[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
COIN AND CURRENCY ISSUES FACING
CONGRESS: CAN WE STILL AFFORD MONEY?
=======================================================================
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 NINTH CONGRESS
SECOND SESSION
__________
JULY 19, 2006
__________
Printed for the use of the Committee on Financial Services
Serial No. 109-109
U.S. GOVERNMENT PRINTING OFFICE
31-538 WASHINGTON : 2007
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
RON PAUL, Texas JULIA CARSON, Indiana
PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
JIM RYUN, Kansas GREGORY W. MEEKS, New York
STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut JOSEPH CROWLEY, New York
VITO FOSSELLA, New York WM. LACY CLAY, Missouri
GARY G. MILLER, California STEVE ISRAEL, New York
PATRICK J. TIBERI, Ohio CAROLYN McCARTHY, New York
MARK R. KENNEDY, Minnesota JOE BACA, California
TOM FEENEY, Florida JIM MATHESON, Utah
JEB HENSARLING, Texas STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida DAVID SCOTT, Georgia
J. GRESHAM BARRETT, South Carolina ARTUR DAVIS, Alabama
KATHERINE HARRIS, Florida AL GREEN, Texas
RICK RENZI, Arizona EMANUEL CLEAVER, Missouri
JIM GERLACH, Pennsylvania MELISSA L. BEAN, Illinois
STEVAN PEARCE, New Mexico DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas GWEN MOORE, Wisconsin,
TOM PRICE, Georgia
MICHAEL G. FITZPATRICK, BERNARD SANDERS, Vermont
Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
CAMPBELL, JOHN, California
Robert U. Foster, III, Staff Director
Subcommittee on Domestic and International Monetary Policy, Trade, and
Technology
DEBORAH PRYCE, Ohio, Chair
JUDY BIGGERT, Illinois, Vice Chair CAROLYN B. MALONEY, New York
JAMES A. LEACH, Iowa BERNARD SANDERS, Vermont
MICHAEL N. CASTLE, Delaware MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma MAXINE WATERS, California
RON PAUL, Texas BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio PAUL E. KANJORSKI, Pennsylvania
DONALD A. MANZULLO, Illinois BRAD SHERMAN, California
MARK R. KENNEDY, Minnesota LUIS V. GUTIERREZ, Illinois
KATHERINE HARRIS, Florida MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas GWEN MOORE, Wisconsin
TOM PRICE, Georgia JOSEPH CROWLEY, New York
PATRICK T. McHENRY, North Carolina BARNEY FRANK, Massachusetts
MICHAEL G. OXLEY, Ohio
C O N T E N T S
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Page
Hearing held on:
July 19, 2006................................................ 1
Appendix:
July 19, 2006................................................ 47
WITNESSES
Wednesday, July 19, 2006
Bowers, Q. David, Numismatic Director, American Numismatic
Rarities, LLC.................................................. 31
Cipoletti, Christopher, Executive Director, American Numismatic
Association.................................................... 35
Deisher, Beth, Editor, Coin World Magazine....................... 33
Felix, Larry R., Director, Bureau of Engraving and Printing, U.S.
Department of the Treasury..................................... 8
Glass, Brent D., Director, National Museum of American History,
Smithsonian Institution........................................ 13
Johnson, Scott, Deputy Special Agent in Charge, Criminal
Investigative Division, U.S. Secret Service.................... 10
Lebryk, David A., Acting Director, U.S. Mint..................... 6
Roseman, Louise L., Director, Division of Reserve Bank Operations
and Payment Systems, Board of Governors of the Federal Reserve
System......................................................... 11
Weinberg, Fred, Vice Chairman, Industry Council for Tangible
Assets......................................................... 37
APPENDIX
Prepared statements:
Bowers, Q. David............................................. 48
Cipoletti, Christopher....................................... 52
Deisher, Beth................................................ 56
Felix, Larry R............................................... 72
Glass, Brent D............................................... 78
Johnson, Scott............................................... 80
Lebryk, David A.............................................. 86
Roseman, Louise L............................................ 100
Weinberg, Fred............................................... 109
Additional Material Submitted for the Record
Hon. Frank D. Lucas:
Statement of Harvey G. Stack................................. 113
Hon. Carolyn B. Maloney:
Letter to Hon. Deborah Pryce and Hon. Carolyn Maloney from
David Ganz, Ganz & Hollinger............................... 120
Hon. Deborah Pryce:
Responses to Questions Submitted to Louise L. Roseman........ 128
Responses to Questions Submitted to David A. Lebryk.......... 130
Hon. Michael Castle:
Responses to Questions Submitted to David A. Lebryk.......... 132
Hon. Frank D. Lucas:
Responses to Questions Submitted to David A. Lebryk.......... 137
Hon. Carolyn B. Maloney:
Responses to Questions Submitted to David A. Lebryk.......... 138
COIN AND CURRENCY ISSUES FACING
CONGRESS: CAN WE STILL AFFORD MONEY?
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Wednesday, July 19, 2006
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 notice, at 2:05 p.m., in
room 2128, Rayburn House Office Building, Hon. Deborah Pryce
[chairwoman of the subcommittee] presiding.
Present: Representatives Pryce, Lucas, Neugebauer, Maloney,
Sherman, and Kelly.
Chairwoman Pryce. Good afternoon. I am very pleased to
welcome all of your here today to this hearing on coin and
currency issues. I want to thank Representatives Lucas and
Castle for their support of this hearing and leadership on the
issue, and as always, my friend, Mrs. Maloney, the co-chair of
this subcommittee--the ranking member of this subcommittee, and
we act like co-chairs.
The collection of coins in our country can be a charitable
act and an education piece all at once. Legislation like my own
commemorative coin to honor the passage of the Civil Rights Act
of 1964 or Chairwoman Kelly's coin commemorating the sacrifices
disabled veterans have made for our country can be used in
remembrance, and in passing on the history of our country from
generation to generation.
Additionally, we have seen an overwhelming use and
appreciation for the States quarters program. The Mint and
Federal Reserve have done a good job of getting word out about
the quarters, and I hope they will do the same with the newly-
enacted Presidential $1 coin.
Unfortunately, with all the successes we have seen with
these programs, we are continuing to learn that our coins are
costing more to make than they are worth. While our Mint works
to produce new, less-costly coins, our Bureau of Engraving and
Printing has put its concentration on protecting our paper
currency from counterfeiting.
We welcome the new director of the BEP, Mr. Felix, here
today, and look forward to hearing from him and the other
witnesses on steps our Government, and the governments of other
countries, are taking to address similar problems with the cost
of coins and counterfeiting.
Finally, this hearing will also serve in part as a
legislative hearing on Representative Lucas's bill, H.R. 5077,
the Numismatic Rarities Certainty Coin Act of 2006.
We would like to thank our witnesses for being here today
and look forward to hearing your testimony.
Ms. Maloney?
Mrs. Maloney. I would like very much to thank Chairwoman
Deborah Pryce, and I welcome the witnesses to this hearing,
which serves as the regular oversight hearing that this
subcommittee holds each year to examine the operations of the
Mint and the Bureau of Engraving and Printing. It is also an
opportunity to address issues relating to coins and currency,
and recently passed or pending legislation in those areas.
Today we have several such issues: the implementation of
the Presidential Dollar Coin Act, a bill on which I was the
lead Democrat with Congressman Castle; the rising cost of
manufacturing the penny and the nickel; a bill introduced by
Mr. Lucas to resolve ownership of mint rarities; and a bill
introduced by Mr. Colby to eliminate both the penny and the
dollar bill.
The Presidential dollar coin bill that Mr. Castle and I
initiated was bipartisan legislation intending to be a win/win
for the taxpayers and the economy. The House passed this bill
by an overwhelming bipartisan majority, and the Senate did the
same with the same version.
The Presidential dollar coin will begin in January of 2007
with the issuance of the George Washington dollar, and continue
at the rate of four Presidents a year, until all Presidents who
have completed their term in office have been honored,
including President Bush, and at least one successor.
Through discussions with Representative Pomeroy, Indian
tribal chiefs, and women's groups, the provisions of the bill
relating to the Sacagawea dollar coin were clarified and
strengthened to make clear that Sacagawea will continue to be
honored on the dollar throughout the program and after the
program is complete.
This law was modeled on, and builds on, the remarkably
successful program of our 50 State quarter bill. Like the State
quarters, the Presidential dollar coin is expected to revive
interest in the dollar coin, educate the public about our
presidents, and make money for the taxpayers.
After 5 years, at the halfway point, the 50 State quarter
point had made $4 billion, primarily from collectors--including
my two daughters--taking the coins out of circulation so that
the Federal Reserve then buys more from the Mint.
We have similar expectations for the effect of the
individuals collecting the Presidential dollar coins. In
addition, we expect this bill will revive interest in and
encourage use of the dollar coin. To some extent, however, this
depends on the Mint and the Federal Reserve taking a strong
advocacy position in the implementation of this program. And I
will be asking those witnesses today what they are going to do
in this regard.
On the Lucas bill, I see no reason to reward collectors who
happen to have acquired coins illegally taken from the Mint. If
we want to resolve these ownership issues through legislation,
which I am not sure is a good idea when the courts are
perfectly well suited for this task, we need to do a much more
careful job of it. I would also like to ask for permission to
put into the record the comments of David Ganz, a coin expert
who has substantial, detailed information on this bill.
While I understand Mr. Colby's desire to find new ways to
reduce Government waste and make our currency more profitable,
I cannot support eliminating the penny at this time. First, I
am not persuaded that we would save money. Although the penny
does cost more than what it costs to make the penny, the nickel
also costs more than a nickel to make. According to the Mint,
the penny costs 1.4 cents and the nickel 6.4 cents. In other
words, we lose more per unit on the nickel than on the penny.
While we are not making more nickels than pennies, if we drop
the penny, we would need to make more nickels. So it is not
clear that the Mint would come out ahead financially.
Also, a study by a former Federal Reserve economist shows
that rounding hurts lower income people the most. And this
effect would be especially strong if only cash transactions are
rounded, since lower income people are most prone to be
unbanked and to rely more on cash.
That said, I will be asking the Mint and the Federal
Reserve for their views on these issues, and I hope to learn
what they are planning to do to reduce Government spending on
currency. I look forward to the hearing, and I thank the
chairwoman for calling this hearing. Thank you.
Chairwoman Pryce. Thank you.
Representative Lucas?
Mr. Lucas. Thank you, Madam Chairwoman. I would like to
thank you and the ranking member for holding this hearing
today. It is extremely appropriate that we have this
opportunity to discuss these issues of numismatic importance.
And I would like to thank our witnesses for coming today. I
look forward to a complete and thorough discussion by both
panels of the numismatic and currency issues of the past and of
today, and how these issues affect the numismatic as a whole.
I have filed H.R. 5077, the Numismatic Rarities Certainty
Act, as an effort on my part to address some of our
uncertainties in present law and perhaps an opportunity to
enhance the numismatic experience for everyone, and clearly
provide some guidance to the United States Government on how to
handle some very important issues.
The bill sets a date, December 31, 1932, before which any
coin manufactured by the Mint but never properly issued will no
longer be declared Government property. It would be safe for
coin collectors to buy, to own, and to sell. Coins that were
manufactured after that date would still be considered
Government property unless the current possessor could
demonstrate legal ownership.
The Mint would be required to preserve any coins that came
into the Mint's possession under the provisions of the bill,
not destroy them, as has been the case sometimes in the past.
If a sufficient amount of a certain coin has been preserved
under the bill, the excess would be legally sold at Government
auction to coin collectors, with the proceeds going to the
Smithsonian for the preservation and display of the national
coin collection. Once these pieces have been deemed excess and
sold by the Government at auction, they would then be legally
ownable forever.
With my bill, I intend to provide certainty to coin
collectors who currently have coins that may have originally
been mysteriously manufactured or released from the U.S. Mint,
but which have been publicly sold at auction several times
since then without the Mint ever attempting to confiscate them.
Additionally, the Mint has gone after, as is famously
discussed by many, any 1933 Double Eagle that has been found,
but has ignored other coins, such as the 1913 Liberty head
nickels. The bill also directs the Secretary of the Treasury to
conduct an inventory of all coins, medals, or numismatic items
that are in the possession of the United States Government and
report back to Congress the inventory before January 31, 2007,
and every 5 years thereafter.
Again, I would like to thank our witnesses for agreeing to
appear today. I look forward to hearing from the Mint about
their thoughts on my proposed legislation. As for the
Smithsonian, I would like to thank them for their efforts in
preserving the national coin collection, the largest numismatic
collection in the world.
And I am very curious about what plans the Smithsonian has
for the national collection if my legislation were to pass and
a funding stream could be created. It is a tragedy that due to
limited resources, the collection is not currently in permanent
display.
Finally, I look forward to hearing from the numismatic
experts assembled for the second panel. This should be a
fascinating hearing.
Thank you, Madam Chairwoman.
Chairwoman Pryce. Mrs. Kelly, do you have a statement?
Mrs. Kelly. Thank you, Madam Chairwoman. I appreciate you
holding this hearing.
As a representative of the Nation's newest Mint at West
Point, I am keenly interested in ensuring that our circulating
coinage meets today's needs while numismatic products remain
the most commercially appealing in the world. This committee,
with your support, passed the Presidential Dollar Coin Act that
authorized the production of the new $50 gold Buffalo coins at
West Point. These .999 pure gold coins celebrate the numismatic
heritage of the famous Buffalo nickel while meeting the world's
needs for pure gold bullion coins for savings and investment.
I am also thankful for your comments in support of H.R.
1951, which would pay homage to our Nation's disabled veterans
in two very important ways. First, it would mint a coin
depicting a veteran disabled for life while defending his or
her country. Second, the proceeds from the sale of the coin
will go toward helping to plan, design, and construct a
memorial for disabled veterans here in Washington, D.C.
This is a long-overdue tribute. There are over three
million living disabled veterans in the United States, and the
sacrifices that they have made to protect our freedom can never
be repaid. They should be remembered and they should be
honored. And this is a tribute that is a very timely one
because there are over 16,000 U.S. soldiers who have been
wounded fighting the current global war on terror.
Congress approved this national memorial to be built in
October of 2000 with the passage of Public Law 106-348. The law
created the American Veterans Disabled for Life Memorial
Foundation to see to the construction of the memorial. The
foundation's work is important, but it is not yet complete.
They have raised quite a bit of money for it, but this will
help. The coin will help. And when they are finished, they will
have created a memorial that is long overdue to pay tribute to
the Nation's veterans who have returned from the battlefield
bearing the scars of war.
H.R. 1951 currently has over 180 co-sponsors. I urge all of
the members who are present here who have not co-sponsored this
to do so soon so we can allow this legislation to move forward.
