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THE STATE OF U.S. COINS AND CURRENCY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC MONETARY POLICY 

AND TECHNOLOGY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

JULY 20, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–145 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON DOMESTIC MONETARY POLICY AND TECHNOLOGY

MELVIN L. WATT, North Carolina, Chairman 

CAROLYN B. MALONEY, New York 

GREGORY W. MEEKS, New York 

WM. LACY CLAY, Missouri 

BRAD SHERMAN, California 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

KEITH ELLISON, Minnesota 

JOHN ADLER, New Jersey 

SUZANNE KOSMAS, Florida 

RON PAUL, Texas 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

BILL POSEY, Florida 

LEONARD LANCE, New Jersey 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 20, 2010 ..................................................................................................... 1 

Appendix: 

July 20, 2010 ..................................................................................................... 39 

WITNESSES 

TUESDAY, JULY 20, 2010 

Clark, Michael B., President, Diamond State Depository .................................... 27 

Felix, Larry R., Director, Bureau of Engraving and Printing (BEP) .................. 8 

Hesch, Craig A., Chairman, National Automatic Merchandising Association ... 26 

Jenkins, Kenneth, Deputy Special Agent in Charge, Criminal Investigative 

Division, U.S. Secret Service ............................................................................... 11 

Marks, Gary, Chairman, Citizens Coinage Advisory Committee ........................ 29 

Moy, Hon. Edmund C., Director, United States Mint .......................................... 6 

Roseman, Louise L., Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors of the Federal Reserve System ................ 9 

APPENDIX 

Prepared statements: 

Watt, Hon. Melvin ............................................................................................ 40 

Castle, Hon. Michael ........................................................................................ 44 

Paul, Hon. Ron .................................................................................................. 46 

Clark, Michael B. .............................................................................................. 47 

Felix, Larry R. .................................................................................................. 53 

Hesch, Craig A. ................................................................................................. 61 

Jenkins, Kenneth .............................................................................................. 69 

Marks, Gary ...................................................................................................... 76 

Moy, Hon. Edmund C. ...................................................................................... 84 

Roseman, Louise L. .......................................................................................... 98 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Watt, Hon. Melvin: 

Written responses to questions submitted to Craig Hesch ........................... 117 

Written responses to questions submitted to Kenneth Jenkins ................... 118 

Written statement of James Mulroney, Coin Director, Brink’s Inc. ............ 119 

Written responses to questions submitted to Louise Roseman .................... 128 

Written statement of Mark Weller, Americans for Common Cents ............. 132 

(1) 

THE STATE OF U.S. COINS AND CURRENCY 

Tuesday, July 20, 2010 

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 2:33 p.m., in room 

2128, Rayburn House Office Building, Hon. Melvin L. Watt [chairman of the subcommittee] presiding. 

Members present: Representatives Watt, Sherman, Green, 

Cleaver; Paul, Castle, Lucas, and Lance. 

Chairman WATT. I will convene this hearing of the Subcommittee 

on Domestic Monetary Policy and Technology of the Financial Services Committee, and the hearing will come to order. We will start 

by having 10 minutes per side of opening statements, or up to 10 

minutes per side, and I will recognize myself for the first opening 

statement. 

In general, the purpose of this hearing is to examine the current 

state of coins and currency in the United States. The U.S. Mint, 

the Bureau of Engraving and Printing, the Federal Reserve, and 

the U.S. Secret Service are jointly responsible for the circulation of 

all U.S. coins and currency and anticounterfeiting measures to protect the U.S. money supply. 

There are several specific issues we would like to explore in some 

detail in this hearing. First, how effective are the government’s 

anticounterfeiting measures? Some have estimated that in 2009, 

the amount of counterfeit notes passed was approximately $70 million, an amount that has been increasing in recent years. There 

have also been reports from the United Kingdom that 1 and 2 British pound coins are being counterfeited at an increasing rate. So, 

we need to know what steps are being taken by the U.S. Mint to 

prevent counterfeiting of U.S. dollar coins, and what is the government’s plan going forward to combat the increasing counterfeiting 

of notes that cost taxpayers millions of dollars per year. 

Second, what is the government’s response to the worldwide rise 

in the price of metals used to manufacture coins? Some reports 

suggest that it actually costs more to manufacture the penny and 

the nickel than these coins are now worth. The Administration has 

proposed legislation to amend 31 U.S.C. Section 5112 to allow the 

Treasury Secretary to prescribe the metal composition of all circulating coins, including the penny, nickel, dime, quarter, half dollar, 

and $1 coin. However, some have raised concerns about this proVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
2 

posal because, by statute, only Congress has the authority to prescribe the metal content of circulated coins. 

We need to evaluate alternatives, such as perhaps granting the 

U.S. Mint research and development authority to research alternative metals and report these researched findings back to Congress, while perhaps retaining the authority of Congress to determine the metal content of coins. 

Third, is there an oversupply of certain coin denominations? Some reports suggest that there are up to $1 billion in dollar coins 

and other low-denomination coins being stored in large quantities 

by the Federal Reserve and partner companies. We need the Fed 

to either confirm or refute these reports; and if the reports are confirmed, we need to know what efforts the Fed is taking to reduce 

these coin surpluses and more efficiently manage the Nation’s 

money supply. 

Fourth, some dealers and collectors of numismatic coins have indicated that the U.S. Mint is not keeping up with the demand for 

numismatic coin products. Current statutes require that all refined 

gold and silver must be used first to meet bullion demand. We need 

to evaluate whether it would be a good idea to divert refined gold 

and silver from the bullion program to meet demand for numismatic products and what impact this would likely have on the supply of bullion products. 

While there are many other important issues related to the state 

of U.S. coins and currency, the four issues I have outlined above 

should allow for a robust exchange. 

While we are not attempting to address this issue today, one 

other important topic that we need to explore in the future is the 

issue of equal access to U.S. currency by the visually impaired. The 

Bureau of Engraving and Printing has issued a proposed rule that 

is open for public comment until mid-August, and the Bureau expects to issue a final rule in the fall of 2010. While I thought it 

would be inappropriate to put the BEP in the awkward position of 

commenting on a proposed rule while the rule is in the comment 

period and before the rule is finalized, when the final rule is 

issued, it would certainly be appropriate to have a hearing on this 

and related issues. Of course, it is important for the visually impaired to have equal access to U.S. currency and for the Congress 

to ensure that the Bureau’s final rule accomplishes that result. 

With that, I will now recognize the ranking member, the gentleman from Texas, Mr. Paul, for up to 5 minutes. 

Dr. PAUL. Thank you, Mr. Chairman. And I welcome the panel. 

I remain opposed to the Mint’s current effort to gain greater 

power in determining the composition of circulating coinage. It is 

unconstitutional to delegate a determination of the metal content 

of our coinage to the Secretary of the Treasury. Under Article I, 

Section 8, of the Constitution, the Congress is given the power to 

coin money and regulate the value thereof. It is a shame that Congress has already unconstitutionally delegated its coinage authority 

to the Treasury Department, but that is no reason to further delegate our power and essentially abdicate congressional oversight. 

While I sympathize with the aim of saving taxpayer dollars by 

reducing the cost of coinage, it is disappointing that our currency 

has been so greatly devalued as to make this step necessary. At the 

3 

time of the penny’s introduction, it actually had some purchasing 

power. Based on the price of gold, that one penny would have purchased in 1910 what requires 57 cents today. It is no wonder that 

few people nowadays would stoop to pick up any coin smaller than 

a quarter. 

One of the witnesses on our second panel mentions the importance of the Mint’s production of bullion coinage and the danger of 

counterfeit collector coins that may or may not be minted from silver or gold. It is a shame that instead of protecting the value of 

the dollar to ensure that precious metals coins could still circulate 

as money, or enforcing counterfeiting laws to stop the flow of clearly fraudulent coins, the Federal Government insists on printing 

trillions of dollars out of thin air and prosecuting individuals who 

attempt to create precious metal currencies to compete with the devalued U.S. dollar. 

The topics discussed in today’s hearing exemplify how far we 

have fallen not just since the days of the Founders, but only in the 

last 75 to 100 years. We could not maintain the gold standard or 

the silver standard. We could not maintain the copper standard, 

and now we cannot even maintain the zinc standard. Paper money 

inevitably breeds inflation and destroys the value of the currency, 

which harms all Americans. I wait for the day that we have a committee hearing when we talk about once again reinstituting sound 

money for our people. 

I yield back. 

Chairman WATT. I thank the gentleman for his opening statement. I will just remind him, I am one of those people who still 

picks up pennies, especially when the head is up. That is supposed 

to be lucky. 

Mr. Sherman from California is recognized for 3 minutes. 

Mr. SHERMAN. Commenting on the Executive Branch’s desire to 

control what is in the metal that is used to make coins, I would 

think if you had a good proposal, we could pass it. It would be a 

delightful break from renaming post offices; and the fair deal ought 

to be we will let you guys rename a couple of post offices, and we 

will keep control of what metal is in the coinage, unless there is 

a real agenda you have here to move to another metal and you figure Congress wouldn’t pass it if we actually knew what you were 

going to use the power for. 

As to counterfeiting, my whimsical suggestion is that we retaliate against North Korea by counterfeiting some of their currency. 

I realize this would not fully compensate us for what they are 

doing to ours, but it would be nice for us to be on offense for a 

change. 

There are two major issues in this area: should we phase out the 

paper dollar; and should we eliminate the penny? There are those 

who think that the amount of value in a dollar should be represented by a piece of paper. When I was growing up, that amount 

of value was a quarter or less, and you had a metal coin called a 

quarter that was sufficient in value to buy a quarter pounder and 

a drink. And so I don’t see why we need to have the Federal Government go through the expense of making and replacing paper 

money for an amount of value that has traditionally in this country 

been represented by a coin. 

4 

This would help dramatically reduce costs for our transit systems 

and our vending machine operators. As long as there is a paper 

dollar, the metal dollar will not take hold. And we could reduce 

dramatically the costs of a lot of transactions if we had a coin dollar that was in wide circulation. We could also save a lot of paper 

and a lot of ink because these coins last a lot longer. 

