[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]









                THE FUTURE OF MONEY: COINAGE PRODUCTION

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                        DOMESTIC MONETARY POLICY

                             AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 17, 2012

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-117












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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO R. CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

           James H. Clinger, Staff Director and Chief Counsel
        Subcommittee on Domestic Monetary Policy and Technology

                       RON PAUL, Texas, Chairman

WALTER B. JONES, North Carolina,     WM. LACY CLAY, Missouri, Ranking 
    Vice Chairman                        Member
FRANK D. LUCAS, Oklahoma             CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   GREGORY W. MEEKS, New York
BLAINE LUETKEMEYER, Missouri         AL GREEN, Texas
BILL HUIZENGA, Michigan              EMANUEL CLEAVER, Missouri
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
DAVID SCHWEIKERT, Arizona


















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 17, 2012...............................................     1
Appendix:
    April 17, 2012...............................................    23

                               WITNESSES
                        Tuesday, April 17, 2012

Blake, John, Executive Vice President of Engineering, Cummins 
  Allison Corporation............................................     4
Bosco, Rodney J., Director, Disputes and Investigations Practice, 
  Navigant Consulting, Inc.......................................     6
Weber, Dennis H., coin industry consultant.......................     8

                                APPENDIX

Prepared statements:
    Paul, Hon. Ron...............................................    24
    Blake, John..................................................    26
    Bosco, Rodney J..............................................    30
    Weber, Dennis H..............................................    98

              Additional Material Submitted for the Record

Cleaver, Hon. Emanuel:
    Written statement of Richard A. Peterson, Deputy Director, 
      United States Mint.........................................   102

 
                          THE FUTURE OF MONEY:
                           COINAGE PRODUCTION

                              ----------                              


                        Tuesday, April 17, 2012

             U.S. House of Representatives,
                  Subcommittee on Domestic Monetary
                             Policy and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Ron Paul 
[chairman of the subcommittee] presiding.
    Members present: Representatives Paul, Luetkemeyer, 
Huizenga, Hayworth, Schweikert; Clay, Maloney, Green, and 
Cleaver.
    Also present: Representative Stivers.
    Chairman Paul. This hearing will come to order. Without 
objection, all Members' opening statements will be made a part 
of the record.
    The Chair also notes that the gentleman from Ohio, Mr. 
Stivers, wishes to sit in on this hearing. Without objection, 
he will be seated for this hearing and recognized for an 
opening statement and for questions.
    I now recognize myself for 5 minutes to make an opening 
statement.
    I want to welcome everybody to the hearing this morning. 
This is a subject that is not brand new. It has come up in the 
past on what we should do with our coinage, what we should do 
with the penny, what we should do with the nickel, and why we 
have to keep changing it all the time.
    I see a hearing like this and this discussion, which has 
gone on literally for years, as being a technical discussion 
which cannot be ignored. But there is also a monetary issue 
involved here, which is generally ignored, and I don't think it 
should be. Why should we have to change the nature of our 
coinage? Why shouldn't a penny be a copper penny? Why shouldn't 
a dime be a silver dime? Why shouldn't a double eagle be gold?
    And the reason is very simple. It is because we as a 
country live beyond our means. We want to spend too much money 
overseas. We want to spend too much money at home. We run up 
huge deficits. We can't cover it by taxes. We can't borrow 
enough money, so therefore, we print money. And that is where 
the problem comes from.
    We print money. The value of the money goes down and the 
cost of things go up. The cost of labor goes up. The cost of 
commodities go up. First, the so-called value or the dollar 
value of silver and gold and copper and zinc--they go up 
essentially because the value of the dollar goes down.
    But we can tinker. We can change. We can take the penny and 
dilute the metal. In the old days, they might just clip the 
coins or dilute the gold or the silver. Today, we even dilute 
base metals.
    First, we were on gold standards and silver standards. We 
couldn't maintain it. And then, we thought at least we could 
have a copper standard. The penny had real value up until about 
1980. And then, the value of the copper became worth more than 
the penny itself.
    So this is where our problem lies. And if we are trying to 
deal with this by saving money, by changing the technicalities 
on how we produce the coinage itself, and think there might be 
a savings--this idea that we can save money is rather 
interesting to me, because the U.S. Mint isn't even in the 
appropriations business. They so-call earn their own money. 
Yes, they mint their own money. It is sort of like saying the 
Federal Reserve doesn't--the Fed can make profits. Of course, 
they create as much money as they want.
    But diluting the metals doesn't solve the problem. And so, 
we haven't been able to maintain the zinc standard. Now, we are 
going to the steel standard. But it seems we are not even 
starting off really well with the steel standard. Under the 
steel standard--the best I can do with these calculations--it 
will cost us more than a penny to make a penny. And a lot of 
people don't even like the penny. I don't know how this is all 
going to work out.
    Sometimes, we mint coins and there seems to be no market 
for them. We mint silver--not silver dollars--but metallic 
dollars. And they keep making it and the Mint makes money with 
seigniorage. But the truth is dollars, metal dollars, don't 
circulate. The Fed buys them. I think sometimes we kid 
ourselves about this.
    But my prediction is this may be helpful. It may save a 
couple of dollars. Others will argue it doesn't save anything--
that it might hide the problem for a little bit, but eventually 
we will have to deal with the real problem in this country.
    The reason we have a problem with our coinage--the problem 
we have with our money, whether it is silver dollars or gold 
dollars--is the fact that we live beyond our means. And we 
think we can get away with just creating money out of thin air 
and believe that is real wealth. But that is all coming to an 
end.
    So the most I think we could expect if we do anything about 
silver--steel pennies or not--will not address, I think, the 
real problem that we have in this country. Since the Mint is 
not even in the budget, to say that there will be a savings, I 
think might be a bit of a stretch. I would like to save 
literally billions, if not trillions of dollars, and address 
the subject.
    But in the meantime, we will be dealing with these 
technicalities on how we mint the coinage. And obviously, it is 
the Congress that has this responsibility. It is not the 
Treasury. It is not the Mint. It is not the Executive Branch. 
Explicitly, in the Constitution, it says that Congress should 
have this responsibility and we shouldn't be reneging and 
giving up on this responsibility.
    So with that, I would like to yield to Congresswoman 
Maloney.
    Mrs. Maloney. In some ways, this hearing is timely. 
Canada's recent announcement to eliminate the penny has many in 
Congress questioning whether we should be doing the same thing. 
Have we simply stopped using smaller denomination coins like 
the penny to warrant making it a thing of the past?
    And there are several legislative proposals that would 
change the composition of the penny to make it cheaper to 
produce. But under the Coin Modernization Act that this 
Congress passed in 2010, the Mint is required to undertake an 
extensive study of alternative compositions of coins. This 
study will be completed at the end of this year. So I hope that 
this subcommittee will take another look at this issue when 
that study is released and specific recommendations are made in 
terms of how we can move forward.
    For now, Congress has the authority to set the weights and 
measures of coins that are produced, so I look forward to the 
testimony. But I think we should wait until the report comes 
out later this year before taking any specific actions. Thank 
you. I yield back.
    Chairman Paul. I thank the gentlelady. And now, I recognize 
Congressman Stivers from Ohio.
    Mr. Stivers. Thank you, Mr. Chairman. I would like to thank 
Chairman Bachus and Chairman Paul from the subcommittee for 
allowing this important hearing today.
    I am a new Member of Congress. And I came here to help cut 
excessive government spending and save taxpayers money. I 
appreciate Chairman Paul's comments about the real problem in 
Washington being spending. I believe that to be true, and I am 
working hard to address that. But in these tough fiscal times, 
I think there are some things we can do to be much more 
efficient in America about the way we mint our coins, more 
specifically, the composition of our coins.
    I recognize what the gentlelady from New York stated about 
a study that the Mint is currently conducting, which will be 
finished by the end of year. But that is no reason for us to 
wait to do our own due diligence. We need to forge ahead, which 
I appreciate this committee is doing. I am not saying we are 
going to absolutely run roughshod over a study or go ahead of 
it, but I do think we need to continue to do our job.
    So earlier this year, I introduced legislation to change 
the composition of the 1-cent and 5-cent coins. Because since 
2006, the commodity metals required to manufacture those coins 
have made those couple of denominations--the penny and the 
nickel--very expensive and uneconomical. Specifically, the cost 
of minting a 1-cent and 5-cent coin is greater than their face 
value.
    In fact, included in the U.S. Mint's recent annual report, 
the unit cost to produce a penny was 2.41 cents. And the cost 
to produce a nickel was 11.18 cents. Last year, the Mint 
produced 4.3 billion pennies and 914 million nickels.
    Currently, the penny is produced from highly expensive 
zinc, which is copper-plated. And the nickel is made of a 
nickel-copper alloy. The production costs of these 
denominations have resulted in millions more in cost to the 
Treasury--to the Mint--than they need to have.
    And so that is why I suggested, in my legislation, creating 
steel coins. An American multi-ply steel composition would the 
material we would use. Most nickel is from Canada, but even 
Canada makes their nickels out of steel, ironically. And 
because it is an American resource, it would help American jobs 
and these new coins could easily resemble the current coins. 
You could put a copper plating on a steel penny and they could 
co-circulate with the existing currency and be used in things 
like vending machines.
    In fact, there was a recent study that estimated that 
replacing the metallic content of nickels and dimes could 
actually save as much as $182 million to $207 million annually. 
So, I think it is a great opportunity for the U.S. Mint to 
operate more efficiently.
    I know the U.S. Mint is considering various materials, but 
I think that the Royal Canadian Mint recently made their 
transition to steel coins. It has been an effort that has saved 
the taxpayers in Canada money. I think it could work here. And 
I think it is worth examining.
    I appreciate Chairman Paul for having this hearing and I 
look forward to addressing the issues related to making our 
coins much more economical.
    Thank you, Chairman Paul. I yield back the balance of my 
time.
    Chairman Paul. I thank the gentleman.
    I thank the Members for their opening statements, and now I 
would like to introduce our witnesses.
    Mr. John Blake is executive vice president of engineering 
at Cummins Allison Corporation, a leading producer of coin and 
currency counting machines.
    Mr. Rodney Bosco is the director of the disputes and 
investigations practice at Navigant Consulting, Incorporated.
    Mr. Dennis Weber is a coin industry consultant, and was 
formerly the vice president of marketing and sales for Jarden 
Zinc Products.
    Without objection, your written statements will be made a 
part of the record. You will now be recognized for a 5-minute 
summary of your testimony. We will start with Mr. Blake.

