• seperator

Future of U.S. money on table

NN0808Lucas_color.jpgHearings on the future of American money, including both coin and paper currency, were held July 19 before the House coinage subcommittee. Hobby witnesses and government officials parried with committee members during a two-panel presentation that covered events of concern to the Mint, Federal Reserve, Secret Service and Bureau of Engraving and Printing.

In the photo: Subcommittee Chair Deborah Pryce, unidentified, and Rep. Frank Lucas listen as Oversight and Investigations Subcommittee Chairwoman Sue Kelly questions a witness about coin issues.

Chaired by Rep. Deborah Pryce, R-Ohio, with ranking minority member Rep. Carolyn Maloney, D-N.Y., the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology held a hearing entitled ?Coin and Currency Issues Facing Congress: Can We Still Afford Money??

There was also a critical examination of a recent bill introduced that would help clarify rules concerning ownership of pattern coins, experimental coin issues, and numismatic errors. Hearings were therefore held on H.R. 5077, a bill by Rep. Frank Lucas, R-Okla., that could revolutionize the way some orphan coins are collected. An orphan coin is one which is an irregular issue such as the 1913 Liberty nickel, the 1804 silver dollar and the 1933 $20 gold piece, to name three.

Subcommittee Chairman Pryce said, ?This hearing will provide important oversight on a broad range of issues, from protecting our currency from counterfeiting to reviewing the value of the coins in circulation.?

Invited to testify were government officials as well as several industry groups and leaders, including the U.S. Mint, the Secret Service, Bureau of Engraving and Printing and the Smithsonian Institution, repository of the National Coin Collection.

Mint Deputy Director David Lebryk testified for the Mint. Though the Senate Banking Committee cleared the nomination of Edmund Moy to be new Mint director the same day, it still has to be voted on before he takes up the new title and the ability to testify on behalf of the administration.

On the industry side, representatives who testified included former president of both the American Numismatic Association and the Professional Numismatists Guild Q. David Bowers, newspaper editor Beth Deisher, ANA executive director Chris Cipoletti, and the Industry Council for Tangible Assets represented by Fred Weinberg.

Introduction of H.R. 5077 by Lucas on April 4 has a stated purpose: ?to provide a clear line of demarcation with regard to private ownership of any coin, medal, or numismatic item made or issued by the United States Government before Jan. 1, 1933, that is not in the possession of the United States Government, to establish certain guidelines and requirements with respect to the inventory, preservation, public display, and disposition of certain United States coins, medals, and numismatic items that were struck or made after Dec. 31, 1932, and for other purposes.?

House Financial Services full committee Chairman Michael G. Oxley, R-Ohio, said, ?It is important for our committee to examine the work of the U.S. Treasury, the Federal Reserve and the Secret Service in creating more effective and innovative anti-counterfeiting features on our currency. As thieves continue their efforts to counterfeit, the U.S. government must stay one step ahead. I also look forward to hearing from the witnesses on how Rep. Lucas? legislation would help bring certainty to our nation?s coin collectors.?

Hobby witnesses focused on their support for a version of that bill. Deisher was particularly critical of potential unintended consequences of the proposal, which would otherwise legalize ownership of all government-issue coins made before 1933. This would include coins with a nebulous history like the 1913 nickel and 1804 silver dollar.

It would not allow ownership, per se, of modern errors such as the Sacagawea dollar mule with a state quarter, nor 1943 copper cents.

The ICTA testimony presented by Weinberg made several important points that the organization supports with H.R. 5077:

  • The numismatic community and relevant government agencies will have certainty as to which products may be legally owned and traded;
  • The U.S. Treasury may save considerable financial, personnel and other resources by avoiding extensive research and sometimes litigation in situations where a coin, medal or other numismatic item?s presence in the marketplace is not clearly the direct result of recent, proven illegal actions;
  • Law enforcement resources will be freed to focus on more urgent matters since there will no longer be a need to pursue these essentially victimless situations; and
  • The American taxpayers? funds will no longer be spent on such technical matters from which there is no threat to the integrity of the U.S. Mint, U.S. Treasury or the U.S. money supply.

Rep. Frank Lucas, R-Okla., author of the bill under review, had his own comments: ?I have filed this year H.R. 5077, the Numismatic Rarities Certainty Act, 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 U.S. Government on how to handle some very important issues.?

