[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                        MONEY MATTERS: COIN AND
                         COUNTERFEITING ISSUES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 28, 2004

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-82


                    U.S. GOVERNMENT PRINTING OFFICE
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSSELLA, New York              CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey            CHRIS BELL, Texas
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
 Subcommittee on Domestic and International Monetary Policy, Trade and 
                               Technology

                   PETER T. KING, New York, Chairman

                                     CAROLYN B. MALONEY, New York
JUDY BIGGERT, Illinois, Vice         BERNARD SANDERS, Vermont
    Chairman                         MELVIN L. WATT, North Carolina
JAMES A. LEACH, Iowa                 MAXINE WATERS, California
MICHAEL N. CASTLE, Delaware          BARBARA LEE, California
RON PAUL, Texas                      PAUL E. KANJORSKI, Pennsylvania
DONALD A. MANZULLO, Illinois         BRAD SHERMAN, California
DOUG OSE, California                 DARLENE HOOLEY, Oregon
JOHN B. SHADEGG, Arizona             LUIS V. GUTIERREZ, Illinois
MARK R. KENNEDY, Minnesota           NYDIA M. VELAZQUEZ, New York
TOM FEENEY, Florida                  RAHM EMANUEL, Illinois
JEB HENSARLING, Texas                CHRIS BELL, Texas
TIM MURPHY, Pennsylvania
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 28, 2004...............................................     1
Appendix:
    April 28, 2004...............................................    39

                               WITNESSES
                       Wednesday, April 28, 2004

Ferguson, Thomas A., Director, Bureau of Engraving and Printing, 
  U.S. Department of the Treasury................................    10
Fore, Henrietta H., Director U.S. Mint, U.S. Department of the 
  Treasury.......................................................     8
Johnson, Hon. Jay W., former Director of the Mint and now 
  Director of Business Development, Collectors Universe Inc......    32
Marquardt, Jeffrey C., Associate Director, Reserve Bank 
  Operations and Payment Systems, Board of Governors of the 
  Federal Reserve System.........................................    15
McMahon, Thomas C., Senior Vice President and Chief Counsel, 
  National Automatic Merchandising Association...................    29
Noe, Thomas, President, Vintage Coins and Collectibles, and a 
  member of the Citizens Coinage Advisory Committee..............    30
Tam, Chung Chung, Revenue Systems Engineer, Chicago Transit 
  Authority, on behalf of the American Public Transportation 
  Association, Chairman Revenue Management Committee.............    33
Townsend, Bruce, Deputy Assistant Director, Office of 
  Investigations, U.S. Secret Service............................    12

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    40
    King, Hon. Peter T...........................................    42
    Ferguson, Thomas A...........................................    43
    Fore, Henrietta H............................................    49
    Johnson, Hon. Jay W..........................................    54
    Marquardt, Jeffrey C.........................................    57
    McMahon, Thomas C............................................    69
    Noe, Thomas..................................................    74
    Tam, Chung Chung.............................................    77
    Townsend, Bruce..............................................    83

              Additional Material Submitted for the Record

King, Hon. Peter T.:
    Letter to Federal Reserve System from Hon. Jim Greenwood.....    88

