks, and how you are 
satisfying those orders and whether there is an issue of 
commingling. You heard Mr. Benfield say, and I have in my 
notes, as well, anecdotal evidence from people who say, ``I 
have to order a lot of dollar coins in order to get the 
sufficient stock of Sacagawea Golden Dollars that I need 
because I get intermingled coins with Susan B. Anthony and 
Sacagawea Golden Dollar coins.''
    Well, that is not a way of satisfying the demand, and I 
think in order for this coin to be successful--and I want it to 
be successful--we are going to have to make it easy for people 
to get them, easy for business, easy for banks. Then I firmly 
believe that once this coin is in wide circulation, people will 
enjoy the opportunity to handle them and use them. It, as Mr. 
Benfield says, can replace four quarters and can be used in 
vending machines. We do need some support and some work in 
those areas, as well, including, as I understand it, the 
Washington, D.C. subway system, and even some Federal agencies, 
which I am going to work on as a result of this hearing.
    Amy Mossett, you have heard all of this. What is your 
impression of what you have heard this morning?
    Ms. Mossett. I think it is hopeful that the Sacagawea 
dollar will continue to be in circulation and I think, in 
listening to everything here, it is apparent to me that there 
are things that can be done to put this dollar into 
circulation. Back in Newtown, North Dakota, with our Tribal 
Business Council, we are presenting a resolution asking the 
tribe to encourage all of our tribal businesses to use the 
dollar coin. I was surprised to find out, for example, that our 
casino does not use the dollar coin. But I think the issue of 
the ease of obtaining the coin is a main concern, and if it is 
made easier for retailers and businesses to obtain the coin, 
then I think we will see more in circulation.
    I think one of the things as far as the public holding on 
to the dollar coin, there certainly has to be a reason for 
that, and it is probably because they do not know what the 
future of the dollar coin is and so they are hanging onto the 
coins that they do get instead of spending them.
    Senator Dorgan. Thank you.
    Let me ask one additional question. The 500-plus million 
coins that are not now in circulation, part of those coins are 
coins intermingled with Susan B. Anthonys. Part of them are at 
the Fed in bags with only Sacagawea Golden Dollars in the bags. 
And then part of them are still at the Mint, is that right? 
What quantities----
    Ms. Fore. Correct, and ours are only Golden Dollars.
    Senator Dorgan. What quantities remain at the Mint?
    Ms. Fore. About 300 million.
    Senator Dorgan. All right. And as a result of that, you 
have decreased production to roughly 12 million coins?
    Ms. Fore. That is right.
    Senator Dorgan. And that is not an ``I give up'' strategy?
    Ms. Fore. That is not a----
    Senator Dorgan. An ``I give up'' strategy?
    Ms. Fore. Oh, absolutely not.
    Senator Dorgan. In light of that, then, if you will provide 
me with the report so that we can evaluate where do we go from 
here. I want all of us to think through this.
    This coin was developed with great fanfare at substantial 
cost and with great hope. My own view, despite Mr. Benfield's 
irrepressible optimism, my own view is that it has failed at 
this point and I want it to succeed. I believe you all do, as 
well.
    So what I hope will come from this hearing is a kind of a 
wake-up call to all of us to say this coin exists. We want this 
coin to be part of our coinage in this country and widely 
circulated and widely used. I especially want it to become a 
significant part of our coinage and circulation leading up to 
the bicentennial of the wonderful Lewis and Clark expedition 
and I hope this hearing can be a catalyst to rivet all of the 
attention that needs to be paid to this issue.
    I want to insert in the record a statement from Senator 
Campbell, who was unable to be with us this morning.
    [The statement follows:]

         Prepared Statement of Senator Ben Nighthorse Campbell

    Thank you Chairman Dorgan. Good morning, I too would like to 
welcome our witnesses here today.
    Today we will hear from all parties involved in the circulation of 
the Sacajawea $1 coin.
    Historically, we haven't had much success with the dollar coins, 
the Susan B. Anthony or the 1969 Eisenhower dollar. Collecting a coin 
is one thing, spending it every day is another. When the Sacajawea coin 
was released in 2000, the common expression was that ``everybody wants 
one, but nobody wants two.''
    According to the March 29, 2002 Mint report to Congress, the Mint 
spent $62.3 million to promote the dollar coin and that amount was just 
to persuade Wal-Mart, Coin Star, SFX entertainment, International House 
of Pancakes and others to use the dollar coin in their establishments 
or facilities.
    I would presume that a great deal of this amount was for awareness. 
What we are looking for now is not awareness, but answers on how to get 
the coin to co-circulate with the $1 note and to determine what 
percentage of the circulating market will determine if the coin is 
successful.
    I look forward to your testimonies to address these issues and 
possibly some type of resolution to the problems.
    Thank you.

    [Clerk's Note.--We have received a written statement that 
will be included in the record.]