I thank you again, Madam Chairwoman. I look forward to a
very interesting hearing today, and I look forward to hearing
from our witnesses. Thank you.
Chairwoman Pryce. Thank you all.
I will now introduce our panel and ask that, without
objection, your written statements will be made a part of the
record. Each of you will be recognized in the order of
introduction for a 5-minute summary of your testimony.
We have with us today David Lebryk, the Deputy Director of
the United States Mint. He is responsible for the day-to-day
operations of the world's largest manufacturer of coins,
medals, and coin products, with operations in San Francisco,
Denver, Philadelphia, West Point, Fort Knox, and the District
of Columbia. Welcome.
And Larry Felix, the Director of the Bureau of Engraving
and Printing. As Director, Mr. Felix is responsible for the
overall operations of the Bureau in the production of U.S.
currency and other Government securities documents. Welcome.
Also, Scott Johnson, the Deputy Special Agent in Charge,
Criminal Investigative Division, U.S. Secret Service. His areas
of responsibility include supervision of all domestic and
foreign Secret Service criminal investigations, as well as
liaison with other Government agencies and local law
enforcement with the Secret Service. Thank you.
And Louise Roseman, the Director of the Division of Reserve
Bank Operations and Payment Systems, Board of Governors of the
Federal Reserve System, which oversees the Federal Reserve
Bank's provision of financial services to depository
institutions, fiscal agency services to the Treasury, and other
Government agencies in significant support functions. Welcome.
And last, but not least, Brent Glass, the Director of the
National Museum of American History, Smithsonian Institute.
From 1987 to 2002, he served as the executive director of the
Pennsylvania Historical and Museum Commission, the largest
public history program in the Nation. He has served on the U.S.
National Historical Publications and Records Commission and on
the council of the American Association for State and Local
History.
Welcome to all of you. Once again, you can summarize your
statements, and you will all be given 5 minutes. And Mr.
Lebryk, we will begin with you. Thank you all.
STATEMENT OF DAVID A. LEBRYK, ACTING DIRECTOR, U.S. MINT
Mr. Lebryk. Chairwoman Pryce, Representative Maloney, and
members of the subcommittee, the United States Mint welcomes
this opportunity to report to you today. I am pleased to say
the United States Mint has never been busier, with 35 new coins
at some stage of design and production, and manufacturing an
average of 70 million coins per day. Thank you for keeping us
busy.
In the past year, we have launched many popular coin
programs and coins that you have authorized--five State
quarters, the final two nickels in the Westward Journey Nickel
Series, the John Marshall and Benjamin Franklin commemorative
coins, the sold-out Marine Corps commemorative coins, and the
American Legacy set.
Most recently we have introduced the 24-karat American
Buffalo Gold Proof Coin and Bullion. We are particularly proud
of this program, executed and introduced to the public in less
than 6 months from the enactment of the bill. The men and women
of the United States Mint at West Point have done a fabulous
job in executing this program, and I brought samples, not to
keep, but if you would like to take a look at the proof and the
bullion, you are welcome to take a look at them as we are going
through our testimony.
As of this morning, we have sold over 320,000 ounces of 24-
karat gold, generating more than $200 million in revenue. That
is a remarkable introduction, and remarkably successful in such
a short period of time, since June 22nd.
Despite rising base metal prices, the United States Mint
has increased total revenue and cut costs and made its products
more accessible to Americans. In Fiscal Year 2005, the United
States Mint transferred $775 million to the Treasury General
Fund, an increase of $110 million from the previous year.
Despite the increased spike in prices, we expect to transfer
close to $800 million to the Treasury General Fund this year.
We have done that with a focus on efficiency and cost
reduction throughout the United States Mint. In the last 2
years, for example, we have increased our manufacturing
efficiency by 26 percent and we have cut our General and
Administrative expenses by 13 percent. In response to lower
production of circulating coins, we have had staffing levels go
from a peak of 2,800 FTE's in 2000, to 1,933 FTE's as of this
morning.
We have improved by between 21 and 141 days the time it
takes to introduce our products to market. In the last 6 years,
we have been among the top agencies in customer service and
customer satisfaction. The United States Mint has received 12
clean audits, and we reduced our lost time accidents from 5 in
the year 2000 to .8 as of this morning. In 2005, our
Philadelphia facility won an award for safety, the top award
OSHA gives. And we recently received a White House Closing the
Circle Award for environmental management.
Last month we launched the 38th quarter in the 50 State
Quarters Program. More than 140 million Americans are now
collecting these coins, and we are now down to the last twelve
States. There are only 29 months remaining.
The United States Mint is also energetically implementing
the Presidential $1 Coin Act of 2005, and we have had to move
quickly. Within 4 short weeks of the President signing the bill
in late December of 2005, we presented design concepts for the
Presidential $1 coins and a 24-karat bullion coin to our
advisory committees. These coins and productions have proceeded
on schedule.
On June 22nd, a month ago, as I mentioned, we issued and
minted the Nation's first 24-karat American Buffalo Gold Coin.
The research and development work is completed, and the
manufacturing processes and equipment for edge lettering are
being finalized. The anti-tarnishing process for the new coins
is also finalized.
Together with the Federal Reserve, we hosted a well-
attended and well-received dollar coin users group forum on
June 8th to discuss, among other things, how to maximize
circulation and the acceptance of the Presidential dollar.
Additional forums and outreach will occur over the course of
the fall. We are also implementing a demand/acceptance study to
see if we can gauge what the demand for the new coins will be,
and this fall we will launch a public awareness and public
education campaign to make sure that Americans are aware of the
new coin.
We expect to successfully introduce the George Washington
$1 coin on or about President's Day of February 19, 2007, to
honor our Nation's Presidents. We thank the sponsors and the
Congress for the opportunity to implement this legislation. We
look forward to, and are committed to, a successful program.
I now turn to H.R. 5077, the ``Numismatic Rarities
Certainty Act of 2006.'' The most significant provision of this
bill would similarly terminate the public ownership of any
coin, medal, or numismatic item made prior to 1933 if such item
is not then in the possession of the Government.
The production and security of America's money and property
are essential to the Treasury Department's mission. We
recognize the concerns of the numismatic community, but they
are not unique.
While the United States Mint appreciates the efforts of
Congressman Lucas to lend certainty to numismatic rarities, we
are particularly concerned that this bill could transfer title
to rare antiquities and other ``national treasures'' currently
owned by the public, from the Government to the person who
happens to possess it--regardless of whether he knew it was
public property, knew it might be illegal to own, or worse,
played a role in its illegal production or distribution.
The Department of the Treasury can either support a small
fraction of the numismatic community--a community, I might add,
that is a vital stakeholder to the United States Mint--or
protect the Government's broader national interest in
protecting public property as trustee of the citizenry. The
Administration respectfully supports the latter position.
In conclusion, we are proud of the work of the men and
women of the United States Mint who strive to be good stewards
of the taxpayer's money and to fulfill our mission of producing
coins and protecting the Nation's assets. The question posed by
today's hearing is, ``Can we still afford money?'' We at the
United States Mint are determined to prove that the answer is
``yes'' to that question.
I thank you and welcome the opportunity for questions.
[The prepared statement of Mr. Lebryk can be found on page
86 of the appendix.]
Chairwoman Pryce. Well, thank you for being with us today.
And I am sorry if some of us were just a bit distracted while
we looked at that beautiful coin that you sent up here. It is
very, very lovely.
Larry Felix will be next. Mr. Felix. Welcome.
STATEMENT OF LARRY R. FELIX, DIRECTOR, BUREAU OF ENGRAVING AND
PRINTING, U.S. DEPARTMENT OF THE TREASURY
Mr. Felix. Thank you, Chairwoman Pryce, Congresswoman
Maloney, and members of the subcommittee. Thank you for holding
this hearing and inviting me to testify. I appreciate the
opportunity to report on the initiatives of the Bureau of
Engraving and Printing.
The BEP is the security printer of the United States. While
our primary product is Federal Reserve notes, we also produce
other security documents on behalf of Federal agencies. The BEP
uses state-of-the-art equipment in combination with exceptional
technical competence of the workforce, to efficiently produce
billions of Federal Reserve notes each year.
The goal of staying ahead of technological threats to our
currency rather than simply responding to existing threats
requires the Government to plan ahead and regularly develop new
designs for currency. This means that the new currency must be
in development several years before the counterfeiting threat
is projected to materialize.
In the mid-1990's, the Bureau introduced the first redesign
of U.S. currency in 65 years. The design changes were needed to
combat the emergence of a new breed of counterfeiters who were
beginning to employ computers and scanners, color copiers, and
other emerging technologies to replicate notes. All of the
notes, all of the denominations, with the exception of the $1
and $2, were redesigned. This design of currency was effective
in combating counterfeiting that existed then by making it more
difficult to produce a high quality counterfeit note.
Nevertheless, due to the increased availability of
sophisticated digital equipment, the Advanced Counterfeit
Deterrence Committee concluded that further actions were needed
to stay ahead of emerging counterfeit threats. Consequently,
U.S. currency was further enhanced with the introduction of the
current design series, commonly referred to as the 2004 series,
which features background colors and improved security
features.
The redesigned $20, $50, and $10 notes were introduced into
circulation. Recently, the Treasury Department, the BEP, and
the Federal Reserve announced that the $5 note is expected in
2008, with the new $100 note to follow. The Government has no
plans to redesign the $1 and $2 notes.
The redesigned 2004 notes contain an array of counterfeit
deterrent security features, some of which are visible and
easily recognizable to the American public, and some of which
are machine-readable only. The signature feature of this
redesigned note is, in fact, an anti-digital counterfeiting
system that was developed under the auspices of the Central
Bank Counterfeit Deterrence Group in cooperation with major
digital printer and software manufacturers.
The United States' effort on this initiative is led by the
Federal Reserve. 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 technology
digital printers and software.
This new systemic design feature heralds a vibrant and
growing partnership between the public and private sector to
protect the Nation's currency, and is intended to thwart
increasing counterfeiting of currency using digital
reprographic technology. This is a significant investment in
the future of currency and will greatly assist in preventing
counterfeiting as the anti-digital technology becomes much more
dominant in the marketplace.
In addition to the security features mentioned above, plans
for the redesigned $100 note include the addition of new overt
features intended to deter increasingly sophisticated
counterfeiting activities directed at the $100 note.
In cooperation with the Federal Reserve, the BEP
administers a public education program to support the
introduction of new currency designs. The goal of this program
is to build an adequate threshold of awareness to ensure
seamless transitions as the new currency designs are introduced
into the public.
The BEP is progressing with its solicitation to acquire
public education services over the next 5-year period. Most of
the duties associated with that contract will entail providing
educational support for the introduction of the $5 note in the
spring of 2008, and the redesigned $100 note in Fiscal Year
2009.
Public education outreach to support the $100 effort is
especially vital given that the value of $100 notes comprise
roughly 72 percent of the estimated $762 billion of outstanding
United States currency, of which, by the way, an estimated two-
thirds of which are held outside our borders.
There are a number of initiatives that the BEP is in the
process of implementing to continue to enhance efficiency and
effectiveness of the organization, such as the introduction of
the new 50-subject printing production process, and enhancing
our employee development to be able to achieve those production
capabilities.
While my tenure at the BEP is only a few months old, I am
eager to push the BEP to securely produce products of the
highest quality in the most cost-effective manner possible.
This concludes my opening remarks, Madam Chairwoman, and I
would be happy to respond to any questions you or the
subcommittee members may wish to ask.
Thank you.
[The prepared statement of Mr. Felix can be found on page
72 of the appendix.]
Chairwoman Pryce. Thank you very much, Mr. Felix.
Mr. Johnson.
STATEMENT OF SCOTT JOHNSON, DEPUTY SPECIAL AGENT IN CHARGE,
CRIMINAL INVESTIGATIVE DIVISION, U.S. SECRET SERVICE
Mr. Johnson. Good afternoon, Chairwoman Price. I would like
to thank you as well as the distinguished Ranking Member, Mrs.
Maloney, and the other members of the subcommittee for
providing an opportunity to discuss currency issues and the
trends in counterfeiting, as well as the introduction of new
Federal Reserve notes.
The United States Secret Service was established in 1965 to
protect our financial infrastructure through the investigation
of counterfeiting U.S. currency. Our mission to protect our
payment systems and financial infrastructure continues as we
mark 141 years of service to this country.
Though our agency was transferred to the Department of
Homeland Security in 2003, we continue to maintain our historic
ties in a robust partnership with the Department of the
Treasury in the safeguarding of our currency and other payment
systems.
The Secret Service strongly believes that the economic
security is a central element of homeland security. Therefore,
the safeguarding of our financial infrastructure and monetary
framework continues to be a paramount objective of our
worldwide investigative efforts.
We continue to see the expanded international use of the
U.S. dollar as the world's currency of choice. Of the
approximately $762 billion of U.S. currency in circulation, as
much as two-thirds of that amount circulates outside of our
borders, making the U.S. dollar a truly global currency. In
addition to the dollarized economies, those nations that have
adopted the U.S. dollar as their own currency, businesses and
individual interests worldwide depend upon the integrity and
the stability of the U.S. dollar.
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 U.S.
counterfeit currency activity, it is difficult to provide
precise figures detailing how much counterfeit U.S. currency is
passed on a global scale each year.
However, being the U.S. depository for the counterfeit
currency, the Secret Service received approximately $56 million
in counterfeit that was passed successfully to the U.S. public
in Fiscal Year 2005. Approximately $52.6 million in counterfeit
U.S. currency was seized last year by the United States Secret
Service and other authorities worldwide. Of this amount,
approximately $14.7 million was seized in the United States.
The remaining notes were seized overseas, with over $14.4
million seized in Colombia alone.
It is also interesting to see the different methods
utilized by counterfeiters both within the United States and
outside of our borders. Currently, more than 44 percent of all
counterfeit currency passed domestically was printed outside of
the United States using traditional offset printing techniques,
predominately offset printing. Virtually every note that was
produced overseas and passed in the United States was produced
by offset printing. In contrast, 46 percent of the counterfeit
currency passed domestically last year was produced within the
United States by individuals using digital technology such as
computers, scanners, printers, and multi-function devices.
Today, Colombia is the second largest source of counterfeit
U.S. currency in the world, accounting for approximately 14
percent, or $8 million of the $56 million in counterfeit
dollars passed in the United States. A trend has emerged that
indicates counterfeiting activity may increase in Latin America
as Colombian organized crime and others take advantage of
counterfeiting opportunities associated with the widespread use
of the U.S. dollar in Latin America.
