This article was originally printed in the latest issue of Numismatic News.
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Consumer protection or politics?
That is the question many in the hobby are asking as the result of new legislation aimed at telemarketers introduced in the U.S. House of Representatives.
Rep. Anthony Weiner, D-N.Y., introduced H.R. 6149 on Sept. 16, known as the “Coin and Precious Metal Disclosure Act.” A hearing was scheduled a week later for Sept. 23 at 2 p.m. by the House Committee on Energy and Commerce. This occurs after this issue of Numismatic News goes to press.
Holding the hearing will be the Subcommittee on Commerce, Trade, and Consumer Protection. The witnesses are tentatively set to include Goldline, a California-based precious metals dealer whose sales Weiner has been vocal about since the spring of this year, and those who feel “ripped off” by their selling practices.
Weiner’s bill, which stands a strong expectation of passing, has a three-fold requirement on every telemarketer (as well as consumer affairs gatherers).
The bill requires that in any sale of coins or precious metal bullion, the following information shall be provided to the consumer:
1. Any fee that is or may be incurred by the customer if the sale of the coin or precious metal bullion were to be consummated.
2. Purchase price, the melt value and the reasonable resale value of the coin or precious metal bullion.
The legislation would also require that if federal documents are involved, it shall be at no cost to the consumer; if the Federal Trade Commission has regulatory authority, that it be blessed by that agency as well. There may be others who are accidentally covered. The bill, if it becomes law, will fundamentally alter coin sales by telephone.
The legislative agenda says that the purpose of the legislation is to legislate the term ‘‘coin or precious metal dealer,’’ which has a different meaning to some collectors. One way that it does this is in its definition section.
“1. The term “coin or precious metal dealer” means any person that sells or offers for sale for investment purposes gold coins or bullion or coins or bullion made of other precious metals.”
Besides the grammatical error (“that” should be “who”), the legislation purports to apply to those who offer or sell coins “for investment purposes.” Presumably, a vendor whose literature is appropriately endorsed (“No investors need apply” or “Collectors only”) might escape regulation.
Next the legislation says that,
2. “the term ‘melt-value’ means the reasonable estimated value of any coin or precious metal if such item were processed and refined;” that will prove useful when a vendor specializing in investments offers an 1838-O half dollar (silver) for sale (melt value about $8) with a selling price of, say, $600,000.
Also in the bill:
3. The term “reasonable resale value” means a reasonable price that the coin or precious metal dealer selling the coin or other precious metal determines that other coin or precious metal dealers would pay to purchase the coin or other precious metal from the consumer on the date that such coin or other precious metal is sold to the consumer.”
The problem with that can be seen in these examples of disparity of value for particular coins:
In the Heritage August 2006 Signature sale, a rare 1884-S silver dollar in about uncirculated (AU-58) condition was offered in three consecutive lots (2912 through 2914): NGC – $862.50; ANACS – $1,380; PCGS – $1,092.50. The spread on this runs 60 percent.
On Jan. 6, 2007, at a Heritage sale, an 1886 Morgan dollar, Mint State-65, sold for PCGS – $1,265 and NGC – $862.50, a 46 percent change.
This is not a modern phenomenon; it was also true a generation ago. Consider if you will the Bowers & Merena sale of November 1987. The 1936 York commemorative MS-65 (lots 2332, 2333 and 2334) were offered with an MS-64 specimen (lot 2335). The result:
• 2332 MS-65, a gem, $715
• 2333 MS-65, a gem, $467.50
• 2334 MS-65, a gem, $577.50
• 2335 MS-64, $687.50
Here, the MS-64 is valued at more than two of the MS-65 coins.
At an Oct. 13-14, 2004, auction sale conducted by Stack’s in New York City of the Betty Goff C. Cartwright Collection, there were many more examples in several different series. Consider, first, the 1875-CC brilliant uncirculated 20-cent piece, lots 1259 and the identically graded and described lot 1260. One went for $1,300, the other for $700.
Weiner’s bill contains clauses that focus on investment value and proportions of precious metals.
“Nothing in this Act shall apply to the sale of rare and collectible coins – (1) the precious metal content of which constitutes only a limited or insignificant portion of the overall value of the coin; and (2) whose value is not affected by the increase or decline in the value of such precious metals.”
Limited or insignificant amounts suggest they are trying to make it a bullion bill, but the “and” followed by “value is not affected by the increase or decline in the value of such precious metals” takes it away – because when gold goes up or down, the entire rare coin market moves; that’s true of silver, too, as years of study show.
What drives Weiner and his bill is not certain, but his attack has been mostly on Goldline.
TPM Muckraker, an online media view, says “Reps. Anthony Weiner, D-N.Y., and Henry Waxman, D-Calif., have announced a hearing next Thursday on Goldline International, a company that encourages consumers to convert their assets into gold to prepare for the supposedly inevitable market collapse. Goldline has been accused, by Weiner and others, of using “aggressive sales tactics and conservative spokespeople such as Fox News’ Glenn Beck to sell overpriced gold coins.””
The Huffingtonpost.com quotes Rep Weiner “Advancing his campaign against one of the top advertisers on Fox News’s Glenn Beck show,” in a letter questioning Goldline on July 20th. Much of the opposition seems to stem from Goldline’s sponsorship of Glenn Beck’s radio show.
Radio business Report on RBR.com, its website says, “The subcommittee is under the gavel of Bobby Rush, D-Ill., but the prime mover behind the bill is subcommittee member Anthony Weiner D-N.Y., who indicated that current and former Goldline employees are among those who have been invited to testify.”
Weiner’s congressional website gives his perspective: “Invitations to the hearing have been sent to representatives of Goldline International, the Federal Trade Commission, the Consumers Union and several other witnesses.”
He continues: “Goldline employs several conservative pundits to act as shills for its precious metal business, including Glenn Beck, Mike Huckabee, Laura Ingraham, and Fred Thompson.”
Huckabee is a former governor of Arkansas; Thompson a former U.S. senator from Tennessee and star of TV’s “Law and Order.”
“By drumming up public fears during financially uncertain times, conservative pundits are able to drive a false narrative,” Weiner claims. “Glenn Beck for example has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation with Barack Obama as President. He will often promote the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. When the show cuts to commercial break, viewers are treated to an advertisement from Goldline,” Weiner says.