      Prepared Statement of the International Carwash Association

The International Carwash Association and the Car Wash Industry
    Founded close to 50 years ago, the International Carwash 
Association (ICA) represents over 3,000 members who own and operate 
over 18,000 car wash facilities and detail shops across the country and 
around the world. Over 90 percent of ICA member car wash facilities are 
family-owned and operated small businesses. ICA also represents over 
400 suppliers, manufacturers, and distributors to the car care 
industry.
    The International Carwash Association serves as the official voice 
of the car wash industry, providing marketing, market research, public 
relations, and advertising support programs, car wash safety training 
programs, and special bulletins for its members. ICA also serves as the 
industry liaison with automobile manufacturers, publishes a monthly 
newsletter and provides access to an annual Membership Directory & 
Buyer's Guide, as well as coordinating the ICA Annual Convention & 
Exposition and management seminars held throughout the world.
    As a Nation of over 135 million cars, the American car care 
industry has expanded into a multi-billion dollar annual industry. In 
the United States, the car care industry employs an estimated 500,000 
people. There are an estimated 75,000 car wash operations in the United 
States; of these, 30,000 are coin-operated, self-service facilities. 
One community car wash can serve more than 100,000 customers each year.
The Dollar Coin and Customer Service at Car Wash Facilities
    The car care industry has been an ardent supporter of the new 
Golden Dollar coin since its inception. Of the various segments of the 
professional car care industry, the coin-operated, self-service car 
washes and in-bay automatic car washes, have the ability to 
automatically receive and dispense the new Golden Dollar coin.
    The car care industry was quick to support the introduction of a 
new dollar coin because of its distinctive look. The golden appearance 
of the new dollar coin makes it easily distinguishable from the 
quarter. That single factor alone was responsible for car wash 
operators to begin retrofitting their facilities to accept the Golden 
Dollar. Previously the Susan B. Anthony (SBA) coin had not been used in 
our industry because it was easily confused with the quarter. The car 
washes most readily suited to the dollar coin are those that do not 
employ customer service attendants. As a result, car wash operators 
were concerned, and this concern has since been borne out, that the 
confusion between the SBA and the quarter would create customer 
dissatisfaction. This is made more problematic when the customer 
interaction is limited to coin-dispensing equipment, with no 
opportunity for operators or attendants to help the customer 
distinguish the SBA from the quarter. Complaints to our customer 
service telephone lines and vandalism to our coin changing equipment 
provide clear evidence of the problem with the SBA.
    The migration from accepting a single coin (the quarter) to 
accepting multiple denominations of coins is both time-consuming and 
expensive. The equipment required to accept multiple coin denominations 
requires a significant investment to purchase and install. Petty cash 
reserves must be more than quadrupled. Nonetheless, the coin-operated 
car washes began this conversion process based upon the Mint's 
marketing campaign for the new Golden Dollar coin and a belief that we 
would not be faced with the unpleasant customer service issues created 
by the SBA.
he Need for an Uncontaminated and Bulk Supply of Golden Dollars
    The conversion process at car wash facilities was progressing with 
strong commitment until the concern with the SBA turned into a reality. 
Orders for the Golden Dollar became contaminated with inclusion of the 
SBA and immediately our customers became angry because they believed 
they were being ``shortchanged'' by our change machines. It appears 
that the Mint was successful in educating the public to believe that 
the dollar coin was golden in color, not silver, but the Mint has 
failed to ensure the availability of Golden Dollars, free of SBA 
contamination. It has also failed to support the needs of businesses 
relying on the dollar coin for commerce.
    Today, faced with contaminated Golden Dollar orders, car wash 
operators across the country have stopped their conversion process. 
These, as well as other coin-operated businesses that order and 
dispense the dollar coin as an essential component to their business 
models, can not be expected to make additional investments in 
conversions until the Mint gives a clear signal that the new Golden 
Dollar will be the only dollar coin received when Golden Dollar-only 
orders are placed at our financial institutions. For those of us 
relying on coin-operated equipment to provide our business services, 
this decision is not an easy one. Do we abandon the financial 
commitment we have made to the Golden Dollar's acceptance and return to 
dispensing and accepting only quarters at our self-service facilities? 
How do we respond to the dissatisfaction expressed by our customers who 
have accepted the Golden Dollar and have been enjoying the ability to 
use a single coin to purchase services, but who will have to return to 
using four coins for the same services? Certainly an unacceptable 
option, one contrary to best business practices, would be to dispense 
random combinations of SBA and Golden Dollar coins, accepting customer 
dissatisfaction and their confusion between the SBA and the quarter.
    The contaminated supply of Golden Dollar coins is causing more than 
just customer relations nightmares for our service sector. When an 
operator receives dollar coins from a local bank, they are received 
from the armored carrier wrapped in rolls, not loose in bulk. These 
business people are primarily owner/operator small businesses whose 
time is already at a premium. Under the current delivery system, they 
must take the time to unwrap the coin rolls, manually separate the SBA 
coins (because the SBA has the same diameter as the Golden Dollar, 
automated sorting equipment will not work), and make another trip to 
the bank to buy more Golden Dollar coins to meet their petty cash 
requirements. This process is repeated as much as four to five times 
before, for example, 2,000 Golden Dollars are secured from an initial 
$2,000 purchase. It is not at all unusual for 50 percent, or as much as 
85 percent, of the coinage to be the SBA. A car wash operator may 
purchase, and manually process, as many as 5,000 dollar coins just to 
get 1,000 Golden Dollars. And this process is repeated every week to 
meet our petty cash demands.
    One car wash operator in Denver planning conversions at 14 car wash 
facilities has stopped after completing 9 conversions. If the 
inconvenience and burden on a small business resulting from SBA-
commingling with Golden Dollar deliveries were not enough, calls on his 
customer service line have certainly discouraged him from making 
conversions at the remainder of his locations.
    A survey of nine operators who have converted 24 coin-operated, 
self-service car washes to accept the new Golden Dollar indicates that 
35,000 Golden Dollars are put into circulation each week! These are not 
the Golden Dollars dispensed, some of which are used at the car wash 
facility; these are the Golden Dollars leaving our facilities and being 
used elsewhere in our local economies. That amounts to 1,820,000 Golden 
Dollars being placed into circulation each year by 9 small businesses 
alone. Based on the Mint's estimate of a profit of $0.82 per Golden 
Dollar sold, that represents revenues to the national treasury of 
$1,492,000. Imagine for a moment that the more than 30,000 coin-
operated, self-service car washes, with reliable sources of the Golden 
Dollar, would convert to the new Golden Dollar. One segment of the car 
wash industry could circulate 2,275,000,000 Golden Dollars each year! 
That's one segment of one industry! That represents the potential of 
$1.8 billion in revenues to the national treasury.
A Commitment to the Golden Dollar with a Golden Dollar-Only Policy
    Car wash operators are surely not alone in their struggle with the 
barriers to conversion created by the contaminated supply of the Golden 
Dollar. The customer dissatisfaction and business costs related to the 
current dollar coin delivery system are both unnecessary and easily 
solved. To help the coin-operated, self-service business sector help 
make the Golden Dollar a real success, the Mint must respond to the 
contamination issue and the needs of those businesses that both rely on 
the dollar coin and are in the best position to enhance its 
circulation. The Mint's efforts to promote the Golden Dollar must now 
become more attentive to the practical, business needs of the coin-
operated, self-service sector of our economy that relies on Golden 
Dollar-only dispensing.
    Orders for dollar coins placed at local financial institutions must 
be delivered without contamination by the SBA and in bulk format. To 
further avoid confusion in the general public, the SBA should be taken 
out of circulation for purposes of commerce. The SBA should become the 
collector's item, not the Golden Dollar. To this end, the SBA should 
not be delivered by the Federal Reserve to local financial 
institutions.
    Golden Dollar-only deliveries, in bulk, based on Golden Dollar-only 
requests at local financial institutions where small businesses bank, 
will result in the use of the Golden Dollar not only at our car wash 
facilities and other coin-operated, self-service facilities, but also 
at retail businesses throughout our communities. As part of one 
industry sector with great potential to help place the Golden Dollar 
into circulation and promote public use and acceptance, car wash 
operators will do their part, but reliable, business-friendly sources 
of Golden Dollars will be essential to our success and the success of 
the dollar coin.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Dorgan. I want to thank all of you for being here. 
Amy Mossett, thank you not just for coming today but for 
keeping the spirit of Sacagawea alive as you travel around the 
country. Director Fore and Mr. Pickens, thank you. Ms. Roseman, 
thank you for representing the Federal Reserve Board. And Mr. 
Benfield, thank you for being an optimist.
    [The following questions were not asked at the hearing, but 
were submitted to the Agencies for response subsequent to the 
hearing:]