Counterfeit printing plant suppressions and seizures in
Colombia show that a number of Colombian counterfeiters are
producing lower denomination counterfeit U.S. currency for
distribution in fully dollarized countries.
As a result of our collaborative efforts with the Colombian
national police, there has been a 56 percent reduction in
Colombian-produced counterfeit currency passed in the United
States since 2001. The collaboration with the Colombian
Government has been a success story, and the Secret Service is
eager to work with Congress to obtain the authority to continue
these efforts in Colombia and other troubled regions.
As new technologies continue to emerge, the challenges
facing law enforcement are significant as large quantities of
counterfeit currency and other obligations can be reproduced
quickly and efficiently.
Domestically, the Secret Service is attacking counterfeit
production and circulation from several fronts. First, with our
partners in the Department of the Treasury and the Federal
Reserve, we are continuing with the redesign of our currency.
We have an active role in the research, design, and
introduction of our new currency, and the Secret Service is
continually evaluating the methods currently employed by
counterfeiters and studying the cutting edge anti-
counterfeiting technology to enhance future redesigns of U.S.
currency.
The Secret Service is also continuing our public education
and training efforts both domestically and abroad. Secret
Service personnel conduct training seminars on topics such as
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 mission.
Chairwoman Pryce, this concludes my prepared remarks. I
would be pleased to answer any questions that you or the
members of the subcommittee may have.
[The prepared statement of Mr. Johnson can be found on page
80 of the appendix.]
Chairwoman Pryce. Thank you very much, Mr. Johnson.
Ms. Roseman?
STATEMENT OF LOUISE L. ROSEMAN, DIRECTOR, DIVISION OF RESERVE
BANK OPERATIONS AND PAYMENT SYSTEMS, BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
Ms. Roseman. Thank you. Madam Chairwoman, and members of
the subcommittee, thank you for inviting me to discuss Federal
Reserve activities related to currency and coin. My written
testimony provides an update on the new currency designs and
currency counterfeiting generally, in addition to some specific
coin issues. In the time I have before you today, I would like
to focus my comments on our planning for the Presidential
dollar coin program.
The Presidential Dollar Coin Act of 2005 establishes a
program under which the U.S. Mint will issue four new
Presidential dollar coin designs and a Sacagawea coin each year
starting in 2007. In February, Federal Reserve and Mint staff
began meeting regularly to establish plans for effectively
distributing the new coins. And last month, as Dave mentioned,
we hosted the first dollar coin users group forum. We will
continue to consult with a wide range of coin users to gather
ideas, advice, and information to gauge demand and anticipate
circulation obstacles.
It is unclear at this point whether the Presidential dollar
coin program will have a substantial effect on the use of
dollar coins in everyday transactions. The last redesign of the
dollar coin did not lead to a sustained increase in demand. Net
payments of dollar coins into circulation did rise sharply in
2000, but once the public satisfied its initial interest in
collecting Sacagaweas, demand has returned to historic levels.
The Sacagawea has not been successful in substantially
increasing ongoing demand because it appears that some of the
largest obstacles to dollar coin circulation don't relate to
the design. Vending machine operators, transit authorities, and
other organizations that accept payment at automated equipment
have indicated that dollar coins are less costly than dollar
notes for them.
Other sectors of the retail industry, however, have
indicated that their costs for using dollar coins would be much
higher than those associated with dollar bills. In addition,
dollar coins do not have widespread consumer acceptance.
Consumers seem to prefer to carry dollar bills rather than
weigh down their pockets with dollar coins.
A 2002 GAO study concluded that the continuing circulation
of the dollar bill is the biggest barrier to the widespread use
of the dollar coin. So should the Government eliminate the
dollar bill so the public has no choice but to use the dollar
coin? We believe, at this stage, that market forces, rather
than Government action, should determine the relative use of
the dollar bill and dollar coin in our economy, particularly
given that there is no compelling evidence that societal costs
will decrease as a result of a shift to a greater use of dollar
coins.
The Reserve Banks and the Mint currently hold large
inventories of dollar coins, enough to meet current demand for
the next three-and-a-half years. If this new program does not
spark broad use of dollar coins for everyday transactions, we
expect Federal Reserve inventories will further increase with
the issuance of each new Presidential dollar coin design.
The Presidential Dollar Coin Act requires the Treasury to
mint and issue Sacagawea coins each year in quantities equal to
no less than one-third of the total Presidential dollar coins
issued. Given our already ample inventories, which may increase
further under this program, the Reserve Banks may not need to
order more Sacagaweas from the Mint for a number of years.
If the Presidential dollar coin program does not
substantially increase demand for dollar coins in everyday
transactions, the requirement that the Mint must nonetheless
produce Sacagaweas would result in a cost to the taxpayers
without any offsetting benefits. In those circumstances, we
would strongly recommend that Congress reassess this one-third
requirement.
We are working with the Mint on how best to address the
demand for the Presidential dollar coin for ordinary commerce
as well as from casual collectors, while effectively managing
Reserve Bank inventories. For example, we are exploring options
for providing dollar coins to depository institutions in
increments that are smaller than our current standard of 2,000,
and are planning to conduct a pilot program in conjunction with
the Mint to assess the benefits of packaging dollar coins in
smaller rolls.
In addition, for about the first month after each new
Presidential dollar coin design is issued, the Reserve Banks
will suspend their normal practice of first paying previously
circulated coins to depository institutions and instead will
pay out only the new design.
In conclusion, the Federal Reserve will continue to work
with the Mint to successfully implement the Presidential dollar
coin program. More broadly, we will continue our focus on
meeting the public's demand for currency and coin in an
effective and efficient manner.
I appreciate the opportunity to discuss these issues with
you, and would be happy to answer your questions.
[The prepared statement of Ms. Roseman can be found on page
100 of the appendix.]
Chairwoman Pryce. Thank you very much, Ms. Roseman.
And Dr. Glass.
STATEMENT OF BRENT D. GLASS, DIRECTOR, NATIONAL MUSEUM OF
AMERICAN HISTORY, SMITHSONIAN INSTITUTION
Mr. Glass. Thank you. Good afternoon, and thank you,
Chairwoman Pryce, Ranking Member Maloney, and other members of
the subcommittee, for inviting me to testify before you here
today.
As you know, the legislation offered by Congressman Frank
Lucas, H.R. 5077, the Numismatic Rarities Certainty Act of
2006, would require that the proceeds from a Government coin
auction be deposited in an endowment fund for the National
Numismatic Collection at the Smithsonian. The purpose of my
testimony today is to tell you about this collection, and how
these proceeds would be used if we were to receive them.
The National Numismatic Collection is one of the largest
numismatic collections in the world, and is the largest in
North America. Located in the National Museum of American
History, the collection includes approximately 1.6 million
objects, more than 450,000 coins, medals, and decorations, and
1.1 million pieces of paper in the collection highlight the
numismatic history of the world.
Also, the collection contains many great rarities, from the
earliest coins created 2,700 years ago up to the latest
innovations in electronic monetary exchange, as well as
fascinating objects such as beads, wampum, and other
commodities once used as money.
The collection's emphasis is the development of money and
medals in the United States. The core of the United States
collection came to the Smithsonian during the 1920's from the
United States Mint, and includes many exceptional rarities.
Later transfer to the museum from the U.S. Mint included two
examples of the world's most valuable coin, the 1933 Double
Eagle.
It is also important to note at this time that the museum
is going through a major transformation. We are about to
undergo a renovation. Beginning in September, the museum will
close for approximately 2 years. That will allow us to make
some important architectural changes and to replace critical
infrastructure in the museum, as well as develop a new gallery
for the Star Spangled Banner, the flag that inspired our
National Anthem.
In August 2004, initial preparations for this renovation
required us to close the History of Money and Medals
exhibition, which had been home to a small portion of the coin
and currency collection for over 40 years. However, this
closing of the gallery, the coin and currency gallery, actually
created more opportunities for us to display and to use the
collection in new ways that we think are more meaningful and
engaging to our visitors.
For example, several of the coins that had formerly been in
the Hall of Money and Medals, as well as some that had not been
on view for years, are now in a new exhibition called Legendary
Coins and Currency, which is on display through March 2007 in
the Smithsonian Castle. This exhibit contains 56 objects,
including coins, bills, medals, and captivating oddities, while
a companion Web site allows the museum to reach audiences far
beyond those who come to Washington, D.C. With the help of
private funding from the numismatic community, we are
initiating a new traveling exhibition program beginning this
August, when a selection of objects under the title Frontier
Gold will be on view at the American Numismatic Association's
convention in Denver. Other displays will travel in 2007 to
numismatic conferences in Orlando, St. Louis, and Baltimore, so
that more Americans, especially young audiences, can learn
about these coins and currency and their history.
To facilitate the traveling exhibitions, as well as other
plans for the numismatic collection, we would like to establish
a National Numismatic Collection Endowment to provide a
dedicated funding source for the preservation, continued
security, and display of these national treasures. The size of
this endowment is proposed at $10 million. Importantly, any
funds directed to the Smithsonian as a result of the
legislation offered by Mr. Lucas would be made part of this
endowment, and hopefully would help us reach and even surpass
this fundraising goal.
Funding from an endowment would allow us to hire additional
curatorial and administrative staff to oversee the collection,
present rotating exhibitions at the museum, and to collaborate
with others, such as the U.S. Mint and the American Numismatic
Association, to develop additional exhibitions that could
travel.
The funds in the endowment would allow us to pursue
opportunities to secure new objects for the collection. In
addition, we would hope to increase outreach to individuals in
communities outside of Washington, D.C., by enhancing our
existing Web site with virtual exhibitions and a searchable
database. Educational outreach and public programs, including
school curricula, symposiums, guest speakers, and visiting
scholars, would be possible with an endowment.
We at the Smithsonian know that American history cannot be
told without understanding the history of America's coins and
currency. In order to understand the American dream and
American identity, one has to know about American money and
economics. That is why it is very important to us to protect
and share the National Numismatic Collection with the American
public, a task that would be greatly supported by the funds
generated by this legislation.
Thank you, and I will be happy to answer questions.
[The prepared statement of Mr. Glass can be found on page
78 of the appendix.]
Chairwoman Pryce. Thank you very much to our whole panel
for their excellent testimony this morning.
Let me begin the questioning with Mr. Johnson. We are all
impressed with the anti-counterfeiting efforts of the Secret
Service, and this committee in the past has given the Secret
Service extra tools with which to do that job. And we are
wondering, is there anything else we can do to give you
additional tools to be helpful? Is there any new technology on
the horizon? Are there new developments that we should be aware
of, or make ourselves become aware of, as time goes on to be
helpful to you?
Mr. Johnson. Chairwoman Pryce, we are working with the
Administration at this point in time to enhance our
counterfeiting laws. If you could support those, and the
committee could support those, the Secret Service would really
appreciate that.
Chairwoman Pryce. All right. Thank you.
Ms. Roseman, I was interested to hear your testimony about
the Sacagawea coin and the mandate that a third of the new
Presidential coins be Sacagawea.
And when should that reevaluation happen?
Ms. Roseman. Well, we have been concerned for some time
that this may require the Mint to produce coins for which there
is no public demand. So it may be useful to start the
evaluation now.
But I think fairly early next year, we may start getting
more information with respect to the demand after we have gone
through a cycle of at least one or two coins to better gauge
both what depository institution ordering practices are going
to be--whether they are going to group their orders for dollar
coins that they may need during just the 1-month introductory
periods we have for each design, and maybe our orders will go
down significantly during the other 2 months before the next
design goes out.
So I think we may have some fairly early indications in the
first half of next year of what the situation is going to be
like.
Chairwoman Pryce. And what happens traditionally if there
is a glut, if there is no adjustment made? Is there a history
that tells us how to handle ths?
Ms. Roseman. I will defer to Dave on this. I am not aware
of previous legislation that required the Mint to mint
circulating coins in particular quantities. So I don't know if
there has been a precedent for this or not.
Chairwoman Pryce. Well, there being no precedent, what
would you imagine would happen?
Ms. Roseman. My best guess is that the Presidential dollar
coins will largely meet the public's demand for dollar coins
during the course of the program. We already have substantial
numbers of Sacagawea coins that are already minted. And I
suspect that there probably isn't additional demand, at least
in the next several years, to warrant minting additional
Sacagaweas, at least in any material quantity.
Chairwoman Pryce. But if the law is not changed, you would
be required to do that, and they would just sit there? Or what
would happen?
Ms. Roseman. I think that is what would happen. The Mint
would mint them and they would just sit there because there
wouldn't be a demand to have them issued.
Chairwoman Pryce. All right. That is very interesting.
Well, if you have data that would be useful to this committee,
please provide it any time that it is available.
Ms. Roseman. We will do so.
Chairwoman Pryce. Mrs. Maloney?
Mrs. Maloney. Thank you, Chairwoman Pryce.
Mr. Lebryk, I would like to ask you about a letter that the
Mint, or you, sent to Chairman Oxley earlier this year. And you
estimated the Mint would lose about $12 million on the nickel
and $20 million on the penny.
And my question is, do you have the ability to calculate
how much the Mint would lose if we were to eliminate the penny
and make more nickels?
Mr. Lebryk. We can do that calculation and get back to you
on what it would do. There would be--as you mentioned in your
opening statement, there would be a demand dynamic that would
occur, that you would move from pennies to nickels as the
lowest denomination, and that in turn would--you know, if you
are losing money on the production of that coin, it would then
have an impact along the way.
You know, with respect to the penny and the nickel, what I
would say is that metal prices have been rising significantly
over the course of the last 3 or 4 years. And in some ways, we
have not had this debate or this discussion any earlier because
the United States Mint has become so much more efficient in its
production; we have been able to offset those metal price
increases through increased efficiencies.
What we have seen recently, though, particularly in the
case of the nickel, is that nickel prices are just spiking
significantly, and that is why you are now seeing the nickel as
costing more to produce than face value as well.
Mrs. Maloney. So could you go back and get back to the
committee an analysis on whether or not the Mint would make
money as a result of eliminating the penny, but with the price
of nickel going up, in fact it might cost you more money
because then you would have to mint more nickels? Could you
look at that and get back to us?
Mr. Lebryk. We sure can. I think in your--in the letter
that I sent on May 1st, it was $20 million as it related to the
penny because of penny production levels. Seven or 8 billion
pennies are made a year. By contrast, there are only a billion
or so nickels produced every year. So the loss that we incur on
the nickel is only $12 million relative to the penny losses.
Mrs. Maloney. But if you minted more nickels, you might, in
effect, lose more money. Correct?
Mr. Lebryk. Correct.
Mrs. Maloney. So could you give us a little look at that?
Because we are all concerned about the Treasury and the
deficit, the growing deficit, that we have in the country.