     STATEMENT OF JOHN BLAKE, EXECUTIVE VICE PRESIDENT OF 
            ENGINEERING, CUMMINS ALLISON CORPORATION

    Mr. Blake. Mr. Chairman, members of the subcommittee, on 
behalf of Cummins Allison Corporation, we would like to thank 
you for this opportunity for me to speak with you today. My 
name is John Blake. I am executive vice president of Cummins 
Allison, in charge of the engineering and product development 
function.
    Cummins Allison is a privately held company located near 
Chicago in Mt. Prospect, Illinois. And we are a global leader 
in the development of systems for counting, sorting, and 
authenticating currency, checks, and coins. We have a 125-year 
heritage of leadership and product innovation. We serve 
financial institutions worldwide, as well as retail, gaming, 
armored carriers, government, and virtually anybody who handles 
coin and currency sorting and processing.
    We have 50 branch offices in the United States that sell 
and service our products. We also have wholly owned 
subsidiaries in France, Germany, Canada, the U.K., and Ireland. 
And we work with a network of dealerships worldwide in 70 
different countries that also sell and service our products.
    All Cummins products are designed, developed, and 
manufactured in the United States. And we have a portfolio of 
350 patents that we depend on to protect our IP and support our 
R&D investments.
    As far as products, we have a broad portfolio of products 
from small desktop machines for retailers to large high-speed 
machines for volume customers who demand industry leading 
speed, accuracy, and dependability. We also have a line of 
self-service coin machines used by the public to count coins 
that are collected at home.
    And one of the critical features of our products is our 
sensing technology. We have a research group near San Diego 
that develops state-of-the-art sensing technologies that are 
used in our equipment. What that allows our customers to do is 
to authenticate and denominate currency and coin, and off-sort 
any strangers or counterfeit.
    Cummins Allison supports congressional efforts to identify 
cost-savings opportunities, including efforts to reduce costs 
associated with the circulation of coin and currency. And being 
an IP-intensive engineering and manufacturing company, we 
understand the challenge; that is, how to reduce cost while 
still being innovative and maintaining features and 
functionality and quality. We know firsthand it is not an easy 
endeavor.
    Cummins Allison has been through a number of coin changes 
from various countries. Some have gone well. Some have not gone 
very well. And I offer the following points for consideration.
    The United States has been through a number of changes. 
Take the penny, for instance. Most of those changes, more 
recently, have been done to material only. They have maintained 
the size; that is, the diameter and the thickness of the coin. 
And those transitions to those new designs or new materials 
have gone relatively smoothly.
    In other countries--we have been talking about the Canadian 
one dollar and two dollars that was recently introduced, 2 
weeks ago. There again, they have changed the material only. 
They have maintained the diameter and the thickness of the 
coin. And at least from what I understand today, the transition 
has been relatively smooth in that regard.
    Cummins Allison's machines can process material changes. It 
becomes more difficult when you start talking about changing 
the diameter and thicknesses of coins. Those changes could 
require significant modifications to our machines or perhaps 
even replacement, which would be a significant impact in the 
marketplace.
    Coin construction can have impact in other ways. It can 
impact machine function and coin durability, such as if you use 
soft materials. If you use soft materials, that impacts not 
only the wear characteristics of the coin, but also the 
durability of the machines that we have in the marketplace.
    Common metals also are more readily available, and 
therefore, are an open opportunity for counterfeiting--maybe 
not so much a threat for low-value coins. But certainly for 
higher-value coins, that would become a significant concern. 
So, the ease of counterfeiting should be carefully studied in 
any change that is proposed.
    Coins should be unique to other coins in other countries. 
Again, counterfeiting--we had one particular case in the U.K. 
with the U.K. pound, where they used the same blank in another 
country, and it is creating a problem in the U.K.
    Some competitors use scales. While Cummins equipment can 
process coins of different weights, when you are talking about 
scales and different weights of material, it is very difficult 
to separate denominations, count and authenticate, based on the 
differences of weight of a particular denomination of coin.
    Finally, changes could impact worldwide the value of 
American currency and could affect public commerce. Confidence 
in commerce will cost the government far more than what would 
be saved by initial material alteration.
    So for seamless transition, Cummins Allison believes that 
stakeholder input is essential, and early involvement is the 
key. Stakeholders should work collectively to raise and address 
issues. And we suggest the development of a government industry 
stakeholder taskforce that would ensure technical, commercial, 
and public issues are addressed early and at every stage of the 
project.
    For Cummins directly, we would welcome the ability to test 
and report on options early and we believe this is very 
important. We prefer to establish a strong partnership with 
Congress, the Treasury Department, and the U.S. Mint. This 
relationship would ensure that decisions made are in the best 
interest of the American public.
    So in conclusion, Mr. Chairman and members of the 
subcommittee, again, thank you for the opportunity to appear 
here. Cummins appreciates your efforts and supports the efforts 
of the U.S. Mint to reduce costs. However, we encourage 
everyone to proceed slowly and cautiously on decisions to alter 
weight, appearance, size, and material of our Nation's coins. 
Any savings realized would mean nothing if there are societal 
costs due to the inability to process and circulate American 
currency. If changes make coins attractive to counterfeit, that 
puts our economic and national security at risk.
    So, we commend the subcommittee for taking the time and 
care to research this important matter. Going forward, we 
encourage Congress, the Treasury Department, and the United 
States Mint to consult with all stakeholders long before 
decisions are made. This should ensure a smooth transition and 
public acceptance while protecting the security of our Nation's 
monetary system. Thank you.
    [The prepared statement of Mr. Blake can be found on page 
26 of the appendix.]
    Chairman Paul. Thank you. Now, I recognize Mr. Bosco.