             Questions Submitted to Henrietta Holsman Fore

             Questions Submitted by Senator Byron L. Dorgan

    Question. During the recent hearing before the Senate 
Appropriations Subcommittee on Treasury and General Government, the 
United States Mint Director testified that the United States Mint and 
the Federal Reserve are working together to increase the circulation of 
the Golden Dollar by defining options and resolving issues in several 
key areas that are barriers to increasing circulation. These key areas 
and related matters are discussed in more detail in the United States 
Mint's responses to the following Questions for the Record.
    After receiving Congressional approval, the United States Mint 
proposes to focus on eliminating four of the five barriers to 
increasing the circulation of the Golden Dollar during the next 18-24 
months. We will work with our partners, the Federal Reserve Banks, 
armored carriers, financial institutions, and commercial users to 
ensure that businesses can obtain Golden Dollars.
    As we proceed, we are mindful of the recommendation by the House 
Appropriations Subcommittee on Treasury, Postal Service, and General 
Government that the United States Mint make all applicable 
modifications and improvements to its Golden Dollar marketing plan 
based on the results of the current General Accounting Office (GAO) 
studies and on all other pertinent economic and policy factors prior to 
the plan's implementation.
    Why were these obstacles not considered and addressed before the 
initial launch of the Golden Dollar?
    Answer. Many of the obstacles were considered and discussed at the 
Financial Institutions Advisory Council (FIAC). The United States Mint 
and Federal Reserve formed FIAC as a forum for financial trade 
associations concerning the Golden Dollar. Members included the 
American Bankers Association, America's Community Bankers, Independent 
Community Bankers of America, and the National Association of Federal 
Credit Unions. The Federal Reserve's Cash/Fiscal Product Office was 
also represented. Although this group identified some issues, plans 
were not made to address them all.
    While the FIAC considered the issues associated with wrapping and 
ordering options, its efforts did not go far enough to totally 
eliminate these obstacles. The three remaining barriers (commingling, 
extra fees and co-circulation) were not considered or specifically 
identified as barriers limiting circulation. We now believe that the 
following barriers may contribute to limited circulation of the Golden 
Dollar:
  --Commingling.--The Federal Reserve Banks and armored carriers 
        currently receive commingled Golden Dollars and Susan B. 
        Anthony dollars from depository institutions. Retailers reject 
        using the Susan B. Anthony dollars because they too closely 
        resemble the quarter. They are reluctant, therefore, to order 
        dollar coins if they cannot be guaranteed Golden Dollars. 
        Transit authorities and the Postal Service however, have 
        accepted commingled dollar coins. We did not anticipate 
        commingling as being a problem because the FIAC believed that 
        collectors would have pulled the Susan B. Anthony dollars from 
        circulation once they knew that the coin was no longer in 
        production.
  --Bags versus rolls (Wrapping capacity).--Different industries want 
        the coins packaged in formats that satisfy their business 
        needs. Retail commerce will usually request wrapped coins. 
        Armored carriers told us that they were reluctant to invest in 
        modern, high-speed rolling equipment without assurance of a 
        return on their investment. We could not guarantee sustained 
        levels of circulation for the coin in every geographic region. 
        Therefore, the armored carriers continued to use older 
        technology to wrap the dollar coin. To meet the initial peak 
        demand when the United States Mint first introduced the Golden 
        Dollar, it contracted with a private vendor to supplement the 
        rolling capacity of the armored carriers. Given current 
        circulation of the dollar coin, the armored carriers can meet 
        demand with existing equipment.
  --Extra fees.--Financial institutions and retailers are charged fees 
        by carriers for wrapping and transporting coin. We expected 
        that this barrier would not present a problem because it is the 
        industry practice to pay wrapping fees for coin. However, our 
        research and advisory groups did not anticipate that the market 
        would simply decline to pay this fee because they had an 
        enormously powerful alternative in the one-dollar currency 
        note.
  --Ordering options.--Some commercial banks' cash ordering systems do 
        not provide for the specification of dollar coins versus dollar 
        bills and, by default, bills are generally ordered. Between the 
        United States Mint and the Federal Reserve System, we were 
        unaware of the deficiencies in some of the cash ordering 
        systems when we launched the coin.
  --Co-Circulation with Dollar Bill.--Historically, research 
        consistently indicates that a dollar coin would have limited 
        success when co-circulated with the dollar bill in the majority 
        of market segments. Because the Treasury Department is 
        committed to supporting both the dollar note and coin, the 
        United States Mint and the Federal Reserve System will work 
        under this longstanding policy to find ways to increase the 
        Golden Dollar's sustained use in commerce.
    Question. Does the United States Mint have adequate resources and 
staff to direct a marketing effort to increase circulation of the 
Golden Dollar?
    Answer. The United States Mint will assess any additional resource 
requirements based on the approved marketing plan submitted for 
Congressional approval. However, as advised by Chairman Istook in his 
May 20, 2002, letter, the United States Mint is waiting to review the 
GAO study on the Golden Dollar that is scheduled to be completed in 
late summer. Upon receipt, the United States Mint will review, and if 
appropriate, revise its marketing plans for fiscal year 2003 to 
consider GAO's recommendations and all other pertinent economic and 
policy factors before resubmitting them to Congress.
    Question. What would be the pros and cons to contracting this 
effort to a private firm that specializes in marketing?
    Answer. The biggest benefit to be derived from contracting this 
effort to a private firm is the opportunity to draw upon the expertise 
of a company with extensive experience in the field of marketing. Of 
course, there is an expense associated with hiring this expertise from 
the private sector.
    Question. During the initial launch of the Golden Dollar, Wal-Mart 
was a major participant. That partnership resulted in the distribution 
of 94.3 million Golden Dollars. What is their role today? What has 
changed and why?
    Answer. Once the original agreement was fulfilled, Wal-Mart did not 
express any interest in continuing to drive the use the new dollar coin 
in its operations. Specifically, given the difficulty in obtaining the 
coin from local financial institutions, Wal-Mart felt that there was 
insufficient customer demand to warrant the continued use of the coin 
in its daily commerce. In addition, the Golden Dollars were being 
privately shipped to Wal-Mart, outside of normal distribution channels, 
during the promotion period. This process was too costly and too 
cumbersome to be sustained in normal business. It is more expensive for 
Wal-Mart to use Golden Dollar coins than dollar notes due to shipping 
expenses and extra wrapping fees charged by carriers.
    Question. What were the goals of the initial marketing campaign? 
How were they met? What are the goals of the new marketing campaign?
    Answer. In 2000, the United States Mint created and executed a 
marketing campaign for the Golden Dollar Program that had several key 
objectives:
  --Generate positive awareness of the program among consumers.
  --Promote long-term acceptance of the coin by the commercial sector 
        and the public.
  --Support changes in consumer behavior and stimulate usage of the 
        Golden Dollar in commerce.
    This campaign yielded encouraging results for Golden Dollar 
awareness and acceptance. In July 2000, 6 months after launching the 
new dollar coin, 91 percent of Americans polled were aware of the 
Golden Dollar.\1\ However only 37 percent said they have actually used 
the coin to make a purchase.\2\
---------------------------------------------------------------------------
    \1\ Fleishman-Hillard Consumer Awareness, Acceptance and Potential 
Use Tracking Survey--July 2000.
    \2\ Coinstar National Currency Poll dated January 8, 2002.
---------------------------------------------------------------------------
    The United States Mint has proposed a 2-year plan that, if approved 
by Congress, would focus its efforts and investments on eliminating 
four of the distribution barriers while proactively participating in 
selected programs to improve circulation of the Golden Dollar coin. We 
tentatively plan to focus on usage in military, federal, state, and 
local government agencies, and large urban transportation districts, as 
well as in selected private sector activities and at retail 
establishments such as NASCAR events and retail businesses located on 
the Lewis and Clark expedition route.
    Question. Can Public Service Announcements be used to aid the 
circulation of the Golden Dollar?
    Answer. While public service announcements can create and maintain 
public awareness, studies have shown that they do little to influence 
or change public behavior. To increase the circulation of Golden 
Dollars, the United States Mint's marketing campaigns have tried to 
educate consumers and help change their behavior.
    Because the Mint's studies show that public awareness of the Golden 
Dollar is already high, we do not believe that public service 
announcements are the most effective use of resources at this time. We 
will continue to monitor this and reevaluate this decision if events 
warrant.
    Question. What were the needs of the initial promotion partners in 
terms of packaging (rolled vs. bags), availability, commingling, 
storage and delivery expenses? How would the United States Mint rate 
itself in meeting these needs?
    Answer. The initial Golden Dollar promotions were in support of the 