I would like to ask you a little bit about the new dollar
coin. And I am very excited about it. I am a former teacher,
and I see it as a way that we can involve young people in
learning more about their Presidents, their First Ladies, the
history of this country--not just well-known Presidents, but
lesser-known Presidents, as well.
And I would like to know if you have any ideas of coming
forward with educational materials. I can tell you that in my
district, some of our teachers came forward with very creative
teaching tools with the quarter program, learning about the
States and the important parts about the States. It was
tremendously successful on all levels. And I would like to know
if you have any ideas of partnering with educational tools or
ways that we can develop an interest educationally with our
young people.
I would also like to ask you about how you are going to
market the new dollar coin. Obviously, with support for it and
packaging and distributing it to various places, you would
increase the use of it. I want to specifically mention the
success that you had with the quarter coin in partnering with
large retail establishments, such as Costco and Wal-Mart and
dime stores, so that they had them, and it helped generate the
use for it.
So I am interested in what you are going to do to promote
the dollar coin. There was one study that I read from the
Department of Defense, and that was on the dollar coin. And
they said--it was a GAO study that they did on the use of the
dollar coin earlier in the 2000 introduction. And they
literally criticized the Mint for having it in 2,000-coin bags,
and they said that this was just--the volume was too large for
their commissaries, and they would prefer to have a--they would
have used it more in the commissary if it was fewer dollars in
the bag.
So I just would like to hear your comments on how you hope
to work to bring this new dollar coin, which I am very excited
about, into the public in a way that is successful.
Mr. Lebryk. Well, I think that the drafters and the
sponsors of this bill did a wonderful job of addressing many of
the fundamental underlying issues. As you look through some of
the barriers that we face introducing a coin, the circulating
design, your mentioning about the educational value, our
ability to promote and to educate the American public and
school children about out great leaders in our Nation's
history.
Unlike the golden dollar, that provision, I think, is going
to sustain interest in the program beyond an introductory
period because you are going to have the opportunity to learn
more about succeeding Presidents as we go through the list.
The second piece I would mention is the anti-tarnishing
provision in the bill, making sure that the coin retains its
luster over a longer period of time. We have had success with
that, and we are expected that as we are moving forward
introducing the bill, that that will be fully in place and will
be successful.
Another is the packaging requirement found within the bill,
which says, during the introductory period we need to have
special packaging--that people should be able to get the coins
in unmixed rolls, or unmixed quantities, during an introductory
period, as the legislation says.
As Louise was mentioning earlier, we are now in the process
of assessing what is that right size? We had a dollar coin
users forum recently, on June 8th, in which a lot of opinions
were expressed about what is the right size. We need to do a
little bit more research and figure out exactly what is the
optimal way to deliver those coins.
We will do that at the United States Mint and wrap them in
a more limited quantity than in the 2,000 range that you have
identified.
Mrs. Maloney. Madam Chairwoman, may I respond briefly to
his comment?
On the size of the dollar coin, the first Sacagawea, it was
too close to the quarter. Everybody did not like it because
when they put it in their pocket, they mixed it up with their
quarters. And so I think you really have to pay close attention
to the size.
I thank you for your work. I think you do an incredible
job. And we are very proud of the work that you do for our
country. Thank you.
Chairwoman Pryce. Thank you.
Mr. Lucas.
Mr. Lucas. Thank you, Madam Chairwoman. And a few of the
things we have discussed, I suspect perhaps with the next panel
of sage old numismatists, we gain some insights. But it is
worth probably noting from a historical perspective, we had a
half-cent until 1857. We shrank the penny one time--sorry, the
one-cent piece--in 1857. We did away with a smaller five-cent
piece that was a half-dime. We have made changes before, so
whatever is appropriate.
Ms. Roseman, at the present level, on the Sacagaweas, what
is the monthly draw-down rate? How many are leaving the Federal
Reserve banks, on average?
Ms. Roseman. Our net payments of dollar coins are about $5
million a month.
Mr. Lucas. $5 million a month. And off the top of your
head, what is the draw-out or the payments on the one-cent
pieces?
Ms. Roseman. I think--
Mr. Lucas. Dollars or pieces, either one.
Ms. Roseman. I think that last year we may have had net
payments of about eight billion pennies.
Mr. Lucas. Okay. So on the dollar coins, if they are minted
at a rate that they are used approximately by the public, then
there is about a demand for, say, 60 million a year, taking
that 5 million and multiplying it by 12?
Ms. Roseman. Yes, the current demand has been 60 million a
year, which is about what it was in the late 1990's before the
Sacagawea coin came out, when we were using the Susan B.
Anthonys.
Mr. Lucas. Okay. Director Lebryk, for a moment to touch on
your testimony on 5077, and I say this respectfully, but I
appreciate the comments about the Mint's opposition to the bill
and issues about Government property that has been loaned or
things that are stolen. I would say, in all fairness, my
lawyers disagree with your lawyers. And in the legislative
process of drafting and crafting, we can work those kind of
things out.
Did I understand you to say, in fact or in effect, that the
Mint reserves the right to be able to seize anything at any
time that may have come from the Mint pre-1932, post-1932, if
they define it as not having properly left?
Mr. Lebryk. I would characterize that as ``recover''
because in that instance, if it has not been legally issued by
the United States Mint, it remains United States Mint/
Government property.
Mr. Lucas. So the Mint reserves the right to recover
anything that they define as not having properly left?
Anything?
Mr. Lebryk. I would mention that the enforcement arm of
this is not the United States Mint or the Treasury Department,
but is the Secret Service and the Department of Justice.
Mr. Lucas. But I would assume that the Secret Service,
being the law enforcement arm, responds to requests from the
Mint. And it would be subject to--fascinating. Anything.
Fascinating.
Let's touch for a moment on the inventory issue. You run a
very modern and efficient industrial facility generating--
creating many billions of dollars in coins. In the bill, there
is a section which in your testimony, in essence, it appears to
refer to as a duplicative process that talks about the
inventory issues.
Tell me about what kind of an inventory system the Mint
maintains now. You are an industrial plant. You have valuable
metals. You have dies. You have all sorts of artwork. You have
got a variety of things, as well as finished product. Tell me
about the inventory system that you currently use as part of
your management program.
Mr. Lebryk. As a modern manufacturing facility, our
objective is just-in-time inventory, that is, that we want to
retain as little inventory as we possibly can on our books. So
we work closely with the Federal Reserve to make sure that as
coin demand orders come in, we fill them quickly and
responsibly, and do not retain much inventory at all of
existing product.
Mr. Lucas. Well, in the popular media I have read accounts
about inquiries from different individuals and media outlets
about things. And I think they use the Freedom of Information
Act, the FOIA stuff.
Tell me about how the Mint responds to FOIA requests. Say
someone writes you a letter and asks, ``Mr. Director, do you
have any coins from pre-2005 still in your vaults or in your
holdings?'' That would come as a FOIA request.
Mr. Lebryk. Yes.
Mr. Lucas. Is it the policy of the Mint to respond to those
things and give that kind of information out?
Mr. Lebryk. That is correct. There is a body of regulation
and procedure which we follow when a FOIA request comes in to
be responsive to those requests. And there are exemptions, and
there are situations in which we can decide whether we withhold
information based on a certain standard, or whether we can
provide that information.
Mr. Lucas. So from a perspective of an inventory like this,
not only just the coins that commonly go into circulation, not
only the coins that wind up, thanks to legislative action by
Congress, for a particular purpose issued for a limited period
of time that wind up in your inventory, but you also have, I
would assume, dies and artwork from the past that were used to
create present and past pieces. You have a variety of test
strikes, those kind of things.
Is there a master list of that kind of information?
Mr. Lebryk. We keep an inventory of what--of our existing
property consistent with generally accepted accounting
principles, and that is property that is in the control of the
United States Government. We take that responsibility very
seriously.
At the same time, we keep a working inventory of dies and
the like. In fact, with respect to the 24-karat program, one of
the reasons why it was so important to have those historical
documents in hand is that as the legislation asked us to
produce the 1913 James Earl Frazier type 1 variety of the
Buffalo coin, we were able to go back to the original galvanos,
digitally scan those into our system, and it saved us a lot of
time and effort from having to recover that information from an
alternative means.
So when we have property--when we have possession of
equipment, we take an assessment about whether that property is
still of value to us or may be of value to us at some time in
the future.
Mr. Lucas. So if I write you a specific letter, as is
customary in these hearings for a period after which with
additional questions, and I were to address the question
something to the effect of, please provide me with a list of
all non-current dies that you may hold in your inventory, would
it be possible for you to respond to me with an accounting like
that?
Mr. Lebryk. In the same way that we account for our
property--if you asked me how many machines we had, how many
Schuler presses we had, how many dies that we had and the like,
we have the obligation to protect that property.
Mr. Lucas. Of course.
Mr. Lebryk. How easy it would be for us to come up with a
quick inventory for you, I just don't know.
Mr. Lucas. Fascinating. Because after--Madam Chairwoman,
could I indulge you for an additional period of time?
Chairwoman Pryce. Let's indulge for 2 more minutes. Do we
have consent to do that?
Mr. Lucas. Or after my colleague has--our colleague has had
an opportunity to ask his questions, come back again?
Chairwoman Pryce. Certainly. That is fine with me.
Let's go to Mr. Neugebauer, who has been very patient. Then
we will go to Mr. Sherman, who is just getting his breath.
Mr. Neugebauer. Thank you, Madam Chairwoman.
First, to Mr. Felix, I have had an opportunity to go over
to the engraving operation that you have here. And I guess it
is probably one of the few Government agencies that makes money
faster than they can spend it.
[Laughter]
Mr. Neugebauer. I want to go to Mr. Lebryk. I want to make
sure I am clear about this. Now, I am a customer, and I buy the
gold eagles. I like the gold eagles. And I may buy--I am
certainly interested in the Buffalo coin. I want to make sure,
when I buy that coin from the Mint, are you telling me that, in
fact, that still belongs to the people of the United States of
America?
Mr. Lebryk. No. We--by the way, I am a customer as well, so
when I purchase a coin, I also purchase it directly from the
Mint. When we lawfully issue a coin and sell it, and you
purchase it with legal tender, it is now your coin.
The issue, I think, that is being discussed here is if we
have never lawfully issued a coin, at which point it should
remain in the possession of the United States Government and
the American people?
Mr. Neugebauer. How do you not lawfully issue a coin?
Mr. Lebryk. Through theft. In the case of the 1933 Double
Eagle, there was a theft that occurred. President Franklin
Delano Roosevelt said it was illegal to hold those coins at
that time. And subsequent courts determined that it was
Government property and remained Government property.
Mr. Neugebauer. By the way, I do want to complement the
Mint because they are very user-friendly, and I have found it
to be a pleasure to do business with you.
So when I have been with a good friend from Oklahoma and
talk about his bill of arbitrarily setting--1933, I believe, is
the date--does that mean coins that were in circulation? Like I
used to collect pennies, for example. And so if I had a penny
collection, are we saying that from 1933 on, the American
people share ownership of that coin set with me? Is that what
we are saying?
Mr. Lebryk. If we lawfully issued any of those coins, then
they are the possession of the person who holds them. The issue
here is whether something is unlawfully being held, as is the
case if someone stole your automobile. You would expect to be
able to recover that automobile free of legal action.
Mr. Neugebauer. Okay. So for all the people out there
listening, if you have been collecting coins and you are going
to collect some of the Presidential coins, they are going to be
your coins and we don't have to worry about the Federal
Government--
Mr. Lebryk. That is correct.
Mr. Neugebauer. I am glad we--
Mr. Lucas. Would the gentleman yield for one moment?
Mr. Neugebauer. Yes.
Mr. Lucas. But if you paid several million dollars for a
1913 Liberty Head nickel, you might think about it.
Mr. Neugebauer. Well, I am a collector, but not that kind
of collector.
[Laughter]
Mr. Neugebauer. I wouldn't mind someone showing me the
money, so to speak.
But I want to go to Ms. Roseman. This penny/nickel issue,
with the debit cards and ATM's and credit cards and--you know,
I go--well, sometimes I write one check a month, and I carry
money around that is getting old because I am using credit
cards just for about everything, or debit cards. Is that
reducing the demand for coinage that the Federal Reserve needs?
Or if you were to start graphing that, can you shed some light
on that?
Ms. Roseman. You know, it is interesting. You are right.
There has been a very high growth in the number of electronic
payments in this country, particularly over the last 10 years.
Back in the mid-1990's, Americans wrote about 50 billion
checks a year. Now it is roughly 30 billion a year. It is still
a large number, but declining due to the increasing use of
electronic payments.
We suspect that this trend is also making some inroads, and
may continue to make some inroads, in the domestic use of cash.
The card companies are now focusing on signing up merchants
that primarily accept cash, such as fast food chains.
I don't think people will stop using coins and cash
altogether by any means, but there may be some either lessened
growth rate or maybe a slight decline in the usage as these
instruments continue to expand into different kinds of
retailers who don't have them today, and consumers get more and
more comfortable making transactions by card or other
electronic means rather than by cash.
Mr. Neugebauer. Mr. Lebryk, just one short question. As I
remember, there was a penny that was not copper. It was in the
1940's or 1950's or something?
Mr. Lebryk. Yes.
Mr. Neugebauer. Yes. And have we explored, you know,
alternatives of making--I mean, you know, a lot of people don't
even know a nickel maybe is made out of nickel or--I mean,
obviously I think a lot of people know that a penny is copper.
But, I mean, I know in other countries that I have been in,
they are using--
Mr. Sherman. If the gentleman will yield, I believe a penny
is not made out of copper. It is chiefly zinc.
Mr. Neugebauer. Maybe so. So you see there what I am
saying?
Mr. Sherman. Ninety-seven and a half percent zinc and--
Mr. Neugebauer. I rest my case. I made my own case, and
thanks to the gentleman for helping me. But, I mean, have we
explored different other metals to--
Mr. Lebryk. We have. And about two-and-a-half years ago, we
undertook an extensive review of alternative metals that we
might use, and we have a variety of criteria on which we
assessed the different metals that might be alternatives.
I would mention that we at the United States Mint are a
supplier, a manufacturer of coins. There are a lot of
considerations that are beyond our control that would have to--
that the Congress would need to take into account to determine
whether they wanted us to change the composition of those
coins.
The Constitution, Article I, Section 8, grants the power to
make money or coin money to the--and determine the standards
and weights to Congress. And so if we were going to change the
composition of our coins or change the denominations or do
something with our coins, it would be an act of Congress which
we would require to do that.
So with that said, we have done our research on this issue.
We have tried to figure out what is viable. But we have not
taken into account the broader range of issues, that is, how
they will be--how they will work through commerce, the impact
on the American public, and the like.