     STATEMENT OF RODNEY J. BOSCO, DIRECTOR, DISPUTES AND 
       INVESTIGATIONS PRACTICE, NAVIGANT CONSULTING, INC.

    Mr. Bosco. Thank you, Mr. Chairman, members of the 
subcommittee, Congressman Stivers. My name is Rodney Bosco. I 
am a director in the Disputes and Investigations Practice at 
Navigant Consulting, Incorporated. Navigant is a global 
advisory firm that provides independent, objective analysis and 
opinions on accounting, financial, economic, and operational 
issues facing our clients.
    I am pleased to testify today concerning our Nation's 
coinage, the factors that influence their cost of production, 
and two studies we recently conducted that have applicability 
to legislation being considered by this body.
    Our first study examines potential cost savings available 
to the United States Mint if it were to move to multi-ply 
plated steel compositions for the vended nickel, dime, and 
quarter denominations. Our second study looks at the potential 
consequences of a hypothetical decision to eliminate production 
of the penny on the United States Mint's costs and profits.
    Both studies were commissioned by Jarden Zinc Products, 
North America's leading plated coin blank producer and a 
licensee of the Royal Canadian Mint's multi-ply plated steel 
technology. The studies were conducted by myself and by Kevin 
Davis, who is a director and colleague of mine at Navigant.
    As the subcommittee endeavors to find ways in which to make 
our coins more cost-effective to produce, our work has led us 
to three key findings that I would like to share with you 
today. First, raw material costs--that is, the cost of the 
metal itself--currently make up between 50 and 70 percent of 
the total production costs for the nickel, the dime, and the 
quarter.
    The change in the metallic content of these coins to multi-
ply plated steel will reduce the per unit raw material cost of 
each of these coins by over 80 percent, based on recent metal 
prices. Applied to the average, historical production of these 
coins over the past 30 years, raw material cost savings would 
average approximately $200 million annually.
    Our second finding relates to the opportunity presented by 
the parallel adoption of an alloy recovery program. Under such 
a program, the United States Mint would collect and replace 
existing copper nickel alloy coins with multi-ply plated steel 
coins and salvage the copper in the nickel from the retrieved 
coins. Since its launch of multi-ply plated steel coins in 
2001, the Royal Canadian Mint has had in place an alloy 
recovery program that has generated more than $200 million in 
revenue for the Canadian people.
    The United States Mint could execute a similar program for 
its current copper and nickel alloy coins--the 5-cent, 10-cent, 
and quarter, dollar denominations. Based on the analysis we 
have conducted, which assumes the recovery of one-third of the 
coins minted in the last 30 years, such a program has the 
potential to generate more than $2 billion in additional 
revenue for the United States Mint.
    Our third finding relates to the impact of eliminating 
penny production on the United States Mint's costs and profits. 
The United States Mint has reported that its production of 4.3 
billion pennies during Fiscal Year 2011 resulted in a loss of 
$60.2 million, or roughly 2.4 cents per coin, leading some to 
suggest that the penny should be dropped as a means of 
eliminating such losses.
    We have found that ending production of the penny would not 
eliminate these losses, as a portion of the United States 
Mint's fabrication, distribution, and administrative costs 
currently assigned to the penny are fixed and would continue to 
be incurred regardless of whether the penny is produced.
    We estimate this fixed portion to equal $30.7 million, 
based on 2001 production, resulting in an apparent cost 
reduction at first blush of $29.5 million in Fiscal Year 2011. 
However, the analysis does not end here. Dropping the penny 
will result in increased demand for the nickel, which the U.S. 
Mint currently reports costs an excess of 11 cents to produce 
each coin. If production of the nickel doubled in response to 
elimination of the penny, a scenario posed by the U.S. Mint's 
acting Director in answering a question from this subcommittee 
in 2006, the United States Mint would incur losses of 
approximately $40 million related to the additional nickel 
production. This amount is greater than the perceived cost 
reduction of $29.5 looking at the penny alone, resulting in an 
overall increase in net loss to the Mint of as much as $10 
million. So our analysis of the United States Mint's costs 
found the possibility of greater losses to the Treasury without 
the penny.
    Mr. Chairman, I thank you for the opportunity to appear 
here today. And I welcome the opportunity to answer your 
questions.
    [The prepared statement of Mr. Bosco can be found on page 
30 of the appendix.]
    Chairman Paul. Thank you. I recognize Mr. Weber.