Wal-Mart and the Small Bank Programs. Our partners required the 
following for their promotional efforts:
  --All coins were to be in rolls.
  --All coins were readily available to meet the promotional 
        requirements.
  --There were no commingling issues during the promotional efforts 
        because Golden Dollars were distributed directly from the 
        United States Mint.
  --There were no storage issues because each promotional partner 
        received limited quantities as required for each promotion.
  --The United States Mint paid for all distribution and promotional 
        expenses.
    We performed well in meeting the needs of our original promotional 
partners. Because the Mint's efforts are to promote a successful dollar 
coin that circulates through traditional distribution channels, we do 
not believe that direct shipment programs are the most effective use of 
resources at this time. We will continue to monitor this and reevaluate 
this decision if events warrant.
    Question. It is my understanding that the former United States Mint 
Director went around to all federal agencies requesting their adoption 
of the Golden Dollar in their service centers and restaurants. All, 
including the Senate, said no thanks. According to your recently 
submitted marketing report, encouraging the use of the Golden Dollar 
through government agencies is one of your ideas for increasing 
circulation. How will you approach this differently than the past 
Director?
    Answer. The former Director of the United States Mint did visit 
many federal Government agencies to encourage their use of the Golden 
Dollar. These meetings did not create sufficient interest in using the 
coin. As you requested at the hearing, the United States Mint would 
welcome your support and the help of Congress in requesting that 
federal agencies and the military use the Golden Dollar.
    Question. What can be done to remove the Susan B. Anthony dollar 
coin from circulation?
    Answer. To eliminate commingling of dollar coins the United States 
Mint would engage in a two-step process. The first step would be to 
remove Susan B. Anthony dollars from the existing inventories of dollar 
coins. The second is to take the necessary steps to ensure that 
inventories are replenished only with Golden Dollars.
Remove Susan B. Anthony dollars from circulation
    The technology exists to rapidly sort items by color, density, 
temperature, heat capacity, optical refractive index, or 
electromagnetic field intensity. The United States Mint could acquire 
the necessary sorting capacity to automatically separate the Susan B. 
Anthony dollars from the Golden Dollars.
    If Congress adopts this program, sorting could take place with 
privately contracted companies, armored carrier coin depots, or non-
profit companies. This sorting program is expected to run for 2 years, 
however, this time frame could be reduced or extended based on the 
success of the program. The percentage of Susan B. Anthony coins 
removed from circulation depends on the demand for the dollar coin and 
the velocity of payments and receipts between the Federal Reserve and 
the depository institutions. Our current projections indicate that 
after 2 years, approximately 90 percent of the dollar coins in 
circulation will be Golden Dollars. The cost associated with program is 
being analyzed and will be documented in the United States Mint's 
Golden Dollar report to Congress.
    As Susan B. Anthony coins are removed from the inventories, the 
United States Mint would replenish dollar coin supplies with Golden 
Dollars as the Federal Reserve Banks order more coin. Susan B. Anthony 
coins returned to the United States Mint as ``uncurrent coin'' would be 
melted and reworked into other denomination coinage. The United States 
Mint will buy back the Susan B. Anthony coins from the Federal Reserve 
Banks at face value. However, as I mentioned in my testimony, we are 
mindful of the fact that attempts to remove Anthony dollars from 
circulation could be costly. Demonetizing Anthony dollars could cost in 
the hundreds of millions of dollars in reverse seigniorage. Just the 
process of sorting Anthony dollars and storing them could be expensive.
    Sorting and melting Susan B. Anthony coins is likely to increase 
collector demand and therefore increase the likelihood that the public 
will remove the remaining coins from circulation. This would have the 
effect of removing additional Susan B. Anthony coins from circulation 
and further increase the ratio of Golden Dollars coins in commerce.
Issuing only Golden Dollars when dollar coins are ordered from the 
        Federal Reserve or their coin terminals
    The long-standing policy of the Federal Reserve is to pay re-
circulated coin first before using new coin to fill orders. However, 
the Federal Reserve Banks and their coin terminals have modified their 
standard coin distribution policy to support the Golden Dollar program. 
If Congress approves this plan, the Federal Reserve Banks will be able 
to continue this practice.
    Question. Does the Federal Reserve have the storage capacity to do 
so?
    Answer. According to the Federal Reserve Banks, if Congress 
approves the commingling plan referenced in the answer to the above 
question, the Susan B. Anthony coins could be melted and used for other 
coinage rather than stored in inventory.
    Question. What can the Federal Reserve do to ship/distribute more 
Golden Dollars and fewer Susan B's?
    Answer. As discussed in the answers above, sorting and exchanging 
circulating Susan B. Anthony dollars with Golden Dollars, while 
maintaining an inventory of strictly Golden Dollars for shipments to 
financial institutions, would significantly reduce if not eliminate, 
the commingling problem for those businesses whose banks are serviced 
by the Federal Reserve. In addition, the Federal Reserve System has 
temporarily modified its long-standing coin distribution policy and is 
currently shipping only Golden Dollars when filling orders to financial 
institutions. As referenced in our prior response, it will be able to 
continue this practice if Congress approves the plan to eliminate 
commingling.
    Question. I understand that retail businesses, particularly those 
in self-service, are not able to secure uncontaminated (a mix of 
Sakakawea and Susan B) supplies of the Golden Dollar. For example, in 
order to meet a weekly demand of $1,000 to $2,000 in Golden Dollars, 
one coin operated car wash owner reports having to make on average four 
trips to his local bank, manually separating out the Susan B. Anthony 
coin from the roll of dollar coins during each trip. On average, this 
operator will have to purchase $5,000 in dollar coins to secure $1,000 
in Golden Dollars. These same operators report that they have stopped 
making investments in their conversion of change equipment to accept 
the dollar coin until the contamination issue is solved. Of course, 
those operators who have made the commitment and invested in the 
conversions are incurring significant costs of doing business resulting 
from the contamination issue.
    Answer. As referenced in prior questions, if directed by Congress, 
we have a plan that would significantly reduce, if not eliminate, the 
commingling of the Susan B. Anthony dollar with the Golden Dollar. If 
Congress authorizes this process, bags and rolls of pure Golden Dollars 
will be more readily available to businesses.
    Question. What can the United States Mint do to help secure an 
uncontaminated supply of Golden Dollars for the self-service sector and 
coin-operated businesses?
    Answer. If directed by Congress, there is a plan to eliminate the 
commingling of the Susan B. Anthony dollar with the Golden Dollar. If 
Congress authorizes this process, bags and rolls of pure Golden Dollars 
will be more readily available to businesses.
    Question. Can financial institutions still order uncontaminated 
supplies of Golden Dollars directly from the United States Mint at the 
same cost as they pay the Fed?
    Answer. No. The United States Mint does not have the infrastructure 
to efficiently distribute circulating coins directly to financial 
institutions.
    Question. What role can the Fed play in securing an uncontaminated 
supply of Golden Dollars when it receives an order from a financial 
institution like a local bank or a small business?
    Answer. The plan to significantly reduce, if not eliminate, the 
commingling of Susan B. Anthony and Golden Dollars, if directed by 
Congress, will ensure a steady supply of Golden Dollars to those banks 
serviced by the Federal Reserve. In order for this plan to be 
successful, the Federal Reserve will need to order Golden Dollars from 
the United States Mint as demand dictates and distribute only Golden 
Dollars to its customers.
    Question. How can the Fed, working with the custodians who deliver 
orders to banks for the Golden Dollar, help create a reliable, 
uncontaminated supply of the Golden Dollar?
    Answer. This question has been answered in our responses to 
questions above.
    Question. What more can be done to encourage armored carriers like 
Brinks to invest in the equipment necessary to roll the Golden Dollar?
    Answer. Brinks and other armored carriers will develop and install 
adequate capacity to process and distribute the Golden Dollar coin if 
they are assured that the coin will circulate and be ordered 
consistently by the banks. In other words, the armored carriers have 
indicated that they will make an investment to increase their dollar 
coin processing capacity if they believe that they will get adequate 
business to offset their investment and make a reasonable profit. They 
currently are reluctant to invest capital in dollar rolling equipment 
because they do not believe there will be sufficient, sustained 
business to justify the expenditure. The coin depots have adequate 
capacity to handle current demand for dollar coins.
    Question. The Federal Reserve Bank states that within months, their 
inventories of Golden Dollars could be depleted. With approximately 250 
million Golden Dollars currently in their inventories, how is this 
likely?
    Answer. According to the Federal Reserve Banks, since it has re-
instituted its policy of filling all orders for dollar coins with only 
Golden Dollars, its remaining inventory of non-commingled Golden 
Dollars is expected to last no more than 2 to 3 months. The United 
States Mint will manufacture additional Golden Dollars as required to 
meet the demand of the Federal Reserve Banks.
                                 ______
                                 