 
                        MONEY MATTERS: COIN AND
                         COUNTERFEITING ISSUES

                              ----------                              


                        Wednesday April 28, 2004

             U.S. House of Representatives,
         Subcommittee on Domestic and International
              Monetary Policy Trade and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:03 p.m., in 
Room 2128, Rayburn House Office Building, Hon. Michael Castle 
[acting chairman of the subcommittee] presiding.
    Present: Representatives Castle, Maloney, Watt, Sherman and 
Bell.
    Mr. Castle. [Presiding.] Good afternoon. The Subcommittee 
on Domestic and International Monetary Policy, Trade and 
Technology will come to order.
    I am Congressman Mike Castle, and I am chairing the meeting 
for Subcommittee Chairman Peter King, who has been called to 
the White House on an important matter and hopes to be able to 
join us later.
    So you who go back a little bit will recall that I actually 
did chair this subcommittee a number of years ago for a couple 
of terms, and I still serve on it.
    The subcommittee meets today to discuss a number of matters 
related to the important issues of coin and currency design and 
the related problem of counterfeiting of U.S. currency.
    The hearing is the first of what Chairman King hopes will 
become a fairly regular series under the broad heading of 
``Money Matters,'' dealing with the physical and virtual 
aspects of money and payment systems.
    As well, today's session will serve as the legislative 
hearing for a bill, H.R. 3916, I introduced last month with the 
co-sponsorship of the gentlelady from New York, to my right, 
Ms. Maloney, entitled The Presidential $1 Coin Act of 2004.
    The legislation seeks to increase the availability of the 
$1 coin in the economy so that it can fulfill its promise of 
controlling costs for business and thus restraining prices for 
consumers. I will further describe the bill in a moment.
    Today's second panel will focus entirely on the 
Presidential dollar.
    Testifying to us will be four experts: Mr. Chung Chung Tam, 
a cash management specialist for a major public transit agency 
and chairman of the Cash Management Committee of the American 
Public Transportation Association; Tom McMahon, East Coast 
director of the National Automatic Merchandising Association, 
representing the vending industry with some 7 million machines 
deployed around the country; Jay Johnson, the immediate past 
director of the United States Mint, who is now director of 
business development for Collectors Universe, a company 
providing collector services; and Tom Noe, a coin collector and 
coin dealer, who also serves as vice chairman of the Citizens 
Coinage Advisory Committee, a panel advising the Treasury 
Secretary on design proposed by the Mint. Mr. Noe is the 
founder, owner and president of Vintage Coins and Collectibles 
of Maumee, Ohio.
    First, however, we have a panel of government witnesses, 
some of whom no doubt will address H.R. 3916, but who are to 
speak to the larger issues of coin and currency design.
    We will hear from the current Mint director, Henrietta 
Fore, who no doubt will tell us about the successful 50 State 
Quarters Program. Everybody is collecting them, and 
surprisingly, the program is now more than half finished.
    I will also be interested to hear about the early successes 
of the temporary redesign of the five-cent coin, an effort 
spearheaded by Mr. Cantor, who formerly sat on the Financial 
Services Committee, and I expect Ms. Fore also will address the 
redesign proposal for the dollar coin.
    The director of the Bureau of Engraving and Printing, 
Thomas Ferguson, will tell us about the new $50 bank note 
design that we all saw in the news yesterday and about the $20 
bank note released last year.
    Both new designs come as part of an ongoing effort to keep 
ahead of counterfeiters who increasingly are turning to 
inexpensive, readily available digital scanners and printers to 
make their fakes.
    Mr. Jeffrey Marquardt, associate director of the Reserve 
Bank Operations and Payment Systems at the Federal Reserve 
Board, will address issues relating to counterfeiting, as the 
Fed is the actually issuer of U.S. currency, and likely also 
will talk a little about the circulation patterns of coin and 
currency.
    Finally, Bruce Townsend, deputy assistant director of the 
United States Secret Service, who heads the Office of 
Investigations, will talk to us about current trends in 
counterfeiting at home and abroad and about ways to combat the 
counterfeiters.
    I will be particularly interested in hearing his opinions 
on the new $20 and $50 designs, his anti-counterfeiting 
efforts, and about the Secret Service's successful efforts at 
working with other governments to stem the flow of 
counterfeits.
    I see it is in a slightly different order than you sit. It 
does not make much difference to us which order you go in.
    The issues we will be discussing today are important. 
Having a strong currency that resists attack by counterfeiters 
is the bedrock of a robust, vibrant economy, and having widely 
available, easily identifiable units of coin and currency is 
the best way to facilitate commerce.
    I would like to return to the legislation before us today 
for a moment.
    The Presidential $1 Coin Act of 2004 I authored with Ms. 
Maloney. This legislation honors each U.S. President by placing 
them on the obverse side of the $1 coin on a rotating basis.
    I believe this program is a great opportunity for educating 
both children and adults about the history of our country.
    In addition, although it is not the goal of the program, 
these new coins will likely generate as much as $5 billion for 
the government.
    I did not write that part about it not being one of the 
goals. To me, it is a goal.
    In many ways, this legislation is modeled after the 
successful 50 States Quarter Program, which, at the end of last 
year, reached its halfway point.
    The 50 States Quarter Program, which I was also proud to 
author, includes five quarters a year bearing images connected 
with one of the States so that over a decade each state will 
have been honored.
    Before the States Quarter Program started, the U.S. Mint 
was making about 400 million quarters a year, but in the first 
year of the 50 States Quarter Program, it minted approximately 
1.2 billion quarters.
    The Mint estimates that one person in each household is 
collecting the quarters, and they are collecting a full set, 
not just their own state.
    According to the most recent numbers from the Mint, over $4 
billion worth of savings have been created for the Federal 
Government with an expected $2 billion more through the life of 
the program.
    I appreciate the time and effort each of our panelists has 
put into their jobs and the time and energy they put into their 
testimony today. I say that very sincerely because I have 
worked with almost all of you in some capacity or another, and 
you really do an extraordinary job.
    The collectors have always had, I think, the public 
interest in mind here, and we always appreciate that.
    And with that, I yield to a strong supporter of these 
programs and one who has been extremely helpful in bringing all 
this to fruition, the gentlewoman from New York, Ms. Maloney.
    Mrs. Maloney. Thank you very much, Representative Castle.
    I am delighted to join him on the dollar coin program. 
Representative Castle was the architect of the 50 States 
Quarter Program, which most Americans absolutely love and 
collect, including my two daughters. We just had the Florida 
coin released. We are eagerly awaiting the Texas coin. It has 
been absolutely a sensational success.
    So I applaud Congressman Castle. He is truly a visionary 
legislator since so many people have enjoyed this program, and 
I am delighted to be a partner in this new effort.
    At its heart, this legislation creates a massive national 
American history teaching tool. This bill combines all the best 
elements of a successful coinage program: education, collecting 
interest, a financial windfall for the Treasury.
    Politicians and educators are always searching for a new 
way to boost interest in American history.
    The program also promises to be a boon to the U.S. 
Treasury. Halfway through the quarter program, it has returned 
more than $4 billion to the Treasury.
    No doubt a similar popular dollar program would produce 
another huge benefit as novices and professionals and young 
people, and all people really, collect this coin and are drawn 
to collecting it as a hobby.
    The Presidential $1 Coin Act would also increase awareness 
of this overlooked coin, the dollar coin. My hope is that we 
will raise interest in the dollar coin, making it all the more 
popular and increasing its use so that when the great Sacagawea 
returns at the end of the Presidential program, it will be more 
in circulation.
    Finally, we also called for a coin program that will 
memorialize each First Lady and include symbolism that is 
representative of their time, again a very important teaching 
tool and awareness tool.
    We are also today holding a hearing on counterfeiting.
    Counterfeiting is one of the most important law enforcement 
issues the Congress and the committee faces. In fact, documents 
seized from Al Qaida indicate that this is a means by which 
they carry out terrorist operations.
    So I look very much forward to the testimony to see how our 
currency stands up relative to efforts in other countries.
    Just recently, the new $50 bill was unveiled. This is 
certainly a step forward, but it is also my understanding that 
we will soon be unveiling the $100 bill, which is, according to 
accounts, very vulnerable to counterfeiting. Nearly two-thirds 
of $100 bills circulate overseas.
    While, in the U.S., our primary defense against 
counterfeiting is to use multiple colors, the new euro uses 
advanced metallic foils incorporated in them during printing.
    So I look forward to the panelists' discussion of this 
technique.
    The present budget also includes a proposal to study the 
advisability of combining the Bureau of Engraving and Printing 
and the United States Mint.
    While I understand the stated goal is to achieve cost 
savings through a reduction in administrative costs, I do have 
some concerns about the study and the manner in which it is 
being conducted and will ask a few questions in that area.
    I congratulate the Chairman for his leadership and 
wonderful ideas in coinage, and I hope we will pass this bill 
and move forward readily with other projects.
    Mr. Castle. I thank the gentlewoman from New York.
    Since there are people out in this audience who helped 
conceived the original 50 States Quarter idea and helped with 
this dollar idea, I do not want to take too much credit for 
being too innovative.
    Mrs. Maloney. Well, you pushed it through Congress.
    Mr. Castle. Well, I was just smart enough not to get in the 
way. I did for about six months, but then I learned my lesson 
and wised up and realized we had a good program in hand.
    Does the gentleman from North Carolina, Mr. Watt, wish to 
make an opening statement?
    Mr. Watt. Thank you, Mr. Chairman. I will be brief because 
I know you want to move on with the hearing and the markup.
    I do want to applaud the Chairman for convening the hearing 
because it is an important hearing both as a prelude to the 
markup of the bill that we are considering today and to 
establish a predicate for moving forward on a bill. I just 
always think it is a good idea to build a public record about 
what the bill is about.
    But I also think this is an important hearing because 
counterfeiting has become and is becoming more and more a 
problem in our society and I hope that we are doing everything 
that we can do to address that as a problem.
    Three or four years ago, Chairman Oxley and I and a couple 
of the other members of the Financial Services Committee 
traveled to Europe and looked at some of the advanced processes 
that they were beginning to implement and look at--perhaps this 
was before the euro, I guess it must have been--to incorporate 
into the euro, and I came away deeply impressed with the 
efforts that they were making to try to combat counterfeiting.
    At that time, I did not realize that some of the cutting-
edge technology that was being used in their effort, or that 
was in use combat counterfeiting internationally, actually was 
being generated from my congressional district right in North 
Carolina.
    When I got back, I got more proactive in actually going out 
and looking at some of that technology and trying to understand 
how the technology worked.
    So I am going to ask forgiveness, Mr. Chairman, for 
sounding like I know more about this than I probably do. You 
know what they say about a little knowledge is a dangerous 
thing.
    But with that kind of background, it is hard not to get 
interested in something when the magnitude of the problem is as 
severe as it is. Because my service on this committee is also 
parallel with my service on Judiciary, and I know that 
counterfeiting is a major component of criminal activity and an 
emerging component apparently of terrorism and acts that are 
taking place around the world.
    So I hope that some of my concerns about whether we are 
doing enough in the area of anti-counterfeiting to combat the 
ability of counterfeiters, and to make it possible for ordinary 
citizens, not just businesses, that have the kind of equipment 
and machinery to evaluate the quality of currency, to make it 
possible for ordinary citizens to be able to get involved in 
this anti-counterfeiting effort.
    I thank the Chairman for convening the hearing, and I will 
yield back the balance of my time and look forward to the 
question-and-answer period and the testimony.
    Mr. Castle. Well, thank you, Mr. Watt. I must comment on 
your comment that you may sound as if you know more about 
something than you do. I think that is the true mark of a real 
congressman when we get in that position. We work hard to get 
to that point in our life.
    The gentleman from California, Mr. Sherman, is yielded to 
if he wishes to make an opening statement.
    Mr. Sherman. Thank you, Mr. Chairman.
    I have always thought that the only skill I bring to 
Congress is how to be ignorant without looking stupid, and 
sounding like I know more than I do is an important part of 
that.
    Mr. Chairman, I thank you for holding these hearings.
    There are important issues as to whom we commemorate on our 
coins and States and localities and people. Putting those 
aside, I see two important issues about our currency, one 
dealing with coins, one dealing with printed money.
    With coins, we ought to be talking about abolishing the 
penny. We are always often talking about abolishing the penny. 
People do not want to abolish the penny. This is because they 
think that somehow when they buy something at the store that 
they are paying exactly the amount they agreed to pay, which is 
not true.
    Every transaction at every store in every state that has 
sales tax--and I speak as the former head of the largest sales 
tax agency in the country--is rounded to the nearest penny. So, 
in fact, you buy a bunch of things at the store. California 
imposes 8 and a quarter percent sales tax. You then owe $99.123 
cents or $99.128 cents. That is rounded to the nearest penny.
    Certainly in a sophisticated, computerized age, we could 
round to the nearest nickel. There would be no way for stores 
to try to get an advantage out of this because, when I go to 
the 99-cent store, they do not know how many things I am going 
to purchase. So whether I buy six or eight or 10 with the 
applicable sales tax either means things are rounded up or 
down.
    Furthermore, they do not know at many stores whether I am 
going to pay with a credit card. If the bill came to $108.12, I 
could pay with a credit card and pay only 12 cents. If I paid 
cash, they would round down to 10 cents. I save two cents. Boy, 
I hope I have more important things to worry about.
    So we can abolish the penny and round to the nearest 
nickel.
    The savings on the pants pockets alone would more than be 
worth it, not to mention what we would save as a country and 
how we would find another use for the zinc and copper involved.
    We probably will not do this because if you poll on it, it 
does not poll well.
    This is not ``Profiles in Courage.'' Perhaps our 
subcommittee could actually look at this independent of the 
polling and perhaps save an awful lot of our natural resources, 
not to mention pants pockets.
    Now, let us talk about printed currency.
    We have $700 billion of printed currency in circulation. 
This is because the dollar is a storehouse of value and a 
medium of exchange around the world, and that is an important 
thing for the United States to preserve and an important 
benefit.
    Just from the seigniorage, the fact that, in effect, the 
world is loaning our Federal Government $700 billion interest 
free, that is worth at least $15 billion, probably more as 
interest rates go up, to the Federal Government every year.
    You know, when you print a Federal note, a 10-year note, 
you pay interest on it. When you print a Federal Reserve note 
like the one illustrated here, you do not pay interest on it. 
It is like a non-interest bearing $50 bond. If you are the 
Federal Government, that is a good business to be in.
    So that is just one advantage of our currency, being this 
storehouse of value.
    It also enhances our status around the world and the status 
of our financial markets. We need to have currency that is not 
subject to counterfeiting.
    As the gentlelady from New York pointed out, there are 
technical means to make our new currency even less 
counterfeitable than the new currency you folks have just come 
up with, which is wonderful and beautiful and looks pretty hard 
to counterfeit, but maybe not as good as it could be.
    The issue, though, that comes up is: What about all this 
stuff you printed in the last century? It's still in 
circulation.
    Now, I know the average bill is only going to last a couple 
or three years. You figure you are going to pull it all in. But 
you are not.
    A lot of folks are going to have the old bill. As long as 
it remains legal tender, you do not have to counterfeit the new 
bill. You can counterfeit the old bill. That is legal tender 
too.
    I would hope that you would address in significant detail 
the positives and negatives of having a currency recall, 
perhaps excluding some of the ancient bills that are valuable 
to collectors and that are worth far more than face value.
    But to recall all the currency that we printed last 
century, to say ``You have until 2007 to turn it in for the new 
stuff'' would tremendously inconvenience the drug dealers, the 
terrorists and the tax scofflaws around the country and around 
the world who ought to be inconvenienced.
    It will help us catch some of them as they try to launder 
the old money into new money.
    And, by the way, it will put out of business everybody who 
is still counterfeiting the old money that could continue to do 
so for many years to come.
    So I hope you will address the benefits of this.
    But let us not mince words. The tax scofflaws and the drug 
dealers have powerful friends in high levels around the world, 
and their complaints will be heard on this. But I would think 
that flushing them out would be a good thing to do and also 
something that would protect our currency from counterfeiting.
    I want to hear more about it. I am just reaching initial 
conclusions based on the ignorance I was so proud of at the 
beginning of this statement.
    I yield back.
    Mr. Castle. Thank you, Mr. Sherman. We appreciate your 
comments. You certainly have the right witnesses here to answer 
your questions, except maybe the pants pockets. I do not know 
if there are any tailors out there, but the rest of them could 
probably answer a lot of the questions you have raised here 
today.
    Mr. Sherman. Mr. Chairman, if I can just insert one other 
thing?
    I am told that out of the $700 billion in circulation, only 
$40 million of it is counterfeit. I hope you folks address that 
because I believe that is way too low a number. I mean, that is 
such a small percentage, and the world is so filled with so 
many people who would like to counterfeit our currency.
    Thank you.
    Mr. Castle. We are going to return to sort of our regular 
order of business, and let me just sort of lay it out for you. 
I understand our last vote is around 3:30 to 4:00. That 
sometimes changes.
    But we have this panel, and each of you will have five 
minutes. We will have a question and answer, if I just go 
through whoever is here, one time. Then we will go to our 
second panel, probably following the same format. And then we 
have a markup after that.
    So we have a lot of business to get done today, so we are 
going to try to stay as efficient as possible.
    Each of your statements will be made a part of the record, 
your written statements. We hope you can try to live by the 
clock as much as possible in your oral statements. I am looking 
at this up here. We do not have this in the Education 
Committee. It says: talk, sum up, that is one minute, stop. We 
will not enforce it precisely, but we would like to keep it 
relatively close.
    Each of us will have five minutes, as most of you know, on 
the back-and-forth. So there is a lot to be done.
    I know if the director of the Mint wants to start with the 
whole penny issue or perhaps other things she was going to talk 
about, but we start with Henrietta Fore, and we will go right 
down the line in order thereafter.

 STATEMENT OF HENRIETTA H. FORE, DIRECTOR, UNITED STATES MINT, 
                U.S. DEPARTMENT OF THE TREASURY

    Ms. Fore. Thank you, Mr. Chairman.
    And thank you, Congresswoman Maloney, members of the 
subcommittee.
    I will, with your permission, give a short summary for oral 
testimony.
    The United States Mint's mission is to fulfill our 
congressionally mandated role as the Nation's coiner of money, 
and we will proudly mint and issue the coins, medals and 
numismatic items that Congress authorizes in legislation.
    We are working diligently to evaluate the manufacturing 
processes that the United States Mint would use to execute H.R. 
3916, The Presidential $1 Coin Act of 2004.
    Working together, I am confident we can deliver to the 
American people the coins provided by the bill.
    With the benefit of 212 years of experience, the United 
States Mint believes that redesign of America's coinage sparks 
interest in our history, culture and values.
    The enormously successful 50 States Quarter Program and the 
redesign of the nickel have demonstrated that Americans embrace 
coin redesign.
    The United States Mint has passed the halfway point of the 
50 State Quarters Program and the release of the Michigan 
quarter in January.
    More than 130 million Americans collect the 50 States 
Quarters, and at its midpoint, this program is responsible for 
the United States Mints depositing more than $4 billion into 
the Treasury general fund.
    This coin program is educational. Teachers and students 
have downloaded the United States Mint free lesson plans on the 
state quarters more than 1.5 million times.
    This March, the United States Mint has also delivered the 
first newly designed nickel in 66 years. The American 5-Cent 
Coin Design Continuity Act of 2003 is the commemoration of two 
remarkable events in American history: the bicentennials of the 
Louisiana Purchase and the Lewis and Clark expedition.
    We are telling the story through a series of new nickel 
designs.
    New United States Mint nickel lesson plans are also being 
downloaded across the Nation.
    In August, we will release the second new nickel in the 
series.
    An essential facet of this renaissance in coin design is 
the United States Mint's new Artistic Infusion Program. With 
the assistance of the National Endowment for the Arts, we have 
selected 24 professional artists and student artists throughout 
the country. Along with the United States Mint's sculptors and 
engravers, they have submitted their first-candidate designs 
for the 2005 nickels.
    Similarly, the United States Mint is evaluating the latest 
techniques and materials being used to manufacture coins around 
the world. As you know, the specific composition of all United 
States circulating coinage, except the dollar coin, is 
legislated by Congress.
    With the rise in metal prices this past year, we are 
renewing our commitment to research coinage materials so that 
Congress has the most current information on the best and most 
economic materials for United States coinages.
    Now let me touch briefly upon the piece of legislation to 
be considered by the subcommittee later during this hearing, 
The Presidential $1 Coin Act of 2004.
    We applaud the efforts of Congress to honor the history of 
our Nation.
    The United States Mint has learned a great deal from its 
past experiences with coin design and dollar coin programs. A 
design change will make a coin more attractive to collectors 
and educators, but it is not likely to have an appreciable 
effect on how many are used in retail transactions. There are 
barriers to Golden Dollar circulation, and a design change does 
not mitigate those barriers.
    As you know, the United States $1 Coin Act of 1997 
authorized the Golden Dollar. More than 1 billion coins were 
produced the first two years of production. Since then, 
however, circulating demand has dropped steadily.
    The United States Mint has more than 262 million Golden 
Dollars in inventory, and we estimate that about 300 million 
are in commercial circulation.
    Golden Dollars make up only about 4 percent of the total 
daily transactions involving dollars.
    Americans are holding on to two-thirds of their Golden 
Dollars, over 600 million, for their collections and not re-
circulating them.
    The change in design of the dollar coin may spark strong 
enthusiasm and collector interest, but it appears to have had a 
modest effect in circulation.
    We now produce about 10 million Golden Dollars per year to 
satisfy numismatic demand.
    Barriers for businesses that choose to use the Golden 
Dollar are: the commingling of the Golden Dollar with the Susan 
B. Anthony in mixed rolls and bags; lack of sustained consumer 
demand; the cost of converting coin-operated machines; the high 
costs incurred by armored carriers and banking institutions 
handling the coins.
    The United States Mint continues to work with the Federal 
Reserve to improve coin demand forecasting and coin ordering 
systems.
    We want to gain efficiencies, streamline the supply chain, 
reduce order lead time, and preposition the coin.
    In conclusion, I would like to share how our commitment to 
meet our customers' needs has been recognized.
    The United States Mint received the highest ranking of any 
Federal agency in the University of Michigan Business School's 
American Customer Satisfaction Index for 2003. The ACSI 
measures more than 180 private American corporations and 
between 60 and 70 government agencies.
    Thank you, Mr. Chairman. I would be pleased at this time to 
answer any questions you may have.
    Thank you.
    [The prepared statement of Henrietta H. Fore can be found 
on page 49 in the appendix.]
    Mr. Castle. Thank you, Ms. Fore. We appreciate that.
    We will now hear about our paper money.
    Mr. Ferguson?