That might go hand-in-hand with abolishing the penny. I am 

sure that we could figure out other ways to honor President Lincoln and President Washington, who appears on the paper dollar, 

perhaps by including these folks in some of the dollar coins that 

we create. Abolishing the penny would mean every cash register 

would have a place where you could put a coin dollar; that is to 

say, in the tray. We would save a lot of zinc. We would save a little 

copper. We would save some money. 

But there are consumers who think that, when I buy something 

for 99 cents, I want to be able to pay just 99 cents. The fact is 

every transaction—I say this as in my former life, I used to have 

the largest sales tax agency in the country—is actually rounded up 

or down. If you buy something for 99 cents in a State with a sales 

tax of 5 percent, then you are actually paying at the cash register 

$1.03.95, which is rounded up to $1.04. So you already have all the 

rounding. And if you want, you can buy a certain amount of 99- 

cent items so the merchant will have to round down, rather than 

up; and if that is important to you, you would now round down to 

the nearest nickel and save almost 21⁄2 cents. 

So I would hope that we could abolish the penny, which is really 

not a unit of value anymore. Mel will pick one up, not for the 

value, only for the luck, and I assure you, those nickels will be just 

as lucky. 

I yield back. 

Chairman WATT. The gentleman’s time has expired. 

I recognize the gentleman, Mr. Lucas, for 3 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. I appreciate the opportunity to be a part of this panel discussion today, and I look forward to the comments from our witnesses, too. It is an esteemed 

and very knowledgeable group. 

The comment has been made about the obsolete coins, the 1-cent 

pieces. How many dollar coins are piled in a vault somewhere? I 

would look forward to the comments from the Fed as to just how 

many dollar coins we have stacked up in the vaults, and do they 

anticipate ever again in my lifetime actually ordering half dollars 

from the Mint for circulation? Does the half dollar fall in the same 

category as the 1-cent piece? Something I look forward to comments, too, here, and also representatives from the law enforcement side of the equation. 

Counterfeiting is a very sensitive issue not only for the integrity 

of the American economy on large notes and other kinds of coins, 

but also from the perspective of counterfeiting numismatic-type 

items, coins of more than just face value, more than just metal content. Many of us have read public accounts how in the 1950’s and 

1960’s and 1970’s, in certain parts of the Middle East, there was 

an ongoing business of producing counterfeit U.S. gold coins, most 

often full weight, full metal content, but nonetheless stamped out 

in a way to harvest that numismatic value to coin collectors. Many, 

5 

many reports appear from some of the most prominent press in 

both numismatic circles and nonnumismatic circles about literally 

what seems to be one of the biggest growth industries in places like 

China, where it is not just counterfeiting low-value coins just to 

sell to tourists nice shiny pieces of eight, so to speak, but also using 

the very best technology, the very best techniques to sell coins that 

are of great sometimes numismatic value to unsuspecting collectors 

and even counterfeiting the packages that the certification services 

produce to try and protect the consumer from counterfeiters. I 

would like to hear a little bit of a discussion about that, about how 

aggressive we are and how aggressive we need to be to protect collectors and consumers in general. 

With that, thank you, Mr. Chairman, for this opportunity. 

Chairman WATT. I thank the gentleman. 

The gentleman from Texas, Mr. Green, is recognized for 2 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

I am concerned about one aspect of the state of U.S. coins and 

currency that deals with its very existence. As we move into this 

age of technology and plastic, I am curious as to what the prognostication is for the distant future in terms of whether we will actually have coins and currency. Is it something that we absolutely 

will have here, or is it something that the rest of the world needs 

when it deals in dollars and in the currency of the United States 

of America? 

I would be interested in hearing your views on how coins and 

currency will actually impact the economic order in the not-too-distant future. But I can see that with the technology being what it 

is, we are moving away from coins and currency to plastic, it 

seems. 

I yield back. 

Chairman WATT. I thank the gentleman for his comments. 

The gentleman from New Jersey, Mr. Lance, is recognized for 1 

minute or more, unless Mr. Castle comes in. 

Mr. LANCE. Thank you, Mr. Chairman. 

And good afternoon to the panel. I look forward to your testimony. I will review your testimony carefully. 

Initially, my viewpoint is that the Congress should not delegate 

further authority to Executive Branch agencies based upon the constitutional clause cited by Ranking Member Paul. I certainly want 

to listen to your testimony, but I would much prefer that any suggestions you have come to us in Congress, where we might review 

them and enact them into statutory law. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Chairman WATT. I think that exhausts our requests for time for 

opening statements from those who are present. And I would just 

say that, without objection, all members’ opening statements will 

be made a part of the record. So if any other members come in and 

wish to submit opening statements, we will certainly put them in 

the record. 

I will now briefly introduce the panel of witnesses. Without objection, their written statements in their entirety will be made a part 

of the record and each of them will be recognized for a 5-minute 

summary of their testimony. Of course, the lighting system is there 

6 

in front of you. It goes green for 4 minutes, yellow for 1 minute, 

and red at the end of 5 minutes. So while we won’t be absolutely 

stringent on that, we would ask you to comply with that as best 

you can. 

Our first witness today on panel one will be the Honorable Edmund C. Moy, who is the Director of the United States Mint. Our 

second witness will be Mr. Larry Felix, the Director of the Bureau 

of Engraving and Printing. Our third witness will be Ms. Louise 

Roseman, the Director of the Division of Reserve Bank Operations 

and Payment Systems at the Board of Governors of the Federal Reserve System. And our final witness on the first panel will be Mr. 

Ken Jenkins, Deputy Special Agent in Charge of the Criminal Investigative Division at the U.S. Secret Service. 

Mr. Moy, you are recognized for 5 minutes. 

STATEMENT OF THE HONORABLE EDMUND C. MOY, 

DIRECTOR, UNITED STATES MINT 

Mr. MOY. Thank you, Mr. Chairman. And I would also like to 

greet Ranking Member Paul and the members of the subcommittee. 

I appreciate being invited to be here today. I welcome the opportunity to discuss operational results and demonstrate the need for 

immediate passage of the Coinage Materials Modernization Act, 

which is the Administration’s proposal offering a potential savings 

of billions of dollars. 

First, I would like to provide a short summary of our operations 

and programs. At the end of Fiscal Year 2009, the United States 

Mint transferred $440 million to the Treasury General Fund, which 

has been the lowest seigniorage in the most recent 5 years. This 

is attributable to higher metal costs that have caused this decrease. 

We have also minted and issued 5.2 billion circulating coins, which 

is a 45-year low. This low production was due to low coin demand 

and high inventories at the Federal Reserve Banks. We also minted 

and issued 27 million ounces of gold, silver, and platinum bullion 

coins, which is triple the amount of recent years. 

Regarding the 2010 circulating coin programs, we have complied 

with our statutory obligations to identify, analyze, and overcome 

obstacles to the robust circulation of the $1 coin; however, despite 

our considerable efforts, we have had limited success while the 

Federal Reserve Banks have accumulated an inventory of approximately 1 billion $1 coins, which is a level that is of great concern 

to us. We believe that the key to robust circulation is greater use 

of this coin at the cash register, but are unsure as to whether or 

not we can cost-effectively achieve significant and sustainable increases in $1 coin circulation. 

High existing Federal Reserve Bank inventories are also affecting production levels of the new 12-year America the Beautiful 

Quarters Program. Thus far, production levels are a fraction of 

those of the 50 State Quarters Program. 

Turning to our gold, silver, and platinum bullion coin programs 

from Fiscal Year 2009, bullion coin sales approached $1.7 billion, 

which is an all-time high and nearly 80 percent above previous 

year’s sales. We have increased both planchet acquisition and production to meet rising demand. 

7 

Consequences from increased worldwide bullion demand were 

threefold. Orders for bullion from authorized purchasers exceeded 

supply for all of Fiscal Year 2009. Planchet diversion to meet public 

demand for bullion coins meant that we could not mint and issue 

the very popular American Eagle 1-ounce gold and silver proof 

coins in 2009. Annual purchasers of these products were very disappointed. 

I am encouraged that the subcommittee is exploring the possibility of an amendment that would afford the Secretary the authority to approve the minting and issuance of the American Eagle Silver Proof and uncirculated coins even when we are unable to meet 

the public’s demand for the bullion versions of these coins. Our 

many customers would welcome such a change. We can mint 

200,000 coins per month; and if we begin production by September, 

we can meet collector demand for the remaining months of 2010. 

Finally, I would like to address the Coinage Materials Modernization Act. Per-unit cost for the penny and nickel have exceeded their face values in 2009 as they have since 2006. The expense 

of current coinage metals is a needless waste of hundreds of millions of dollars. We know how to stop this waste. 

The government has acted twice before in the last 50 years to 

protect taxpayers from bearing the increased costs of coinage materials. In 1965, Congress changed the composition of the dime, quarter, and half dollar from silver to cupro-nickel clad. In 1974, Congress granted the authority to the Secretary of the Treasury to 

vary the copper-zinc alloy of the penny. Thirteen years ago, Congress passed the $1 Coin Act of 1997, granting the Secretary of the 

Treasury sole discretion to select materials for the $1 coin. 

Our proposal builds on these precedents. Support and encouragement from Congress to save billions has resulted in the Administration’s proposal, which is called the Coinage Materials Modernization Act. This proposal provides the Secretary of the Treasury the flexibility to respond quickly to changing market conditions. It ensures fair and efficient management of highly technical 

evaluations and selection of alternate coinage materials. We would, 

of course, use a competitive, transparent, open, deliberative, and 

market-driven process that will consider the views of the public 

and commercial interests. 

So in conclusion, delegating the authority to evaluate and select 

alternative materials to the Secretary of the Treasury is a proven 

approach. Since 1982, taxpayers have realized savings of more than 

$71 billion from the change from silver to clad. Today, we can pass 

the Coinage Materials Modernization Act and achieve similar savings. 

Thank you, Mr. Chairman. I look forward to answering the committee’s questions. 

[The prepared statement of Director Moy can be found on page 

84 of the appendix.] 

Chairman WATT. I thank you for your testimony. 

Mr. Felix, you are recognized for 5 minutes. 

8 

STATEMENT OF LARRY R. FELIX, DIRECTOR, BUREAU OF 

ENGRAVING AND PRINTING (BEP) 

Mr. FELIX. Thank you, Mr. Chairman. Thank you, Ranking Member Paul, and members of the subcommittee. Thank you for inviting me to testify about ongoing initiatives at the Bureau of Engraving and Printing. 