         Questions Submitted by Senator Ben Nighthorse Campbell

    Question. Since the Golden Dollar coin is still not circulating to 
its maximum capacity, what plans and expenditures do you have in mind 
for the future?
    Answer. We will focus our efforts and investments on eliminating 
four of the distribution barriers while actively participating in 
selected programs to improve circulation of the Golden Dollar coin. We 
plan tentatively to focus on usage in military, federal, state, and 
local government agencies, and large urban transportation districts, as 
well as for selected private sector sustainable activities and at 
retail establishments.
    Question. The United States Mint spent $62.3 million to promote the 
Dollar coin, what exactly did we get in return for this vast 
expenditure?
    Answer. The United Sates Mint contracted with three firms to help 
educate the public about the Golden Dollar and raise awareness of its 
availability and utility. This effort included:
  --Fleishman-Hillard.--Spending $4 million during 2000-2001 for the 
        purpose of conducting market research, develop partnerships, 
        and handle advertising campaigns.
  --Fleishman-Hillard.--Spending $48.8 million during 1999-2001 for the 
        purpose of overseeing public relations and promotional efforts. 
        This included a $40 million advertising buy for the George 
        Washington advertising campaign.
  --Double Eagle.--Spending $8 million during 1999-2000 for the purpose 
        of developing and implementing a marketing and sales plan.
  --Marketbridge--(formerly Oxford).--Spending $1.5 million during 
        1998-2002 for the purpose of conducting early market analysis 
        and market research to determine the effectiveness of our 
        marketing efforts (surveys).
    As a result of all the Mint's efforts, and in no small part due to 
the success of the investments listed above, the Mint has returned over 
$1 billion to the General Fund from the seigniorage from the Golden 
Dollar since the inception of the program.
    Question. In the past, we haven't had good luck with our Dollar 
coins, what evidence do you have now that would indicate that the 
American people would like to have this coin and that they actually 
plan to use it in their daily business?
    Answer. While we understand that the Golden Dollar will never 
achieve the same velocity as our one-dollar currency note while co-
circulating, the coin has potential when being used for transit 
districts, small purchases, and vending. If we can overcome some of the 
major barriers preventing general circulation today, then the public 
may accept the coin in everyday use. The future report from the GAO may 
shed more light on this question.
                                 ______
                                 