As a result, I think, in its wisdom, the U.S. House of
Representatives has asked the GAO to look at these sets of
issues and report back, I believe, by March 7th of next year,
of looking at the research that we have done and looking at the
broader range of issues.
My view is that this is the appropriate next step--to look
at this very analytically and thoroughly to determine what is
the best thing for the American people so that the Congress has
the best available information to it as it makes that decision,
if it makes that decision.
Chairwoman Pryce. The gentleman's time is expired.
And Mr. Sherman, thank you for your patience.
Mr. Sherman. Thank you. I misspent my youth dedicated to
the proposition that collecting stamps was the superior
approach.
[Laughter]
Mr. Sherman. And I am confident that no matter what we in
Congress do, that whether you are minting dollar coins or
pennies, that there will be plenty of interesting things for
numismatists--I hope I have that right--to collect.
The big controversies that I was aware of is whether we
should abolish the penny and whether we should abolish the
paper dollar so as to popularize the dollar coin. And I want to
get to those in a second. But I was intrigued by David's
comment that perhaps, even with the existing coinage that we
have, we might want to use other metals.
Could we save much money by shifting to another metal for
any of the coins that we are issuing now?
Mr. Lebryk. Well, as we have seen, it depends on which
denomination I think you are talking about. You know, we have
seen just a huge spike in the price of our underlying metals,
whether it be zinc, copper, or nickel that is the major
components that go into our coins.
I would mention that other nations have faced this same set
of issues and are facing this same set of issues. Most
countries right now, their lowest denominations are being
produced for more than face value because of the rising
worldwide metal prices.
Other countries, when they face this issue, have really
addressed it in one of three ways. They have either accepted
the fact that they are going to have a coin that costs more
than face value because they believe the benefits--or perhaps
the public believes that is appropriate. The second option
would be to change the alloy and try to find a less expensive
metal to use to coin. And the third is to eliminate the
denomination.
Mr. Sherman. Yes. Getting back to the cheaper alloy,
because I want to talk mostly about eliminating denominations,
but what metals would be cheaper for which of the coins we
issue now that would still be a coin that would have a good
lifetime to it and perhaps the same weight that we are used to?
Mr. Lebryk. One of the things I would mention about zinc,
zinc is the--as you rightfully mention, it is 97-1/2 percent
zinc and 2-1/2 percent copper. Zinc is one of the lowest cost
metals available. Other countries have--
Mr. Sherman. Could we make our nickels or quarters or
dollar coins out of zinc? And how much money would we save if
we did? Putting aside the public acceptance issues.
Mr. Lebryk. Yes. That is technologically feasible to do
that.
Mr. Sherman. How much--would we save a million or would we
save a hundred million a year in your operations?
Mr. Lebryk. Congresswoman Maloney had an interesting
question about substitution effect. And the amount of money
that would be saved is something that we can look at more
closely, but it would be in the tens of millions range,
annually.
Mr. Sherman. Okay. Now, one of the chief arguments against
abolishing the penny is then how do you buy something for a
particular price, if it sells for 49 cents? Before I came to
Congress, I headed the largest sales tax agency in the country,
and so I am well aware that every time you buy something, the
amount you owe the merchandise has to be rounded.
In other words, if you buy something in a State with a 5
percent sales tax for 49 cents, you don't owe the merchant 49
cents. You owe them 49 cents plus 2.4 cents tax. They round to
the nearest penny, and the consumer benefits because the 2.4
cents of tax is rounded down to 2 cents. If, on the other hand,
you buy two of those items, then you owe 4.9 cents in tax. And
you round up, and you end up paying a nickel in tax.
I don't know of a single merchant, or even a single
consumer, that has ever sought to buy items in such a way so
that the tax is rounded down or up to the nearest penny. And
even if you were going to round things to the nearest nickel, I
can't imagine a merchant saying, well, we will sell apples for
so many cents, and people will tend to buy so many. And then
they will owe us so much sales tax, and it will come to 2.8
percent sales tax, and they will have to give us a nickel.
So it would--I think we need to somehow explain to the
American people that all transactions are rounded. When I was a
kid, we rounded to the nearest penny. And that penny that they
rounded to when I was a kid is worth more than today's nickel.
The other thing is whether to have a dollar--whether to
abolish a paper dollar and popularize the dollar coin. I will
point out, when I was a kid, we had a very, very popular dollar
coin. We called it a quarter. It was worth more than a dollar
now. On a good day, you could buy a gallon of gas, not for a
piece of paper money, but for something that was commonly in
your pocket.
So since the right time in the good old days is always our
own youth, I think that I should have a coin capable of
carrying more value than today's quarter, perhaps as much as
today's dollar.
I know we hear often from the transportation agencies, and
the vending machine operators, that they would like people to
carry that dollar coin. What improvements are being made in the
ability for vending machines to read dollars, not be ripped off
by counterfeiters? Do vending machines still need the dollar
coin to work effectively, or has technology overridden that
demand for a dollar coin to be popular?
Mr. Lebryk. Would you like me to try to address that?
Mr. Sherman. Yes.
Mr. Lebryk. I, by the way, make the same point to Larry all
the time about the utility of the dollar coin, having more
utility all the time than the dollar bill. As you can imagine,
he does appreciate me telling him that.
I would just mention that it is the policy of the Treasury
that we will have both a dollar coin and a dollar bill in
circulation. So at least at this point, it is not a
consideration that we would eliminate one or the other unless
Congress asks.
Mr. Sherman. But if you don't eliminate the dollar bill,
the dollar coin is just an oddity. The Post Office in this
building gave me dollar coins as change, and I have no idea how
or when I am going to spend them. But I know I am going to have
to explain to the person who takes them what they are.
Mr. Lebryk. I believe that once the dollar coin
implementation occurs, that you will have a much better chance
of using those coins more widely. And that really is the issue
right now, is that there is really a chicken-and-egg problem
right now, which is that the coins are not available because
there is not a demand, and that there is not a demand because
they are not available.
And I think that as we move forward with the implementation
and our objective is to make them more readily available--
Mr. Sherman. Are they distinguishable sufficiently from a
quarter? And I assume you have thought of putting a hole in
them so that they would be distinguished from a quarter. Is
there resistance to using them because--I know you have the
serrated versus the non-serrated edges. And they are a goldish,
copperish color rather than a quarter. They still--I could
still confuse them for a quarter. Is that a problem that you
are running into, and have you fully dismissed the idea of
putting a hole in the coin?
Mr. Lebryk. We will faithfully execute the legislation as
it is written right now, which is it does require that we
continue to use the same material and the same characteristics
as the existing golden dollar for the new Presidential dollar.
I do want to get back to your question, though, about
vending machines. And yes--
Mr. Sherman. Wait. Going back to this question, do you face
difficulty in popular acceptance because people feel that the
dollar coin is too much like a quarter, too easy to confuse?
Mr. Lebryk. We have not seen that as a barrier with the
golden dollar. It was more of a barrier with the Susan B.
Anthony because of the color. And with the anti-tarnishing
provision that is in this bill, we believe that there will
continue to remain a luster to the coin that will readily
distinguish it from the quarter.
But getting back to your question on the vending machine,
yes. The vending machine industry is very interested in us
introducing this bill because they would in fact--and the
transit authorities because it is less expensive, as Louise
mentioned, for them to use coins in transactions.
I would mention, though, something that is on the horizon
that came out on the dollar coin users forum is that most of
the transition authorities right now, most of the areas that
have historically been the purview of coins, are increasingly
becoming more receptive to electronic transactions--they are
becoming the preferred way for those authorities to operate.
So even today, on the way here, on the street corner in
Washington, D.C., there is a new Connector bus that is
available to people to move them from Capitol Hill to
Georgetown. On the street corner, you can buy a token for the
bus with a credit or debit card right now. You can pay parking
tickets with credit or debit cards in many places. You can go
to laundromats and use credit cards and debit cards. There are
fewer pay phones now, and even toll booths now accept
electronic means of payment. In the dollar coin user forum, it
was interesting to hear the transit authorities say that they
are charging a premium for cash transactions over credit card
transactions.
Mr. Lucas. [presiding] The gentleman's time has expired.
The Chair now turns to the gentlelady from New York.
Mrs. Kelly. Thank you, Mr. Chairman.
Mr. Lebryk, in 2002, the $20 Double Eagle auctioned off by
Sotheby's was described by the Mint as the only--the Mint
described it as the only 1933 Double Eagle that would ever be
authorized for private ownership.
I wonder if you could explain to the committee how ten 1933
Double Eagles recently that were recovered by the Secret
Service--and they were stolen, apparently, from the
Government--why allowing them to be sold would encourage theft
from the U.S. taxpayer.
Mr. Lebryk. When we reached a settlement regarding the
Double Eagle you mentioned, the one that was auctioned, we very
specifically in the agreement stated that the settlement shall
not be deemed to have any precedential significance or effect,
legal or otherwise, on any other coin in the United States,
including any other 1933 Double Eagle that may exist. We were
not aware of any additional Double Eagles that existed at that
time.
As a matter of policy, we stated at the same time that we
would not--we did not intend to monetize, issue, or auction any
additional coins that would be--that might be recovered. My
view is that when the United States Government makes a
statement, it is important for us to uphold our word. And so as
we looked at recovering the 10 Double Eagles that came to our
attention last year, we should remain true to our word.
And I think that these coins are the property of the
American people. And as a result, the appropriate disposition
of those coins is with the American people.
Mrs. Kelly. By that you mean in your Treasury?
Mr. Lebryk. We believe that there are opportunities to
display these coins and make them available to the American
public so they, too, can--
Mrs. Kelly. When you say, ``making them available,'' are
you talking about sale?
Mr. Lebryk. No. We do not intend to sell, auction, or
monetize the coins.
Mrs. Kelly. So your statement that it was--the 1933 coin
that Sotheby's sold was the only one that would ever be
authorized for private ownership--
Mr. Lebryk. Correct.
Mrs. Kelly.--you still hold by that?
Mr. Lebryk. Correct.
Mrs. Kelly. Okay. Just checking.
I wanted to ask you, we talked--I talked and you talked
about the Buffalo gold coin. And I wonder what you see for the
long-term potential for the U.S. Mint at West Point. It is a
wonderful Mint, and it has just such dedicated workers.
Mr. Lebryk. They are among the finest public servants in
Government. And that is one of my favorite visits. I know it is
one of your favorite visits, too, to visit that facility to see
the strength and the dedication of the workers within that
facility.
The 24-karat bullion program is a wonderful thing for the
United States Mint. It is wonderful for the United States Mint,
but I think that it is probably more important to say it is a
good thing for the American public. We produce bullion coins
for those people who choose to hold gold or precious metals.
We don't make a recommendation whether they should or they
shouldn't. But if they choose to hold it, we want to make sure
that we produce a beautiful product that has the guarantee of
the United States Government behind it.
It is a tribute, once again, to the men and women of the
United States Mint at West Point that they were able to execute
that program in less than 6 months. That is something we have
never done in the recent history of the United States Mint. And
that is a wonderful reflection on the dedication and quality of
the people at the United States Mint at West Point.
I should also mention there were others who were involved
in that, but they were the ones who really had to bring the
product to market.
Mrs. Kelly. Thank you. Thanks for your kind words on that.
I want to ask Agent Johnson, I have been concerned about
the problem of North Korea counterfeiting U.S. currency. I
don't think it has gotten anywhere near the amount of
attention, and as we are able--as we dry up legitimate sources
of money transfer, these counterfeit areas where we--like in
North Korea, become extremely much more important.
I want to know what progress you have made in the
counterfeiting agenda with regard to the Financial Action Task
Force. And are you getting where you need to get with regard to
North Korea's counterfeiting?
Mr. Johnson. Ms. Kelly, we found our first Supernote in
1989, and hundreds of personnel from the Secret Service have
worked this investigation for 16 years. We have determined that
the Supernote is being produced in North Korea.
We do have a--our agency was founded in 1865. We have an
outstanding relationship with the Department of the Treasury.
We have special agents assigned over there who work with
Treasury. And we have worked with the task force in the past.
Mrs. Kelly. Are you getting where you need to go with
regard to North Korea?
Mr. Johnson. We are getting to where we need to go with
North Korea. It is a quality versus quantity issue. There is
$762 billion of U.S. currency in circulation, and less than 1/
10th of 1 percent is counterfeit. In the history of the
Supernote, we have only seen a little less than $50 million.
Mrs. Kelly. Okay. Secretary Levey had testified to this
committee about the Banco Delta Asia and its role as a
launderer of these Supernotes. It is a Chinese-controlled bank
in Macau. And when--additionally, they have apparently found
North Korean ships carrying Supernotes. They have made a lot of
repeated calls to the Chinese naval ports.
Given that, would you say it is fair to say that Communist
China has actually been an accomplice with North Korea on these
Supernotes?
Mr. Johnson. I would not like to answer that. But I will
tell you this, that if any Supernotes appear worldwide, we have
field offices all over the world. We will investigate it.
Mrs. Kelly. That is very comforting to know. Thank you.
I yield back.
Mr. Lucas. [presiding] The Chair thanks the gentlelady from
New York, and would note that our chairwoman, who is also
chairwoman of the majority conference, has been called away,
and she has asked me to sit in for her, which means that we are
going to have another round. For some reason, I thought there
would be a great deal of humor seen in that response.
[Laughter]
Mr. Lucas. Ms. Roseman, to touch for a moment on another
denomination we have not discussed, do you know off the top of
your head what the draw-down rate or purchase rate or transfer
rate is on half-dollars out of the Reserve system to the Banks?
Ms. Roseman. More half-dollars are deposited into the
Federal Reserve than we pay out. In 2005, our net receipts were
17 million half-dollars.
Mr. Lucas. So then perhaps, when we talk about the one cent
pieces and the dollar coins, we need to talk about the
viability of the 50-cent piece also. My observation, not yours.
Mr. Lebryk, back for a moment to the Congresswoman from New
York's comments. So did I understand you to say that, in
effect, contrary to the expectations of an auction house, in
fact the Mint did not obligate itself to not--or did not give
up the ability at some point in the future to transact other
33's if they would become publicly known?
Mr. Lebryk. I will be very clear and say it was not our
intent to sell or auction or issue off any other 1933 Double
Eagles if they were recovered.
Mr. Lucas. There again, another example of your lawyers and
somebody's lawyers having a different perspective. Okay. All
right.
Along those lines, can you tell me what kind of standard
has been developed--and I touch back for a moment about the
Mint reserving the right to recover any coin, apparently, since
1973 that the Mint felt that was improperly issued. Have there
been standards formulated for this kind of an issue? Is this a
fly-by-the-seat-of-your-britches sort of a deal? And I hope you
say no.