STATEMENT OF THOMAS A. FERGUSON, DIRECTOR, BUREAU OF ENGRAVING 
         AND PRINTING, U.S. DEPARTMENT OF THE TREASURY

    Mr. Ferguson. Thank you, Chairman Castle. It is also a 
pleasure to be before all the members of the subcommittee. 
Thanks for holding this hearing.
    The security of the United States currency was enhanced 
last fall with the introduction of the new redesigned $20 
Reserve Note, which included subtle colors. This marked the 
culmination of a multi-year, cross-agency effort that included 
unprecedented outreach and collaboration with industry 
stakeholders to develop a new design.
    The new design is aimed at deterring threats to the 
security of the Nation's currency posed by technology advances 
in digital printing and reproduction technology.
    Counterfeit deterrence efforts continue as we prepare for 
the introduction of a redesigned $50 note later this year, 
followed by a redesigned $100 note and potentially a $10 note 
in subsequent years. At this time, we have made no decision 
about a $5 note, and we will not be changing the $1 or $2 
designs.
    These efforts are coordinated by the Advanced Counterfeit 
Deterrence Steering Committee chaired by Treasury Under 
Secretary for Domestic Finance Brian Roseboro, and we have 
participation from the Federal Reserve, the Secret Service, 
Treasury Department, as well as the BEP.
    In order to provide the public with the most secure and 
reliable notes, the ACD Steering Committee has developed and 
follows a comprehensive counterfeit deterrence strategy that 
depends on: high-quality currency designs with effective overt 
and covert counterfeit deterrence features; a well-planned and 
executed public education campaign; and aggressive law 
enforcement.
    Fortunately, the United States has one of the finest law 
enforcement agencies involved in counterfeit deterrence, the 
United States Secret Service, and Mr. Townsend will testify on 
their efforts following.
    So I will focus on the currency redesign efforts and public 
education campaign.
    The redesigned Series 2004 $20 note contains an array of 
sophisticated counterfeit deterrent security features, some of 
which are visible and easily recognized by the public--such 
things as the watermark, the security thread, color-shifting 
ink, the new colors, fine-line printing, and that traditional 
feel of U.S. currency--and some are covert or machine-readable 
only.
    The signature covert feature of the redesigned $20 note is 
an anti-digital counterfeiting system that was developed under 
the auspices of the international Central Bank Counterfeit 
Deterrence Group in cooperation with major digital printer and 
software manufacturers. This U.S. effort was led by the Federal 
Reserve system.
    The anti-digital system, which is being used in a number of 
countries, relies on a hidden marker embedded in the note 
design that can be read or detected by new digital technology 
printers and software.
    This new system design heralds a vibrant and growing 
partnership between the public and private sector to protect 
the Nation's currency. It is intended to thwart increased 
counterfeiting by means of digital reprographic technology.
    This is a significant investment in the future of currency 
and will greatly assist in preventing counterfeiting by anti-
digital technology as this technology becomes dominant in our 
marketplace.
    To date, more than 1.2 billion of the new $20 notes have 
been issued into circulation, about 25 percent of the total 
$20s in circulation.
    The BEP worked very closely with manufacturers of vending 
and ATM banking machinery in order to assure that these notes 
would go into circulation without any major inconvenience to 
the public.
    On April 26, the Secretary of the Treasury, John Snow, 
unveiled the new $50 note. I have samples I can show the 
committee later. The new $50 will contain the same robust 
family of counterfeit deterrent features. However, the 
background colors will be different to assist the public in 
differentiating between the different denominations.
    For redesigned $100 notes, the ACD Steering Committee has 
directed the BEP to issue a solicitation to the private sector 
seeking additional counterfeit deterrent features that may be 
added to increase the security of the $100 note.
    The $100 note, which is the most circulated U.S. note 
internationally, is subjected to the most sophisticated 
counterfeiting attempts.
    The possible new features will be subjected to adversarial 
analysis by an interagency working group made up of the 
Treasury, Bureau of Engraving and Printing, Secret Service and 
Federal Research system.
    It will also involve using the auspices of the European 
Central Bank to do adversarial analysis to assure that we are 
providing an effective and durable currency.
    The public education program is a critical element of the 
overall anti-counterfeiting effort in the United States as well 
as around the world. The American dollar is the most 
recognized, trusted and accepted currency in the world.
    While the features render the notes more secure, the 
success of government anti-counterfeiting efforts depend 
foremost on the public and cash-handlers as the first line of 
defense.
    To defend against accepting counterfeiting, the public must 
be aware of the potential counterfeit threat and, most 
importantly, know how to authenticate their notes.
    Results from research conducted before the issuance of the 
Series 2004, based on when we did the 1996 change, indicated 
that we needed to do more to get the word out.
    We also found that the way to get the word out best was to 
utilize television.
    A media strategy was planned to concentrate the greatest 
share of our paid media dollars in the visual medium that 
people spend the most time with, and that is in fact 
television.
    Research conducted one month following the fall 2003 paid 
media program revealed public awareness of the impending 
currency changes went from 30 percent to over 80 percent and 
that the public's ability to describe at least one counterfeit 
feature increased by over 10 percent.
    It is the responsibility of the government to provide the 
public with the information required to protect themselves from 
fraud or economic loss associated from counterfeiting. The 
public education program was designed to provide this 
information to the public and to maintain the integrity of the 
dollar both at home and abroad.
    The better informed the public is, the less likely they are 
to fall victim to currency counterfeiters. It is our 
responsibility as stewards of currency to protect the public by 
enhancing the security of our currency through redesigning it, 
by informing the public of how to protect their hard-earned 
money.
    With the release of the redesigned $50, the public 
education campaign will continue. However, due in part to the 
overall success of the $20 program, it will be conducted on a 
smaller scale than the initial campaign and will consist of no 
paid media in the United States.
    This concludes my opening remarks, and I will be happy to 
respond to any questions.
    [The prepared statement of Thomas A. Ferguson can be found 
on page 43 in the appendix.]
    Mr. Castle. Mr. Ferguson, I assume this is the old $50 and 
the new.
    Mr. Ferguson. The old one, and the new one over on the 
side.
    Mr. Castle. Well, I played basketball. I never knew where 
my left particularly was. I only looked over here at the one on 
the right, and I was trying to figure out the differences in 
it. I was thought it was supposed to be in color, and now I 
realize what is happening.
    Mr. Townsend, the Secret Service has been complimented. We 
appreciate what you do in terms of protection of our money. We 
would like to hear in detail what you can tell us about that.

STATEMENT OF BRUCE TOWNSEND, DEPUTY ASSISTANT DIRECTOR, OFFICE 
        OF INVESTIGATIONS, UNITED STATES SECRET SERVICE

    Mr. Townsend. Thank you, Mr. Chairman, and good afternoon.
    I would like to thank you, as well as the distinguished 
Ranking Member, Ms. Maloney, and the other members of the 
subcommittee for providing an opportunity to discuss currency 
issues and the role of the Secret Service in the enforcement of 
our counterfeiting laws.
    Let me say at the outset of this hearing that the Secret 
Service has long enjoyed its relationship with this 
subcommittee, and we are extraordinarily grateful for your 
longstanding support of our mission and our employees.
    As this subcommittee is aware, the Secret Service has been 
responsible for the integrity of our currency since 1865. It is 
our founding mission. And while we recognize that the public 
today is far more aware of our protective mission with regard 
to the President and Vice President, it is important to 
understand that every special agent on protective detail today 
began his or her Secret Service career investigating 
counterfeiting and other financial crimes cases.
    I want to assure the members of this subcommittee that 
counterfeit currency investigations remain a high priority for 
the Secret Service. Although our agency was transferred to the 
Department of Homeland Security in March of 2003, we retained 
all of our personnel, resources and investigative jurisdictions 
and responsibilities.
    Additionally, we have preserved important ties and 
relationships with key entities in the Department of the 
Treasury, the Bureau of Engraving and Printing, the Mint and 
the Federal Reserve.
    The Secret Service has maintained that economic security is 
vital to homeland security, and as such, the safeguarding of 
our financial infrastructure and monetary framework continues 
to be a cornerstone of our worldwide investigative efforts.
    It is estimated that some $700 billion of genuine U.S. 
currency is currently in worldwide circulation and as much as 
two-thirds of that is circulated outside the United States. 
While current levels of counterfeiting represent a tiny 
fraction of this amount and do not have a meaningful impact on 
our economy as a whole, the losses incurred by individuals or 
businesses from these counterfeit notes can be significant.
    Because of the dollar's stability and value, as well as its 
widespread use overseas, it continues to be a target for 
transnational counterfeit activity.
    The counterfeiting of U.S. currency also continues to be 
associated with organized crime and drug trafficking.
    Recent trends in the counterfeiting of U.S. currency 
indicate a growing globalization in production and distribution 
of counterfeit notes. Because not all nations report the 
passing of counterfeit currency, other than their own, it is 
difficult to provide precise figures detailing how much 
counterfeit U.S. currency is passed on a global scale each 
year.
    The Secret Service estimates that approximately $37 million 
in counterfeit U.S. dollars were passed successfully in the 
United States in Fiscal Year 2003. This would represent about a 
14 percent reduction from the amount of counterfeit U.S. 
currency passed in the previous fiscal year.
    Secret Service statistics also show that approximately $63 
million in counterfeit U.S. currency was seized last year by 
the Secret Service and other authorities worldwide. Of this 
amount, approximately $11 million was seized in the United 
States. The remaining notes were seized overseas, with over $31 
million seized in Colombia alone.
    In recent years, the Secret Service has enhanced its 
international anti-counterfeiting efforts. Today, our agency 
maintains 17 foreign offices and continues to target strategic 
locations throughout the world where significant counterfeiting 
activity is detected through joint task forces with our foreign 
law enforcement partners.
    Our investigative history has proven that the effective 
suppression of counterfeiting operations requires a close 
partnership between our foreign field offices and their local 
law enforcement counterparts, as well as an immediate response 
by the law enforcement community in order to develop 
investigative leads generated when a new counterfeit note is 
detected or an arrest is made.
    The Secret Service has long believed that strategic 
placement of personnel promotes more aggressive law enforcement 
operations because agents are able to respond in a timely and 
consistent manner.
    Additionally, the ongoing presence of our agents in foreign 
locales allows the Secret Service to build the same trusted 
partnerships with our foreign law enforcement counterparts that 
we have successfully built with our local police partners in 
the United States.
    Today, Colombia is the single largest producer of 
counterfeit U.S. currency in the world, accounting for 
approximately 26 percent, or $10 million, of the $37 million in 
counterfeit dollars passed in the U.S. last year.
    Public education and training continues to play a large 
role in the Secret Service's efforts to suppress the 
manufacturing, distribution and sale of counterfeit U.S. 
currency both domestically and abroad.
    Secret Service personnel conduct training seminars on 
topics such as combating counterfeit, financial crimes and 
computer forensics, in an effort to assist our domestic and 
foreign counterparts in their local law enforcement communities 
and augment the Secret Service's mission.
    Mr. Chairman, this concludes my prepared remarks. I would 
be pleased to answer any questions you or other members of the 
subcommittee may have.
    [The prepared statement of Bruce Townsend can be found on 
page 83 in the appendix.]
    Mr. Castle. Thank you very much, Mr. Townsend. As I 
indicated, we appreciate what you all do, and it is a good 
education for every member of Congress.
    Ultimately, Mr. Marquardt, all the money goes to the 
Federal Reserve, as I understand it. If you can share with us 
in five minutes how you manage all that, we would appreciate 
it.