                Questions Submitted by Senator Jack Reed

    Question. Director Fore, some believe that the Sakakawea Dollar 
coin has not been successful because people prefer to use the dollar 
bill. Others believe that the coin has not been circulated 
sufficiently. What steps does the United States Mint believe should be 
taken to foster greater use of the Sakakawea Dollar coin? Does the 
United States Mint believe that the paper dollar must be eliminated in 
order for the dollar coin to succeed?
    Answer. In order to foster greater use of the dollar coin, the 
United States Mint believes that it is necessary to eliminate the 
barriers and increase circulation in certain key markets as previously 
noted in our responses.
    Historically, research consistently indicates that a dollar coin 
would have limited success when co-circulated with the dollar bill in 
the majority of market segments. Because the Treasury Department is 
committed to supporting both the dollar note and coin, the United 
States Mint and the Federal Reserve System will work under this 
longstanding policy to find ways to increase the Golden Dollar's 
sustained use in commerce.
    Question. Director Fore, can you elaborate a bit on what further 
plans the United States Mint has to promote the dollar coin in the 
future?
    Answer. The United States Mint seeks to eliminate the barriers 
preventing the coin from being distributed widely. These barriers 
include the inability of businesses to receive rolls or bags as 
preferred, the commingling of Golden Dollar and Susan B. Anthony coins, 
the fees incurred in rolling and transporting coins, the inadequate 
commercial bank ordering systems which do not differentiate between 
coin and paper dollars, and the co-circulation of dollar coins and 
notes.
    The United States Mint's plan, if approved by Congress, would focus 
efforts and investments on eliminating the distribution barriers we can 
control while proactively participating in selected programs to improve 
circulation of the Golden Dollar. We tentatively plan to focus on usage 
in military, federal, state, and local government agencies, and large 
urban transportation districts, as well as selected private sector 
retail establishments and events.
    Question. Director Fore, what are your thoughts regarding 
assertions that the Federal Reserve Bank did not adequately distribute 
the dollar coin at the beginning of the rollout process, and therefore 
quite possibly contributed to a lack of interest in the coin?
    Answer. After the first 6 months, the Federal Reserve Banks were 
able to fill all orders for Golden Dollars as they were received. The 
Federal Reserve Banks did everything within their power to meet orders 
coming in from financial institutions. However, during the first 6 
months of the program, demand for the Golden Dollar exceeded supplies 
coming from the United States Mint. Many Federal Reserve Banks were 
required to implement an allocation program in order to achieve an 
equitable distribution of Golden Dollars from their limited inventory.
    In addition, the United States Mint's decision to bypass the 
banking industry and distribute coins directly to Wal-Mart stores may 
well have contributed to the lack of enthusiasm on the part of the 
banks to embrace the Golden Dollar.
    The United States Mint now is committed to sustainable, long-term, 
cost effective distribution approaches. Thus, working with the banking 
industry and the Federal Reserve System is essential to our new 
approaches.
                                 ______
                                 