Lucas explained, ?The bill sets a date, Dec. 31, 1932, before which any coin manufactured by the Mint, but never properly issued, will no longer be declared government property. It will be safe for coin collectors to buy, own and sell.?

ICTA also pointed out that there are two highly beneficial provisions of the bill, previously little discussed; the bill would:

  • Provide for preservation of historically important numismatic items and create specific policy for the disposition of patterns, trial pieces and other items, so they will not be lost for posterity at the discretion of an ever-changing administration of the U.S. Mint and/or Treasury; and
  • Provide funding for the National Numismatic Collection at the Smithsonian Institution. This is an especially important provision since the historic 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.

Lebryk addressed some of the issues associated with these coins with unusual pedigrees and stories.

?The United States Mint recognizes that over its long history, a handful of examples of so-called ?mystery coins? have surfaced within the numismatic collecting community. Each of these examples has its own history and its own degree of legitimacy. Some of these examples, such as the 1943 copper Lincoln cents that may have been struck on copper planchets that remained in the press hopper from the 1942 production, may be the result of innocent mistakes,? Lebryk said.

?Although these coins are understandably numismatic rarities, they may very well have been legally struck and properly issued. Other examples are most certainly not as innocent, such as the 1933 $20 gold double eagles, which the Secret Service and federal courts determined were removed illegally from the Philadelphia Mint because there was no lawful authority to issue them.?

In that one brief statement, the history of some unusual coins was turned on its head and the threat of seizure left in doubt. The position of the Mint was then articulated with more specifics.

?Every so often, the United States Mint is asked to articulate its position on the legality of one or more of these examples,? Lebryk told the committee. ?When there is a clear record that a coin was properly struck and issued, we acknowledge its legitimacy. When the record is not as clear, we are understandably reluctant to provide assurances that may not withstand the scrutiny of subsequently discovered evidence.?

The Mint, as its position was set forth, ?We recognize and appreciate the concerns of the numismatic community regarding the desire for clear title to items claimed to be coins, medals and other numismatic items sold on the secondary market.?

He summarized the Mint?s position on H.R. 5077: ?In all these cases, when the property in question might be public property belonging to the United States, these concerns have always given way to the more important principle that we are a nation of laws and, therefore, no government official ? even one who appears to be acting under color of official authority ? can dispose of public property unless he or she actually has the lawful power to do so and does so strictly in accordance with the explicit terms of that power. Our courts have repeatedly upheld the principle that, unless lawfully disposed of, title to public property belonging to the United States remains permanently and indefeasibly in the citizens of the United States.?

Arguing for a preservation of what he called the ?status quo,? Lebryk suggested problematic elements to the proposals by H.R. 5077. ?We are particularly concerned that this proposed bill could have the effect of transferring title to rare antiquities, and other ?national treasures? currently owned by the public, from the government to the person who happens to possess it ? and this transfer of title would occur regardless of whether a person unwittingly paid value to acquire the item, acquired it with knowledge or belief that it might be public property and was not legal to own, or worse, played a role in its illegal production or distribution.?

And, he warned, ?If this bill goes forward, we see numerous unintended consequences as well. For instance, the bill would strip the public?s ownership of a coin, medal or numismatic item given to the government as a gift or bequeathal because it would exempt only those items that the government reacquires ?through value given in a sale or exchange.??

Additionally, Lebryk warned, ?the bill would convert title to any coin, medal or numismatic item that the government incidentally has on loan to a museum or any other party; this is because the bill categorically and summarily passes title to such items to the party who then happens to possess them.?

?But there is an even more glaring oversight in the bill?s draftsmanship: In the unlikely event that a thief could walk into a federal facility today and steal a numismatic rarity minted prior to 1933 from the National Numismatic Collection, this bill, if approved as drafted, would strip the public of its ownership of that coin, medal, or numismatic item and vest title to it in the thief.?

Deisher echoed a similar theme but also addressed other issues she had with the bill, though not the general concept that the bill proposes. She also criticized a basic premise of the proposal, saying that H.R. 5077 arbitrarily draws a line in the sand with regard to any coin, medal or numismatic item manufactured by an agency of the U.S. government after Dec. 31, 1932, that was never issued by the U.S. government and comes into the possession of the government.

The bill, Deisher said, ?would clarify the right to own and trade these historic U.S. numismatic items, many with origins that cannot be proven or documented today.? She gave specific examples: ?15 specimens of the Draped Bust silver dollar bearing the date 1804 are known. All are known to have been struck in 1834 or later, but the pedigrees of only four can be traced with certainty.?