  STATEMENT OF JEFFREY MARQUARDT, ASSOCIATE DIRECTOR, RESERVE 
BANK OPERATIONS AND PAYMENT SYSTEMS, BOARD OF GOVERNORS OF THE 
                     FEDERAL RESERVE SYSTEM

    Mr. Marquardt. Thank you, Mr. Chairman, and thanks to the 
subcommittee for inviting me to report on the Federal Reserve's 
activity in support of new currency design and coin 
distribution.
    My statement contains a number of observations on currency 
design and counterfeit deterrence. Given today's focus on 
coins, in the interest of time, the rest of my remarks will be 
addressed to this topic.
    The Federal Reserve worked with the Mint to implement the 
popular 50 States Quarter Program in 1999, the Golden Dollar 
Program in 2000 and most recently the Westward Journey Nickel 
Program.
    The 50 States Quarter and Westward Journey Programs have 
been both innovative and challenging, as implied by the term 
``commemorative circulating coin'' that is sometimes used to 
describe the coins in the programs; innovative because the goal 
is to satisfy the demand for both a transactional and 
commemorative coin in a single coin, which is distributed 
through normal wholesale distribution channels and whose design 
changes frequently; challenging because frequent design changes 
have affected the Reserve Banks' inventory and payment 
processes that are designed to meet wholesale demand very 
efficiently; challenging also because of heightened public 
interest, the other side of this heightened public interest, is 
that expectations for commemorative circulating coins that may 
be widely available can place added pressure on the wholesale 
distribution system.
    To adjust to these new commemorative circulating coins, the 
Reserve Banks have changed their payment practices.
    For example, as the Mint issues each new coin design, 
Reserve Banks have suspended their normal payment practice of 
first paying out previously circulated coins to depository 
institutions and instead have paid out the new designs for 
initial introduction periods ranging from a few weeks to two 
years, in the case of the Golden Dollar.
    The recent experience of the Reserve Banks with changes in 
coin design has generally been that inventories and operating 
costs have increased. Reserve Banks acquired enough dollar 
coins in the first two years of the Golden Dollar Program to 
satisfy demand by depository institutions for the following two 
years.
    Despite efforts by the Reserve Banks, the Mint and 
depository institutions to manage this demand, inventories of 
quarters at the Reserve Banks are now more than triple their 
1999 level.
    From 1999 to 2003, total Reserve Bank direct costs for 
distributing coins have increased at an average annual rate of 
more than 12 percent, three times the increase in similar costs 
for distributing notes.
    The Reserve Banks and the Mint have used lessons learned 
from the Golden Dollar and States Quarter Programs to help 
manage the distribution of the new Westward Journey nickels.
    Several factors have led to a more orderly initial rollout 
of the first new nickel in the program: Modest initial 
publicity about the new design tempered public demand, and 
perhaps most importantly, there will be no more than two new 
nickel designs this year and next; slower rates of 
introduction, which is particularly important for the nickels 
because they have lower payout ratios than the quarters.
    Although the initial introduction of the nickels has gone 
smoothly, it is still a bit early to fully assess the impact of 
the program on nickel inventories.
    Turning to the demand for dollar coins, the GAO has 
reported a number of barriers to widespread circulation of 
dollar coins, including the following, which I will just tick 
off, that are widely known from the GAO report.
    Obviously, the public generally appears to prefer at this 
point notes because they weigh less; network effects, the 
interdependency of demand in that individuals are unlikely to 
use dollar coins until retailers stock them and retailers will 
not stock them until the public uses them; banks and armored 
carriers may not invest in inventory equipment to handle the 
coins, particularly to meet spikes in demand because they do 
not yet perceive significant benefit, and there may be higher 
fees in some cases for distribution of coins and notes.
    Nevertheless, on this point, there is regular use of dollar 
coins in certain markets, and I think the second panel will 
address this. The Reserve Banks report average monthly dollar 
coin payments of $15.2 million, average monthly receipt of $9.2 
million, and average monthly net payouts of dollar coins of 
about $6 million.
    Overall, it is important to recognize that there are 
significant uncertainties about the effects of additional 
changes to circulating coin designs, particularly to the dollar 
coins. The Federal Reserve's experience since 1999 suggests 
that flexibility in implementing new coin programs, along with 
care in publicizing them, will allow us to better address the 
inventory and distribution challenges of these programs.
    For example, the smooth introduction of the first new 
nickel and experience so far suggests that there are advantages 
to releasing no more than two new designs per year. This rate 
of introduction, at least for widely circulating coins, allows 
the Reserve Banks more lead time to draw down inventories of 
old designs and build up stocks of new designs for the initial 
distribution. More time can also allow for more flexibility to 
wrap coins, which I know is an issue on the committee's mind, 
to meet initial demand for these coins.
    If experience shows over time that higher rates of 
introduction can be managed effectively, the Reserve Banks and 
the Mint could increase the rate of introduction in accordance 
with carefully prepared plans, which are so important to the 
logistical issues.
    In addition, alternative distribution strategies that 
complement wholesale distribution could be explored.
    Finally, we would advise against unduly stimulating public 
interest in new designs, which appears to cause an intense 
initial interest and to place significant pressure on the 
Reserve Banks and depository institutions, with limited long-
term changes in transactional demand. If long-term demand grows 
slowly, depository institutions and the Reserve Banks may need 
to limit the amount of dollar coins they order each year in 
order to manage ever-growing inventories that can occur because 
of this problem.
    We are very concerned that there could be significant 
public frustration with both depository institutions and the 
Reserve Banks if some expectations are not met for the 
distribution of new coins, and if and as long-run demand does 
increase, of course, the Reserve Banks will work closely with 
the Mint to meet demand in accordance with our obligation to 
provide for an elastic currency.
    I thank the committee.
    [The prepared statement of Jeffrey C. Marquardt can be 
found on page 57 in the appendix.]
    Mr. Castle. Well, thank you. It has all been very 
interesting, and we will try to probe into this a little bit.
    I will yield to myself for five minutes to begin. I am 
looking for fairly swift answers on this.
    First of all, Mr. Ferguson, on the $50 bill, was that all 
earned media? Was that all free media? Or did you have a PR 
allotment for the publicity you have gotten in recent weeks on 
the $50 issuance?
    Mr. Ferguson. All the publicity that we have gotten on the 
$50 bill has been free. It has been news media as a result of 
the events.
    Normally, the problem is, you do not get exactly your 
message out, but, yes, that has been free.
    Mr. Castle. Well, I congratulate you because I think the 
message is both out and seems to be delivered correctly.
    Mr. Ferguson. Thank you.
    Mr. Castle. So it seems to have worked out pretty well.
    Mr. Townsend, with the issuance of the new $20--you may not 
be able to judge this yet, I do not even know how much 
counterfeiting there is on $20 bills.
    But with that issuance, have you noticed a decrease--you 
may have even mentioned this at some point--a decrease, or is 
that just not a bill that is very often counterfeited, with the 
issuance of the new $20? Obviously, the $50 is too early to 
tell yet.
    Mr. Townsend. What we have seen is to be viewed in context 
of really the last redesign, because that was our first 
experience in 50 or 60 years with redesign.
    After the last redesign, the 1996 redesign, which I believe 
appeared in 1998, we did see a spike in counterfeiting, which 
was not unexpected. Counterfeiters like to take up a challenge, 
and we have seen that same spike right now.
    However, I want to emphasizes that the data is very 
preliminary and that these numbers are still coming in. We are 
taking a real close look at it.
    We also believe--and I do not want to get over into the 
design features too much and out of my expertise--that the 
investment has been made in securing the design of the note and 
the technology with which it would be counterfeited on is not 
yet fully realized.
    So we think that investment to be a good one for the 
future, but we will keep a close eye on this and keep the 
subcommittee advised.
    Mr. Castle. Good. I mean, I think it is an important 
subject, and we should be advised on that. I appreciate that.
    Let me turn to a subject of some concern, and I am going to 
get in an area of which I do not understand it well enough to 
even perhaps articulate the question correctly.
    I think I am asking the question of you, Mr. Marquardt, but 
I think that Ms. Fore may be involved in this as well, and I 
want to try to straighten some things out.
    I am concerned about some of the things that you spoke 
about when you spoke in terms of the inventory and the ordering 
and depository banks being concerned about being able to get 
things or whatever. Because I would get complaints at home 
about people being unable to get--because they knew I would 
have been involved with the quarters-be unable to get the 
quarters and, of course, you get the mix of the quarters after 
they have been around the first time and that kind of thing.
    What people essentially want to do is order, you know, the 
quarters and whatever denominations that there are, and 
obviously that will probably be true of the dollar coins as 
well.
    Apparently it comes down to order forms--and this is where 
I get a little confused about exactly who is preparing these 
things and how they are going out and how you actually make a 
decision on what you are going to deliver to a bank.
    In the past, I know there has been some finger pointing 
between the Mint and the Fed, and I do not much care about all 
of that. I just want to make doggone sure that we do not add to 
some of the concerns that you have about overinventorying and 
not being able to make your deliveries as is needed.
    What can we do, particularly with the use of computers, et 
cetera, in terms of making sure we understand what is being 
ordered, getting that out so that the banks will get them out 
the door and keep things moving, particularly in terms of some 
of these forms that have been in question?
    I do not have them in front of me, I cannot sit here and 
tell you how to change it or whatever, but I assume you know 
what I am talking about. Perhaps you could help me.
    Mr. Marquardt. Mr. Chairman, I think the forms have been 
discontinued. That was part of the history with the Golden 
Dollar.
    Let me just quickly describe the strategy for payouts of 
the new quarters and the nickels.
    Basically, the idea is: The Reserve Banks pay out only the 
new issue, and they accumulate a stock.
    The figure for the quarter program is on the order of 450 
million initially of the new coin. That is what they pay out 
then for about a two-to four-week period, and so that is the 
effort, is to meet that initial spike in demand, particularly 
by coin collectors and general households.
    In overall management of inventories, we have worked much 
more closely in the last few years--and the activity at the Fed 
is centered at the San Francisco Fed--with our Cash Product 
Office. They have daily phone calls, weekly planning sessions 
to manage coin ordering on a national basis, and we are working 
right now on changing the lead time of these orders from 30 
days to, you know, twice a month.
    So that is going on, and I think inventory management 
overall has improved significantly over the last few years.
    Mr. Castle. Would you agree with that, Dr. Fore? Or do you 
have any comments about that or anything else that we should be 
doing? I am just trying to resolve a problem; I am not trying 
to start a fight.
    Ms. Fore. We have been working very closely with the 
Federal Reserve on inventory management and it is improving.
    There probably is still some difficulty for many banks to 
be able to order the type of quarter, or in this case, of what 
is proposed in the bill, the type of $1 coin. So it is 
something that we would have to work on with the Federal 
Reserve Bank to see if there is a way that we can handle that.
    Mr. Castle. Okay. Well, we think it is important.
    My time is up, but I do want to put one thing on the record 
because Director Fore and I have had a couple of meetings in 
the last couple of days.
    One of the adjunct aspects of the dollar coin legislation 
is to have a spousal coin--generally referred to as First 
Ladies, but you never know in the time this all goes along--and 
part of it was to have, I guess, a .999 bullion coin and then 
some discussion later of cutting that in half.
    Then we have had some further discussions since then of 
doing, I guess, brass--is brass the right expression, is that 
right?
    Ms. Fore. Bronze.
    Mr. Castle. Bronze, excuse me--bronze coins in a much 
lesser figure to make them more collectible for young kids, et 
cetera, or that kind of thing, or maybe some combination of all 
these.
    We will probably go ahead with the legislation today 
without addressing that particular issue.
    But I think it is important to put on the record that we 