                Questions Submitted to Louise L. Roseman

             Questions Submitted by Senator Byron L. Dorgan

    Question. What can be done to remove the Susan B. Anthony dollar 
coin from circulation?
    Does the Federal Reserve have the storage capacity to do so?
    What can the Federal Reserve do to ship/distribute more Golden 
Dollars and fewer Susan B's?
    Answer. The Susan B. Anthony (SBA) dollar coins could be removed 
from circulation with a program in which the Mint reacquires SBAs that 
have been placed into circulation. The premise of such a program is 
that the public's total demand for dollar coins would increase if 
unmixed Golden Dollars were available rather than commingled SBAs and 
Golden Dollars. In general, an evaluation of such a program would need 
to consider the seigniorage that would be gained from greater 
circulation of Golden Dollars in relation to the operational and other 
costs the program would incur. Further, an evaluation would need to 
consider the potential for savings to society from an overall increase 
in the use of dollar coins relative to bank notes.
    The Federal Reserve's role in coin distribution is generally to 
hold and distribute coins to meet the needs of the public. The Reserve 
Banks perform this function by providing coin to depository 
institutions, which, in turn, meet the needs of their customers. As a 
result, if a program to remove SBAs from circulation were implemented, 
the Reserve Banks would no longer have a reason to hold these non-
circulating coins in their vaults.\1\
---------------------------------------------------------------------------
    \1\ All circulating coins, regardless of design, are legal tender 
and satisfy the need for coins used in transactions. The Reserve Banks 
do not have the storage capacity to hold indefinitely non-circulating 
coins. As of May 31, 2002, Reserve Banks reported that coins filled 69 
percent of dedicated coin storage capacity in their vaults and coin 
terminals. Demand for coins is seasonal, and Reserve Bank coin 
inventories are low going into summer months. During the fall and 
winter of 2001-2002, more than 90 percent of Reserve Bank dedicated 
coin storage capacity was filled.
---------------------------------------------------------------------------
    There are several key issues that need to be addressed as part of 
an evaluation of a program to withdraw SBAs. First, there needs to be 
an effective technology to sort SBAs from Golden Dollars. Currently the 
Reserve Banks have no equipment that can mechanically distinguish 
between these coins. The Federal Reserve understands that the Mint is 
researching potential technologies that could sort commingled coins. 
Second, the program will, at a minimum, involve transportation and some 
storage of SBAs. For example, SBAs would need to be shipped from 
Reserve Bank facilities back to the Mint to be stored or destroyed.
    Third, there are different methods by which the Mint could pay the 
Federal Reserve for SBAs that it reacquires. One approach would be for 
the Mint to pay Reserve Banks directly for the SBAs that the Reserve 
Banks return to it. Under a second approach, which we understand that 
the Mint is suggesting, the Mint would pay Reserve Banks for SBAs that 
it acquires by exchanging new Golden Dollars for SBAs. Either approach 
would address the issue of removing the SBAs from the Reserve Banks' 
inventories and books once they are no longer used to meet the public's 
demand for dollar coins. The first approach, however, would enable the 
Reserve Banks to better manage their coin inventories by allowing them 
to order Golden Dollars only to the extent necessary to meet demand. An 
exchange of SBAs for Golden Dollars would not address the very large 
inventories that have built up in the Reserve Banks, unless demand for 
the dollar coin were to increase significantly due to the withdrawal of 
SBAs from circulation. It is not clear the extent to which withdrawal 
of SBAs from circulation would affect demand for dollar coins.
    Neither payment approach would pose a material economic cost to the 
government. In the first approach, all other things held constant, the 
Reserve Banks would invest the proceeds they receive from the Mint in 
government securities. The present value of the earnings stream on 
these securities would equal the value of payments made by the Mint for 
the SBAs, and would be returned to the Treasury over time as part of 
the Federal Reserve's excess earnings. Thus, the earnings on the 
securities in which the Mint proceeds are invested would offset the 
reverse seigniorage. In the second alternative, we understand that the 
Mint would not recognize reverse seigniorage on the SBAs returned to it 
and would not recognize seigniorage on the Golden Dollars used in the 
exchange.
    Overall, if the Congress authorizes the Mint to undertake and fund 
a program to withdraw SBAs, the Reserve Banks will cooperate fully. As 
part of the comprehensive program, the Reserve Banks would resume 
paying out only Golden Dollars as depository institutions order them.
    Question. I understand that retail businesses, particularly those 
in self-service, are not able to secure uncontaminated (a mix of 
Sakakawea and Susan B.) supplies of the Golden Dollar. For example, in 
order to meet a weekly demand of $1,000 to $2,000 in Golden Dollars, 
one coin operated car wash owner reports having to make on average four 
trips to his local bank, manually separating out the Susan B. Anthony 
coin from the roll of dollar coins during each trip. On average, this 
operator will have to purchase $5,000 in dollar coins to secure $1,000 
in Golden Dollars. The same operators report that they have stopped 
making investments in their conversion of change equipment to accept 
the dollar coin until the contamination issue is solved. Of course, 
those operators who have made the commitment and invested in the 
conversions are incurring significant costs of doing business resulting 
from the contamination issue.
    What role can the Fed play in securing an uncontaminated supply of 
Golden Dollars when it receives an order from a financial institution 
like a local bank or a small business?
    How can the Fed, working with the custodians who deliver orders to 
banks for the Golden Dollar, help create a reliable, uncontaminated 
supply of the Golden Dollar?
    Answer. As explained in the answer to the first question, Reserve 
Banks could resume issuing only Golden Dollar coins to depository 
institutions if the SBAs are sorted and exchanged for new Golden 
Dollars. While the Reserve Banks provide wholesale cash services 
directly to depository institutions that account for the large majority 
of the nation's coin volume, about half of the nation's 20,000 
depository institutions obtain their cash through correspondent 
banks.\2\ In addition, coins circulate among depository institutions, 
retail establishments, and armored carriers for long periods without 
being handled by a Reserve Bank. Consequently, we would expect some 
SBAs to continue circulating in commerce even if Reserve Banks sort all 
SBAs from their deposits.
---------------------------------------------------------------------------
    \2\ The Reserve Banks do not provide cash services directly to 
businesses.
---------------------------------------------------------------------------
    The Federal Reserve informally surveyed its largest depository 
institution customers about their customers' demand for dollar coins. 
The ten survey respondents represent large correspondent banks that 
provide coins to depository institutions not served by Reserve Banks. 
All respondents reported that their organizations do not have equipment 
to sort dollar coin designs, and nine of them would not invest in 
sorting equipment because it would increase expenses and create 
operational issues not justified by customer demand. The respondents 
reported that their largest volume customers that most frequently order 
dollar coins, such as the transit authorities, vending companies, and 
U.S. Postal Service, do not prefer one coin design to another; other 
customers occasionally want only Golden Dollars, but not in quantities 
sufficient to justify investing in sorting equipment.
    Question. What more can be done to encourage armored carriers like 
Brinks to invest in the equipment necessary to roll the Golden Dollar?
    Answer. Reserve Bank customers report that their large-volume users 
of dollar coins want coins in 2,000-piece bags, while smaller-volume 
retail customers use rolls of dollar coins. The Federal Reserve 
understands that most armored carriers have wrapping equipment that can 
roll all denominations of coin. The Mint reports, however, that armored 
carriers would need to invest in additional high-speed wrapping 
equipment if demand for rolled dollar coins significantly increases.
    Question. The Federal Reserve states that within months, their 
inventories of Golden Dollars could be depleted. With approximately 250 
million Golden Dollars currently in their inventories, how is this 
likely?
    Answer. The Federal Reserve does not have 250 million Golden 
Dollars in inventory; rather, Reserve Banks held approximately 203 
million in total dollar coins as of May 31, 2002. Based on an April 
2002 survey of all Reserve Bank offices, the Federal Reserve estimates 
that at most 30 percent, or 60 million, of the coins are unmixed Golden 
Dollars. At current payment rates, Reserve Banks would exhaust their 
unmixed Golden Dollar inventories in about 3 months. Because Golden 
Dollar inventories are not evenly distributed across the country, it is 
likely that some Reserve Bank offices will exhaust supplies before 
others. Reserve Banks will begin ordering new Golden Dollars again 
after they have paid out previously-circulated mixed dollar coins and 
reduced inventories to normal levels.
    Question. Will the Federal Reserve commit to aiding in the effort 
of circulating the Golden Dollar?
    Are you prohibited legislatively?
    Will you agree to sit down with the U.S. Mint and coordinate 
efforts?
    Answer. The Federal Reserve will continue to coordinate with the 
U.S. Mint to support circulation of Golden Dollar coins to satisfy our 
customers' requirements and is not legislatively prohibited from doing 
so.
                                 ______
                                 