Mr. Lebryk. No, it is not. In fact, there have been Supreme
Court decisions on this that are very important about the
Government's ability to dispose of Government property. There
is a famous case where a Civil War ship was sunk that was a
Confederate ship.
The Secretary of the Navy determined that he was going to
relinquish possession of that ship. The 4th Circuit Court of
Appeals determined that the Secretary of the Navy did not have
the authority, that once it was Government property, it was
always Government property, and reversed that decision.
And so unless there is specific authority, Government
property will always remain the property of the United States
Government.
Mr. Lucas. Specific authority meaning an Act of Congress?
Mr. Lebryk. Correct.
Mr. Lucas. So the same body that created your institution
can direct and guide it?
Mr. Lebryk. Correct.
Mr. Lucas. Thank you. That is very insightful. Very
insightful.
I guess at this moment, I would turn to my colleagues.
Would the gentleman from Texas have any additional questions?
Mr. Neugebauer. No. Just that I was disappointed that we
were just looking at the sample and not getting samples.
[Laughter]
Mr. Lucas. Speaking of looking at it, before we release the
panel, Mr. Glass, could you touch for just a moment--with
900,000 pieces, as you said two-and-a-half-thousand-plus years,
a couple things come to mind from people out there. And a
tremendous amount of information has come across my trail since
filing this bill from every perspective, every group, every
interest, and every seemingly potential numismatic item that
has come along in the last 200 years.
One of the questions put to me about the bill is the nature
of the pieces in your collection. Has the Smithsonian ever, as
apparently was the custom when the Mint had the collection
prior to 1920, ever traded pieces, sold pieces, that sort of
thing, out of the National Collection?
Mr. Glass. I don't believe we have ever sold pieces from
the National Collection. I think we lend items to other
museums, with the proper security, and to other associations,
with the proper security. And we would continue to do that.
We had an exhibit at the International Monetary Fund Center
of our collection, and we would continue to lend out pieces. In
Houston, the Museum of Natural History had a wonderful
exhibition on gold, and we had one of the Double Eagles on
display there, one of the two that we have.
So we would lend out--we do lend out our collection under
the proper circumstances and security and conditions. But we
have not sold any.
Mr. Lucas. Mr. Lebryk, just a couple of questions, and then
I will be done, and I appreciate the patience of the entire
panel.
Those 10 Double Eagles are, according to popular press
accounts, locked up at Fort Knox?
Mr. Lebryk. That is correct. That is part of the inventory
that we have of valuable items.
Mr. Lucas. And I wait for a more extended inventory soon.
Also in the popular press, occasionally it is discussed the
99 fine gold Sacagaweas. Where are they kept, if there is such
a thing, the dollar coins?
Mr. Lebryk. We do have some rare Sacagaweas. I don't know
about 99 fine, but we did have some Sacagaweas that were aboard
a spacecraft, a Space Shuttle. They also are at Fort Knox right
now.
Mr. Lucas. Okay. How many of those were there?
Mr. Lebryk. Someone who was at the Mint before me? I have
been at the Mint since 2003, so I don't know the exact number.
But I can certainly get that for you.
Mr. Lucas. Are those kind of things classified as trial
strikes, or how do we--where in the authority do we do that
sort of stuff?
Mr. Lebryk. I am not sure. Again, that predates me, and I
don't know the origin of those coins. I believe there are a
dozen, but I can check on that for you.
Mr. Lucas. Now, I know from my reading in the popular
media, and a number of what I consider to be fairly scholarly
journals, it appears that a variety of these interesting pieces
in the last 2 centuries have involved people who either had
access to the Mint or access to the people who were within the
Mint. And I have complete and total confidence in your staff
and all the things that have gone on.
I suppose, probably, that might reflect some of the efforts
in the past, like melting the previous 33's or other coins down
through the years that have been dispatched to the here ever
after. But from an outsider's perspective, it appears that none
of these or many of these interesting things would not have
occurred had there been clandestine effort on somebody's
behalf.
I would hope--and I will conclude my observation question
with that--I would hope that in the effort of the institution,
that it would acknowledge that this is just the things that
have happened in the past, and that good, bad, or indifferent
on how these items were created, we have an obligation to
preserve our heritage.
Mr. Lebryk. I would agree, and--
Mr. Lucas. That is a part of it.
Mr. Lebryk. I would agree. I would tell you that I think
that many in the numismatic community would tell you that we
have perhaps gotten too good at reducing error coins and
allowing coins to be removed from the United States Mint. We
have undertaken a serious effort in the 1990's, so you see very
few. And the numismatic community sometimes jokingly says we
have become too good at it.
But I would also agree with you. Our coins represent our
Nation's history. They reflect important people, places, and
events. And it is important that we preserve that heritage
because they say a lot about our culture. As Brent will tell
you, there are coins that go back thousands of years that are
of great interest to people. And they say a lot about those
societies, as our coins today say a lot about our society.
Mr. Lucas. Mr. Director, take very good care of those
unusual pieces. I suspect, whether it is through the
appropriations amendment process or a free-standing bill or an
amendment on another bill, if consensus can be achieved here,
we may help provide you with some guidance and refinement from
a statute perspective.
And with that, the committee wishes to thank the panel for
their important observations. And Mr. Felix, you are a very
lucky man today. I ask the next panel to come forward.
And while the second panel is coming forward, the Chair
would like to note that we are scheduled some time very soon,
perhaps in the next few minutes, perhaps in the next 10
minutes--the nature of Congress--to have a series of votes. And
when we break for that, we will return probably 35 minutes
later and complete the second panel's testimony. But for now, I
would like to call the second panel forward and give them the
opportunity to offer their oral testimony. And while you are
stepping up, ladies and gentlemen, we have Q. David Bowers, who
is the numismatic director of American Numismatic Rarities,
LLC, and the numismatic director of the Whitman Publishing
Company, LLC, a leading publisher of reference books on rare
coins.
We also have Christopher Cipoletti, who is executive
director of the American Numismatic Association. The ANA is the
world's largest collector organization.
Beth Deisher, editor of Coin World, the largest and most
widely circulated news weekly serving collectors of coins,
medals, and paper money.
And rounding out our witness list today, Fred Weinberg, who
serves as the vice chairman of the Industry Council for
Tangible Assets. He is past president of the Professional
Numismatics Guild, and a life member of the American Numismatic
Association.
The Chair wishes to thank this esteemed and knowledgeable
panel for coming forward, and I hope that you have survived
observing the last round of discussions, and will be able to
provide us with your insights.
And with that, Mr. Bowers, whenever you are ready.
STATEMENT OF Q. DAVID BOWERS, NUMISMATIC DIRECTOR, AMERICAN
NUMISMATIC RARITIES, LLC
Mr. Bowers. Thank you, Representative Lucas. I admire you
for your numismatic expertise and your insights. I am going to
depart from my prepared remarks for two reasons. First of all,
you all have them and you can read them--well, three reasons.
Second, the Mint staff largely left. And the third reason is
time. I would like to give others time to speak. If you are
going to vote, you are going to run out of time.
Several observations. One great observation here is a lack
of knowledge and communications between the collector community
and the Government. And I am going to point out some examples
that were brought out in testimony today.
We had the Mint Director saying never before in history--
the acting Mint director--has a coin been brought to market
within 6 months. I would like to point out that the Act of
February 21, 1857, caused the small cent to be coined, and on
March 25, 1857, the first ones reached circulation in quantity.
I think that is about two-and-a-half or 3 months. Many, many
other instances could be mentioned.
We have--as far as who owns what in the Confederate States
of America, in 1919, the United States Government took the
legal position, correctly, perhaps, that it was heir to the
property of the Confederate States of America, all the assets.
It seized from collectors Confederate paper money, saying, ``We
are the legal heir.'' That didn't get too far. But someone had
to hire a lawyer and get their paper money back. We have what I
call a great lack of definition of what is legal and what is
not.
There has been no recent court case, by the way, despite
some testimony today, saying that the 1933 Double Eagle is
illegal. No court action whatsoever that I am aware of, and I
am a student of it. There have been some agreements and
compromises, but I am not aware of any court action unless I
missed something. Okay?
We have the Mint Act of 1965, which is legislation that
says, without equivocation, that any coin struck by the United
States Mint prior to 1965 for any reason, patterns or anything
else, is legal tender and legal to hold. That is completely
ignored in all arguments.
And the upshot of this is, I believe, that what is really
needed is a liaison between the--or among the fine Congress,
and I have studied Congress legislation back to day one, the
numismatic community, and the Mint and Treasury officials.
The Mint and Treasury officials, for this testimony, have
about seven or eight errors. Another thing is the statement
made by the Mint that never before this current legislation has
anyone ever required that unnecessary coins be made. Well, we
have the Bland-Allison Act of February 28, 1878, which mandated
that hundreds of millions of unnecessary silver dollars be
made.
And these things are sort of like numismatics 101. It is
not rocket science, and I am not Albert Einstein. But I think
that our distinguished chair, Representative Pryce, and Mrs.
Maloney, whose daughters are collectors, would benefit very
greatly by, before having a presentation such as this, running
some testimony by the numismatic community and saying, ``Hey,
what do you think of this? Is this right?'' Because all of
these factual errors have come out in Government testimony, not
because of intent, but because of lack of knowledge.
Second point, guarding my time here and respecting others,
we have the Bureau of the Mint turning in $7- or $800 million
worth of profits to the Treasury Department in a nice flow in
the taxpayer's direction. We have Dr. Brent Glass, struggling
to try to raise $10 million over a period of years to help out
the Smithsonian exhibit at the same time the Mint desires, as
was said today, to get its Presidential dollars circulating,
maybe to get rid of some of those Sacagaweas, State quarters.
The Mint has advertising budgets. They spend money on
advertising. But they do not look at their own doorstep, within
a short walk away, the Smithsonian. The Smithsonian is
advertising the history and appeal of money. Maybe 1/10th of 1
percent of the numismatic profits could go to the National Coin
Collection. Dr. Glass said that they would send exhibits on the
road, and they would have seminars. This is something that is
probably less than the cost of a television campaign, but much
more productive.
And the last statement I want to make is in regards to Mint
records and access.
We have a situation, and brought up by Representative
Lucas, and I am--as a researcher, I am very aware of this. If
the Mint Director happens to be friendly, Donna Pope, for
example, and I am a qualified researcher with some academic--or
some experiential success, I would say, I would like to do some
research in the archives.
She would say, ``Be my guest. Go to Philadelphia. Take a
camera person with you, wherever you want to,'' knowing that
what I was doing or what Coin World is doing is not
antagonizing the Mint. We are not snooping on its personnel. We
are trying to educate people about coins.
The last Administration, that of Mrs. Holsman Fore, if I
wanted to look at something, the answer is, ``Well, we are too
busy. No, you can't do it. You are going to be able to do it
some time.'' And I have done absolutely no research at the Mint
for about 5 years because I am not allowed in.
And there is something wrong with this. There should be a
person at the Mint, a civil service position, who is a liaison
with the numismatic community and also could be a liaison with
the distinguished Members of Congress, just transmitting
education rather than preventing it.
I think we are working at cross-purposes. We have
Representative Lucas saying we should do one thing, saying that
his lawyers are different than yours. I think a lot of this is
unnecessary. I think we are all working in the same direction
to promote coin collecting, to promote the legacy of the United
States, and to increase numismatics.
And I can't think of anything that the people at this side
of the table want to do today that is in opposition to what
Congress wants, or what the American people want, or even, for
that matter, what the Mint wants. I think it is strictly a
matter of communication.
So I appreciate the opportunity to be here and would stay
on for questioning afterwards, and I actually commend
Representative Lucas for inviting numismatists here to what is
obviously mainly a yearly financial hearing. I think this is a
very nice opportunity. Thank you.
[The prepared statement of Mr. Bowers can be found on page
48 of the appendix.]
Mr. Lucas. Thank you, Mr. Bowers.
Ms. Deisher.
STATEMENT OF BETH DEISHER, EDITOR, COIN WORLD MAGAZINE
Ms. Deisher. Representative Lucas, and other members of the
subcommittee, I would like to thank you for inviting me to
testify today.
I have chosen to focus my prepared testimony on H.R. 5077.
Virtually everyone in the coin collecting community welcomes
the certainty that H.R. 5077 would bestow upon certain coins,
medals, and numismatic items made by, or in, the facilities of
the United States Government prior to January 1, 1933. It would
clarify the right to own and trade these historic U.S.
numismatic items, many with origins that cannot be proven or
documented today.
I would like to offer three points regarding this section
of the proposed legislation.
Number one, there needs to be a legal definition of
``issued.'' We have found this term to be used and applied in
very different ways.
Number two, there needs to be a timeframe or a statute of
limitations on items which have entered the collector
marketplace, are known to Government officials, but for which
no action has been taken by the Government to recover them. It
should allow the Government to prosecute those proven to be
involved in illegal acts, but it should not punish the
numismatic item itself.
And number three, this legislation should address burden of
proof. The burden of proof that a coin or medal or numismatic
item has been stolen or illegally removed from a Government
facility should rest on the shoulders of the Government prior
to the item being seized, or as we heard in testimony today,
recovered.
All sections of this proposed legislation are important.
But I would like to draw particular attention to Section C,
which would require an inventory of all coins, medals, or other
numismatic items in the possession of the United States
Government regardless of when such items were made or struck.
An inventory and public accounting of the Government's holdings
is critically important for the U.S. Mint's customers, the
sector of the public who purchase numismatic collectibles, so
that they may have full faith in the products that the Mint
manufactures, and certainty regarding the quantities available
to the marketplace. This is because the number of available
coins to collect is one of the primary determinants of value.
The Mint currently, in its annual report, lists only the
number of coins shipped to the Federal Reserve Bank, and the
number of coins sold, in the case of numismatic and bullion
coins. The Mint should be required to report in a permanent
form the number of coins it strikes by date and Mint facility,
whether for circulation, commemorative, bullion, or other
numismatic products. It should be required to report annually
the number of coins melted, defaced, or otherwise destroyed,
and the numbers of these items being held in inventory.
An inventory of U.S. Mint holdings is essential. Without
it, uncertainty and speculation will continue to eat away at
the integrity of the U.S. Mint's products, particularly the
numismatic offerings. Rather than an inventory mandated every 5
years beginning January 1, 2007, as proposed, an annual product
inventory concurrent with the end of the Mint's fiscal year on
September 30th would seem more logical and efficient.
During the last decade, the U.S. Mint has spent hundreds of
millions of dollars to computerize its operations and
accounting abilities. Surely that system should be capable of
identifying products in inventory on a date certain, and mint
officials should be able to report that information in a timely
manner and in a permanent document such as the annual Mint
report.