have had this discussion so that if we develop a better way of 
doing this that would be of more interest to coin collectors in 
America, that we can step into that at some point before the 
legislation goes through on the floor.
    I thought you might want to comment on that.
    Ms. Fore. Yes. We have a very popular bronze metal program 
for the Presidents, and Presidential spouses would also be very 
fine in bronze metal, both the large three-inch size as well as 
the smaller size. It would be very collectible and affordable 
and, thus, a very good educational tool in classrooms and 
across America.
    Mr. Castle. Thank you. This is just a comment, no question, 
and then I will turn to Ms. Maloney.
    But this may sound a little like a wish list, so do not 
take this as gospel or fact, but my hope is that we are going 
to sort of derive the use and commerce of the dollar coin to a 
degree with this.
    It is my hope that when little Johnny who is 9 years old 
and little Mary goes into McDonald's, they are going to insist 
on getting the Presidential coins in change. If they are going 
to go next door to Burger King instead and get them there, 
maybe they are going to have to stock them at McDonald's or 
whatever the store may be.
    Maybe we will even have the various other retail 
establishments around the country think about having a place 
where they can actually keep dollar coins because there is 
going to be hopefully enough collector demand for them so that 
the average collector, people like me who are not really coin 
collectors, hopefully, will start to drive a little bit of 
that.
    I agree that we are not going to do anything with the 
dollar bill. It is still going to be there. We do not intend to 
do anything about it. I have looked at that issue, and I do not 
intend to touch it ever again.
    But on the other hand, there is no reason they cannot 
coexist, and hopefully that will work out.
    As I said, that is a little bit of a wish list and a dream 
as opposed to potential reality, but my hunch is, based on what 
I have seen with the quarters, it might happen. So we will just 
have to see how it all works out.
    I yield to Ms. Maloney.
    Mrs. Maloney. Thank you very much.
    Dr. Fore and Mr. Ferguson, could you please comment on 
OMB's expectations for this study?
    According to the RFP that Treasury circulated for its study 
of the BEP/Mint merger issues, ``Treasury needs to address OMB 
expectations on Mint/BEP that were raised in the OMB fiscal 
year 2005 budget pass-back.''
    What specific concerns has OMB conveyed to you about the 
operations of BEP and Mint? And how do you expect this study to 
address those concerns?
    Mr. Ferguson. The OMB pass-back did not have any specific 
concerns with either of our agencies or bureaus, but rather the 
potential of cost savings that could possibly be derived by 
combining some or all of the functions of the bureau and the 
Mint, everything from the potential of administrative services 
at the headquarter level to potentially operating facilities, 
getting within a single security environment, et cetera.
    At this point, the study has just I think been going on for 
a little over a month and is due to be completed by the 
beginning of July. That may be a little premature.
    I believe that OMB and the department feel that if there is 
significant efficiencies that can be obtained that they should 
be looked at. It is something that has been looked at a number 
of times over the years, and we have not yet identified great 
savings, but there is always the potential out there.
    Mrs. Maloney. Well, Mr. Ferguson, in testimony before 
Congress in 1997, the General Accounting Office indicated that 
neither of the studies done to date on merging the operations 
of the U.S. Mint and the Bureau of Engraving and Printing nor 
any of the Treasury officials that GAO interviewed for its 
testimony provided information on the savings that would accrue 
from a merger of the two entities.
    I am all for saving money. That is one reason why I like 
the Castle-Maloney bill. It will actually make money for the 
Treasury. I think that is a good thing, particularly when you 
have a $500 billion deficit.
    But in addition, the 1987 Treasury study also did not 
provide support for cost savings from a Mint/BEP merger.
    Does the Treasury Department or OMB or your office have any 
new cost-savings information, since both of these studies were 
conducted that would now justify a merger of these two 
entities?
    Maybe Dr. Fore would like to start this time.
    Ms. Fore. Well, I think what is envisioned here is that it 
be a fresh look at both of these two entities.
    We are both manufacturing bureaus, we both manufacture the 
money used in the United States. And so if there are cost 
savings, we would like to deliver those savings to the 
taxpayer.
    So that is the hope of this study, and it will be done by 
the Department of Treasury.
    Mrs. Maloney. Thank you.
    Getting to the new dollars, or the $50 and the $100 bill, 
that we are working on, what is the effectiveness of the anti-
counterfeiting features on the recently redesigned $20 bill?
    Specifically, Mr. Ferguson, did the color change really get 
to the heart of the problem, especially since so many 
counterfeits are made using computers and color printers?
    I think this is particularly important, given the testimony 
of Bruce Townsend about the high degree of counterfeiting, 
particularly outside of our country, and that Al Qaida types 
and drug dealers, et cetera, are counterfeiting it and using it 
really against our citizens and against our people.
    So we really need to really crack down on counterfeiting.
    I am stunned at these numbers. $31 million received in 
Colombia? You wonder how much went through the hands.
    So did the color really deter counterfeiting?
    Mr. Ferguson. Thank you, Congresswoman Maloney.
    With the addition of the color to the $20 and now to the 
$50, the color itself has never been claimed as a security 
feature in itself. In fact, U.S. currency maintained its lack 
of color for a number of years.
    Mrs. Maloney. Well, then why are we doing it if it does not 
deter? I thought the whole purpose was to deter counterfeiting.
    Mr. Ferguson. I am going to get to that.
    Mrs. Maloney. Okay.
    Mr. Ferguson. As I mentioned in my testimony, the hallmark 
of that design and of this design is the inclusion of this new 
system which we have worked out in conjunction with computer 
manufacturers, hardware manufacturers, and software 
manufacturers so that there is a code built into that color 
print. We had to use color, had to use offset-type printing, 
which is that type of tint printing.
    Mrs. Maloney. But this code I could not see or a 
counterfeiter. A regular person could not see it, but if you 
put it in the machine, you could see it? Is that what you are 
saying?
    Mr. Ferguson. No. When a person tries to scan the note and 
reproduce the note on a machine that has been built in the last 
few years, the machine will stop printing. It will only print a 
portion of the note. It will stop. It will tell you that the 
system does not support that type of reproduction.
    It gives you a Web site to go to, www.rulesforuse.org, 
which will tell you which country to go to. So the note cannot 
be reproduced on that type of equipment. The $20----
    Mrs. Maloney. So our note cannot be reproduced with this 
code in it. Is that what you are saying?
    Mr. Ferguson. On a system that has been manufactured and 
sold in the last couple of years.
    Mrs. Maloney. Well, I just Xeroxed a $50 and, you know, 
with the color you can really Xerox it very well.
    I just got back from Iraq. I have a counterfeit Iraqi 
dinar. I did not know when I bought it there. I thought it was 
a real one. But this has color in it. Someone just told me it 
is a counterfeit one.
    But the euro has the magnetic deal on it. When I was in 
Iraq, in Afghanistan, in Kuwait, they are all using the 
magnetic code. At first, I thought it was a decoration, and 
apparently we are paying, meaning our government is paying, to 
print the Afghani dollar or currency and the Iraqi currency, 
and they apparently are having a more sophisticated form of 
deterring counterfeiting than we have in our own country.
    So I am wondering why we do not have the same standard.
    And to a second point, because I know the Chairman likes to 
raise money for the Treasury, I have a bill in with my 
Republican colleagues that would allow our country to print 
currency for foreign countries.
    Why in the world are we giving a contract to another 
country to print currency that we are paying for, in this case 
Iraq and Afghanistan?
    By all accounts, they say this magnetic field deal is a 
deterrent and, quite frankly, I think a deterrent in 
counterfeiting has become a national security priority.
    We are always trying to fight drugs. Well, if we can crack 
down on the money, you can crack down on the drugs. You are out 
of business if you do not have the currency, and anything we 
can do to crack down on counterfeiting.
    I thought the numbers that Mr. Townsend threw out on what 
was being done overseas was incredible.
    And then, lastly, because my time is running out, the new 
dollar bill, I read in the paper and I cut it out, and it was 
in the New York Post, a big article on it yesterday--this is 
The Washington Post.
    But it said that the most counterfeited piece of currency 
in the world is our $100 bill, the U.S. $100 bill. Though we 
like to counterfeit the $20 bill here in the U.S., the $100 
bill is the most counterfeited currency in the world.
    Are we going to use this new magnetic code to, you know, 
prevent counterfeiting?
    Mr. Ferguson. Congressman Maloney, I am not exactly sure on 
the magnetic code you are talking about. We will have to check.
    I was involved somewhat with the design and production of 
that Iraqi currency, so I do know----
    Mrs. Maloney. Well, then let's just go to the euro since 
that is more well known, the strip on the euro, or the English 
note?
    Mr. Ferguson. On the issue of the $100 note, as I mentioned 
in testimony, given the type of counterfeiting that happens 
with $100s, which does tend to be international and much more 
sophisticated than the type of the digital counterfeiting that 
we see on $20s and $50s domestically, the ACD Steering 
Committee has directed us to go out for the solicitation to 
look at what additional security features are available.
    That solicitation will be out within the next two weeks on 
the street. It will be open for everyone out there with 
technology to submit so that we can in fact look at what 
technologies are available.
    We will test all those technologies looking for what will 
gives us the most efficient, against-counterfeiting, durable, 
cost-effective, good, security features that we can add to the 
$100 bill so that we can have a sophisticated, secure, well-
circulated $100 bill.
    Mrs. Maloney. All I can say--my time is up--why in the 
world are we paying to print in foreign countries a currency 
that is more secure than the one that we have here--referring 
to the Afghani bill that has a metallic code on it, like 
England and like the euro? It does not make sense.
    Mr. Castle. Thank you, Ms. Maloney.
    Do you want a response to that?
    Mrs. Maloney. Yes. Well, if he----
    Mr. Castle. Yes. Do a brief response, please.
    Mr. Ferguson. I would not necessarily agree with that 
supposition on some of those currencies being more secure than 
ours. For the counterfeiting of all those currencies, the 
statistics have to be looked at, a number of the features.
    Again, as I said in testimony, if the public is not well 
educated--some of these very sophisticated features, if the 
public does not know how to use them, are not very effective. 
You need to have this combination of good features, good public 
education and outstanding law enforcement.
    Mrs. Maloney. Well, I think this is critically important. 
Congressman Castle and I have spent a lot of time on the 
Financial Services Committee on cracking down on money 
laundering, on drug money and on the movement of terrorist 
money around the world. And if something can be done as simple 
as putting a magnetic field on it so that you cannot 
counterfeit.
    I have the Saudi money, it has that magnetic field, and 
then I have one that they tried to counterfeit. You cannot copy 
the magnetic field.
    I just would like to ask that the record remain open on 
this question so that I and others can submit further questions 
in writing.
    I truly do believe that this is a security issue. It is an 
issue of combating terrorism and drug laundering of money. 
Since counterfeiting is so prevalent, particularly in foreign 
countries, if we do not do everything to crack down on it, then 
we are not being responsible.
    Mr. Castle. The record will remain open for a while.
    Mr. Ferguson, you suggest that perhaps you could have a 
conversation, too, which might be helpful.
    Mr. Ferguson. I would certainly be available at any time.
    Mr. Castle. Good.
    All right. With that, thank you----
    Mrs. Maloney. Excuse me. I said magnetic, I meant metallic.
    Mr. Ferguson. Actually, that helps, Congresswoman, thank 
you.
    Mr. Castle. Thank you, Ms. Maloney.
    At this time, we will yield five minutes to the gentleman 
from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman.
    I actually did not come in to ask any questions about the 
$1 coin, but my lawyer background kicked in when I heard the 
testimony. Because I got the distinct impression from Ms. 
Fore's testimony and Mr. Marquardt's testimony that you did not 
necessarily think this was a good idea to be doing this coin.
    Can you just tell me whether my impression is correct or 
not? Just say yes or no.
    I do not want to get you into dutch with the Chair and the 
Ranking Member. They are not listening anyway. You can just 
whisper it.
    [Laughter.]
    You can just whisper your answer to me.
    Ms. Fore. All right, I will start.
    Mr. Watt. Yes or no?
    Ms. Fore. It will be very popular among the numismatic 