     STATEMENT OF DENNIS H. WEBER, COIN INDUSTRY CONSULTANT

    Mr. Weber. Thank you, Mr. Chairman. I appreciate the 
opportunity to visit with the committee this morning and speak 
to the Canadian experience with controlling costs for 
circulating coinage. I am a technical consultant under contract 
to the Royal Canadian Mint. I am not an employee of the Mint, 
nor am I a spokesman for the Royal Canadian Mint.
    For nearly 3,000 years, mankind has used coinage to 
facilitate commercial transactions. And one would think that in 
that amount of time, every possible combination of materials, 
shapes, and designs would have been used. But societies change. 
Technologies change. And the demands of the marketplace 
necessitate the continuous evolution of coinage systems.
    On April 10th, the Royal Canadian Mint completed a process 
that was initiated in 1996. Last week, the Canadian 1-dollar 
and 2-dollar coins were converted from nickel and copper-based 
alloy to the modern, safe, and secure multi-ply technology.
    Multi-ply technology is a proprietary process developed in 
Canada that applies electroplated layers of nickel and copper 
to an inexpensive steel core, which creates circulating coinage 
that is both attractive and affordable. In an age of escalating 
global metal costs, governments need to produce coins more 
cost-effectively without compromising quality. Canada has been 
using the multi-ply process for circulating coins since 2001 
when the 5-cent, 10-cent, 25-cent, and 50-cent denominations 
were converted from expensive nickel and nickel-based alloys to 
the more affordable steel coins.
    Because the multi-ply steel coins are nearly identical in 
size, weight, and appearance to the nickel alloy coins they 
replace, the transition went almost unnoticed by the general 
population of Canada. The major reason the transition from pure 
nickel and nickel alloy coins to multi-ply electroplated steel 
went so smoothly was the commitment by the Royal Canadian Mint 
to involve the major stakeholders early and continuously 
throughout the process.
    The national banks of Canada, charitable organizations, 
coin handling and coin transportation companies, and the 
vending industry were personally and continuously updated 
during the conversion. Particular attention was given to the 
vending industry as their support was critical for a seamless 
changeover. Despite the fact that the vending industry 
represented only a fractional percentage of retail 
transactions, nevertheless, every reasonable effort was made to 
address their concerns.
    The annual production volume of Canadian circulation of 
coins has traditionally been only about one-tenth the volume of 
circulating coins produced by the U.S. Mint. Nevertheless, the 
transformation from nickel and nickel alloy to multi-ply has 
saved Canadian taxpayers over $250 million.
    The older pure nickel and nickel alloy coins have 
successfully co-circulated in Canada with the new multi-ply 
coin for over a decade. The Royal Canadian Mint, however, has 
for the last 6 years maintained an active program of removing 
the older nickel and nickel alloy coins from circulation.
    Again, with the escalating global prices for commodity 
metals, the older coins are eventually defaced and sold for 
their metal content. The profit from these sales is returned to 
the Canadian taxpayers. But Canada is not alone in enjoying the 
cost-saving benefits of multi-ply technology. Since its 
introduction, multi-ply technology has been adopted 
internationally by 28 different countries, representing over 60 
denominations.
    The New Zealand experience is a good illustration of this 
process. In 2004, the Reserve Bank of New Zealand sought public 
input on a proposal to reduce the size of the 10-cent, 20-cent, 
and 50-cent coin, while concurrently changing the composition 
from expensive alloy to electroplated steel. The Reserve Bank 
wanted to reduce the size of the coins to make coin usage more 
convenient for the public and for cash-handling businesses. The 
conversion to electroplated steel was motivated by the desire 
to maintain positive seigniorage well into the future.
    The Reserve Bank also recognized that to be accepted by the 
public, the new coins had to be durable and they needed to 
function in vending machines. After extensive, independent 
testing, the Reserve Bank of New Zealand selected multi-ply as 
the only process that met their criteria for public acceptance. 
Multi-ply coins have been in circulation in New Zealand since 
2006.
    The Reserve Bank of New Zealand took a very aggressive 
approach with the introduction of their new multi-ply coins. 
Rather than co-circulate coins of different sizes and different 
compositions, the Reserve Bank elected to completely replace 
the old coins and over a period of 6 months, old coins were 
removed from circulation as the new coins were introduced.
    After the coins were recalled, they were demonetized, and 
the demonetized coins were sold to recoup the current metal 
value. The profit generated from the demonetized coins was 
sufficient to cover the cost of the new multi-ply coins and to 
generate additional revenue for the taxpayers of New Zealand.
    I brought with me samples today for the committee of 
current circulation coins for the Canadian 5-cent and 25-cent 
coin. And I think the committee will notice that the 5-cent 
coin is almost identical in weight and feel to the U.S. nickel. 
The major difference is that the Canadian 5-cent coin costs 
approximately 3 cents to produce versus the reported 11-cent 
cost to manufacture the U.S. 5-cent coin. Assuming that 
approximately a billion coins or a billion nickels are produced 
every year, this generates a cost savings to the American 
taxpayer of approximately $80 million a year.
    So I want to thank the committee for the opportunity to 
appear today, and I look forward to your questions.
    [The prepared statement of Mr. Weber can be found on page 
98 of the appendix.]
    Chairman Paul. I thank the panel, and I will yield myself 5 
minutes for questioning.
    I want to talk a little bit about a cost, but not the cost 
to the government because we are debating on how much money the 
government might save or what it will be--how much cost it will 
be to change. But what about the cost to private industry or 
local government that has meters--parking meters--or other coin 
machines? There have been some estimates that there will be a 
cost to them, too. They have to change their equipment and 
change their coin machines. One estimate was as low as $530 
million, which would be not inconsequential. It is really hard 
to calculate absolutely how much it would cost--some have even 
said it could cost over a billion dollars.
    Mr. Blake or Mr. Bosco, could you address that? What is the 
cost? We can't say there would be no cost. There has to be some 
cost when these machines have to be changed.
    Mr. Blake. I can speak on behalf of Cummins Allison and our 
equipment. It is a difficult thing to say because it depends 
mostly on the nature of the changes. As I mentioned earlier, if 
you change metal only and you maintain the size and diameter of 
the coin, the cost, at least for our equipment, would most 
likely be less significant, maybe because we most likely will 
have to change things like software or sensors or things like 
that.
    As far as the other industries, the vending industries, 
again, I would encourage the committee to engage those 
organizations and really study this and consider any changes. 
It could be significant, or it could be simple. It depends on 
what it is.
    Chairman Paul. But you wouldn't be able to eliminate some 
costs to the vendors?
    Mr. Blake. There is always going to be an associated cost. 
Even if I had to update software for a particular machine, 
there is always a cost involved. How extensive that is depends 
on the nature of the changes.
    Chairman Paul. Do you have anything to add, Mr. Bosco?
    Mr. Bosco. We certainly recognize the fact that there will 
be additional costs. Unfortunately, the scope of our analysis 
was centered on the impact of the Mint's operations and did not 
look at external consequences of changing the coins. So 
unfortunately, I am not in a position to add anything further 
to the discussion.
    Chairman Paul. Mr. Weber, I wanted to ask about the cost of 
the blanks. This is a basic cost and we can't ignore that. But 
if we could buy blanks from a foreign country at one-half the 
price that they can be produced in the United States, would 
that be a wise move for us in the Congress to recommend that we 