The mission of the Bureau of Engraving and Printing is to design 

and manufacture high-quality security documents that meet customer requirements for quality, quantity, and performance, including counterfeit deterrence. The BEP is the government’s security 

printer, and it provides technical assistance and advice to other 

Federal agencies in the design and production of security documents, which, because of their inherent value or other characteristics, require counterfeit deterrence. The BEP also reviews the cash 

destruction and unfit currency operations of Federal Reserve 

Banks. 

Although the BEP produces security documents on behalf of Federal agencies, our primary product is the Federal Reserve note. Our 

operations are financed by means of an industrial revolving fund, 

and on average, the BEP produces approximately 7 billion notes 

per year. 

The BEP works collaboratively with the Board of Governors at 

the Federal Reserve, the United States Secret Service, and the Department of the Treasury to improve the security of Federal Reserve notes. In 1982, by charter, the Advanced Counterfeit Deterrence Steering Committee was established to recommend designs to 

the Secretary of the Treasury for Federal Reserve notes. And as a 

general guideline, the Committee recommended that the government redesign notes every 7 to 10 years to deter counterfeiting and 

anticipate advances in reprographic technologies. 

Consequently, in the mid-1990’s, the U.S. Government introduced the first major redesign to U.S. currency in 65 years. The design changes were needed to combat the emergence of a new category of counterfeiters who were increasingly relying on computers, 

scanners, color copiers, and other emerging technologies to replicate notes. 

The goal of staying ahead of technological threats to currency 

rather than simply responding to existing threats requires that the 

U.S. Government plan ahead in its development of new currency. 

This means that a new currency must be in development for several years before the counterfeiting threat is projected to materialize. 

In April of this year, the U.S. Government unveiled the last 

banknote in the most recent currency design series. The redesigned 

$100 will enter circulation in February of next year. This latest redesign series contains an array of counterfeit-deterrence security 

features, some of which are visible and easily recognizable to the 

public, and some of which are covert and machine-readable. 

Overall, counterfeiting U.S. currency remains at a low level, primarily due to a combination of improvements in the notes’ security 

designs, aggressive law enforcement, and an effective public education effort. According to the U.S. Secret Service, less than 1/100 

of 1 percent of all the value of circulating U.S. notes is a counterfeit. 

9 

The BEP began implementing its strategic plan that will significantly change its currency manufacturing process; and over the 

next few years, the BEP will continue to retool and retrofit its production by purchasing new equipment that will allow the agency to 

migrate to a higher capacity and capability manufacturing environment. Updating this equipment is essential. The aging manufacturing equipment at the BEP no longer meets the performance requirements demanded in today’s dynamic currency manufacturing 

environment. The new equipment will provide a rapid response and 

the flexibility, productivity, and technology necessary to support 

the manufacture of the increasingly complex currency designs, including an array of possible features for the blind and visually impaired. 

In May of this year, the BEP posted a notice in the Federal Register to announce recommendations that it intends to propose to 

the Secretary of the Treasury for moving forward and providing 

meaningful access to the blind and visually impaired to denominate 

currency. The BEP expects very shortly to make recommendations 

to Secretary Geithner as to the best possible manner to provide 

that meaningful access. 

Our recommendations currently consist of raised tactile features; 

large, high-contrast numerals; and a supplemental currency reader 

program. Additionally, the BEP is continuing its efforts to explore 

emerging technological solutions, such as the development of software to enable blind and visually-impaired individuals to denominate currency. Other initiatives on the way at the BEP include employee training, product quality, cost reduction, and a modernization of our technology. 

By leveraging efficiencies in new innovations, the BEP recognized that we were overstaffed in certain positions. We requested 

and were granted permission for early-outs and buyouts. By the 

end of 2014, the BEP expects to have a 10 percent overall reduction 

in its staff. Since 2005, staffing has declined by 338 positions. 

The BEP strives to provide its customers with superior products 

and is continuously looking for ways to manufacture efficiently 

without compromising quality. 

Mr. Chairman, this concludes my remarks, and I am happy to respond to any questions. 

[The prepared statement of Director Felix can be found on page 

53 of the appendix.] 

Chairman WATT. Thank you for your comments and testimony. 

Ms. Roseman is recognized for 5 minutes. 

STATEMENT OF LOUISE L. ROSEMAN, DIRECTOR, DIVISION OF 

RESERVE BANK OPERATIONS AND PAYMENT SYSTEMS, 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

Ms. ROSEMAN. Chairman Watt, Ranking Member Paul, and 

members of the subcommittee, thank you for inviting me to discuss 

the Federal Reserve’s perspectives on issues relating to currency 

and coins. I will focus my comments this afternoon on trends in 

currency demand, strategy for currency redesign, and our recent 

experience managing dollar coin inventories. Additional matters 

are addressed in my written statement. 

10 

The growth rate for U.S. currency began to moderate during 

most of the past decade, compared to the strong growth of the previous 30 years. The recent financial crisis, however, spurred a substantial increase in demand for U.S. currency in late 2008 and in 

2009, driven largely by foreign demand for the $100 note. International demand for U.S. currency tends to increase during times 

of economic and political uncertainties, and this was no exception. 

While domestic demand surged briefly in the fall of 2008, it quickly 

returned to normal patterns as the government took steps to restore confidence in the banking system, such as increasing FDIC 

insurance limits. Overall, currency in circulation increased from 

about $775 billion at the end of 2007 to almost $900 billion by the 

end of last year. 

Let me now turn to activities surrounding the design of currency. 

While currency designs remained unchanged for most of the 20th 

century, rapid changes in copying and printing technologies now require us to change designs more frequently to stay ahead of counterfeiters and keep counterfeit levels low. Maintaining confidence 

in U.S. currency requires a combination of effective security features in the notes, public education, and law enforcement. This requires a strong collaborative interagency effort. 

The Treasury Department, the BEP, the Secret Service, and the 

Federal Reserve participate on a joint steering committee that 

monitors ongoing counterfeit threats and advancements in banknote security features and recommends currency design changes to 

the Secretary of the Treasury. The current design family began 

with the issuance of the new $20 note in 2003, and will conclude 

with the new $100, which was unveiled in April. The Federal Reserve will begin distributing the new $100 next February 10th. We 

are currently engaged in an important program to educate users in 

the United States and around the world about the design and security features of the new note before it begins circulating. 

The subcommittee expressed interest in better understanding the 

demand for Presidential dollar coins and the effect of this program 

on Federal Reserve inventories. Demand for dollar coins remains 

quite low, especially when compared to dollar notes, and appears 

to come largely from collectors. Banking industry representatives 

have indicated that transactional demand for dollar coins has not 

increased materially since the start of the Presidential $1 Coin Program, and they generally do not expect demand to increase significantly in the future. 

Federal Reserve inventories of dollar coins have been growing 

substantially, from less than 70 million in 2006 to more than 1 billion today. We estimate that our dollar coin inventories may reach 

2 billion by the end of the Presidential $1 Coin Program. This inventory growth is due in large part to the legislative requirement 

that the Reserve Banks make each new Presidential design available to their customers for an introductory period. I should note 

that we have no such requirement for any other coin. Therefore, 

the Federal Reserve must continue to order each new Presidential 

design from the Mint even though it already has more than ample 

inventories to meet demand. 

Exacerbating this problem is the legislative requirement that at 

least 20 percent of total dollar coins the Mint issues each year is 

11 

a Native American design. While the Federal Reserve is not currently ordering these coins due to our large inventory levels and 

the lack of banking industry demand, many of the coins the Mint 

is issuing directly to the public are deposited in the banking system 

and ultimately make their way back to the Federal Reserve. These 

legislative requirements are resulting in steadily rising Reserve 

Bank inventories and the associated costs of dealing with them. 

In conclusion, I would like to assure the subcommittee that the 

Federal Reserve will continue to work to meet the public’s demand 

for currency and coin in an efficient and effective manner. I appreciate this opportunity to discuss these issues with you and would 

be pleased to answer your questions. Thank you. 

[The statement of Director Roseman can be found on page 98 of 

the appendix.] 

Chairman WATT. I thank you for your testimony. 

And, Mr. Jenkins, you are recognized for 5 minutes. 

STATEMENT OF KENNETH JENKINS, DEPUTY SPECIAL AGENT 

IN CHARGE, CRIMINAL INVESTIGATIVE DIVISION, U.S. SECRET SERVICE 

Mr. JENKINS. Good afternoon, Chairman Watt, Ranking Member 

Paul, and distinguished members of the subcommittee. I would like 

to thank you for providing the Secret Service the opportunity to 

discuss currency issues. 

The Secret Service is perhaps best known for protecting our Nation’s leaders. We were established in 1865 to investigate and prevent the counterfeiting of U.S. currency. Congress continues to recognize the Secret Service’s 145 years of investigative expertise in 

financial crimes, and over the last 2 decades, has expanded our 

statutory authorities to include access device fraud, identity theft, 

computer fraud, and bank fraud. 

As you are aware, the Secret Service officially became part of the 

Department of Homeland Security in March of 2003. Though our 

agency is no longer a component of the Department of the Treasury, we continue to maintain our historic ties and our robust partnership in safeguarding our currency and other payment systems. 

The Secret Service strongly believes that economic security is an 

essential element of homeland security. Therefore, the safeguarding of our financial infrastructure and monetary framework 

continues to be a paramount objective of our worldwide investigative efforts. 

As new technology continues to emerge, the challenges facing law 

enforcement are significant. These advancements mean counterfeit 

currency and other obligations can be reproduced quickly and effectively. Today’s criminals need relatively little knowledge or specialized training to print counterfeit currency or other financial obligations. Utilizing equipment ranging from inexpensive digital devices, 

such as scanners, computers, and multifunction devices, to large 

commercial presses, a counterfeiter or criminal organization can 

flood a region with counterfeit currency. 

The Secret Service is aggressively combating the production and 

circulation of counterfeits on several fronts. 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 

12 

Advanced Counterfeit Deterrence Steering Committee, an interagency currency design committee, we have an active role in the 

research, design, and introduction of new currency. The Secret 

Service continually evaluates the methods currently employed by 

counterfeiters and studies cutting-edge anticounterfeiting technologies to enhance further redesigns of the U.S. currency. This 

partnership was highlighted on April 21, 2010, with the unveiling 

of the redesigned $100 Federal Reserve note. The new design for 

the $100 note not only retains the effective security features from 

previous designs, but also contains two new security features, the 

3-D Security Ribbon and Bell in the Inkwell. These security features included in the $100 note will hinder a potential counterfeiter 

from reproducing high-quality notes that deceive consumers and 

merchants. 