collectors, the series coin collectors, and it will be very----
    Mr. Watt. No. My was question is: Do you think this is a 
good idea or not?
    Ms. Fore. Design change is always a good idea. It 
encourages Americans to look at their money.
    Mr. Watt. So you support the $1 coin?
    I know I am putting you on the spot, but I thought that is 
why you came over here, to tell us whether you thought this was 
a good idea or not. I guess this a policy consideration, a 
political consideration.
    But it sounds to me like it is going to be terribly 
cumbersome to move this coin around. There are some real 
disadvantages.
    Am I misreading what you are saying, Mr. Marquardt?
    Mr. Marquardt. Mr. Watt, first of all, let me say our board 
does not have a position on this at all.
    Mr. Watt. Okay, well, that is fine.
    Mr. Marquardt. So our remarks today are----
    Mr. Watt. Fine, okay.
    Mr. Marquardt.--designed to provide the committee with, you 
know, in a straightforward way, technical information about 
some of the challenges.
    Mr. Watt. I appreciate it.
    Mr. Marquardt. There are also positives----
    Mr. Watt. Let me get on to what I came here for. I am 
obviously not going to get a direct answer to that question 
because this is a political hearing.
    But, Mr. Ferguson, is the $100 bill the most counterfeited 
currency in the world?
    Mr. Ferguson. I would give that question to Mr. Townsend.
    Mr. Watt. Okay. Yes or no. I am just trying to get a 
straight answer here.
    Mr. Townsend. Outside the United States, the $100 Federal 
Reserve note is the most counterfeited U.S. bank note.
    WATT: Okay, that is fine. That is the answer I am looking 
for.
    Mr. Ferguson or Mr. Townsend, is the $50 bill that we just 
produced the most secure bill that could have been 
technologically produced. Or is there something beyond that 
that we should have been doing?
    Mr. Ferguson. Mr. Watt, we believe that that is against the 
type of threat that was posed against the $50, the type of 
counterfeiting, that the package of features are the most 
effective, giving us a solid base of security, durability----
    Mr. Watt. Yes, but you keep talking about security 
enhancements and deterring when it seems to me we ought to be 
talking about preventing, if we have the capacity to prevent 
and there is technology available to make that possible.
    While it is nice to have a wonderful law enforcement 
backup, that is like saying I should not put the best security 
on my front door because there is a police station down the 
street.
    Isn't it my responsibility to make my own situation as 
secure as I can possibly make it? Isn't that our 
responsibility?
    Mr. Ferguson. Yes, sir.
    Mr. Watt. I mean, is not our currency the most 
counterfeited worldwide?
    Mr. Ferguson. Actually, I do not believe that is true, but 
I will leave that up to Mr. Townsend.
    Mr. Watt. Is an optically variable device embedded in a 
piece of currency better than what we have done with this color 
stuff, or is it not?
    Mr. Ferguson. Sir, we have an optically variable device on 
our currency.
    Mr. Watt. Can I read it?
    Mr. Ferguson. Yes. The lower number on that note--in fact, 
if I gave you this note, it changes color from copper to green.
    Mr. Watt. All right. So I could pick that up and I would be 
able to tell that that was a counterfeit in my own daily 
living?
    Mr. Ferguson. Yes. The vast majority of counterfeit notes 
do not reproduce the watermark that is in the paper, the 
security strip that is in our paper, it says USA----
    Mr. Watt. A guy in my neighborhood is going to be able to 
pick up this $50 bill and determine by looking at it whether it 
is a counterfeit, or is he not?
    Mr. Ferguson. Yes, should be able to.
    Mr. Watt. All right. So you are saying what you did on this 
$50 bill is as effective or more effective as an optically 
variable device, if you put it in there?
    Mr. Ferguson. Sir, again, it does have an optically 
variable device, that being the color-shifting ink. It has 
several features that are not reproduced by typical printing 
means in the strip and the watermark that area available for 
the public. It also has----
    Mr. Watt. Let me ask this question directly since you did 
not necessarily answer it when Ms. Maloney asked it kind of 
circuitously.
    Is our $50 bill as secure as the one that we just approved 
and are putting into circulation in Afghanistan? Isn't it a 
fact that currency is more secure than this $50 bill that we 
just made?
    Mr. Ferguson. Sir, I would have to say I am not familiar 
with Afghanistan's currency.
    Mr. Watt. Mr. Townsend?
    Mr. Ferguson. Iraqi currency, yes. Not Afghanistan's.
    Mr. Townsend. Well, if I could make a couple of 
observations, I----
    Mr. Watt. Would you mind answering my question and then 
making observations, rather than making observations instead of 
answering my question?
    Mr. Townsend. I have to tell you that the Secret Service 
does not routinely investigate cases of counterfeit Afghani 
currency. Therefore, I am not in a position to discuss its 
security features, nor do I have statistical data on how much 
it is counterfeited, nor do we have data on the counterfeiting 
of many of the world's currencies because those countries do 
not make it available to us.
    Mrs. Maloney. Would the gentleman yield?
    Believe it or not, I happen to have counterfeited Saudi 
Arabia money with the original where there is a metallic--it is 
called the optically variable device-a metallic thing shines at 
you, and, when you reproduce it, it comes out like paper.
    So I would be glad to let you look at it, if you would 
like.
    Thank you. I yield back.
    Mr. Watt. I am not trying to be argumentative, but it seems 
to me that our obligation is to try to produce the most secure 
currency that we can produce, and it does not seem to me that 
we are doing that currently.
    While this $50 bill seems to be a step to enhance the 
security, it does not seem to me that the $50 bill has gotten 
us anywhere close to the gold standard that we ought to be 
seeking to achieve to secure our currency when counterfeiting 
is such a serious issue and a growing terrorist issue and a 
growing gangster issue.
    I do not know, maybe I am missing something here. If I am, 
tell me what it is I am missing.
    Don't we want the most secure currency we can get?
    Mr. Ferguson. Yes, we do, sir. And I believe that there is 
no single security feature out there, including the ones that 
are out there, which are not counterfeited regularly. There is 
no silver bullet. There is no panacea.
    We have to look at having a layered effect, having multiple 
security features, and building a very secure design that in 
fact stops, as you said, counterfeiting, putting things in, 
working with the digital industry so that we stop 
counterfeiting before it occurs, providing features in there 
that people on the street can recognize.
    We are looking at all those features.
    As I said, we have a solicitation going on the street to 
look at all those features you mentioned, that Congresswoman 
Maloney had up there, and others that potentially could be 
added. But they have to be features that are going to last on 
the currency, features that in fact are going to add security, 
that while they may not be copied on a copying machine, cannot 
be very easily simulated with other features and, thus, in fact 
remove security from the design.
    Mr. Watt. Thank you.
    Mr. Ferguson. So we need to have a whole sophisticated 
package.
    Mr. Watt. The Chairman has told me my time is up.
    I think you are missing one very obvious thing, though, 
which is the first line of defense against counterfeiting is 
the people who receive a counterfeited piece of currency, and 
if there were some obvious way to make that determination, 
people would not accept the currency.
    Mr. Ferguson. We agree completely, Congressman.
    Mr. Castle. Thank you, Mr. Watt.
    Mr. King actually had three questions he wanted to ask, and 
I think what Ms. Maloney and Mr. Watt have asked actually 
answered two of them, and I am trying to wrap this panel up so 
we can get to the next one.
    So I am going to ask Director Ferguson the one question 
that I think is left.
    Then I do want to reinforce one or two points very briefly.
    ``The House has passed nearly identical versions of the 
foreign currency printing bill in four or five Congresses now 
with little or no action on the Senate side. We feel pretty 
strongly here that it is important for this to be signed into 
law. What plans do you have to meet with senators to get this 
legislation moving? And is there any chance that Under 
Secretary Bodman will meet with senators about it, or Under 
Secretary Designee Levy?"
    Mr. Ferguson. Thank you, Mr. Chairman.
    And I do thank this committee. We fully support that bill. 
We feel that it would be a great boon to our being able to look 
at other security features. If we had done some other 
production, we would have even more knowledge of security 
features, how they could be incorporated into U.S. currency. So 
we appreciate that.
    We are attempting to work the issue on the Senate side. I 
cannot speak for Deputy Secretary Bodman or the Secretary on 
this issue but will pass along your comments to them.
    We are meeting with the Senate Banking Committee in order 
to attempt to get this moving in committee.
    Mr. Castle. Mr. King's comments might have been more 
strength than my comments.
    I am just wondering about something Mr. Watt asked. I want 
to make sure that we are on the same page here before we get 
off on this.
    But, Director Fore, with respect to the support of the 
dollar coin, you and I have had a number of conversations about 
this, I want you to state--and I will be leading you, if you 
will--where your support level is for the Presidential $1 Coin 
Program, if you would, please.
    Ms. Fore. Coins provide many facets in an economy.
    One is for trade and commerce. So one piece that the dollar 
coin provides in our economy is as a coin that is the dollar 
denomination. We have been working diligently in the past few 
years to try to get the coin into greater circulation so that 
you receive it in your change every day. You have been hearing 
from Mr. Marquardt and myself that that is a continuing 
challenge.
    Coins also are very important to collectors. It is a 
worldwide international market. It is a source of profits for 
us and for the general treasury of the United States. Any coin 
design immensely helps that, and we hope that a coin design 
will help increase the circulation, but it cannot guarantee it.
    Coins can also be used for education. A design change is an 
enormously powerful educational tool. Children across America 
and adults across America will learn about the Presidents of 
the United States and about first spouses and what they can 
possibly contribute to their own lives, and that is a very 
powerful symbol.
    So coins have many uses in American society. They reflect 
our values and they reflect also the currency of the nation.
    So any design change is enormously popular and effective in 
the United States.
    Mr. Castle. Thank you.
    And, Mr. Marquardt, I understood exactly what Mr. Watt is 
saying because your comments hit me a little bit the same way, 
too. But I sort of interpreted a little bit differently, and 
that is that at the Fed, you have to manage inventory, you have 
to manage the speed of change and getting things out the door, 
part of inventory management, but I did not take that as 
opposition to a coin change.
    It is a question of how it is done and how it is managed 
and that kind of thing. I would just like you to expand on that 
slightly, if you would, to make sure that we are at a comfort 
level with that.
    Mr. Marquardt. Thank you, Mr. Chairman.
    As I said to Mr. Watt, our board does not have a position 
on the bill itself. What I was trying to do is present to the 
committee the technical issues, as you say. But, in general, 
one of our missions is to provide for an elastic currency. We 
work very closely with the Mint on a daily basis, and we will 
work if the bill passes. Of course, we will work closely, just 
as in the case of the nickels, the quarters, the Golden 
Dollars, with them to implement the bill.
    Mr. Castle. Okay. Well, if you will do that and keep our 
interest rates down, we will be very pleased with the 
performance of the Federal Reserve.
    I just wanted to make sure that the points are clear. 
Because, obviously, you are very significant people in this, 
and we want to make absolutely sure that we understood where 
you were.
    If there are no further questions, I would like to move 
along to the next panel. Let me thank all of you again for your 
service and for being here today, and we will take just about a 
minute break to shift name plates around and get the next panel 
up.
    Thank you.
    Okay. We are ready to proceed with the second panel. We are 
going to try to move along fairly rapidly here, so we are going 
to try to stay as close to that five minutes as we can. I may 
start ratcheting things up here simply because of the session 
on the floor, et cetera.
    However, having said that, your testimony is very valuable. 
We will go in the order in which you are seated, and we will 
start with Mr. McMahon--I have already mentioned all of you in 
the earlier introductions; I think you are all here--who is the 
East Coast director of the National Automatic Merchandising 
Association.
    Actually, you people shifted around the order almost 
entirely here.
    Mr. Noe is a coin collector and coin dealer who has served 
as the vice chairman of the Citizens Coinage Advisory 
Committee.
    Jay Johnson, a former member, is the immediate past 
director of the United States Mint, who is now director of 
Business Development for Collectors Universe.
    Mr. Tam is the cash management specialist for a public 
transit agency.
    So all your testimony is very important. We are pleased to 
have you here.
    And with that, we will start with you, Mr. McMahon.