buy the steel blanks at the best price?
    Mr. Weber. I think there is adequate capacity from vendors 
in the United States to supply blanks to the U.S. Mint, so that 
shouldn't ever be an issue. And there is certainly--if those 
blanks could be purchased domestically, the impact on 
transportation costs--I don't know if it would be exempt from 
import duties or whatever, but certainly, I think if we can 
keep that business at home, it would be a lot better.
    I should mention that in fact, all of the steel that goes 
into the Canadian coins for their circulation business and for 
the coins that they produce and export to foreign countries, 
comes from steel which is precision-rolled here in the United 
States. So, the steel for those coins are used in Canada. And 
the coins that are exported do come from the United States.
    Chairman Paul. Yes, but wouldn't it be a wise and frugal 
move that if it came up--we don't know how to predict future 
prices--if it were 50 percent lower, wouldn't this be a wise 
thing for us to do since we are in the business of trying to 
save some money?
    Mr. Weber. I think that all of those options need to be 
considered.
    Chairman Paul. Okay. Also, I would like to ask a little bit 
about eliminating the penny--you really don't save money. Was 
that you, Mr. Bosco? You mentioned that you don't save a whole 
lot of money by just stopping? To me, this is rather amazing, 
astounding that you can stop something--I can't imagine 
anything in private industry where you no longer produce 
something and there would be no savings. But why don't you 
explain that to me, that you wouldn't save money, because you 
are not--if you got rid of the penny, you wouldn't be buying 
blanks anymore, so there has to be some savings. Would you 
address that?
    Mr. Bosco. And you are absolutely right, Mr. Chairman. If 
the United States were to stop production of the penny, they 
would no longer purchase blanks from their current supplier and 
that would save them approximately $47 million. In addition, 
they would lose the revenue that they receive from selling 
those finished pennies to the Federal Reserve of approximately 
$43 million. So we are looking at a net savings just at that 
level, of approximately $4.3 million.
    The other issue, though, which is perhaps unique to the 
penny, but perhaps is not as prevalent in other types of 
commercial goods, is that in order to facilitate commerce, 
there needs to be low denomination coins. And in the absence of 
the penny being available as a low denomination coin, the 
nickel would need to pick up the slack. Additional nickels 
would need to be produced. And under the current composition of 
the nickel, the Mint would lose approximately 6.5 cents for 
each nickel it makes.
    So yes, up to a point, there is savings for the penny, but 
then when you take into account the additional demand for the 
nickel, those savings become eroded, and eventually they flip 
over and become additional loss.
    Chairman Paul. But I am not sure we can compare selling 
something to the Federal Reserve as a real sale. The Federal 
Reserve has no money, except they print it. It is not really a 
cost. It really indirectly is a part of the problem, because 
the Fed just creates the money and they buy these pennies or 
the dollars and that so-called profit goes to the Mint. And it 
is just sort of a game that we play.
    So if you didn't have that money coming in, and let's say 
the Mint was on budget where it should be and the Congress had 
to appropriate the money, they are going to go to the Fed, too. 
They won't have the money. They just go to the Fed and the Fed 
prints the money and gives it to the Mint. So this idea that we 
are actually selling something which might not ever be used, 
and quite frankly, I am not sure too many people are using 
these pennies. They tell me there are a lot of jars filled with 
pennies in people's homes. And this whole idea that the Fed 
keeps buying them--I can't imagine a bank actually ordering 
pennies from the Federal Reserve, because they have a high 
demand for pennies. Most people are trying to get rid of their 
pennies. Though, what I would like to sort of hone in on is 
actually where we are, but anyway, I want to go ahead and yield 
to Mr. Cleaver his 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. Let me first present 
a statement from Richard Peterson, the Deputy Director of the 
U.S. Mint, who is not here with us today. And I ask for 
unanimous consent that this statement be placed in the hearing 
record.
    Chairman Paul. Without objection, it is so ordered.
    Mr. Cleaver. Thank you, Mr. Chairman. I understand the 
desire to want to get this issue out in the discussion arena 
for the Members, but we are going to receive a report from the 
Treasury in December. Many of the issues we are discussing, I 
think, would be discussed at that time when the report comes 
in. And many of the answers that we are considering may be 
provided in the report.
    Nonetheless, I do have some issues. One is, of course, 
whether or not, with the Coin Modernization and Taxpayer 
Savings Act, it would allow the Treasury the authority to make 
these changes, including coin composition, without Congress.
    Now, I am assuming, Mr. Weber, that when Canada did this, 
they went through the budget process. And so, therefore, I 
guess maybe the legislators did make some changes if it went 
through the legislative process. Is that what happened?
    Mr. Weber. Yes. The Canadian Mint and the U.S. Mint are 
very similar, in that neither one of those organizations makes 
policy. They implement policy. So just as the U.S. Mint 
produces coins that are specified by Congress, the Royal 
Canadian Mint produces coins that are specified by Parliament.
    Mr. Cleaver. Were there provisions made for the high 
possibility that the metals would increase in cost at some 
point, and a candidate could again face a situation where the 
cost of the metal exceeds the monetary unit? Was there some 
provision made for that?
    Mr. Weber. I am a little off base here, but I think that 
the provisions that were established back in the mid-1990s that 
allowed for the creation of multi-ply coins, which we believe 
will be in positive seigniorage well into the future, did allow 
for the Canadian 1-cent coin to be produced in either copper-
plated zinc or copper-plated steel, at the discretion of the 
Mint, whichever was more cost effective for the taxpayer.
    So, there was on the lowest denomination coins some 
flexibility built in. But the multi-ply was seen as a real 
solution to the long-term negative seigniorage potential. The 
elimination of commodity metals and going to a very cost 
effective steel core coin was--is perceived to be effective in 
keeping all of those coins in positive seigniorage for at least 
the next decade.
    Mr. Cleaver. Yes. That is where I was going is that 
ultimately, or eventually, you are going to end up having to 
address that issue, even if it is 10 years from now. Am I 
correct?
    Mr. Weber. I am a bit of a coin collector and I have, as 
Dr. Paul alluded to, $20 gold pieces and $1 Morgan silver 
dollars. And I think it would be extremely difficult in a 
commodity-driven marketplace to maintain an alloy coin in a 
positive seigniorage position for an indefinite period of time. 
But that is why modernization efforts have to take place. The 
economy is constantly changing.
    If you look at the number of coins produced by the U.S. 
Mint, they are half of what they were a decade ago. And that is 
because of e-commerce, debit cards, etc.
    Mr. Cleaver. I don't have time to get my next question out 
to Mr. Bosco, so I will ask it later. Thank you, Mr. Chairman. 
And I yield back the balance of my time.
    Chairman Paul. I thank the gentleman. And now, I yield 5 
minutes to Mr. Luetkemeyer from Missouri.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Bosco, I was 
interested in--we were discussing this before at the committee 
hearing and I want to follow up a little bit with the comments 
made by the chairman.
    I had two interns in my office in the last 2 years from 
Australia--one last year and one this year. And when they got 
ready to leave, I asked them what was the unique thing about 
our country or just interesting thing that they thought off the 
top of their head would be something that would stick out with 
them. And both of them made a comment with regards to the 
penny, which is interesting, because they said, ``In Australia, 
we don't have pennies. We just round it up to the nearest 
