Testimony taken in Ron Paul bullion hearing

This article was originally printed in Numismatic News.
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“Buy American” was a theme that resonated with members of Rep. Ron Paul’s Subcommittee on Domestic Monetary Policy and Technology April 7 during a hearing in Washington, D.C., on the topic of “Bullion Coin Programs of the United States Mint: Can They Be Improved?”

Even in the midst of an ongoing shortage of blanks, subcommittee members were concerned that some coin blanks for the Mint’s various programs, including collector programs, were being purchased from outside of the United States.

Rep. Al Green of Texas raised the issue of platinum blanks and silver half dollar blanks being made in Australia and wondered why they weren’t being made in the United States.

Ross Hansen, CEO of the private Northwest Territorial Mint, who was one of the four invited witnesses, said that the U.S. Mint has not been responsive to vendor development. He cited his own experience as the purchaser of Medallic Art Co., in Nevada, which, he said, he bought two years ago because the prior owners had failed to gain a contract to supply the Mint with blanks.

Even now, Hansen said, he “can supply as many blanks as the Mint needs.” He offered the blanks to the Mint in the past but a former Mint director said it was “not a priority.”

Hansen said to correct the problems in the bullion programs the Mint should create an industry advisory group, engage in an aggressive vendor-development program, ensure these vendors have an elastic capacity to expand blank supply as needed, maintain a larger inventory of bullion blanks and finished coins to better respond to surges in demand and the Mint should change its attitude, which Hansen explained, was originally attributed to the old monopoly phone company: “We don’t care – we don’t have to.”

Subcommittee member Rep. Carolyn Maloney of New York said the country had a jobs crisis and it needs to employ Americans.

Raymond Nessim of Manfra, Tordella & Brookes, Inc., a Mint Authorized Purchaser in the bullion coin program, noted that his parent firm was a blank fabricator and the Mint simply looks for the lowest price.

Because the Mint was not an invited witness, no one was there to give a Mint response, though early on in the hearing Rep. William Lacy Clay requested the committee include Mint input in the written record and Chairman Paul said it would be. Later in the day the Mint issued a statement that said “the United States Mint has been attempting to find additional domestic sources of gold, silver and platinum blanks for many years.”

It pointed out that Sunshine Minting of Idaho has ramped up silver blank production to the point that it has supplied 80 million blanks since 2008.

“Additionally, Sunshine Minting started producing 24-karat gold blanks in 2009 and is currently our primary supplier of 24-karat gold bullion blanks. It has not been able to provide 22-karat gold bullion blanks to date. This leaves only two sources – Vennerbeck Stern Leach (of Rhode Island) and Gold Corporation (Australia)–that can provide 22-karat gold blanks,” the Mint statement said.

Nessim defined the reasons for the hearing this way, “We are assuming that problems that may have promoted this hearing may be:

“a) Current silver Eagle coin supply shortage in relation to unusual current high demand
“b) Circumstances surrounding distribution of the 2010 America the Beautiful (‘ATB’) five ounce silver bullion coin program.”

He recommended that the Mint extend “some flexibility to U.S. blank fabricators in order to help them invest in additional capital equipment for increased capacity.”

He recounted his firm’s difficulties in meeting the Mint’s changing requirements on the 2010 ATB coin sales and that these requirements have not been lifted for the 2011 program.

Terence Hanlon, president of Dillon Gage Metals, another Authorized Purchaser, covered similar ground relating to the American Eagle program blank shortages and the delays in the America the Beautiful 5-ounce coin program, but added a suggestion that tax law be changed to equalize the treatment of bullion investments with securities investment. Currently bullion investments are taxed at a 28 percent rate while gains on securities are taxed at a 15 percent rate.

He said ending this tax discrimination would boost the market potential for American bullion coins. He even forecast a 30-50 percent increase in demand for U.S. bullion coins if the tax playing field were evened out.

However, a follow-up question by a member of the subcommittee asked how the Mint would keep up with this increased demand when it has been having difficulty keeping up with the present demand?

Hanlon said that some demand would move over into other metals and exchange traded funds.

Taking the collector point of view was witness Beth Deisher, editor of Coin World.

“Most of the Mint’s problems in marketing bullion coins are rooted in an ongoing failure to understand who its customers are and why they purchase bullion coins,” she said.

She explained that mistakes made by the Mint in the first year of programs such as the First Spouse gold series and the America the Beautiful series “dramatically reduce sales potential for the remainder of the program.”

She recommended the Mint strike coins to demand by taking orders for a certain number of days for the collector versions of bullion coins and then strike the number of coins ordered.

She also recommended more coin blank suppliers to avoid disrupting the collector component of the program as happened in 2009 when proof silver Eagles were not produced.

The Mint also should issue more consumer alerts to point out misleading marketing in the numismatic field, she said.