Due to the dollar’s value and widespread use overseas, it continues to be a target for transnational counterfeiting activity. Of 

the approximately $908 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. 

Recent trends indicate a growing globalization in the production 

and distribution of counterfeit notes. For Fiscal Year 2009, the Secret Service received approximately $69 million in counterfeits that 

was passed to the American public. Additionally, approximately 

$108 million in counterfeit U.S. currency was seized prior to distribution last year by the Secret Service and other authorities 

worldwide. Currently, more than 38 percent of all counterfeits 

passed domestically was printed outside of the United States using 

traditional printing techniques, predominantly offset printing. In 

contrast, 62 percent of the counterfeit currency passed domestically 

last year was produced within the United States by individuals 

using digital technology, such as computers, scanners, printers, and 

multifunctioning devices. 

The Secret Service has observed the counterfeit notes produced 

on bleached paper are both a domestic and international concern. 

Domestic counterfeiters as well as counterfeiting operations based 

in Colombia, Nigeria, and Italy have produced significant quantities of counterfeit notes still printed on bleached genuine U.S. 

currency paper. 

Today, the Secret Service continues to target locations throughout the world where significant counterfeiting activity is detected 

through joint task forces with our foreign law enforcement partners. Our investigative history has proven that the effect of suppression of counterfeit operations requires a close partnership between our domestic and international field offices and their law enforcement counterparts, as well as an immediate response by the 

law enforcement community. 

The Secret Service’s permanent presence overseas has been essential in establishing the required relationships to successfully 

suppress foreign-based counterfeit operations. For example, Project 

Colombia is a continuation of the Secret Service efforts to establish 

and support Vetted Anticounterfeiting Forces. Since its inception in 

2001, Project Colombia partners have seized approximately $239 

million in counterfeit U.S. currency, arrested more than 600 suspects, suppressed nearly 100 counterfeit printing plants, and reVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
13 

duced the number of Colombia-originated counterfeit passed within 

the United States by more than 80 percent. 

As a collateral effect of our investigative successes in Colombia, 

the criminal element has relocated to other parts of South America. 

For example, from Fiscal Year 2008 to Fiscal Year 2009, the Secret 

Service noted an 156 percent increase in worldwide passing activity 

of counterfeit U.S. currency emulating from Peru. These counterfeit 

notes, referred to as the Peruvian Note Family, have emerged as 

one of the leading domestically passed notes in the last 18 months. 

In response to this increase in passing activity of the Peruvian 

Note Family, which is second only to domestic passing of digital 

counterfeit in Fiscal Year 2008, the Secret Service formed a temporary Peruvian Counterfeit Task Force in collaboration and partnership with Peruvian law enforcement officials. Since opening in 

Peru on March 15, 2009, the task force yielded 38 arrests, 17 counterfeit plant suppressions, and seizure of more than $20.6 million 

in counterfeit U.S. currency. 

Chairman WATT. Mr. Jenkins, can you wrap up? 

Mr. JENKINS. Yes, sir. 

The Secret Service, in concert with established partners, both 

private and public, domestic and international, law enforcement 

and civilian, will continue to play a critical role in preventing, detecting, and investigating the effects of increasingly complex financial and electronic crimes. 

Chairman Watt, Ranking Member Paul, and distinguished members of the subcommittee, this concludes my prepared remarks. I 

am pleased to answer any questions at this time. Thank you. 

[The prepared statement of Deputy Special Agent Jenkins can be 

found on page 69 of the appendix.] 

Chairman WATT. Thank you. 

We will now recognize the members of the committee for 5 minutes of questioning each. And since Mr. Jenkins was in the middle 

of telling us about all the anticounterfeit stuff, I will give him the 

opening to go back to some of that by just asking him, you would 

think if $70 million a year is being counterfeited, that you would 

hear a little bit more about prosecutions and the things that you 

are describing to us. We don’t seem to hear much about that. Why 

is that? 

Mr. JENKINS. I am sorry. The last part of that, sir? 

Chairman WATT. We don’t seem to hear much about prosecutions, or investigations, or blowing up these counterfeiting rings. 

Why are we not hearing more about that? 

Mr. JENKINS. Sir, a lot of these investigations begin overseas 

through our 22 international field offices. I believe in Fiscal Year 

2009, through our investigative measures overseas, we seized over 

$100 million in counterfeit currency. We continue to work with the 

U.S. Attorney’s Office as well as the district attorney’s office domestically to fight counterfeiting. It is just not our stance to publicize our cases in the media, and that is probably one of the reasons why you haven’t heard— 

Chairman WATT. So you are saying the bulk of it is taking place 

outside of the United States? It is not a major problem inside our 

own borders? 

14 

Mr. JENKINS. That is correct, sir. The bulk of the counterfeiting 

is emanating out of Peru. 

Chairman WATT. Okay. Mr. Moy, some of our Financial Services 

Committee members are somewhat concerned about the amount of 

money we are spending to promote the Presidential $1 Coin Program. And as part of our request for this hearing, we asked you 

to provide information about the costs that are being incurred for 

that program, and we did not receive that. So I hope you will provide that, if you don’t have it with you today. We need that information. 

Generally, I guess, the question would be with this program not 

being very successful in getting people to acquire these dollar coins, 

why are we spending so much money to promote something that 

people obviously are not taking to, and what is the rationale for 

that? 

Mr. MOY. Yes. Mr. Chairman, first of all, we are doing a detailed 

accounting. And once that is done, I would like to submit that for 

the record so that you would have your answer. 

To answer your question directly, the United States Mint, for the Presidential $1 coin, has spent $30 million to raise the awareness 

and to try to get this coin integrated into circulation. That money 

has been spent through an awareness program familiarizing Americans with the dollar coin, to pilot programs that adequately stock 

the banks, making sure retailers use it, and consumers are aware 

of it. All those programs have met with limited success. We have 

had success— 

Chairman WATT. Is there some reason that we want to push this 

coin if the American people don’t—what are the policy reasons that 

we would be pushing a coin? 

Mr. MOY. The authorizing legislation said that it was the United 

States’ mission with the dollar coin to analyze, identify, and remove all barriers to robust circulation. We have been attempting 

this now for 3 years. We have had limited success. For example, 

transit systems, like subways, are big users of the dollar coin. But, 

by and large, the dollar coin has not been received well in just cash 

register transactions. And at this point, we have tried every major 

idea that we can come up with, with limited success. And so the 

question is, how much more should we be trying with this? 

Chairman WATT. We understand that we are shipping gold to 

Australia to be made into blanks, with the fabricated blanks 

shipped back to the United States for production. Is this efficient? 

Why can’t the processing of these blanks be done in the United 

States? 

Mr. MOY. It is efficient in that this is the easiest way to get the 

greatest volume of blanks that meet our specifications so we can 

make the bullion coins to satisfy investors’ demand. We have tried 

to expand our ability to acquire planchets by requesting the limited 

number of suppliers to—we have gotten a greater percentage of 

what they produce. We have helped those suppliers increase their 

capacity, and we have constantly put out procurement requests for 

any suppliers, including domestic, to supply those planchets and 

blanks for us. 

Since this effort, we have increased the number of companies 

supplying domestically by one, with one currently in process of conVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
15 

tracting. So we have increased our domestic suppliers, but they do 

have to meet our stringent standards because we are making so 

many of these things, and they do have to offer us an adequate 

supply of planchets so that it is cost-efficient for us. 

Chairman WATT. Okay. The red light is on. That means my time 

has expired. And I recognize the gentleman from Texas, the ranking member, for 5 minutes. 

Dr. PAUL. Thank you, Mr. Chairman. I want to follow up on that 

very subject with Mr. Moy, because I had some questions myself. 

Has the Mint ever made planchets? Is that something they have 

ever done? 

Mr. MOY. The Mint has made planchets in its past, but it got out 

of the business a decade ago mainly because of the extreme cost of 

doing it, the environmental hazard for doing it, and it was determined at that time that there were other private entities who could 

make it more cheaply and safely than the United States Mint 

could. 

Dr. PAUL. Okay. And because of the shortage, you didn’t have— 

and you had a mandate. You had to put them into the nonproof 

coins, that is correct; and you are asking now for authority to say 

that you can take some of that money out or coinage out and make 

proof coins. 

Now, is this the first year that you have missed making proof 

coins in 2009? 

Mr. MOY. Yes. This is the first year that we have missed. 

Dr. PAUL. If the problem were corrected, is there such a thing as 

minting coins a year late? Because some of those collectors are 

thinking, oh, why can’t I have a 2009 coin? 

Mr. MOY. The Mint is required to basically sell the coins that are 

minted in the year that they are made. So if the date is 2009, we 

sell 2009 coins in 2009. 

Dr. PAUL. The 2009 will be missing? 

Mr. MOY. Is missing, and what we are trying to do is prevent 

2010 from missing. 

Dr. PAUL. It still baffles me that we can’t make a planchet. I 

don’t know anything about the equipment or what is necessary, but 

doesn’t this country make jewelry and make complicated jewelry 

out of gold? Isn’t this just pretty simple? This just really is confusing to me why this can’t be accomplished. 

Instead of looking for more planchets, you are saying, give me 

more authority so I can make a few of these proof sets, rather than 

figuring this out. What would a businessman do about this? Would 

he always resort to going to Australia to do this? It just seems so 

bewildering that a problem that seems rather simple, that we 

couldn’t have had an easier solution for this. Right now, we don’t 

even have a solution. 

Mr. MOY. A businessman has to weigh two things. On one end, 

to make the planchets ourselves, we need to make capital investments in order to develop the smelters, the chemical processing, 

take care of the environmental hazard of getting rid of the chemicals, all those issues. And on the other side, you have a limited 

amount of planchet makers around the world who don’t want to increase their capacity unless they get guarantees from government 

16 

that we will continue buying at such a high rate for some foreseeable future so that they can spread out their capital investment. 

So those are the two choices. And right now, it is the most efficient choice to be able to expand the quantity of planchets that we 

are getting from the various suppliers. 