nickel.'' They said, ``It is very inconvenient to carry all 
those pennies in our pocket all the time.''
    Do you know of any other countries in the world that don't 
have pennies or pence or whatever it is?
    Mr. Bosco. I know that there are other sovereignties that 
have dropped their pennies--
    Mr. Luetkemeyer. Their lowest denomination?
    Mr. Bosco. I can't name them for you as I sit here, but I 
know certainly Australia and New Zealand--
    Mr. Luetkemeyer. It begs the question that the chairman was 
asking about your comment with regards to saving money by not--
that we can't save any money by getting rid of the penny. I 
really have a problem with trying to grasp how you cannot save 
money by doing that.
    Your comment that we are going to use more nickels, I 
really don't see how that is even close to being accurate from 
the standpoint you may use a few more, but I don't think you 
are going to use many more, because you are going to have the 
same amount of economic activity instead of having your 95--
instead of being 97 cents, you have 95 cents with a nickel on 
the end of it and two pennies--you will just have 95 cents if 
you round it down. Or if it goes to the upper--the next nickel, 
it would be the dollar. So I don't know why we would have more 
nickels. Can you explain to me why we would need more nickels?
    Mr. Bosco. Certainly. What we do know is when countries 
have retired their lowest denomination coin, there has always 
been an increase in the usage of the new lowest denomination 
coin. In the case of Australia, there was an increase in the 
number of 5-cent coins that were minted once the 1- and 2-cent 
coins had been retired.
    The motivation for our analysis really centered on the 
testimony or the answer provided by the Mint's then-acting 
Director in 2006 to a question posed by the subcommittee: What 
would happen to the United States coinage and the costs to 
create that coinage if the penny were to be dropped at that 
time? And the acting Director responded in part by saying that 
there would be an increase in the production of nickels to 
compensate for that. And the challenge that was faced was that 
the nickels were being made at a loss at the present time.
    Mr. Luetkemeyer. I understand that part of it. I was just 
kind of curious about the increased usage. I really would have 
to have somebody sit down with me and go through the 
transaction and show me how we were going to be using more 
nickels. I really have a problem with that. But that is neither 
here nor there.
    Mr. Weber, in your written testimony, you said something 
about the Canadian Mint investigating issuance of special 
digital currency. Can you tell me what digital currency is?
    Mr. Weber. Yes. That wasn't actually in my testimony, but 
there was an announcement recently that the Canadian Mint is 
investigating a product that they call Mint Chip and it is e-
currency. And it is something that they are looking into, but I 
do not have a lot of details on that. I can have someone from 
the Canadian Mint provide a statement to the committee if that 
would help.
    Mr. Luetkemeyer. I was kind of curious what digital 
currency would be, how you--what it would look like--how it 
would interact, and what--it is kind of interesting. Everything 
else has gone digital. Why not currency, I guess.
    I guess the next question I have is with regards to the 
amount of money that seems to be coming out of circulation. One 
of the comments that was made or some of the discussion that 
was had was how much of the money that comes out of circulation 
is due to collecting and loss and things like that.
    How much--every year we produce more, I guess, coinage to 
be able to supply more activity. How much of it is--or do you 
have any research that shows why we are producing more? Is it 
because of loss--just dropping in the back of your seat of your 
car or something or, it comes out of--are people collecting it? 
Why do we need to continue to do more?
    Mr. Weber. We haven't conducted any studies about the 
reasons for coinage leaving circulation. At the time that the 
Mint was completing the 50-State Quarter Program, it did 
provide what it believed to be an estimate that approximately 
half of the coins that it had minted for the program were 
likely held by collectors because of the unique collector value 
of those coins at the time. I don't believe that would 
necessarily apply to the other denominations. But as I 
mentioned, we have not studied that issue.
    Mr. Luetkemeyer. Okay. I see my time is up. Thank you, Mr. 
Chairman.
    Chairman Paul. I thank the gentleman. I yield 5 minutes to 
Ranking Member Clay.
    Mr. Clay. Thank you, Mr. Chairman, for yielding. And thank 
you for conducting this hearing.
    Let me ask Mr. Weber--as a consultant to the Royal Canadian 
Mint, in your experience, did Canada face higher manufacturing 
costs as a result of the replacement die they had to use?
    Mr. Weber. Actually, Canada not only advanced their coinage 
material, but concurrently came up with technology to improve 
tool-and-die life. And the Canadian Mint actually markets that 
technology internationally to other mints.
    So in fact, with the transition to multi-ply and 
improvements in their tool-and-die manufacturing, they actually 
saw an improvement in tool and die.
    Mr. Clay. Time-wise, how long did the process take from 
start to finish?
    Mr. Weber. The approval for multi-ply came in 1996, and the 
coins were introduced in 2001. But the majority of that time 
was taken up with the construction of a manufacturing facility 
in Winnipeg, so all of the technology in and around the multi-
layer plating process had to be developed. And equipment needed 
to be purchased and installed.
    So from initiation to introduction was a period of 5 years, 
but that is primarily due to the fact that the manufacturing 
facility had to be constructed.
    Mr. Clay. Thank you. And Mr. Bosco, your testimony 
discusses significant raw material cost savings associated with 
a transition to copper-plated steel, but does not address the 
concerns outlined by former Mint Director Moore that the 
savings incurred from using steel could be offset by higher 
manufacturing costs. Is this something that you can address?
    Mr. Bosco. Not at this time. Our study did not look at the 
costs associated with transitioning the penny to plated steel. 
So I am not in a position to address that--
    Mr. Clay. What factors should Congress consider in order to 
mitigate the impact that changes to composition of the penny 
and the nickel could have on existing coin-operated devices? 
Mr. Blake?
    Mr. Blake. Yes. I think I can answer that for you. I 
strongly encourage the establishment of a subcommittee with 
Congress involved with all stakeholders in trying to make these 
kinds of decisions. They are not easy. There are a lot of 
considerations that need to be made. And I think that is the 
best approach.
    If I could go to the example of what has happened in 
Canada, when they were working on the $1 and $2 coin changes, 
Cummins Allison was involved very early in the process. We were 
given test coins before the coins were introduced to make sure 
that whatever impact it had on our equipment, we could manage 
and minimize costs.
    The same thing happened with the introduction of the euro 
coins back in the early 2000s. Again, we were involved early. 
The Mint engaged us early in that process to make sure that 
what they were doing was something that was more compatible 
with what would be taking place when they introduced those 
changes in industry and in the marketplace.
    Mr. Clay. In Representative Stiver's bill, the Steel Nickel 
Act includes a provision to ensure that the Secretary of the 
Treasury sets specifications of the 5-cent coin in a way that 
would ensure that not more than one change would have to be 
made to coin accepting and coin handling equipment. Should a 
similar provision be included in the bill he introduced to 
change the composition of the penny?
    Mr. Blake. I think anything you can do to reduce the cost 
of the penny and the nickel is something that Cummins supports. 
However, I still strongly--I don't know how you could simply 
say, ``It is only limited to one change.''
    I think you have to go through a series of investigative 
activities with stakeholders and try to arrive at an acceptable 
solution that quite honestly works. And whatever those changes 
are, the objective should always be to try to minimize the 
societal costs and the cost of making those changes to existing 