Deisher also criticized the approach: ?There needs to be a time frame or 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.? She cites the 1974 aluminum cent as an example.

Her solution: ?If after 100 years from the time of manufacture, the government has taken no action to recover a numismatic item deemed illegal for a citizen to hold, the item could be held and freely traded. This would allow the government to prosecute those proven to be involved in illegal acts, but would not punish the numismatic item itself for existing. This would allow the public to learn about the particulars.?

Dealer Q. David Bowers, who has handled probably all major rarities, defined the cause of the problem, ?At one time it was the practice of Mint officials (beginning in spring 1859 under Director James Ross Snowden and ending under the administration of Daniel Fox in 1885) to have restrikes, rarities and other fancy pieces made, for their private sale to dealers. Today these are widely collected. However, there is no record of them having been legally released. Similarly, in modern times there have been Mint errors, off-metal pieces and other oddities that have found their way out of the Mint, sometimes produced in a regular manner, but not caught as errors before they were released into the Federal Reserve System.?

His solution is similar to Deisher?s ? fixed ? but a shorter window. To give ?assurance to the holders of such pieces[,] I suggest that there be a moving date for the age of such pieces, such as ?dated more than 25 years ago,? or similar. In this way H.R. 5077 will remain useful for a long period of time. Otherwise, long from now, a date such as 1932 will seem unusual.?

Bowers gave some focus on the Lucas proposal to fund the National Coin Collection. ?H.R. 5077 specifically mentions the National Coin Collection held at the Smithsonian Institution. In recent times this has suffered from lack of proper funding, not making it possible to maintain modern exhibits, install up-to-date facilities, and the like,? he charged.

?In the same era the U.S. Mint has turned in a brilliant performance in producing collectible coins, ranging from proof sets to commemorative coins to the widely popular state quarters program. These activities have brought hundreds of millions of dollars each year into the Treasury Department, in the form of seigniorage (profit on the face value of the coins as opposed to the minting cost) as well as premiums charged for special striking,? Bowers declared.

?As such, the Mint is one of relatively few government activities in which funds flow the other way, enhancing the funds of the Treasury, rather than depleting them.? His plea: ?I suggest that provision be made for part of the profits of the U.S. Mint to be given to the National Numismatic Collection in the Smithsonian, cast not as a charity or a donation, but as an intelligent business concept reinforcing the programs already in place at the Mint.?

With the National Coin Collection display dismantled, and its proud visual heritage reduced to several displays throughout the museum, it came to Dr. Brent D. Glass, director of the Smithsonian Institution?s National Museum of American History, to articulate his organizational position at the hearings.

His preface was by Rep. Lucas, who used the opportunity to inquire, ?As for the Smithsonian, I would like to thank them for their efforts in the preservation of the National Coin Collection, the largest numismatic collection in the world. I am very curious what the Smithsonian plans for the National Coin Collection if my legislation were to pass and a significant funding stream were created. It is a tragedy that due to limited resources, the collection is not currently on permanent display.?

Glass began his testimony with a description of a portion of more than 1.5 million numismatic objects accessioned into the collection as ?money.?

?The collection emphasizes the development of money and medals in the United States. The core of the U.S. collection, more than 18,000 items, came to the Smithsonian during the 1920s from the U.S. Mint and includes many exceptional rarities.?

He approves of the funding mechanism of the Lucas bill, and hopes to ?establish a National Numismatic Collection Endowment which would provide a dedicated funding source for the preservation, continued security and display of these national treasures for years to come. The total size of this endowment is proposed at $10 million.?

Importantly, Glass says, ?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 fund-raising goal.?

Defining the scope of the project: ?Funding from the endowment will allow us to hire additional dedicated curatorial and administrative staff to oversee the collection, create rotating temporary exhibitions of the collection right here in the National Museum of American History, collaborate with other venues (such as the International Monetary Fund Center, the American Numismatic Association and the U.S. Mint) to develop temporary exhibits, and organize a national tour of small displays.?

Also, he says, ?The funds also will allow us to pursue new collecting opportunities to secure new objects that address gaps in the collection. In addition, we plan to increase our outreach to individuals in communities outside Washington, D.C., by enhancing the collection?s existing Web site? with virtual museum exhibits.

He concluded that, ?We at the Smithsonian know that the history of America cannot be told without considering America?s coins and currency.?