 STATEMENT OF THOMAS C. MCMAHON, EAST COAST DIRECTOR, NATIONAL 
              AUTOMATIC MERCHANDISING ASSOCIATION

    Mr. McMahon. Thank you, Mr. Chairman.
    My name is Tom McMahon. I am senior vice president and 
chief counsel of the National Automatic Merchandising 
Association.
    I realize that we are running late, so I am going to 
summarize very briefly my statement.
    The vending industry has been a strong proponent of a 
circulating dollar coin for about 25 years.
    We very much support H.R. 3916. We think that it stands a 
pretty good chance of stirring up interest in the dollar coin, 
and we hope that it might lead to more use of that dollar coin.
    Our industry sells about $30 billion a year of food and 
beverages to the American people through vending machines. We 
think that if this legislation works and it leads to the 
circulation of more dollar coins, it could have a positive 
impact on our industry of about $1 billion per year.
    That would be about an increase of $300 million in sales 
because, right now, we lose sales to degraded or worn-out $1 
bills, and all of those sales would be captured if the American 
people had a dollar coin in their pocket or purse.
    We also spend about $700 million a year on service calls 
due to jammed bill acceptors. A lot of that cost would be 
eliminated if the American people had a circulating dollar 
coin.
    So we support the legislation because it would have a 
positive economic impact on our industry.
    We have four suggestions that we think would lead to a 
circulating dollar coin which would help our industry.
    One is enact the Presidential Coin Act of 2004. As I said 
earlier, we think it stands a good chance of stimulating 
interest in the $1 coin and getting more people to use.
    Two--and this is very important--get the Susan B. Anthony 
dollar coin out of circulation. Too many people do not know 
what it is. It is not a problem for our industry. Vending 
machines accept both the Susan B. and the Golden Dollar coins. 
But the over-the-counter retailer who wants to try the program 
ceases the program as soon as he goes to a bank and gets a role 
of coins half of which are Susan B's.
    So the second step after enacting H.R. 3916--I think that 
is the number of it--would be get the Susan B. Anthony dollar 
coin out of circulation.
    The third step that you can take to ensure the success of 
this coin is make the Golden Dollar coin available to the 
American people. And you can start with Federal buildings.
    This government cannot go to McDonald's or 7-Eleven or Wal-
Mart or anybody else in the private sector and urge them to use 
dollar coins and make coins available to their customers if the 
Federal Government itself does not do it. And, right now, 
except for stamp vending machines in post offices, it is not 
doing it.
    So that is the third step. Make the coin available and 
start with the Federal Government itself.
    And the fourth is, engage the Nation's retailers in the 
Presidential Coin Program. If Wendy's offers Presidential coins 
to its customers, and those coins bring business in the door, 
you can bet McDonald's will follow suit. And if Target offers 
Presidential coins to their customers, and those coins bring 
business in the door, you can bet Wal-mart will follow also.
    If you take those four steps, I think we will have a 
reasonably successful circulating dollar coin that will help 
our industry, and the American people will then have a 
convenient, useful, cost-efficient alternative to the $1 bill.
    Thank you.
    [The prepared statement of Thomas C. McMahon can be found 
on page 69 in the appendix.]
    Mr. Castle. Thank you, Mr. McMahon. Thank you for the 
suggestions.
    We will go down the line.
    Mr. Noe?

 STATEMENT OF THOMAS NOE, VINTAGE COINS AND COLLECTIBLES AND A 
       MEMBER OF THE CITIZENS' COINAGE ADVISORY COMMITTEE

    Mr. Noe. Thank you very much. Thank you, Chairman.
    Representative Maloney, thank you so much for letting me 
speak here today.
    Good afternoon, everyone.
    My name is Tom Noe. I am president of Vintage Coins and 
Collectibles located in Maumee, Ohio.
    As a collector of coins and other historic memorabilia 
since 1962 and a full-time numismatist, or coin dealer, for 
over 30 years, I am truly honored to address this committee on 
a number of issues related to H.R. 3916.
    Let me begin by congratulating Congressman Castle for his 
continued leadership on behalf of all of the collectors and 
dealers of United States coinage.
    I think an editorial by Beth Deisher in the March 22 issue 
of Coin World sums it up best: ``The 50 States Quarters Program 
has become the most successful coinage program in U.S. 
history.''
    I see no reason why a new circulating $1 coin depicting the 
former Presidents of the United States will not be as 
successful.
    Furthermore, the size of the dollar coin will allow larger 
images and more relief and details than that of the quarter 
dollar.
    As chairman of the Ohio Commemorative Quarter Commission, I 
learned that people do care about our coinage. We had over 
7,000 design suggestions for the Ohio quarter alone. The 
healthy debate within the state on which design to ultimately 
recommend for the governor's approval caused many citizens to 
analyze the state's rich heritage and history.
    More importantly, the increase in the U.S. collector base 
has been too large to even measure. Grandparents, parents and 
children flock to banks and coin shops looking for the newly 
minted state quarter. It has given a father and son or a mother 
and daughter a reason to collect something together. This is 
something I have not seen since my childhood over 40 years ago 
when U.S. silver coinage and the occasional Indian head penny 
or buffalo nickel were still available.
    The final point to the States Quarter Program has been the 
tremendous demand for those coins from teachers who wish to use 
all of them in their classrooms as tools to teach American 
history of all 50 States. That is why I think a $1 coin 
depicting U.S. Presidents is an idea whose time has come. What 
better way to teach children about our U.S. heritage than to 
issue four new coins annually that can be used as an impetus to 
learning?
    Another portion of 3916 I would like to address is the 
design portion.
    The ability to design a larger portrait by moving required 
dates, mint marks and mottoes to the coin's edge will enhance 
the historical significance by making the President the focal 
point of each and every coin.
    As vice chairman of the Citizens Coinage Advisory 
Committee, the number one complaint we hear from our members is 
the lack of relief and details on many of the state quarters. 
The $1 coin will give the artists and designers the ability to 
work with the U.S. Mint and their sculptors to create dramatic 
and dynamic coins we can all be proud of.
    The last area I would like to comment on is Section 4 of 
H.R. 3916, regarding the introduction of the First Spouse 
Bullion Coin Program.
    As we learned from the success of the States Quarter 
Program, U.S. citizens like new coinage and paper money.
    In a recent Internet poll, people were asked, ``What do you 
think about the new $50 design?'' With over 250,000 responses 
in a day, 80 percent said they liked it and only 4 percent 
responded that they did not like it.
    A new gold bullion coin depicting America's First Ladies 
will be very successful and a welcome change. I also project 
that the sales will be extremely high due to not only the 
design change, but also the fact that the content will be .9999 
percent pure gold.
    We will finally have a gold bullion coin to compete 
directly with the Canadian maple leaf and other world .999 
percent gold coins.
    I would be remiss if I did not take a moment to comment on 
U.S. coinage in general.
    I look at the States Quarter Program as a good start in the 
total redesign of U.S. coinage. H.R. 3916 takes it all one step 
further. This would be a great opportunity to analyze all U.S. 
coinage in regards to design, size, content and use for the 
visually impaired.
    It has been almost 100 years since the Lincoln penny was 
introduced in 1909. Let us all work together--Congress, the 
United States Mint, the dealers, the collectors and the media--
to plan the future of U.S. coinage for the next 100 years.
    In conclusion, I would like to commend the sponsors of this 
bill and offer any assistance that you might require to ensure 
the successful passage of this bill and the subsequent minting 
and marketing of these coins.
    I know I speak for the millions of collectors and thousands 
of dealers when I say that we look forward to these new coins 
and the future total redesign of all U.S. coinage.
    Mr. Chairman, thank you very much, and I would be happy to 
answer any questions.
    [The prepared statement of Thomas Noe can be found on page 
74 in the appendix.]
    Mr. Castle. Thank you, Mr. Noe, we appreciate that.
    Jay Johnson, it is a pleasure to have you back with us, 
sir.

 STATEMENT OF JAY W. JOHNSON, FORMER DIRECTOR OF THE MINT AND 
NOW DIRECTOR OF BUSINESS DEVELOPMENT, COLLECTORS UNIVERSE, INC.

    Mr. Johnson. Thank you, Mr. Chairman, Ranking Member 
Congresswoman Maloney. I thank you very much for this 
opportunity to testify before you and the committee on this 
exciting piece of legislation. And I said it is exciting 
because of reaction I have heard from coin collectors, coin 
dealers, and folks I have talked to in recent weeks since this 
legislation was announced.
    Let me say that, for the most part, all of the reaction has 
been positive. Naturally, as anyone who is involved with coin 
collectors knows, you can find a lot of varied opinions about 
any coin redesign.
    But, overall, collectors like the idea of new designs on 
U.S. coins. Many have called for redesign for years.
    What I think is an obvious goal of this legislation is more 
than just coin redesigns. The multiple goals of trying to re-
ignite the interest in coin collecting, increase the use of the 
dollar coin in regular circulation and help promoting the 
educational history of our Nation are all excellent reasons to 
make changes to a relatively new coin, like the Golden Dollar 
or the Sacagawea Dollar.
    I can tell you, as Mint Director, I made it one of my goals 
to be a booster, a promoter, a strong advocate for the Golden 
Dollar. It debuted prior to my arrival at the Mint with what we 
remember was a spectacular TV advertising campaign and 
promotion at some stores.
    Despite this--and for many other reasons, which have been 
enumerated today--the general public has not seen nor have they 
used regularly the dollar coin on a circulating basis.
    Yet, the amazing popularity of the Mint's 50 States 
Quarters Series increased the circulation, the personal 
accumulation, the collectibility and the popularity of not just 
quarters but all coins. And that is just one reason, I 
believe--one reason alone--that the dollar Presidential Coin 
Program will help to do much the same for the little-used 
Sacagawea Dollar.
    Also, as a former member, I also appreciate the sense-of-
Congress language in this legislation, which gives the Mint 
directives to promote the new Presidential dollar coins in all 
areas of commerce.
    Coin collectors--indeed, many in numismatic businesses--
have urged for years there be new designs. The 50 States 
Quarter Series proved the ultimate correctness of their views. 
It was an idea that helps generate new revenue for Federal 
coffers. It also generates new collectors who come to 
appreciate the story that new and old coins tell about our 
history.
    I also applaud the legislation for the addition of the 
bullion part of this dollar coin program and the additional 
revenues it can bring to government coffers, as well as an 
interest in innovative coinage from the U.S. Mint.
    Other mints of the world produce bullion coinage, but you 
should know the U.S. leads all the other countries in its 
bullion production and is the most prized of bullion coins.
    So new, collectible and valuable gold coins can and should 
be another source of revenue for Federal coffers.
    To those who collect U.S. gold coins, this offers another 
numismatic addition as a collectible, as well as another choice 
for gold buyers who appreciate these gold coins for their 
bullion value, their beauty and their value.
    And this concludes my testimony. I would be happy to answer 
questions.
    [The prepared statement of Hon. Jay W. Johnson can be found 
on page 54 in the appendix.]
    Mr. Castle. Thank you very much, Mr. Johnson, we appreciate 
it.
    Mr. Tam, you are the cleanup there.