equipment and machines that are installed in the vending and 
anybody who is processing coin and currency.
    Mr. Clay. Thank you for your response. And Mr. Chairman, I 
yield back.
    Chairman Paul. I thank the gentleman. I yield 5 minutes to 
Mr. Huizenga from Michigan.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that. 
And having a formerly Canadian wife, I am very familiar with 
the ``loonie'' and the ``toonie'' as they are dubbed up in 
Canada.
    But at this time, I am actually going to give my time to my 
good friend and colleague from Ohio, Mr. Stivers. If that is 
okay, I will yield to him.
    Mr. Stivers. Thank you for yielding me time. I do want to 
address one thing that has come up a couple of times from the 
gentleman from Missouri and the gentlelady from New York about 
the study that is going on.
    Congress has a constitutional mandate to regulate security 
in Article I, Section VIII, Clause V, which I would like to 
read, since it is only one sentence long: ``Congress has the 
responsibility to coin money, regulate the value of foreign 
coin, and fix the standard weights and measures thereof.''
    So, I don't think Congress should cede its authority and 
constitutionally mandated requirement to deal with currency. 
And while I consider the folks at the U.S. Mint to be experts, 
it is Congress' job to do this. That is why I have introduced 
these bills and that is why I think it is important.
    The first question I have is for Mr. Blake. It is pretty 
simple. When you suggested that counterfeiting may be a 
problem, do you expect that is a high likelihood or a low 
likelihood with the 1-cent and 5-cent coins?
    Mr. Blake. Let's face it. We are talking about going with 
materials that are lower cost and more readily available. 
Whenever you do that, you always open yourself up to the 
possibility--
    Mr. Stivers. I understand that. I am asking if you think it 
is a high likelihood or a low likelihood that the 1-cent and 
the 5-cent coins--
    Mr. Blake. On low-value coins, it is probably less likely.
    Mr. Stivers. Thank you. That is all I needed there.
    The second question I have is for Mr. Weber. You talked 
about an alloy recovery program that over 6 years has been in 
place in Canada. What percent of the previous coins have been 
recovered? Do you have any idea?
    Mr. Weber. I am really not sure, but I could get that 
information for you, Congressman.
    Mr. Stivers. Okay. That kind of goes to the question that I 
had for Mr. Bosco. You suggested that maybe a third of the 
coins could be recovered. I didn't know if that was--what you 
used for that or how you came by that number. that is why I 
wanted to compare it to the experience that Mr. Weber might 
have seen in Canada.
    Mr. Bosco. It was essentially--it was judgment. We looked 
at the dollars retrieved in Canada and tried to back into what 
that might translate into in terms of number of coins. But that 
number is subject to refinement, clearly.
    Mr. Stivers. Sure. And obviously, that money can be used 
to--for any capital expenditures and the balance could be 
returned to the U.S. taxpayers or to pay down the national 
debt. Obviously, we would have to do that legislatively.
    The next question I have is actually for Mr. Blake. We 
talked a little bit about the impact on the vending machine 
industry and that is what I want to get to next. What is the 
cycle for capital expenditures on vending machines? And over 
what period of time would they typically update or replace 
their machine through capital expenditures? Obviously, that 
varies a little bit, but can you give us an idea?
    Mr. Blake. Cummins Allison is not involved directly in 
vending machine devices and so forth. We make machines that 
count currency and handling, so I am not in a good position to 
speak on that regard.
    Mr. Stivers. Okay. My understanding is that it is a 5- to 
7-year cycle that they update and replace most of their 
machines. And I guess the point of that is that as long as we 
work within that cycle, we can help ensure and limit the cost 
to these folks.
    And that is, I guess, my question for Mr. Weber. What did 
the Royal Canadian Mint do to pacify the vending machine 
industry's concerns? Obviously, you had a 5-year window of 
phasing in. Did that help? What else did you do? Obviously, you 
limited some of the changes. Could you help us understand how 
you worked with the vending industry in Canada? Or how they 
worked with the vending industry?
    Mr. Weber. I think the more relevant experience is the 
introduction of the $1 and $2 coin. As I mentioned, in the 
first 5 years, a lot of that time was taken up with the 
construction of the plating facility. So what Canada did was 
they invited all of the stakeholders in. And these are the cash 
handling people, cash transportation folks, charitable 
organizations, national banks, and of course, the vending 
machine people.
    And what Canada did was actually delayed for 1 year the 
introduction of these coins to allow the vending machine people 
more time primarily to upgrade software, because essentially 
the shape of the coin didn't change. And with that allowance of 
additional time and great communications and getting samples 
into people's hands early, the impact on the vending industry 
in Canada was minimal.
    I don't think you can eliminate it. There is going to be 
some expense there, but I think it can be managed. And it is 
managed through education and communication.
    Mr. Stivers. Thank you. I yield back the balance of time to 
Mr. Huizenga.
    Chairman Paul. I thank the gentleman. And now, I yield 5 
minutes to the gentleman from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I thank Ranking Member 
Clay. I also thank acting Chairman Cleaver. I thank the 
witnesses for testifying as well.
    I would like to make mention of a few things that I believe 
are important as it relates to this effort, to the effort 
itself. Obviously, we all agree that we should not pay 2.4 
cents to produce a penny, and we should not pay 11.2 cents to 
produce a nickel.
    The question becomes, what is the approach that we would 
utilize to remedy this? And in seeking an approach, I would 
like to acknowledge some of my colleagues who have been 
associated with this endeavor. Of course, our former chairman, 
the Honorable Barney Frank, and Mr. Gutierrez introduced a 
piece of legislation. I would like to note that this piece of 
legislation passed the House in 2008. It did not make it 
through the Senate, but the House has acted on this issue. And 
I want to thank the current Members, Representatives Roskam and 
Castle.
    I think everyone is trying to move in the same direction. 
It is just that there are different approaches. I think it is 
important to make mention of Representative Watt, because he 
did pass a bill in the House that made it to the President's 
desk and did receive the President's signature. This bill gave 
authority to conduct R&D on all circulating coins.
    And it is important to note his bill, titled the Coin 
Modernization Oversight and Continuity Act--it is important to 
note that this authority has been accorded the Treasury. 
Actually, it requires the Mint to report to Congress. And that 
report is due by December 14th of this year. It is important to 
note this, because he seems to have taken a rather holistic 
approach without giving a sense of direction--simply said, 
``Help us with our sense of direction.''
    And that report, I would assume, was thought to be 
something that would be beneficial at the time we passed the 
law that required the report. And if we thought it would be 
beneficial to have the report, it would seem that we would 
think it beneficial to utilize the report that passed in the 
bill that passed the House, passed the Senate, and was signed 
by the President.
    So I do express a desire to know what the report will 
contain, such that we will have an opportunity to get some 
additional sense of direction. Let me just ask each of you to 
respond to the concern that we hear by way of the report, some 
of the needs thought to be associated with this issue. Mr. 
Blake?
    Mr. Blake. Again, I commend the Members of Congress for 
taking the steps to try to reduce cost. I think that is a step 
in the right direction. We are all looking for direction in 
this matter. I think it is an important matter. And if we can 
start to get some direction from the report that is due later 
in the year, then that would be a good thing.
    I also encourage the establishment, again, of a committee. 