The inventory envisioned in H.R. 5077 also includes a
listing of historic artifacts and experimental items. This kind
of material, in all likelihood, is not part of the Mint's
production and numismatic marketing computer systems.
Identification in inventory of such items may take more than 1
year. Two-year inventory intervals would seem logical for this
kind of material, beginning September 30, 2008.
It is imperative that numismatic artifacts being held at
various U.S. Mint facilities be identified and inventoried, and
that such information be disseminated in a timely and permanent
format. In my written testimony, I have cited examples of
experimental pieces, plasters, galvanos, ledgers, and other
artifacts within the confines of the U.S. Mint facilities that,
without a formal inventory, are in danger of being lost to
history.
Also, the U.S. Mint has struck commemorative silver coins
since 1982, commemorative gold coins since 1984, and precious
metals bullion coins since 1986. Yet there exists no
independent public verification of the content of these coins.
Congress should immediately reinstitute the US Assay
Commission, with authorization to randomly test the weight and
fineness of coins produced by the U.S. Mint in order to ensure
that they conform to their respective legal standards. Each of
these areas I have cited cry out for certainty and
accountability. H.R. 5077 provides a vehicle that brings these
issues to you for discussion and action. We trust that you will
act wisely, decisively, and promptly.
I thank you for the opportunity to testify, and I would be
happy to answer any questions.
[The prepared statement of Ms. Deisher can be found on page
56 of the appendix.]
Mr. Lucas. Thank you for your insights.
Mr. Cipoletti?
STATEMENT OF CHRISTOPHER CIPOLETTI, EXECUTIVE DIRECTOR,
AMERICAN NUMISMATIC ASSOCIATION
Mr. Cipoletti. Thank you, Mr. Chairman. I am Chris
Cipoletti, executive director of the American Numismatic
Association. The American Numismatic Association is a federally
chartered nonprofit corporation founded in 1981 and chartered
by Congress in 1912. Our mission is to encourage and educate
people to study and collect money and related items by
promoting, preserving, and protecting the interests of those
who desire to discover and explore the world of money. The
American Numismatic Association appreciates the opportunity to
present testimony here today.
Money, in its many forms, reflects culture, art, science,
and history. In the United States, our money is a source of
documenting historic events, it reflects our values and our
culture, and it presents artistic renderings of who we are and
what is important to us as a Nation. Numismatists from around
the world have a strong interest in American money. The
production of money, with designs reflecting our history and
culture, is as important to the numismatic community today as
it always has been.
In the last several years, the diminishing exposure to
numismatics, particularly through circulating coins and paper
money, has changed, with renewed excitement in the money
produced by the United States. Much of the resurgence in
numismatics at the basic level can be attributed to the
introduction of the 50 State Quarters Program by the United
States Mint, which has created an interest in collecting that
has not been seen for decades.
The changing face of money through designs and colorization
of paper money produced by the Bureau of Engraving and Printing
has furthered the interest created by the 50 State Quarters
Program as people of all ages are now looking at and looking
for the new look of money and numismatic materials being
produced under the auspices of the Department of Treasury. With
the new efforts from the United States Mint and Bureau of
Engraving and Printing, an educational introduction to culture,
art, and history is being presented in every transaction
involving United States currency.
Money is an educational tool that allows us to learn about
the struggles in which the country has been engaged. It teaches
us about significant events that have influenced the
development of a nation. And it allows us to hold and own a
tangible asset that has value beyond the denomination of the
coin or the note. For money to be the educational tool that it
has the potential to be, it must be accessible for viewing,
research, and study.
The American Numismatic Association is supportive of H.R.
5077, introduced by Representative Lucas to address numismatic
issues. Others have, and will, comment on the specific language
of the legislation. And while the American Numismatic
Association is not specifically commenting on the language of
the proposed legislation today, the Association supports the
intent of the legislation in creating certainty for the
collecting community about numismatic materials.
Currently, there are rare numismatic items that are
privately owned by individuals who spent hundreds of thousands
or millions of dollars to legitimately purchase the materials.
Yet ownership is potentially called into question because the
numismatic material was not formally released by the Department
of the Treasury.
H.R. 5077 addresses this issue for pre-1933 issued
numismatic material, assuring numismatists that they have
legitimate ownership, and that their ownership cannot be
challenged, particularly when new Administrations in the
Treasury take office and may have an agenda to address items
which the Treasury believes were not rightfully released from
the Treasury.
The American Numismatic Association also supports the
efforts of H.R. 5077 to provide funding for the National
Numismatic Collection maintained by the Smithsonian
Institution. This numismatic treasure is an educational
resource that cannot be replaced or surpassed. Since the
National Numismatic Collection was dismantled in the summer of
2004, the country and visitors from around the world have been
deprived of the educational treasure this collection offers.
The National Numismatic Collection can, and should, be used
to teach people of all ages. From the history of money to its
current day uses, money serves as an irreplaceable educational
asset. Money can be used in practically any educational
discipline, but to be effectively used, people must have access
to the tangible objects. This requires that an historical
collection be maintained and available for display and
collection. The efforts of H.R. 5077 to accomplish this for the
National Numismatic Collection must be applauded.
Money is not, and will not, become obsolete. Rather, it
will change form over time as society and culture changes.
Making sure that the culture, art, and history of money is
collected, preserved, and maintained for future generations is
an important and necessary action.
The American Numismatic Association applauds the Department
of the Treasury's foresight in changing and allowing changed
designs on our money to pique interest in numismatics, to
create a network of people who are interested in preserving our
culture and our heritage through money. The American Numismatic
Association also encourages the continued development of new
and changing designs on American money. This will continue to
keep people interested and involved in money as an educational
tool and a collectible item of significant value.
I appreciate the opportunity to provide testimony here
today, and will be happy to answer any questions.
[The prepared statement of Mr. Cipoletti can be found on
page 52 of the appendix.]
Mr. Lucas. Mr. Weinberg?
STATEMENT OF FRED WEINBERG, VICE CHAIRMAN, INDUSTRY COUNCIL FOR
TANGIBLE ASSETS
Mr. Weinberg. Congressman Lucas, and members of the
subcommittee, my name is Fred Weinberg, and I currently serve
as the vice chairman of the Industry Council for Tangible
Assets, or ICTA, which is the national trade association for
rare coin, precious metals, and collectible currency dealers.
Within the United States alone, it is estimated that retail
sales of rare coins total about $10 billion annually, as of the
end of 2005.
I am also a past president of the Profession Numismatists
Guild, and I have been a member of the American Numismatic
Association for more than 38 years. I have been a full-time
numismatist for 35 years, and a collector for over 40 years.
And I specialize in mint error coins, currency, and the minting
process.
I appreciate you inviting the Industry Council for Tangible
Assets to testify before you today. In mid-April of this year,
Representative Lucas requested that ICTA gather input from the
numismatic community for his bill, H.R. 5077, which he
introduced in April of 2006.
Consequently, I and a number of other leaders of the
numismatic community, met with ICTA staff to collect our ideas
on the bill as introduced and to decide what, if any,
amendments or changes we would recommend to Congressman Lucas.
This group then met with Mr. Lucas and his staff via conference
the following month, and subsequently provided him with some
suggestions designed to fulfill his purpose in introducing H.R.
5077.
H.R. 5077 will establish a clear definition regarding the
legal private ownership of certain coins, medals, and owner
numismatic items produced by the U.S. Mint. Such clarity will
accomplish several goals that we feel will benefit both the
U.S. Treasury and the numismatic community, which include the
fact that the numismatic community and relevant Government
agencies will have certainty as to which products may be
legally owned and traded.
H.R. 5077 will also provide for the preservation of
historically important numismatic items, and create specific
policy for the disposal of trial pieces, patterns, and other
items so that they will not be lost for posterity at the
discretion of changing administrations of the U.S. Mint or
Treasury.
It will also provide funding for the National Numismatic
Collection at the Smithsonian Institution. This is especially
important since the National Numismatic Collection at the
Smithsonian was closed last year. H.R. 5077 will provide for
the preservation of our coinage, which is part of our Nation's
cultural heritage.
Numismatic industry experts agree that the provision in the
bill that would officially declare all coins, medals, and owner
numismatic items produced before December 31, 1932, as legal to
own and trade is acceptable, and very desirable, from our point
of view.
From our experience, the items of most concern to the U.S.
Treasury have been a very small number of test or trial pieces,
such as the solid gold 24-karat Sacagawea dollars and the 1933
Double Eagle gold coins mentioned earlier. We understand many
of the Treasury's and the Mint's concerns, and we wish to help
resolve any of the issues that might impede passage of H.R.
5077.
Over time, proving whether an item left the Mint legally or
illegally becomes very difficult. We would suggest that if an
item in question comes to the attention, possession, or
recovery of the Mint after a time frame of 50 or 75 years, it
is legal to transact unless there is clear documentation that
the item's return to the Mint was a requirement at the time of
issue or within a reasonable time of its original distribution.
For future issues, clear documentation could be something
as simple as including in any cover letter or memo that
accompanies the product, including some wording indicating that
the Mint requires the item or items to be returned to the Mint
if they are shown to a committee such as this.
Should the Government seize numismatic items, it is our
position that the Government should be required to show that
these numismatic items were removed illegally from the U.S.
Mint's facility.
There are certain specific areas of concern to the
numismatic community that the current language of H.R. 5077
does not address. For your examination, I have brought with me
some samples of the following products and items which are
currently not specifically addressed in this legislation, and
which we are concerned about. They include error coins,
patterns, numismatic items such as cancelled dies, punched
planchet strips, and items that may be legally provided by the
Mint to legislators such as yourself or outsourcing companies
that provide items to the Mint but whose legal status may be
unclear if they have entered the marketplace.
We urge Congress to establish that all mint error coins,
made in the normal course of production, are legal to own and
trade if they left the Mint legally. The Mint can be very proud
that new production technology has resulted in far fewer
striking errors, and technological advances in security and
minting procedures at the Mint's facilities all across the
country make items less likely to be able to be removed
illegally.
Indeed, my colleagues and I in the industry agree that in
the last 5 years alone, due to the implementation of new
minting presses and technology, the incidence of error coins
alone has decreased by approximately 97 percent, and the Mint
is to be commended for that. In addition, in the past, once
these products have entered the marketplace, it is not always
possible to determine if they entered commerce legally. We
assume that die varieties should not be any problem for the
Mint.
To the best of our knowledge, none of the items listed
above has been particularly problematic for the U.S. Treasury
or for the Mint. However, we do believe that their status
should be formally addressed in H.R. 5077.
On behalf of ICTA, PNG, and the numismatic community, I
wish to thank you for this opportunity to present our comments.
I welcome your questions. And we encourage any member of this
subcommittee or their staff to contact us for assistance and
any additional information and background we may be able to
provide. We look forward to continuing to work with Congressman
Lucas and this subcommittee as you consider H.R. 5077. Thank
you.
[The prepared statement of Mr. Weinberg can be found on
page 109 of the appendix.]
Mr. Lucas. Thank you, Mr. Weinberg.
And a couple of housekeeping notes. I would first like to
ask unanimous consent that a letter in the form of some written
testimony from Mr. Harvey Stack of New York City be included in
the official record.
Unanimous consent. So ordered.
And we are now in a series of four votes on the Floor of
the United States House. This is a very distinguished panel.
You have come a long way, a number of you have. I would like to
ask your indulgence to recess until the final vote, which is
probably 40 minutes away, return at that point, and continue
our discussion.
With that, the committee will stand in recess until 5
minutes after the final vote in this series.
[Recess]
Mr. Lucas. [presiding] The subcommittee is reconvened. I
appreciate the indulgence of the witnesses. In this body, our
most important act is voting on behalf of our constituents. We
just had a series of four votes, and in an hour will have
another vote. Certainly I wanted to give the witnesses an
opportunity to expand a little bit more under the
circumstances.
And with that, could I turn to you first, Mr. Bowers. Part
of the topic that we discussed today was the Nation's coinage
in its present form. And from a little historic perspective,
when we talk about the future of the one-cent piece, the future
of the dollar coin--and we faced these challenges in the past--
the end of the old half-cent in 1957. I have read accounts in
publications by yourself and others about literally barrels of
the old large cents being turned in for the new small cents.
This is not a new experience, is it?
Mr. Bowers. No. The coinage spectrum has changed. It has
evolved continuously. There was a time when we had gold coins.
We no longer have them. The silver coins. These were
foundational changes far exceeding nickels and cents. And we
abolished silver coins. And somehow, the American economy
survived and prospered.
The numismatic community watches all this happen. If you
make a two-cent piece tomorrow, we will collect it. But the
historical record shows that the citizens will adapt to just
about anything.
The American West prior to the 20th century in California,
Nevada, and Wyoming, didn't use nickels or one-cent pieces even
though they were made. Their economies started at mainly a
dime, and they didn't even have small change.
But whatever is available, I think, will be used, and the
public will get used to it. But there will be a resistance to
change. Sort of like Y2K--the world was going to fall apart,
but somehow it didn't. And if the one-cent piece, the dearly
cherished one-cent piece, which I like its history, if it were
to pass, soon whatever the lowest denomination would be would
take its place and it would be forgotten, maybe and fondly
remembered, and probably quickly collected. I could see them
going out of circulation very fast.
Mr. Lucas. While we are visiting with you, Mr. Bowers,
would you touch for a moment on the comments by the Mint
Director that in effect said that the Mint reserved the right
to, as they use the phrase, ``recover'' any and all numismatic
items which in effect, it appeared, they determined did not
meet their standard of having been issued or delivered or
brought forth or whatever?
Mr. Bowers. Well, the record--
Mr. Lucas. That is a pretty profound statement, isn't it,
really? The potential consequences?
Mr. Bowers. The record shows that in the 19th century and
also at times since then, the Mint people themselves kept
samples, and sold coins. There are approximately 1,700
different varieties of patterns--a few more than that, 1,800--
of pattern coins from 1792 onward, of which there is no
official record of being distributed, less than 5 percent of
them were ever documented.
There are tens of thousands of coins with no documentation
whatsoever that are now avidly collected. And the Mint could
take the position that, ``Well, we have no record these were
ever issued; we want them back.'' And this puts a sword over
the head of everybody who has such a thing and feels that they
could be held legitimately.
And as the Mint administrations change--I will give another
example. Around 1960, I had a plastic one-cent piece that was
made in 1942 by a private company as a proposal for a cent. The
Secret Service came and seized this from me. And this was 1960,
46 years ago. And I said, ``Well, I believe it is legally
held.'' And they said, ``Well, we will let you know.''