Dr. PAUL. Now, there are private companies making, not coinage, 

but they make medallions, and I have never heard of them running 

out of planchets. Do you think they have that problem? 

Mr. MOY. They don’t, because they are not in a business of being 

the largest bullion maker and supplier in the world. Last year, we 

sold 28 million ounces of these. This year, we are headed to 32 million ounces. On an average year, the Mint might make 8 million 

ounces of this. So, the other people don’t have to deal with the volume issues that the United States Mint does. 

Dr. PAUL. This is awfully disturbing. What are we going to do 

when we go on the gold standard? We won’t even be able to make 

the gold coins. You can’t even keep up with a few collectors. 

Mr. MOY. By that time, my term at the Mint will be done, and 

I will start a planchet-making company to pick up the excess. 

Dr. PAUL. I don’t know what it is, but it seems to me that there 

has to be a market answer for this. And maybe it is the promise 

to take these no matter how many they make. Maybe that would 

help. They are not going to lose their value, like it is a risky thing. 

But you are dictated by law that you have to promise these private 

sources on how many you can take? 

Mr. MOY. We are not dictated by law, but just by business practice. When a company invests in expanding their capacity, they are 

going to want to make sure that investment gets paid off over time, 

and they are not willing to do it unless they get a commitment 

from their buyers to buy up all their excess capacity. 

Dr. PAUL. It sounds like they don’t trust the government. I don’t 

know. Thank you. 

I yield back. 

Chairman WATT. You have another problem for the gold standard that we have identified. 

The gentleman from Missouri, Mr. Cleaver, is recognized for 5 

minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

To the first three panelists, it would seem to me that one of the 

things that you would want to sell with this proposal is the sustainability. If a $1 note lasts for approximately 21 months, and a 

$1 coin lasts for 30 years, it would seem to me that there is a very 

clear and real issue of sustainability. 

Mr. MOY. Excuse me, sir. Is that question directed at me? 

Mr. CLEAVER. Yes, to any of you. 

Mr. MOY. Coins, because they are made of metal, are harder and 

last longer. We engineer our coins to make sure that they have a 

usable surface for at least 30 years. Many of our coins end up lasting 40 or more years. So there is an advantage for using dollar 

coins. 

But Americans are creatures of habit. So they are very used to 

using the bill. They are not used to using coins in regular retail 

transactions. 

17 

One thing that we have seen some utility for is when you use it 

in a vending machine, without dollar coins, if you buy a $1 soda 

for $5, you get 16 quarters back. People find it a little more convenient to get four $1 coins back. But that has not been enough to 

change behavior. 

So we are a little bit vexed, given the current co-circulation of 

both the dollar bill and the dollar coin, for how to make inroads 

for sustained utilization of the dollar coin. 

Mr. CLEAVER. So, let’s say a $1 bill has a life span of 21 months, 

how long would it take to phase out the $1 bill? 

Ms. ROSEMAN. Actually, the $1 bill now lasts longer than 21 

months. There have been efforts that both BEP and the Federal 

Reserve have taken over the years to extend the useful life of dollar 

bills. 

Mr. CLEAVER. For how long? 

Ms. ROSEMAN. It is about 3.5 years. We are planning to make 

further changes to Federal Reserve processing operations to extend 

the useful life even further. It won’t approach the 30 years for the 

dollar coin, but I think there are a number of considerations that 

we need to take account of in weighing the dollar bill versus the 

dollar coin. 

There is, as you alluded to, the cost to government. I think we 

also need to look more broadly at the cost to society in general, particularly to businesses that handle coin and currency and the differential cost to them. 

There is also the issue that I think was brought up earlier with 

respect to public preference. Today, Americans have a strong preference for dollar notes. That may evolve over time. But that is the 

case for today. 

Mr. CLEAVER. But the GAO says that they have that preference 

until you follow with a second question dealing with the fact that 

it would save a half billion dollars. 

Ms. ROSEMAN. It is unclear—and I know the GAO, and we are 

also and I think others are looking at, in today’s environment, what 

would be the savings to the government from looking at the dollar 

coin and the dollar bill. That study is just getting under way. 

Mr. Jenkins would be able to address the counterfeit deterrence 

and detection features of coins versus notes, and if there was counterfeiting, how readily it would be detected. 

And also, I think one of the other things we would need to take 

into consideration is the use of the dollar in other countries. Now, 

most use of the U.S. dollar in other countries has been more in the 

high denominations, but there are some economies that use the 

U.S. dollar for transactional purposes, as well. They are either 

dollarized economies, or they have the U.S. dollar co-circulate with 

their local currency. And as part of the cost equation, will U.S. currency be as attractive to them if the dollar coin were to replace the 

dollar note? 

I am not clear at this point what the answer is, but I think those 

are all things that would need to be weighed in doing that evaluation. 

Mr. CLEAVER. Mr. Jenkins, I think my time is up. So if you can 

do a small response. 

18 

Mr. JENKINS. Sir, it definitely would be an educational process 

for us to reeducate the American public on the detection of counterfeit coins. Currently, right now, through our 138 field offices and 

22 international offices, we go out and educate the consumers out 

there on what to look for in counterfeit currency for all paper notes. 

So we would have to reeducate the general public on the detection 

of counterfeit coins if we did make that switch. 

Mr. CLEAVER. Thank you. 

Chairman WATT. I thank the gentleman. 

The gentleman from Delaware, Mr. Castle, is recognized for 5 

minutes. 

Mr. CASTLE. Thank you very much, Mr. Chairman. I am pleased 

to be here. Unfortunately, my schedule is such that I am dancing 

around a little bit in terms of where I am going to be. 

But I would like to welcome Michael Clark—who will be on the 

second panel—a coin expert and a friend of mine from Delaware. 

I deal with him on a regular basis. 

And pursuant to that, Mr. Jenkins, I want to ask a question of 

something he had in his written testimony, which you haven’t 

heard yet. I will read it to you. It says, ‘‘Our industry believes that 

Congress needs to take swift action to protect consumers from the 

increasing and systematic counterfeiting and subsequent marketing 

of collectible, numismatic, rare and investment-grade legal tender 

United States coins. As a first step, we ask that Congress direct 

the Treasury Department’s Inspector General to conduct a thorough investigation of the sources and extent of such counterfeiting 

and report back to Congress on the results of that investigation 270 

days after enactment.’’ 

In your mind, is that—I realize that it may be a little bit off of 

your department, but is that a reasonable request to be made by 

Congress? 

Mr. JENKINS. Sir, to be quite honest with you, we don’t see many 

cases involving counterfeit coins. I think, in the past 2 years, we 

have seen less than 100 cases related to counterfeiting coins, and 

99 percent of those cases deal with collectors where one collector 

has made a purchase from another collector, and there is a discrepancy there. In cases where we do deal— 

Mr. CASTLE. It is a discrepancy, but it is not a counterfeit? 

Mr. JENKINS. It is one collector saying it is counterfeit, and the 

other collector saying it is genuine. What happens then, sir, is that 

it will be referred to the Secret Service. We will investigate it, and 

we will bring it into our labs here in Washington, D.C., to determine if it is counterfeit or not. And then, we will refer it out to one 

of our field offices. At that point, they will conduct the investigation. And then, we refer it to either the U.S. Attorney’s Office for 

prosecution or the District Attorney’s Office, and they would make 

the decision on whether there will be a prosecution or not. 

Mr. CASTLE. I think I will drop that particular subject and go to 

something else, although I am not sure we have a complete answer 

at this stage. 

I wanted to ask Mr. Moy a question about the America the Beautiful Quarters Program and how it is coming along. We all know 

the 50 State Quarter Program worked extraordinarily well. It may 

have produced seigniorage, I think in the area of $3 billion or 

19 

something of that nature. But I am not sure exactly where we are 

with the America the Beautiful Quarters Program in terms of production. Is production sufficient? I am not hearing as much about 

it as I did the 50 State Quarter Program. I would be interested in 

the Mint’s views on that program and where it seems to be right 

now. 

Mr. MOY. The short answer is that the program was launched 

late this spring. There have been two quarters that have come out, 

both the Hot Springs and Yellowstone. The orders for these quarters from the Federal Reserve are enough to meet demand, but the 

demand overall for quarters—not just these—is relatively low. So, 

for both Hot Springs and Yellowstone, the average Federal Reserve 

coin order has been about 50 million of these quarters. And that 

is compared to, at the end of the 50 State Quarter Program, when 

both the Mint and the Federal Reserve figured out what the right 

amount is, that right amount was between 350 million and 550 

million quarters per issue. That is compared to early on in the 50 

State Quarter Program, States like Virginia—at that time, nobody 

knew what the demand was going to be. So in order to meet anticipated demand, both the Federal Reserve and the Mint made about 

1.6 million of Virginia State quarters. 

So, comparatively speaking, the program is starting out slow because these quarters are much more difficult for consumers to get. 

As a result, the United States Mint has worked with the Federal 

Reserve to find alternate distribution mechanisms that don’t tread 

on the Federal Reserve’s responsibilities, such as allowing people 

to buy bulk bags, meaning bulk is 200,000 coins or $50,000 at the 

face value, which they can purchase directly from the Mint and 

pick them up at either the Denver or the Philadelphia Mint. 

Mr. CASTLE. My time is about up. Did you say 50 million versus 

350 million to 500 million? 

Mr. MOY. That is correct, per issue. 

Mr. CASTLE. Is that an economic issue in the terms of the need 

for quarters in general? 

Mr. MOY. Yes, we believe so. 

Mr. CASTLE. Thank you. 

I yield back, Mr. Chairman. 

Chairman WATT. The gentleman from Texas, Mr. Green, is recognized. 

Mr. GREEN. Thank you, Mr. Chairman. 

And I thank the witnesses for appearing. The information is 

greatly appreciated. 

I am going to go into this line of questioning that deals with 

what I am calling an electronic cash society. There are other 

names, alternative transactions, for this. 

But I noted from your testimony, Ms. Roseman, that from 1980 

to 2009, the circulation increased to an average of 7 percent per 

year from 124.8 billion to 888.3 billion. And this is driven by demand that—much of which is international. I also noted in your 

testimony that the Federal Reserve estimates that as much as twothirds of the currency is circulated abroad, which is a significant 

amount. 