STATEMENT OF CHUNG CHUNG TAM, REVENUE SYSTEMS ENGINEER, CHICAGO 
      TRANSIT AUTHORITY, REPRESENTING THE AMERICAN PUBLIC 
   TRANSPORTATION ASSOCIATION, CHAIRMAN, REVENUE MANAGEMENT 
                           COMMITTEE

    Mr. Tam. Thanks.
    Mr. Chairman and members of the subcommittee, on behalf of 
the American Public Transportation Association, APTA, thank you 
for this opportunity to testify for the Presidential $1 Coin 
Act of 2004, which would provide for the issuance of new $1 
coins and other purposes.
    My name is Chung Chung Tam. I am chair of the APTA's 
Revenue Management Committee, and I also chair APTA's Financial 
Management Committee of the Universal Transit Fare Card 
Standards Program.
    I am a revenue systems engineer with the Chicago Transit 
Authority, CTA.
    Transit systems have been longtime supporters of efforts to 
increase the use of dollar coins, and they strongly support the 
efforts of this committee in that regard. The use of dollar 
coins clearly reduces costs for operators of public transit 
systems.
    APTA's 1,500 public and private member organizations serve 
the public by providing safe, efficient and economical public 
transportation service and by working to ensure that those 
services and products support national economic, energy, 
environmental and community goals.
    APTA member organizations include public transit systems 
and commuter railroads; design, construction and finance firms; 
product and service providers; academic institutions; and State 
associations and departments of transportation.
    More than 90 percent of the people who use public 
transportation in the United States and Canada are served by 
APTA transit system members.
    Mr. Chairman, in the face of budget constraints at the 
local, State and Federal levels, the Nation's transit systems 
are operating in the most cost-effective ways they can. In the 
past, APTA was pleased to be a member of the Dollar Coin 
Coalition that advocated broader use of the dollar coin. Our 
members have backed up their rhetoric with action.
    Most transit systems around the country accept the dollar 
coin. In that regard, a September 2002 GAO report on the new 
dollar coin includes an appendix showing that 19 of the top 20 
transit systems in the country accept the dollar coin.
    Our transit system members do so for practical reasons. The 
dollar coin is very cost effective in transit operations. 
Transit systems, especially those in major metropolitan areas, 
are some of the largest processors of $1 bills in the country. 
On an annual basis, they can collect and process millions of 
pieces of currency.
    One transit system has quantified the cost of processing 
dollar bills. They determined that the cost to process $1,000 
worth of $1 bills is approximately $10.11. The cost to process 
the same amount in dollar coins is $1.22.
    The difference is that handling paper currency is much more 
labor intensive. Coin processing is more efficient due to the 
use of technology and the availability of counting machines.
    In addition, the processing of coins by fare boxes and 
vending machines is faster than bill processing. Since the 
Federal Reserve requires that paper currency be face up when 
stacked, transit agencies must stack and face all bills by 
hand.
    In addition, more agencies are procuring fare boxes which 
can validate currency and coins. This validation may increase 
boarding time on buses due to bill condition, bill rejections 
and bill jams, which could require scheduling more buses and 
increase operating costs.
    The expense of theft-deterrent equipment and associated 
resources also result in increased costs.
    If transit agencies were able to realize the cost savings 
associated with the use of dollar coins, they would be able to 
use those resources to keep fares stable and promote the 
increased use of public transportation.
    Mr. Chairman, we are thus very supportive of efforts to 
increase the use of the dollar coin. But there clearly are 
barriers to widespread use of the dollar coin, and the GAO 
report I cited earlier identifies a key one.
    The report States as follows: ``The most substantial 
barrier is the current widespread use of the dollar bill in 
everyday transactions and public resistance to begin using the 
dollar coin.''
    The report goes on to say that: ``Until individuals can see 
that the government intends to replace the dollar bill with the 
dollar coin, they will be unlikely to use the coins in everyday 
transactions.''
    Therefore, Mr. Chairman, while we support this and other 
efforts to increase the usage of the dollar coin, APTA would 
also support efforts to phase out the use of $1 bills as part 
of the effort to implement the exclusive use of $1 coins in the 
country.
    Having said that, we are supportive of efforts such as the 
Presidential $1 Dollar Coin Act of 2004, which we trust would 
increase the public's acceptance of dollar coins in general and 
thus increase the use of the dollar coins to pay for transit 
fares.
    In addition to the savings realized by public transit 
agencies and other businesses that deal in small denominations, 
there would be significant cost savings to the Nation if the $1 
bill were replaced with the $1 coin.
    Both the Federal Reserve and the GAO have projected savings 
of $456 million annually on average over 30 years, in addition 
to the savings for public transportation systems, if the dollar 
bill were replaced with the dollar coin.
    Mr. Chairman, we appreciate and thank you for your efforts 
to increase the use of $1 coins and to promote the public's 
acceptance of dollar coins in everyday use.
    Clearly, the counting and handling of paper currency is 
much greater than the cost of counting and handling coins. Just 
as clearly, increased use of dollar coins in public 
transportation systems would reduce operating costs at those 
systems and permit more of the limited resources available to 
public transit to go to improving transit service.
    We believe this legislation, which is modeled on the 
minting and introduction of the successful 50 States Quarter 
Program, has a good chance of increasing the use of dollar 
coins.
    We agree that minting coins that identify Presidents and 
their terms of service would increase awareness of our 
Presidential history and increase the popularity of the new 
coins.
    We appreciate the thoughtfulness with which you have 
developed this legislation and its objectives.
    We look forward to working with you and the members of this 
committee in advancing this legislation that could be very cost 
effective for the Nation's transit systems.
    Thank you.
    [The prepared statement of Chung Chung Tam can be found on 
page 77 in the appendix.]
    Mr. Castle. Thank you, Mr. Tam.
    Let me do a couple of things.
    One, Mr. Greenwood, a member of Congress, has written a 
letter to the Federal Reserve and a letter to Chairman King 
asking that his letter be submitted for the record. I will just 
summarize it briefly.
    It just basically expresses concerns that they have had 
with the Federal Reserve about the lack of cooperation with 
respect to obtaining of Sacagawea coins and Susan B. Anthony 
coins-a concern, by the way, I have heard otherwise.
    Without objection, it is part of the record.
    [The following information can be found on page 88 in the 
appendix.]
    We welcome Mr. Bell from Texas to the subcommittee hearing.
    We are going to go pretty fast and maybe almost waive our 
questions, unfortunately, because of several things. We are 
going to be voting shortly. We want to do the markup. Secretary 
Rumsfeld and others are coming over here at 4:30.
    So I apologize for that. I just want to say a couple of 
things. We thank you. Your testimony is of vital importance.
    I do want to ask, though, Mr. Johnson and Mr. Noe, if I 
can, to comment on something you may have heard me comment on 
to Ms. Fore, and that is, in a addition to the .9999 bullion, 
there is some discussion now of doing the spouses in a lower-
cost type of coinage that could be used for collectors items, 
part of the educational aspect of it, in addition perhaps to 
doing a limited number of bullion coins.
    Are there concerns with that? Do you embrace it? I know you 
may be hearing it for the first time today, but I would be 
interested in your almost offhand comments because you have not 
had a chance to really study it.
    Mr. Noe. Mr. Chairman, Representative Maloney, I think 
there is always concern with the low cost as far as the 
collectibility goes. I think it might be good for 
schoolchildren to be able to use these for an educational tool.
    But we found, if you go back to even 1976 when they did 
bicentennials bronze metals, that type of thing, they do not 
sell for any premium. They are probably worth considerably less 
than what they came out in 1976 for.
    So, as far as collectibility and value added down the road, 
I would say there is not a lot. Educationally, there may be 
some merit to it.
    Mr. Castle. What if you did the bullion coins, too, which 
would be the collectible part of it?
    Mr. Noe. I think the bullion coins would be important to go 
along with it. I will tell you that the bullion coins will get 
collected whereas the other issues probably will not be 
collected as readily, I would not think.
    Mr. Castle. Mr. Johnson?
    Mr. Johnson. I agree that the metals, they have the metal 
program now for the Presidents, and it is not as popular as I 
think it should be. It is a great program.
    But I think all the alternatives that you can provide in 
terms of collectibility are great for the numismatic business. 
It is something that you give a variety of choice to people. If 
you made this a coin, it would be even more popular.
    It is difficult at a half-ounce of gold to have kids have a 
collection of First Ladies. That is going to be difficult for 
children. But, you know, I do not know that that bullion 
program is aimed at children.
    As I say, I think it will increase revenues and it will 
increase interest in all aspects of the U.S. gold coin program.
    Mr. Castle. If that bullion program is aimed at children, 
they have a heck of an allowance, is all I can say.
    In the interest of time, I am not going to pursue 
questions, except I want to say to Mr. Tam, that we may want to 
get back to you on some issues of where you get your coins and 
circulation. Staff may get in touch with you on follow-up 
written questions on that particular subject.
    Mr. McMahon, as you might imagine--again, you may want to 
do this in writing as well-but we are very interested in your 
whole business's involvement in furthering the use of coins.
    You and I had that conversation before. I want to make sure 
that we are on the same wavelength if we do this, that you are 
going to be able to be helpful in that area in terms of 
advertising and the use of it. I just was not as comfortable 
with that last time as I would like to be, so we would like to 
get into that.
    But I am going to skip that for now, if we may, because it 
would take us several minutes to go through it.
    And let me just make sure that Ms. Maloney or Mr. Bell does 
not have anything they wish to ask before we go to the markup.
    Mrs. Maloney. I just want to thank particularly the 
Chairman and all of the panelists.
    And I would like to be associated with the Chairman's 
comments on the quarter program and the possibility that a 
lower-cost one would be very effective with children.
    Who would have believed that every school child in America 
is now collecting the quarters? And the most asked question I 
get from my daughters' friends, ``Can you get me this quarter? 
Can you get me that quarter? Can you get me the quarter book?"
    If this type of thing took off with schoolchildren with the 
First Ladies or with the Presidents at a lower-cost coin, it is 
true, in the past it has not worked, but it has not been 
targeted for schoolchildren. So, possibly, it would work.
    In any event, it is a very exciting field. And it is a bill 
that actually raises money for the Treasury, which is important 
in these days.
    Thank you. I yield back the balance of my time.
    Mr. Castle. Mr. Bell? Do you have any comments, sir?
    Mr. Bell. Thank you, Mr. Chairman.
    I would join with Congresswoman Maloney. My kids are 
constantly asking me can I get them a quarter. But since they 
are only 6 and 8, they are just taking the quarter and putting 
it in the gum machine and they are not collecting them as her 
kids are.
    The only question I have is to the design of the dollar 
coin and its impact on use. The bill, as its stated, a national 
survey and study by the General Accounting Office has indicated 
that many Americans who do not seek or who reject the new 
dollar coin for use in commerce would actively seek the coin if 
an attractive educational rotating design were to be struck on 
the coin.
    And that's really the only question I have for the 
panelists and perhaps in the earlier testimony addressed it, 
but I missed it.
    Has it really been a design problem? Or has it also been 
somewhat of a marketing problem in regard?
    Mr. McMahon. A marketing problem insofar as our industry is 
concerned.
    Mr. Castle. We have a problem.
    Mr. Bell. I am sorry, is there a problem with the sound 
reproduction or the----
    Mr. McMahon. Can you hear me now?
    Mr. Castle. No, something died.
    Mrs. Maloney. Just talk loud.
    Mr. Castle. Yes.
    Mrs. Maloney. Just talk loud at this point.
    Mr. Bell. Yes, we have got to keep moving. Can you answer 
it briefly and loudly?
    Mr. McMahon. Yes.
    Mr. Castle. I am sorry, Mr. McMahon, we are going to have 
to suspend.
    Mr. McMahon. Okay.
    Mr. Castle. We do need to get this straightened out. Is it 
back?
    Do you want to reiterate that or briefly summarize?
    Mr. McMahon. Yes, yes.
    If you want the coin to work, if you ever have another 
hearing on this, have someone from the retail community here 
testifying and see if you can figure out from them if they are 
going to back this program or not. If they do, the coin will 
succeed; if they don't, the coin will fail.
    Mr. Castle. I think based on that, if you have any further 
questions, it will have to be yes or no at this point.
    If not, we appreciate very much all of you testifying. It 
is of vital importance in terms of building where we are going 
on this.
    And with that we will adjourn the panel. And the 
subcommittee will turn to its markup at this point, after we 
get everybody in place.
    We will take a moment or two.
    [Whereupon, at 3:58 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             April 28, 2004


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