What we don't want to happen is something in the report and 
then act on it in haste. So I think we are all interested in 
what is going to happen in December with this report.
    Mr. Green. Because my time is about to elapse and I would 
like to hear from the other two--let me just simply say this to 
you, sir, and to all of you--do you think that, given that the 
bill that requires the report passed the House, passed the 
Senate, and was signed by the President, should we look into 
the report before we take action? Or should we simply ignore 
the fact that a bill passed the House, passed the Senate, and 
was signed by the President calling for information, calling 
for intelligence on how to do this--required an R&D research be 
done? Do you think that we ought to honor what we required--the 
House, the Senate, signed by the President? Is that of no 
consequence?
    I will start with Mr. Blake, again. Mr. Blake, let me just 
go to the next person now, because my time is up. Go ahead, 
sir.
    Mr. Bosco. We certainly are not in any position to direct 
Congress with regard to the timing of approaching this issue. 
The purpose of our studies, which predated actually the bills 
that--
    Mr. Green. Because my time is about up, your position is 
that you would not direct Congress. Thank you. And I don't mean 
to be rude, crude, and unrefined; it is just that I would like 
to hear from others.
    What is your position, Mr. Weber?
    Mr. Weber. I think there is--certainly, waiting for the 
report is a good idea. But I think in the interim, you continue 
to lose money on these coins. So I think the committee needs to 
be aware of taxpayer losses on an ongoing basis, so that when 
the report is issued, you can act relatively quickly to make 
whatever changes are necessary.
    Mr. Green. So your position is to use the report, but start 
a process now. Okay.
    I thank all of you for your time. And thank you, Mr. 
Chairman, you have been more than generous. I yield back.
    Chairman Paul. I thank the gentleman. We will have time for 
a second round of questioning.
    I would like to direct my question to Mr. Weber.
    You are not with Jarden Zinc Products at the moment. Is 
that correct?
    Mr. Weber. That is correct.
    Chairman Paul. Does that company do any blanks or 
participate in any private mintage? Or is this always blanks 
and different things for governments?
    Mr. Weber. Jarden produces blanks for a number of different 
countries that are struck for circulating coinage. They do not, 
to the best of my knowledge, participate in token programs and 
things of that nature, though they have some, I believe, 
capacity for striking coins--it is very limited.
    Chairman Paul. So it is mostly government, then. I am 
interested, obviously, in the nature of money and our finances. 
And there is a private coin that is issued now and it is an 
ounce of copper. And it is a large coin. It reminds me of the 
big penny that we had many, many years ago.
    That coin today, because it is one ounce--my estimate--it 
is probably worth about 25 cents. So in reality, in real money, 
it is worth about a quarter. What is your opinion about more of 
that coming up? One of my answers to our dilemma is not so much 
to close down the system we have, but just allow some 
competition out there--competition with our current monetary 
system, instead of trying to doctor up and tinker around and 
make this money work that is constantly losing value, where we 
can't even afford steel in our money.
    What is your opinion about maybe encouraging private 
alternatives, say in coinage? There is a lot of resistance in 
the government, because governments like a monopoly on coinage. 
But the whole idea that you can have today a copper coin that 
is worth a quarter and the worst thing that could happen to 
that is that its purchasing power will probably go up.
    Do you have any sympathy at all for private competition in 
the use of coinage?
    Mr. Weber. I think there is a very, very robust market in 
bullion coins. And bullion coins can be purchased from the 
Mint. They can be purchased from private producers. They can be 
purchased internationally.
    To consider copper or nickel a bullion product is a bit of 
a stretch. Because what people are doing is, they want to make 
that investment. They are not making that investment in the 
hopes that they are going to lose money. So it is an investment 
vehicle. They are buying it today in the hopes it will go up in 
the future. It is different than having coins and currency for 
commerce.
    Chairman Paul. But overall, the precious metals, they have 
obviously, in terms of dollars, gone up in value. The dollar 
keeps going down.
    Yes, buying bullion coins may be as an investment 
protection one thing, but I am talking about permitting 
competition. Because the monopoly laws say that if you tried to 
use a silver ounce in circulation and use it as money or call 
it a dollar, you can get into really serious trouble with that. 
The government doesn't like that. The Treasury comes down 
pretty hard on an individual.
    But I am trying to see a transition period where we would 
have more of this. So in your personal view, would you have any 
sympathy for maybe permitting a little competition--true 
competition--in coinage? Where in a way, it would indirectly 
place even a bigger check on government destroying the value of 
money--it would be an incentive to say, hey, maybe we ought to 
keep up with the private market.
    Mr. Weber. I think the real challenge there is interstate 
commerce. If I buy a copper coin of some sort minted in New 
York, I have no idea what the purchasing power of that coin 
would be in California if it is coming from a private facility. 
Whereas, if I am getting a quarter from Denver or Philly, it 
doesn't matter, I can take it anywhere in the country and use 
it. So I think managing that would have some real challenges.
    Chairman Paul. But the purchasing power of our dollar is 
different in New York as in Texas, also. It varies a whole lot.
    Okay. I think we will go on, and I will yield 5 minutes to 
Mr. Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman. I actually only have 
one question, and any of the three of you can answer, I would 
hope. Given the emerging technologies which generate a higher 
and higher demand for metals and alloys, and as Dr. Paul 
mentioned earlier, that when you have that demand for those 
metals and alloys, that then the cost is going to rise. Is 
there any benefit in considering non-metallic alternatives? 
Plastic? Pigskin? The sky is the limit.
    Are there some non-metallic alternatives that--with you, 
Mr. Weber--that Canada considered? What are some options? Why 
would we go into an area where we know the cost of the metals 
and alloys are rising and start using that for new coinage?
    Mr. Weber. I am not aware of any attempts to make plastic 
coins, for example. There was some discussion of ceramics, but 
that looks to be more expensive than the metals. It is 
interesting. The human experience is that if you go to a 
country that uses aluminum for coins, there is a perception 
that those are useless because people want to feel the weight 
of a coin. So generally, the heavier metals have been the coins 
that have gotten the most viability in the commercial 
marketplace.
    Mr. Cleaver. Okay, maybe I am out here by myself. We know 
that the cost of the metal will rise. We have new technologies 
coming out every day and they are demanding more metals. And 
so, am I way out there to assume that the cost is going to 
continue to rise for metals and alloys?
    Mr. Weber. I think it is a reasonable assumption that 
demand could drive prices higher. I think that is why it is 
really incumbent to have ongoing development programs and 
ongoing research programs to stay ahead of the curve. It is one 
of the things that Canadians have really done a very good job 
at--very innovative--very research-driven. And they have a few 
things on the shelf that look very promising.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Chairman Paul. I thank the gentleman. I want to thank the 
witnesses today for their testimony. And our hearing is now 
adjourned.
    The Chair notes that some Members may have additional 
questions for the panel, which they may wish to submit in 
writing. 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.
    [Whereupon, at 11:13 a.m., the hearing was adjourned.]









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                             April 17, 2012








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