And I have not come to any conclusions about this. I really am 

interested in the answers. I am very much inquisitive, as you 

20 

might well expect, given that I personally use electronic transfer 

for most of my transactions. I understand the use of the debit card 

and how that is impacting society, the credit cards. Checks are still 

being used. 

And then there are persons who are attracted to these plastic 

cards or other alternative transactions simply because of the interest-bearing nature of the currency. To hold currency is to lose 

money if you hold any large amount of it when you can have it in 

some sort of account wherein you actually are making money on 

your money. 

So my concern or question—perhaps I should not say concern. 

My question has to do with whether or not we will find at some 

point that we will move aggressively or with some greater amount 

of speed to a society wherein we really do rely more on plastic than 

on the Federal notes that we carry and the coins that we carry but 

not quite as much, it seems to me, as we used to—we seem to lean 

more toward currency than coins for obvious reasons. But with that 

said, your thoughts, please, ma’am, in terms of our moving into 

what I am calling an electronic cash society. 

Ms. ROSEMAN. The use of different payment mechanisms in this 

country is something that we have been very interested in tracking. We have tracked over time the use of noncash payment mechanisms. It is more challenging to determine how pervasively cash is 

used for transactional purposes because it is more difficult to count 

the number of cash transactions than it is for card transactions, 

checks, or wire transfers. 

There is clearly evidence that there is some substitution taking 

place. Transactions that used to be done primarily in cash may be 

performed more frequently with debit cards and credit cards these 

days. Fast food restaurants, Starbucks, or other outlets that 10 or 

15 years ago were largely cash-only, now have a growing portion 

of their transactions using cards. 

But we are not sure whether actually the number of cash transactions in this country has started to decline. If it is still growing, 

it is growing at a very small rate, where electronic transactions are 

growing at a much higher rate. 

So I do think that you are right, that over time there will be a 

continued substitution away from cash towards electronic payments. It is just unclear at this point how fast market forces will 

go in that direction. But I think the trend is as you suggest. 

Mr. GREEN. Thank you. 

I will just leave you with this comment. Perhaps you might want 

to respond. It seems that the technology is driving it simply because it is becoming so easy now to do this and to acclimate to it. 

At one time, it was somewhat alien to us, but the vending machines now will accept credit cards and debit cards. Almost everything in life seems to be moving in this direction. I am talking 

about in terms of the necessity to use cash. 

So it just seems that at some point, we will see an exponential 

increase once the technology becomes so pervasive that it is immediately available and accessible. 

Would anyone else care to respond? If so, I am all ears. 

Mr. MOY. Yes, sir. Given the Mint’s experience, what we have 

seen in electronic transactions, the larger rate of growth has mainVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
21 

ly come at the expense of checking. And so, when you take a look 

at checking’s market share, that has dramatically shrunk and continues to shrink, whereas, what impacts a lot of the Mint’s coin demand is retail sales. 

What we have been able to extrapolate from cash used, dollar 

amount-wise, represents about one-third of all retail transactions. 

But over the last 5 years, it has been stable, one-third for 50 years. 

And in the last 5 years, that has eroded to about 29 percent. So 

you begin seeing that substitution in there. And when you 

anecdotally test that, you will find that customers are feeling more 

comfortable with it, but you have old guys like me who don’t want 

to use a credit card for a $3 transaction. 

Mr. GREEN. Thank you. My time has expired. 

Thank you very much. Thank you, Mr. Chairman. 

Chairman WATT. The gentleman’s time has expired. 

Mr. Lucas is recognized for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. 

I come at the panel with several questions from several different 

directions. 

First, Director Moy, it is always a pleasure to see you again. And 

to tee off with what my colleague from Texas was discussing about 

the planchette business, we get occasional reports here in Congress 

that there are entities in this country, manufacturers who would 

like to produce and provide those planchettes and that they believe 

they don’t have an opportunity to compete. I know you will comment on that in just a moment. 

But I would also note that I realize that the Mint got out of the 

business of making planchettes and assaying gold and silver in the 

1960’s. But you do have that cavernous, huge Mint building in 

Philadelphia that was designed for this very purpose. Maybe some 

of those rotating fund dollars you have, maybe they should be 

spent on what I suspect you have already done, which is a study 

to determine, is it more effective for the Mint to produce these 

products, the same kind of study that would project for the years 

to come how many planchettes that you would need, because, as 

you said, we are the biggest bullion sellers? We could provide some 

certainty here. And I think Mr. Paul and I probably would help you 

with the directive for the appropriations process if you need it to 

do this study. Let’s apply that businessperson sense, and let’s just 

see what the economics are. 

To turn to Ms. Roseman, we have talked about dollars, and we 

have talked about 1 cent coins, so let’s talk about the half dollar 

for a moment. Off the top of your head, how long has it been since 

the flow of half dollars out of the Federal Reserve Banks has been 

greater than the flow of half dollars from the public into the Federal Reserve Banks? 

Ms. ROSEMAN. Each year since 2000, we had more half dollars 

deposited with the Reserve Banks than were ordered from the Reserve Banks. 

Mr. LUCAS. So, essentially, 10 years since you have ordered new 

half dollars for circulation from the Mint. Any idea how many 

halves you have in the inventory system? You mentioned a billion 

of the dollar coins. How many half dollars? 

Ms. ROSEMAN. We have 197 million half dollars. 

22 

Mr. LUCAS. But it has been 10 years since the flow has been 

greater out than the flow coming back in? 

Ms. ROSEMAN. I am sorry. I have been corrected by my colleagues. Until 2004, we had a greater flow out than in. 

Mr. LUCAS. One year out of 10, and yet it has been a decade 

since you have ordered new circulation pieces from the Mint. So, 

basically, it is a functioning obsolete denomination, too, along with 

the 1 cent, for all practical purposes, and the problems of the dollar 

coin. 

Turning to Mr. Jenkins, discussing the counterfeiting stuff, I 

guess I have a couple of technical questions you may or may not 

be able to answer. But tell me, how many trained agents do you 

know that the Secret Service has who have the experience to be 

able to detect and work with counterfeit coins? By the way, since 

1865, you have an awesome history of addressing counterfeit paper 

currency. How many folks do you have who really know anything 

about counterfeit coins? 

Mr. JENKINS. Thank you for your question, sir. 

We have a counterfeit lab here in D.C., where if we do get coins 

that are suspected of being counterfeit, we will actually analyze the 

coin to see the makeup of the coin to determine whether it is counterfeit or not. Any counterfeit coins that would come in would come 

into our lab here in D.C. 

Mr. LUCAS. The reason I ask that, agent, is there are reports 

that come to us that Secret Service offices and, on occasion, field 

agents around the country tell members of the public and perhaps 

even some other law enforcement officers that they are really too 

busy chasing the paper fraud and the other paper currency fraud 

and the other things going on around to worry about counterfeit 

U.S. coins. I would hope that is just urban legend. I would hope 

that we are not telling people we don’t have time to mess with 

counterfeit coins. Any comments on that? 

Mr. JENKINS. Sir, I can assure you that the men and women of 

the Secret Service will investigate, whether it is a counterfeit coin 

or whether it is counterfeit currency on paper. 

Mr. LUCAS. And there have been no directives of, ‘‘Don’t waste 

your time on the coin side, focus only on paper?’’ 

Mr. JENKINS. Absolutely not, sir. We just haven’t seen the demand. 

Mr. LUCAS. Thank you very much. 

Now, we are supposed to be protected in this country, folks who 

are interested in coin collecting and the numismatic areas, by the 

Hobby Protection Act, which requires that copies be stamped with 

the word ‘‘copy’’ to make it very clear that they are not actual U.S. 

coins, that they are reproductions or whatever. 

But one of the issues that again occasionally comes up in my discussions with folks who care about this is that because the Federal 

Trade Commission has jurisdiction or primary jurisdiction over the 

Hobby Protection Act, that confuses the chain of responsibility in 

pursuing these kind of cases for counterfeit coins and the selling 

of them in the U.S. markets. Do you have any insights? Is it more 

complicated because that particular issue involves the FTC versus 

perhaps a more straight-up issue about counterfeiting on currency? 

23 

Mr. JENKINS. To be honest with you, sir, I would have to research that further due to the lack of demand that I have seen 

from counterfeit coins that have come in to us. As mentioned previously, I think it is less than 100 cases we have in the last 2 

years. 

Mr. LUCAS. Mr. Chairman, will you indulge me with one more 

question? 

Chairman WATT. Yes, sir. 

Mr. LUCAS. I would also note, I think, by the reports that come 

to us, there are areas in the world where there are industrial-level 

efforts at manufacturing counterfeit U.S. coins. And not just ones 

that go through the vending machine down at the corner store, but 

pieces that are worth substantially more than the metal content. 

They are numismatic value. They are historic value, things copied 

from the 1790’s and the 1800’s and all this sort of stuff. 

This is not the first time that this has gone on. There are reports 

that in the 1950’s, 1960’s, and 1970’s that certain places in the 

Middle East counterfeited in great quantities U.S. gold coins, full 

weight, full metallic value simply because having Uncle Sam’s 

stamp on the front provided a substantial surcharge. If that was 

the case, then that was most unfortunate. And those are still floating around. 

There are reports in certain Asian countries, perhaps one of the 

biggest Asian countries, that this level of industrial counterfeiting 

is going on now. If that is indeed the case, then we are seeing the 

potential defrauding of many people who are purchasing these 

items unknowingly as legitimate investments or because of great 

appreciation for the perceived value. We need to do something 

about that. 

And with that, I yield back my time to the Chair. 

Chairman WATT. I thank the gentleman, and I thank this panel. 

I am not sure I want to go to a second round because we have a 

second panel. But it does seem to me that we have raised a substantial number of questions here that raise some issues that I 

think would cause me to ask this question with the unanimous consent of my colleagues here. Yesterday, the Washington Post ran 

this pretty extensive article about all of the proliferation of activities in response to terrorism and various entities not knowing what 

the others are doing and duplication and multiplication. And it 

seems to me that these four entities that are represented at the 

table here, some of these issues would be worth some collaboration 

on and—such as—we have reports, for example, that a number of 

studies have demonstrated that eliminating the penny, for example, would have a substantial regressive impact on poor people because they are—is anybody studying this? Is anybody talking about 

it, to give Congress advice about it? 