They could do this by fiat because no individual collector
can say, ``Well, I am going to challenge the Secret Service and
the Treasury Department. No one has enough money to do this. So
I believe that H.R. 5077, by defining what can be held and what
cannot be, removes uncertainty because there are so many
undocumented things, and different ways of interpretation.
Another way of interpretation in the past has been the
statutes. You could point to legislation, well, the statute
clearly says that a quarter dollar has to be made in ``XYZ''
metal and a certain diameter. Well, obviously a mint error, if
you have a quarter that is struck on a one-cent planchet,
violates Federal law. Yet--so the Mint could say--a new
director, for example, say, oh, this violates the coinage
statute. It could not have been legally issued. It was issued
by mistake. We want it back. Or it was illegally issued.
This House bill gives some assurance to American citizens
who collect coins without any fraudulent intent, and just want
to own things, and have some security in the value of their
assets without fear of Government intervention.
Mr. Lucas. Mr. Weinberg, along that line, again, part of
this process is establishing an official record of our
proceedings. And as I think the panel has observed, Congress,
like the general public, is always in need of a little
education. That is an important thing.
Could you give some examples of the kind of items that we
are talking about here and the dollar amounts of some of these
items that have traded publicly that fall within this broad
range of what we heard earlier from the previous panel?
Mr. Weinberg. Well, when you talk about mint errors, there
are coins that were struck off center that are only worth $5
apiece, but there are hundreds of thousands of them that have
been released from the Mint over the last even 50 years. The
Mint accepts the fact that these errors were part of the
production process and got out legally. They don't question
that.
But back in the 1960's, an off-metal coin, a coin like Mr.
Bowers mentioned, a half-dollar struck on a penny or a nickel
that was struck on a dime, could be considered, and was
threatened by the Treasury Department to be, confiscated, even
though there's very few, if any, actual records of seizure back
in the 1960's. It was, as Mr. Bowers says, held over the head
of every collector that these things weren't possibly legally
issued.
Some error coins are worth a few dollars. Some error coins
are worth $50,000. There are certain gold error coins that
might be worth $150,000, but those are 100 years old. So we are
looking for some type of consistency for whether it is pattern
coins that were issued by the Mint but never acknowledged, or
error coins, 97 percent of which were probably issued as part
of the normal production process, some of which might have been
taken from the Mint 50 years ago, but they become fungible. You
can't tell a double-struck penny that was taken from the Mint
and a double-struck penny that was not taken from the Mint.
And so the Mint should be required to show that they either
know an employee was stealing these coins, and they know who
they sold them to and they can recover them, or the Mint should
say, these are coins that were issued in error--and again, the
Mint does a great job. As my testimony says, the Mint makes--at
the height, 5 years ago, the Mint made 26 or 27 billion coins.
And if you take a defect rate of .000000001, that is still a
decent amount of coins, but that is a better--a lower defective
rate of probably any manufacturing process of almost anything
in the world except maybe computer chips.
Mr. Lucas. Fair enough. And I address this question to the
entire panel. The portion of the bill that strikes toward the
goal of a systematic inventory, trying to give the Mint maximum
flexibility, requesting only, as the bill is now drafted, an
every 5 year revision of that inventory, does it strike anyone,
any of you members of the panel, as unreasonable that a public
institution, using public resources, and generating public
profit, would seem to have difficulty in providing what any
good, from my perspective, private enterprise business would
have on the books on a day-to-day basis? Mr. Bowers?
Mr. Bowers. I can address that with personal experience. I
wrote a book, the Encyclopedia of Silver Dollars--the official
title was Silver Dollars and Trade Dollars of the United
States: A Complete Encyclopedia--in 1993. At that time, I
talked with Donna Pope, the Mint Director, and I said, the
record shows that Susan B. Anthony dollars were made in large
quantities in the year 1980, but yet they don't seem to turn
up. Where are they?
So she said she would check around. And the Mint didn't
know where they were. And she was very cooperative, but the
Mint had no idea where they were. She said, you might check
with the Federal Reserve system. I made some calls, and they
said, well, we think we might have 250,000 of these in Denver,
but we are not sure. And there was no way I could get any
further information.
Right to this day, I believe the numismatic community
doesn't know if all the 1980 dated Anthony dollars were
distributed, if they were, how they were, or where they are
stored. And I think, as the Mint accumulates things, we now
know that the Mint gives information, like we have sold--this
is just a hypothetical example--we have sold 38,000 of this
commemorative coin. That is what they have sold. But that does
not necessarily equal to what they have struck. They strike
extras for possible loss. If they sold 38,000, did they make
42,000, 38,004, or what? The numismatic community would like to
know that.
Also, for accounting purposes, if they sold 38,000 and they
made 43,000, there are 5,000 available somewhere. What is the
disposition of those? Can somebody with an inside track get
them at face value? What if they have a numismatic premium?
I think the H.R. bill does address that because if these
are disclosed and we find 250,000 1980 Susan Anthony dollars
that are worth hundreds of thousands of dollars in the
aggregate or millions of dollars, we recognize this and make a
sale that would benefit the Smithsonian.
Right now, there is no accounting that I am aware of. And I
try to be a fairly careful student of numismatics. It is just
like a black hole when you ask for answers.
Mr. Lucas. If I could, Mr. Bowers, at various times the
topic has come up, in particular, those 1933 Double Eagles. And
I know that there is potential litigation out there, and we are
not concerned necessarily with that here. And I know that is
not an issue of the bill.
But in the way the Mint keeps their records and the records
that you have been able to examine down through the years, is
it possible that old customs from days gone by where collectors
were allowed to swap for certain coins at the beginning of a
new run year, were allowed to purchase certain pieces--is it
possible that some of these ``rarities'' fall in that category?
Mr. Bowers. Well, my theory on the 1933 Double Eagle, and I
would require 2 hours to expound on it--
Mr. Lucas. Of course.
Mr. Bowers.--but in brief, in 1933 the Secretary of the
Treasury was William H. Woodin, who was a numismatist, a
student of gold coins, and at the time Double Eagles weren't
widely collected.
If I went to William H. Woodin in March 1933 and said,
``Mr. Woodin, I would like to have one of your new 1933 Double
Eagles,'' I am sure, based on Mint tradition, that he would
say, ``Well, you go down to the cashier of the Mint and you
just give him another Double Eagle and he will give you one.''
Things were very casual. When the 1933 Double Eagle was
investigated in 1944, there was not a single administration
person from 1933 still in service that they could interview. A
case in point, a little closer in time, in 1936, there was a
certain commemorative half-dollar made among over a dozen
different designs. John Sinnock, the engraver, sent one of
these pieces. He pickled it in acid to create a matte proof,
and he sent it to the designer of this coin with a little
letter like, ``I thought you would like to have one of the
first strikings, and I actually prepared it with a special
surface, the only one made. Here it is.''
Okay. Well, this coin came into my possession and is now
owned by a collector overseas. But the Treasury Department
could rightfully say, ``Well, we have no record that the
engraver was allowed to do that,'' and so on, and confiscate
the coin. Whereas I think the circumstances I just mentioned
show that it wasn't stolen from the Mint. According to practice
at the time, it was given as a token of appreciation to the
designer.
The proposed House rule will protect coins from what I
would call capricious seizure by people who are not aware of
the facts, or in other instances the facts aren't known so they
assume that the coin is guilty until proven innocent, whereas
the average citizen of the United States doesn't have the legal
wherewithal to challenge the Treasury Department and prove
something isn't guilty.
Mr. Lucas. A question from a slightly different angle, just
drawing upon your numismatic knowledge. After the great gold
recall that was ongoing for--well, basically, I guess, until in
essence the legal ownership of gold was restored, initially all
those coins were returned to the United States Government
through, I assume, the Federal Reserve system.
At what point was the decision made to melt all of those
down into 90 percent bars?
Mr. Bowers. Most of the coins were melted in 1937. So the
coins were retained at the Mints in different vaults, at the
Philadelphia Mint, mainly, and then in 1937 they were melted.
In 1937, there were a number of people in the Treasury
Department in Philadelphia that went into these vaults,
substituted other Double Eagles for them for $20 gold pieces--
dated, for example, 1932 in particular, 1931--and took them to
New York City coin dealers--for example, Abe Kosoff, and I
interviewed these people. We had a steady stream of Mint people
coming from Philadelphia with these rare Double Eagles that
they were finding in the melt quantity. They substituted coins
from pocket change.
And I said--I have said this in print in my Coin World
column and elsewhere--that these people are sort of like Robin
Hood or somebody. I mean, we have to be thankful that these
coins would have been reduced to bullion and lost forever. The
Treasury Department didn't lose one penny because they got
another Double Eagle to melt, and because of this, we have the
vast majority of Double Eagles dated 1931, 1932, and also 1933.
And talking about the 1933, Mr. Israel Switt was
interviewed at great length in 1944 by the Treasury Service. No
charges were ever filed against him. He was not convicted of
anything. And now we have it as gospel that he stole them from
the Mint. Well, that is highly unlikely. What probably happened
is someone from the Mint came to him and said, would you like
to get these that I just rescued from oblivion? Or maybe he got
them some other ways.
But in hindsight, when we don't know what happened in 1937
or 1933, all sorts of very strong facts--and the word ``facts''
is in quotation marks--are saying, this is the true story of
the so-and-so. And I will go beyond the Double Eagle because it
is controversial.
But take all the patterns. They were not released legally.
In 1909 and 1910, the Treasury Department sought to seize
pattern coins from a Philadelphia dealer named John Haseltine,
seized them and said, ``These weren't officially released. We
want them.'' And he went to court and got them back.
But what the H.R.--what the resolution is trying to do is
to prevent capricious seizures, not well-studied things where
someone was--some coin was stolen from the Mint by armed
robbery or something. Nothing that was documented, but things
that fall into the great never-never land where they exist but
are not documented. And the people who own them should be
protected from a force that they cannot combat, and that would
be the Treasury saying they are illegal.
Mr. Lucas. From your research, who actually gave the order
for the mass melting of those coins in the vaults? Did that
ever come to the top?
Mr. Bowers. I would have to research that. But that would
be--it would have been--Franklin Roosevelt was President, and
it would have probably been a Treasury edict. I don't think it
would have been subject to--
Mr. Lucas. Bless whoever in Treasury decided to wipe out
that part of our heritage.
Mr. Bowers. Right. Well, they probably said--and I don't
like to deal in supposition--that we have been storing these,
and we can't count them. And Fort Knox was a new facility. We
can melt them down into bars, which are easier to count and
store them in Fort Knox. And then we know easier how much gold
we have rather than these cloth bags in various vaults in the
Philadelphia Mint.
Probably it was not necessarily a bad decision if you
remember that in 1937, these weren't widely collected. I mean,
it wasn't a good numismatic decision, but it wasn't a
capricious decision. It was what they thought best at the time,
and I have no quarrel with it.
It is just that the pieces that got out of the Mint for one
reason or another and were saved numismatically but not
documented, to say that they were stolen from the Mint has
several interpretations.
Is a coin stolen if you are at a--if the Treasury
Department tomorrow says, all Sacagawea dollars must be
returned to the local bank. We are calling them in. Someone
goes to their bank counter and said, well, instead of turning
that one in, sir, I would like to buy it for a dollar bill, and
gives the bank a dollar. Is that an illegal action? I would
probably say no.
Mr. Lucas. Good point.
Mr. Cipoletti, as executive director of the largest coin
collecting association in the country, could you expand on your
written and oral testimony about the nature of how the ANA
views the handling of our National Collection, and where as a
group they believe we should go?
Mr. Cipoletti. Certainly. One of the primary functions of
the ANA is to provide educational resources in numismatics to
not only the membership but to the general public. And
certainly the National Numismatic Collection housed at the
Smithsonian Institution is one of, if not the, very best
resource that exists around the world for study and research on
numismatic material.
And it is imperative that material be accessible, not only
to researchers who know how to get in behind the scenes but to
the general public, to understand and learn about numismatics,
to learn how money throughout the ages, whether it is U.S.
money, whether it is ancient or foreign money, has really
influenced and developed and is reflective of who we are as a
people, what our culture is about, what our history is about,
where we have been geographically--everything that money really
speaks to.
And so we at the American Numismatic Association actually
have had dialogue with the Smithsonian about what we can do to
benefit and support the Smithsonian in any efforts to bring the
National Numismatic Collection back out of mothballs and into
the public's eye.
Mr. Lucas. Gentlemen, any final thoughts or observations
you would care to share with the committee for the record?
Mr. Bowers. I would like to reemphasize that the numismatic
community is trying to ride the same horse team as the Mint and
Congress. The numismatic community is a resource that we--
speaking for everybody at the table, I am sure--we want to work
with the Treasury Department, work with the Mint, and help you
with your programs.
We have no adversarial interest whatsoever. We are just
trying--we appreciate money. As Christopher Cipoletti said, it
is history. It is heritage. We appreciate the current Mint.
Often, when Mint Directors retire--Jay Johnson, who was here at
the testimony today--if they were an Agricultural Department
official, they would be forgotten. A Mint Director can go to a
coin convention 10 years later, 20 years later, and be feted
and honored.
We like the Treasury Department. We like Mint officials. We
like Congress. And I believe we just need to work closely
together. And we invite you to tap us, free of charge, if we
can help in any way.
Mr. Lucas. Thank you, Mr. Bowers.
Mr. Cipoletti?
Mr. Cipoletti. Yes. I would echo what Mr. Bowers said. The
American Numismatic Association certainly has developed a very
good and strong working relationship with the United States
Mint, and with the Bureau of Engraving and Printing, and it is
our hope to continue to further that relationship.
But we certainly don't find the position that is taken by
the Mint on H.R. 5077 to be well thought out or supported,
especially given the interests of the collecting community and
the fact that it is the numismatic community that is truly
supporting the Mint in many respects and providing a
substantial amount of money to the Treasury of the United
States.
Mr. Lucas. Thank you.
Mr. Weinberg?
Mr. Weinberg. I would just like to say that the Industry
Council for Tangible Assets is offering you and your committee
any help, background, and suggestions to make your bill easier
to pass, and any amendments or changes. We are here to help you
with any information that we can provide that would support
your bill.
Mr. Lucas. The Chair wishes to thank the panel for their
input and their observations. And yes, this will be a process
that we will continue to move forward.
With that, the Chair also would like to note that some
members may have additional questions for the panel which they
may wish to submit in writing. And without objection, the
hearing record will remain open for 30 days for members to
submit written questions to these witnesses and to place their
responses in the record.
And with that, this hearing is adjourned.
[Whereupon, at 5:22 p.m., the subcommittee was adjourned.]
A P P E N D I X
July 19, 2006
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