         Questions Submitted by Senator Ben Nighthorse Campbell

    Question. Does the Federal Reserve System have a direct role in the 
distribution of the Golden Dollar other than providing cash services to 
the banks, savings and loans, and credit unions?
    Answer. The Federal Reserve does not have a direct role in the 
distribution of Golden Dollars other than providing cash services to 
depository institutions. Currently about half of the nation's 
depository institutions, accounting for the large majority of coin 
volume, deal directly with the Reserve Banks.
    Question. Is there more of a problem in the distribution of the 
Golden Dollar than any of the other coin denominations?
    Answer. To support the introduction of the Golden Dollar coin, the 
Reserve Banks varied their normal distribution policies for the first 2 
years after the introduction and paid out only new Golden Dollar coins 
rather than first paying out previously circulated coin. Consequently, 
as of the end of May, Reserve Banks held about 203 million dollar coins 
in inventory, less than 60 million of which were segregated Golden 
Dollars. This dollar coin inventory is more than six times the Federal 
Reserve's target inventory of 30 days-payable, or about 20 to 30 
million for dollar coins.
    Similarly, the Reserve Banks modified their distribution policy to 
meet public demand for the Fifty State Commemorative Quarters Program. 
As each new quarter design is issued, the Reserve Banks pay out the new 
design for a short period--typically two to three weeks. After 
collector demand is satisfied, however, about 600 million quarters are 
added to the circulating stock every 10 weeks. These additional coins 
exceed amounts needed to meet transactional demand. Consequently, 
Reserve Bank inventories of quarters continue to grow and occupy 
significant portions of their dedicated coin storage space.
    Question. What is the cost associated with transporting coins 
especially the Golden Dollar to and from the Federal Reserve?
    Answer. Depository institutions pay the transportation cost of coin 
to and from Reserve Banks and the U.S. Mint pays the transportation 
cost of coin to Reserve Banks. The Federal Reserve, therefore, has no 
specific information about coin transportation costs.
    Question. Has the Federal Reserve considered investing in 
processing equipment that could separate the Golden Dollar and Susan B. 
Anthony dollar coins?
    Answer. We understand that the Mint is investigating sorting 
equipment that it would acquire; if the Mint acquired the equipment, 
the Mint and Federal Reserve would work collaboratively to locate it 
wherever it would be most cost-effective from a transportation, 
processing, and storage perspective.
                                 ______
                                 

                Questions Submitted to James C. Benfield

             Questions Submitted by Senator Byron L. Dorgan

    Question. Mr. Benfield, you are here today on behalf of 
approximately 30 trade associations and companies who are strong 
supporters of the Golden Dollar. What benefits would be gained by these 
companies if there was wide distribution of the Golden Dollar?
    Answer. The savings are unique to each company or industry sector, 
depending on how change is obtained from banks and how cash receipts 
are counted processed and deposited at banks.
    For example, all $1 bills received in thousands of municipal bus 
fare boxes must be hand straightened. If $1 coins were received 
instead, the collective savings to all transit agencies would exceed 
$100 million annually, according to an analysis by University of 
Chicago economist George McCandless.
    Some municipal parking authorities are converting on-street parking 
meters to accept $1 coins because $1,000 worth of quarters weighs 50 
pounds while $1,000 worth of $1 coins weighs only 17 pounds. The total 
reduction in number of coins and weight would bring significant savings 
in processing of revenue while bringing convenience to consumers.
    The National Association of Convenience Stores is a member of the 
Coin Coalition because it advocates the removal of the penny from 
circulation. Using $1 coins instead of $1 bills in addition to removing 
pennies from circulation would reduce transaction time at the point-of-
purchase.
    Two fast food operations in Wisconsin have discovered that 
standardizing their cash registers in favor of $1 coins speeds 
transaction. Subway restaurant owner Jim Opitz found that fewer errors 
were made because $1 coins do not stick together.
    Question. Mr. Benfield, in your testimony you suggest that 
distribution could be improved by specific targeting with a concurrent 
low cost marketing effort. How did you make that assessment?
    Answer. My views are based in part on my work with the Mint's 
marketing consulting firms, Oxford Associates (now known as 
MarketBridge), Double Eagle and Fleishman Hillard. Oxford Associates 
identified the self-service carwash industry as having the largest 
potential for growth in the use of $1 coins of any market sector. By 
that time, I also had previous experience working with a carwash 
operator in Windsor, Connecticut, who had converted a family-owned 
operation to use Susan B. Anthony $1 coins.
    Working with Double Eagle and the publisher of the Self-Service 
Carwash News, we prepared a 20-page special edition on ``New Money''--
$1 Coin and More!'' The core of the publication was a 9,500 word 
article on the new Golden Dollar written and researched by Tom Coutre, 
a successful operator in the Chicago area. The feature article was 
complemented by a strong opening letter from Mint Director Philip 
Diehl, an article on the new $10 and $5 bills, and several full-page 
advertisements from the leading coin mechanism manufacturers in the 
carwash industry.
    The publisher later told me that reader response from this 
publication was the strongest of any issue he had ever printed.
    The proof of the special edition's success was the conversion by 
dozens of carwash operators of their retail locations, many of which 
operate only with $1 coins. Some operators are now placing more than 1 
million $1 coins into circulation annually.
    The total cost to the Mint for this publication was under $10,000. 
The cost-benefit to the government was staggeringly positive.
    This type of model can be replicated with other industry sectors.
    Who should pay for the costs?--The Mint should fund these projects 
from profits realized from the sale of Golden Dollars into the 
marketplace.
    What can your coalition do to help this endeavor?--Coin Coalition 
members can help to identify businessmen who currently are using the 
Golden Dollar in their operations. We also will bring 15 years of 
experience on this issue to the table to make the Mint's marketing 
efforts more targeted and effective.
                                 ______
                                 

         Questions Submitted by Senator Ben Nighthorse Campbell

    Questions. Other than eliminating the Golden Dollar [$1 BILL????], 
do you have suggestions on how to increase the circulation of the 
Golden Dollar?
    Answer. The Mint, working with various trade associations and 
individual entrepreneurs and governmental entities, should create 
demonstration projects to test and prove the viability of $1 coin usage 
in new markets, such as coin Laundromats, public pay phones, 
cafeterias, vending break rooms, commissaries and post exchanges 
operated at government and military facilities. Some research already 
exists ON pilot programs in these sectors. I believe they can be 
brought to fruition, studied and sold to a broader market for a modest 
investment by the Mint.
    Questions. Since the Golden Dollar has surpassed the Susan B. 
Anthony by a surmountable amount, what do you consider as success or 
failure for the Golden Dollar? What do you base your findings on?
    Answer. As I testified on May 17, the demand for SBAs during the 
mid-1990s was about 60 million per year. The demand during 2001 was 
about 180 million, or triple the 1990's baseline for the SBA. With a 
sustained marketing plan over the next 5 years, the annual movement of 
Golden Dollars entering circulation should increase to at least 600 
million.

                         CONCLUSION OF HEARING

    Senator Dorgan. This hearing is recessed.
    [Whereupon, at 4:27 p.m., Friday, May 17, the hearing was 
concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]

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