This issue that Mr. Lucas raised, what kind of collaboration is 

going on between these four entities here? This is not all of the different entities that I saw in the Washington Post yesterday dealing 

with terrorism. This is four entities basically. How much are you 

all talking to each other? And what kind of authority do we need 

to be giving—do we need to be setting up a study commission to 

study some of these issues? Who is studying these issues so that 

they can make recommendations to Congress? If we have the statuVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
24 

tory authority to do this, we need to do it on an informed basis. 

We don’t need to keep producing quarters that nobody is using. We 

don’t need to keep producing dollar coins that nobody is using. We 

don’t need to be producing more and more pennies unless there is 

some policy reason for it. Who is studying this? Is there a collaboration going on between the four entities? And what kind of authorization do you need to study some of these issues now that we 

have identified them? 

Can somebody answer that for me? Mr. Jenkins? And then, we 

will go right down the line. And maybe then, we will close this 

panel out, unless somebody else has questions. 

Mr. JENKINS. Mr. Chairman, in terms of communication, I think 

we all have a strong partnership together and we are on two committees where we meet on a regular basis to discuss issues that 

may be coming up, whether it is dealing with counterfeit currency 

trends or other issues that my other partners may have. So there 

is strong communication between the four entities at this table. 

Chairman WATT. And out of that communication, is anybody 

communicating these recommendations of any kind to Congress so 

that we can act on them or do they not require congressional action? 

Mr. Jenkins, that is the second part of my question, so then we 

will go right down the line. 

Mr. FELIX. In terms of the currency design, the Secretary of the 

Treasury has that authority. It is not an authority that—it is a legislative authority. But to further Mr. Jenkins’ point, we meet on a 

monthly basis to talk about some of the issues that impact not only 

counterfeiting, designs. At the Treasury Department, there are conversations and dialogues going on about the coin boundary mix and 

also about some of these issues. But certainly, the Federal Reserve 

has a major role and a major voice in this discussion, as well. 

Ms. ROSEMAN. I would agree with respect to the level of collaboration among our four agencies. From the Federal Reserve’s perspective with respect to studying certain issues, we wouldn’t need 

additional legislative authority. I think that there may be opportunities in some laws to make changes to be able to address increasing inventories and other matters, some which we have raised in 

past reports to Congress, for example, on the Presidential Dollar 

Coin Act. 

Chairman WATT. Mr. Moy? 

Mr. MOY. Yes. I agree with my colleagues and further add that 

there are ways that we communicate the results of our collaboration, whether through reports on the Presidential dollar coin that 

are required on an annual basis to—during my confirmation hearings, one of the questions that was asked of me was—being 2006, 

that was the first year that making the coins exceeded their face 

value and what was I going to do about it as Mint Director. So that 

has spurred an initiative within Treasury Department to think of 

what the best solutions to that are. And as a result, you got that 

as a budget proposal in the Administration’s Fiscal Year 2011 

budget. So there are ways that we can communicate that to you. 

And based on the discussions here of the potential of the Mint 

doing a study on whether we should get back into the planchette 

25 

business, that is something we are going to explore when we get 

back. 

Chairman WATT. The Chair notes that some members may have 

additional questions for this 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. 

So maybe we will try to frame some kind of comprehensive question to ask you all to collaborate on and to give us some recommendations. This hearing kind of comes at a—this is July of the 

second year of the House term because we have been basically devoting most of our attention to the financial services meltdown in 

our committee. And who knows who will be the chairman or ranking member of the subcommittee in the next term of Congress. It 

could be anybody up here, on this side. 

So, perhaps, the problem is one of continuity as much as anything else. But these questions do cry out. This is the medium by 

which we conduct business in this country. And I suppose all these 

people sitting in this audience are not here just by happenstance. 

They are here because they want to know what is happening with 

their dollars. And we need to be making good decisions about these 

issues. So with that—unless there are other questions—this panel 

will be excused. We thank you very much for your testimony, and 

we would encourage you to respond to any written questions that 

may be submitted to you either collectively or individually as we 

go forward. So thank you so much. 

And the second panel, if they will come up promptly, so we don’t 

get caught by votes at some point this afternoon. And while the 

second panel is coming up, I would ask unanimous consent for the 

following statements to be submitted into the record: number one, 

a statement by Mark Weller, the executive director of Americans 

for Commonsense—I think he has a perspective on the one penny; 

number two, a statement by James Mulroney, director of coin services of Brinks, Inc.; and number three, a Federal Reserve chart 

that explains parts of Ms. Roseman’s testimony. 

Without objection, those items will be made a part of the record. 

We will now proceed with the second panel, the members of 

which I will introduce in abbreviated form. My apologies for not 

giving your long bios. We will put them into the record, but we 

don’t want to get caught by votes and not have the opportunity to 

hear your testimony. 

Our first witness on the second panel is Mr. Craig Hesch, chairman of the National Automatic Merchandising Association. Our 

second witness is Mr. Michael B. Clark, the president of Diamond 

State Depository. And our final witness will be Mr. Gary Marks, 

chairman of the Citizens Coinage Advisory Committee. 

And you were present, I hope, when we gave the instructions 

about the lighting system to the first panel: green for 4 minutes; 

yellow for 1 minute; and then red means 5 minutes has expired, 

and we would ask you to wrap up as promptly as you can. 

So, Mr. Hesch, we recognize you for 5 minutes for your testimony, being aware that your entire written statement, will be 

made a part of the record, so we would ask you to summarize. 

26 

STATEMENT OF CRAIG A. HESCH, CHAIRMAN, NATIONAL 

AUTOMATIC MERCHANDISING ASSOCIATION 

Mr. HESCH. Thank you, Mr. Chairman. Mr. Chairman, and members of the committee, I am Craig Hesch, volunteer 2010 chairman 

of the board for National Automatic Merchandising Association, 

your vending machine people of the United States. 

In addition, I am the chief financial officer of A.H. Management 

Group, a family business, my family and our third generation of 

business. It started out as a mom-and-pop operation and grew to 

the size that we are now. We provide vending snacks and beverages to companies throughout the Chicago land area. 

Our national association, NAMA, is the trade association for the 

food and beverage companies, coffee service, and food service management industries. Our membership is comprised of service companies, equipment manufacturers, and suppliers of products and 

services. We have 34 affiliated State councils encompassing 36 

States. 

The vending industry is a $40 billion a year business, employing 

approximately 700,000 people who work at an estimated 13,500 

companies. According to The Vending Times Census of the industry, there are approximately 5.3 million food and beverage machines in the United States. 

Since 100 million Americans will use a vending machine each 

day, any changes in coins or currency will directly impact our 

membership and our customers. The industry could lose jobs if dramatic changes are made to coin or currency. To understand why 

jobs could be lost, it is important to understand the costs of a modern coin and currency acceptance system. 

The coin and bill validator costs between $250 and $475 each. I 

have with me examples of a coin and a bill validator. This mechanism costs $450 and takes 20 minutes to install. If it needs to be 

reprogrammed to accept the new designs of a new U.S. Federal Reserve note or new metal content of a U.S. coin, it will cost, at a 

minimum, $100 per device, and take 20 minutes for a trained technician to travel to the location and reprogram the device. So 

changes could result in an estimated cost of at least $530 million 

just to this industry. 

But an estimate of the cost may be much more complicated. For 

example, one NAMA member estimated that it would cost the industry billions of dollars when you consider all of the unattended 

point-of-sale locations. In addition to an estimated 5.3 million food 

and beverage machines, there are approximately 1.3 million 

amusement machines; 750,000 to 1 million gaming devices; 1.5 million to 2 million retail, car wash, and other specialty devices; 2 million, in addition, parking meters; and millions of coin and cash 

handling or currency counting devices in banks and retail locations 

currently. 

And the more drastic the change to the coin and currency, the 

greater the cost of the engineering. If the unit is older and it requires new hardware or potentially an entirely new device, then 

the jump in cost is an additional $100 for low-end devices to $500 

in the higher-end devices, such as you see here. The most common 

cost would be $300 to $400, in that range. 

27 

Examples of change which would require more costly upgrades 

would include coin size changes or notes that significantly differ in 

width and length from our current bills. 

Regarding changes to the metal content of coins, we recognize 

that there is an increased cost of mining coins; however, changing 

the composition alloy, size, or weight of the coins could very well 

lead to expensive modifications to coin mechanisms by the vending 

industry. 

NAMA generally opposes coins manufactured from multilayer 

plated materials, especially for higher value coins. Multilayer plated steel construction or other material changes to coins could have 

similar electronic metal signatures which may not allow coin 

validators to distinguish coins directly. 

We also strongly oppose mechanical changes to coins, such as 

shapes, sizes or weights. 

In my closing, because my time is up, in regards to currency, we 

support reasonable changes to U.S. currency to accommodate the 

visually impaired, but we must ensure that currency readers in 

vending machines can validate the currency. NAMA opposes any 

changes which will unnecessarily burden the thousands of small 

businesses which operate vending machines or to our customers, 

sir. 

[The prepared statement of Mr. Hesch can be found on page 61 

of the appendix.] 

Chairman WATT. Thank you for your testimony. 

Mr. Clark, you are recognized for 5 minutes. 

STATEMENT OF MICHAEL B. CLARK, PRESIDENT, DIAMOND 

STATE DEPOSITORY 

Mr. CLARK. Chairman Watt, Ranking Member Paul, and members of the subcommittee, thank you for the opportunity to address 

you today. I appear before you this afternoon as president of Diamond State Depository in Wilmington, Delaware, a subsidiary of 

the Dallas-based Dillon Gage group. Dillon Gage is one of the 12 

authorized purchasers of the American Eagle Silver Bullion Coin 

from the United States Mint. 

I also represent the industry council for tangible assets, the National Association for Rare Coins, Precious Metals and the Tangible 

Asset Industry. 

This afternoon, I wish to discuss three issues, all related to coinage: first, the market impact of the Mint’s continuing difficulties in 

keeping pace with the market demand for its American Eagle Gold 

and Silver Bullion programs; second, the desire among collectors 

and investors alike for an American Eagle palladium bullion coin; 

and third, the growing presence of counterfeit coins in the marketplace. 

When Congress authorized the minting of the gold and silver bullion coins with the Gold Bullion Act of 1985, it created a wildly successful program for investors and hobbyists interested in the advantages that precious metals can offer in diversifying and stabilizing one’s investment portfolio. 