ANA executive director Chris Cipoletti was supportive of both the Smithsonian coin museum funding mechanism and the Lucas bill proposals solidifying ownership. ?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,? he said, ?Yet ownership is potentially called into question because the numismatic material was not formally released by the Department of the Treasury. The current owners had no role in any claim that the material was wrongfully taken from the Treasury but based upon current law, a significant numismatic investment may be at risk.?

He took a different tack than Deisher and Bowers, claiming that ?HR 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.?

As might be expected, Scott Johnson, deputy special agent in charge, Criminal Investigative Division, U.S. Secret Service, brought a different perspective to the table. His focus was on the dollar as world currency: ?Of the approximately $762 billion of genuine U.S. currency in circulation, roughly two-thirds of that amount circulates outside of our borders, making the U.S. dollar a truly global currency.?

He spoke of counterfeits, nearly half of which are manufactured outside the United States. ?Approximately $52.6 million in counterfeit U.S. currency was seized last year by the 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.?

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. As a member of the Advanced Counterfeit Deterrence Steering Committee and the Interagency Currency Design Committee, we have an active role in the research, design, and introduction of the new currency,? the agent said.

?The Secret Service is continually evaluating the methods currently employed by the counterfeiters and studying cutting-edge anti-counterfeiting technologies to enhance future redesigns of U.S. currency.?

Nary a word on seizing rare coins, however, like the 1933 $20 gold piece.

Larry Felix, BEP director, naturally focused on his organization?s currency role and the problem of digital imaging and currency reproduction. ?U.S. currency was further enhanced with the introduction of the current design series (Series 2004) that features background colors and improved security features. Redesigned $20, $50 and $10 notes were introduced into circulation in 2003, 2004 and 2006, respectively. Recently, the BEP and Federal Reserve announced that a redesigned $5 note is expected in 2008, with a new $100 note to follow.?

New technology is the key, Felix said. ?There are a number of initiatives that the BEP is in the process of implementing to enhance the efficiency and effectiveness of the organization, such as the introduction of a new 50-subject printing production process, enhanced employee development programs, and implementation of functional re-alignment to promote synergy and streamline the organization.?

Up next was Louise L. Roseman, director, Division of Reserve Bank Operations and Payment Systems of the Federal Reserve. Her big area of coin concern: ?The Presidential $1 Coin Act of 2005 establishes a program under which the Treasury will issue four new Presidential $1 coin designs per year starting in 2007.? She disclosed that, ?In February, Federal Reserve and Mint staff began meeting regularly to establish plans for distributing the Presidential $1 coins effectively. In addition, to help plan for the introduction of these new dollar coins and to gauge demand for, and anticipate obstacles to, their efficient circulation, we are consulting with a wide range of coin users to gather ideas, advice, and information.?

Significantly, outreach includes collectors. In June ?the Federal Reserve jointly hosted the first $1 Coin Users Group Forum, where input from representatives of banking, armored carrier, transit, automated merchandising, numismatic organizations, as well as from other federal agencies.?

It is unclear, she said, ?at this point whether the Presidential $1 Coin Program will have a substantial effect on the use of dollar coins in everyday transactions.?

One reason she cited: ?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.?

So does this means that the Fed advocates eliminating the dollar bill? Nope.

Another surprise is the involvement that the Fed has ?to meet collector demand for commemorative circulating coins.? How do they do this? During ?an initial introductory period, the Reserve Banks have suspended their normal practice of first paying out previously circulated coins to depository institutions and instead pay out only the new design … For the Presidential $1 Coin Program, we are currently contemplating a 30-day introductory period during which only the new coin design would be issued.?

The Mint is ?energetically? moving on the Presidential $1 coin and first lady bullion counterparts, Lebryk said. ?The other important elements of the Presidential $1 Coin Program are proceeding on schedule, with Presidential coin designs completed and approved and the required hubs, plates and dies now in production. Designs for the First Spouse gold coins and bronze medals are in development. For the first time we will employ edge lettering on a circulating coin, allowing the date, mintmark and inscriptions ?In God We Trust? and ?E Pluribus Unum? to be incused into the edge.?

The hearing marks the start rather than the conclusion of the debate. From here, there may be a push for the Lucas bill, a committee mark-up and then floor action. Whether it?s a bill that could become law is far from clear, but it is likely that if it does, H.R. 5077 would become law in a changed format.

This entry was posted in Archived News, Articles, News. Bookmark the permalink.

Leave a Reply