Today, the American Eagle Bullion Series, which includes gold, 

silver, and platinum products, is the dominant provider of bullion 

and coin investment products to the global market. The coinage 

28 

program has provided investors with a convenient manner by 

which to invest in silver, gold, and platinum bullion. Of course, 

these coins are also prized by collectors for their beauty. Strong investment demand, coupled with the global economic turmoil we 

have experienced in recent years, has paved the way for a bull 

market in precious metals investments. 

In the past 3 years, the U.S. Mint has sold unprecedented volumes of American Gold and Silver Eagle Bullion Coins. Demand 

for these products has been so robust in recent years that the Mint 

at times has suspended the production of both its fractional Gold 

Eagle Bullion Coins, which are produced in 22 carat, and its 24- 

carat Buffalo Gold Bullion Coin. 

Moreover, in late 2008, production of the American Eagle Gold 

and Silver Proof and Uncirculated Coins was suspended because of 

the exceptionally strong demand for the bullion coins. The Mint 

has allocated all available gold and silver bullion blanks to the production of the American Eagle Gold and Silver Coins because the 

United States is required by law to produce these coins ‘‘in quantities sufficient to meet public demand.’’ As a result, collectors that 

prize the Proof and Uncirculated Coins are being denied the opportunity to purchase these products. 

While the Mint’s inability to keep pace with demand has had a 

negative and unnecessary impact on the investment and hobby 

community, it has also caused frustration among the Mint’s main 

marketers, its authorized purchasers. On many occasions, the Mint 

has had to ration coins amongst the purchasers, causing havoc in 

the distribution system. 

At the heart of the problem is the Mint’s inability to sort sufficient blanks from multiple producers. Its reliance on just three suppliers is flawed. Moreover, there is some irony in the fact that Congress requires the Mint to procure gold for the Bullion Eagle Coins 

from newly mined U.S. deposits, but then the Mint shifts the gold 

to Australia, as we have heard, to have them made into blanks. 

Then, the fabricated blanks are subsequently shipped back to the 

United States for production of the coins. The inefficiency of this 

system is obvious. It seems that we should be able to create jobs 

at home by sourcing these blanks in the United States and eliminate the cost for the intercontinental shipping. 

We wish to recommend that Congress take the following actions: 

one, authorize the Mint to produce both Proof and Uncirculated 

versions of the Gold and Eagle—Silver Eagle Coins, regardless of 

the demand requirements for the bullion coins to ensure an uninterrupted supply to the market; two, direct the Government Accountability Office to undertake a review of the Mint’s procurement 

process for blanks and to seek its recommendations on what can be 

done to improve it; and three, require the Mint procure the blanks 

for its bullion programs with sources within the United States by 

2014. 

Our industry also believes that Congress should broaden the offerings of the American Eagle Bullion Coin Program by authorizing 

the Mint to produce a palladium bullion coin investment coin. 

While principally an industrial metal, much like silver, platinum 

and palladium, palladium is also favored by investors because of its 

rarity. Palladium is similar to platinum in composition and appearVerDate Nov 24 2008 17:32 Nov 22, 2010 Jkt 061849 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\61849.TXT TERRIE
29 

ance. Palladium is mined in only a few nations, and the United 

States is the fifth largest producer of this rare white metal. A 1- 

ounce palladium coin would offer the precious metals investor an 

interesting price point for entry, as gold trades currently at about 

$1,200; platinum over $1,500; and palladium at about $450 an 

ounce. 

Lastly, a palladium bullion coin would create or maintain U.S. 

mining and refining jobs. In addition to mining jobs in Montana, 

palladium is refined in New Jersey, California, and South Carolina. 

Unfortunately, I have run out of time. I was going to speak about 

the counterfeiting issue, but my time is up. So it is in my submitted testimony, of course. 

I thank you for the opportunity to address the subcommittee, and 

I would be happy to answer questions at the conclusion. 

[The prepared statement of Mr. Clark can be found on page 47 

of the appendix.] 

Chairman WATT. I suspect you will get some questions in the 

question-and-answer period. It will give you an opportunity to 

elaborate on that. 

Mr. Marks, you are recognized for 5 minutes. 

STATEMENT OF GARY MARKS, CHAIRMAN, CITIZENS COINAGE 

ADVISORY COMMITTEE 

Mr. MARKS. Chairman Watt, Ranking Member Paul, and distinguished members of the subcommittee, thank you for the opportunity to address the matter of design quality for the coins and 

metals produced by the United States Mint. 

I am the chairman of the Citizens Coinage Advisory Committee, 

commonly known as the CCAC. In 2003, Congress created the 

CCAC to advise the Secretary of the Treasury on any theme or design proposals relating to circulating coinage, bullion coinage, Congressional Gold Medals, and national and other medals produced 

by the Secretary of the Treasury, in accordance with Section 5111 

of Title 31 of the United States Code. 

As a committee designed specifically to advise the Secretary of 

the Treasury, the CCAC serves in an independent capacity from 

the United States Mint. Over the past 3 years, members of the 

CCAC have expressed concerns to Mint officials that the design 

proposals for various metals and for circulating and commemorative coinage have at times lacked the appropriate quality for the 

United States of America. 

Specifically, the lack of design quality has been evidenced in designs that are cluttered and lack focus—and I have included these 

exhibits along with my submission—the use of design devices that 

are so small they cannot be readily discerned by the naked eye, 

and the use of what I call storyboard depictions that attempt to illustrate design themes in literal terms rather than through the use 

of allegorical or symbolic devices. And historically, some of this Nation’s most acclaimed coin designs have been achieved through the 

effective use of allegory and symbolism. 

In other instances, the CCAC has been provided a single design 

proposal for a medal and asked to make a recommendation. If the 

CCAC finds the design unacceptable or lacking, production 

30 

timelines are often so tight that the Mint is unable to provide alternate designs for review. 

In a similar vein, the CCAC was recently provided a set of three 

proposed designs for the obverse of the silver dollar for the 2011 

Medal of Honor Commemorative Coin Program. All three designs 

were virtually the same, except for a few very small variations. 

When the choices we are asked to make become nearly meaningless for the lack of variation or because only one design is proposed, 

the ability of the CCAC to effectively administer its advisory role 

is severely diminished. 

In a recent review of the 2011 United States Army and Commemorative Coin Program, the CCAC was presented with a design 

showing a United States soldier pointing a rifle in the direction of 

a United States Army helicopter, giving the unintended and unfortunate appearance of trying to shoot it down. In another example, 

the Army emblem was rendered with inscriptions reversed from 

their official position. 

Despite these examples, members of the CCAC have been hopeful that necessary changes would be made and, in fact, that a renaissance in United States coinage design would occur. 

This hope has been founded in a vision articulated by Mint Director Edmund C. Moy, in 2007. During the Art Medal World Congress held in Colorado Springs in September of 2007, Director Moy 

issued a stirring call ‘‘to spark a neo-renaissance for coin design 

and achieve a new level of design excellence.’’ 

I count myself as a strong supporter of the vision to bring about 

a neo-renaissance, as the Director has called for, and I know many 

of my fellow members on the CCAC share the same or similar convictions and desire to see a true modern revival of excellence for 

the designs of our Nation’s coinage, yet nearly 3 years after the Director’s call for design excellence, members of the CCAC continue 

to express dissatisfaction with the Mint’s design proposals. 

Let me be very clear. It is not my intent to find blame or point 

fingers, but rather to identify what must happen going forward to 

bring about the positive change we desire. 

Let me also be very clear that the Mint’s art staff is highly 

skilled and very capable of producing high-quality designs. I have 

seen moments of genius in these artists, and I believe the answer 

will be found when we discover what changes in the process need 

to be made to liberate them to perform at their full potential. 

Therefore, acting in my statutory role as the CCAC’s chairman, 

I recently appointed a Subcommittee on Coin Design Excellence 

comprised of five members of the committee. I have given the subcommittee the task of investigating the Mint’s design processes, 

identifying what changes would lead to improved designs and, subsequently, to develop recommendations designed to further these 

changes. 

It is my intent that such changes would be issued by the full 

committee to the Secretary of the Treasury within the next several 

months. Once the committee has issued its design quality recommendations, I would be pleased to provide copies to this committee or any members who might be interested. 

31 

The CCAC’s Fiscal Year 2009 annual report has just been released, this document here, and it is available to all interested parties in the room if you would like to know more about us. 

Thank you for the opportunity to report to you on the design 

quality issue and the CCAC’s recent efforts to develop recommendations for improvement. I would be very pleased to answer 

any questions you might have. 

[The prepared statement of Mr. Marks can be found on page 76 

of the appendix.] 

Chairman WATT. Thank you for your testimony. 

And I thank all three witnesses for their testimony. 

I will now recognize the members for questions. 

And, Mr. Marks, I was thinking, apropos to my closing comments 

on the first panel, that the CCAC might be the appropriate body 

to be doing some of this. But it sounds like you all are being 

marginalized to some extent, and maybe that wouldn’t be the appropriate body if you get marginalized. 

Do you see the kind of consultation on a number of these issues 

going forth, or is your portfolio only with the design of coins and 

currency? 

Mr. MARKS. Our statutory role is limited to design and themes 

for designs. I think, essentially, the Mint is a manufacturing operation, and because of that, there are production schedules. And I 

think that dictates a lot of what happens with the Mint. 

In recent years, the last decade or so, there has been a flourish 

of legislation with various commemorative programs, both circulating and more of the numismatic type that I think have taxed the 

capacity of the Mint. That is my personal observation. 

And unfortunately, groups like mine, the CCAC and the Commission on Fine Arts, typically are at the end of the design process. 

So, by the time a design reaches us, having sufficient time in the 

production schedule to react to our input I think sometimes is very 

limited, and sometimes, as I have indicated in my testimony, we 

are somewhat marginalized. 

Chairman WATT. I assume both Mr. Hesch and Mr. Clark, you 

would support giving the Mint and/or other bodies, the four who 

appeared on the first panel, greater research and development authority on alternative metal compositions for circulating coins and, 

I suppose, numismatic coins also. Do you have any comments to 

make in this area? 

Mr. CLARK. Thank you, sir. 

I believe our industry feels as though the present system is probably best. I like one idea that I heard I think from Congressman 

Paul. 

Chairman WATT. The present system being— 

Mr. CLARK. That Congress has the authority. 

But the recommendation earlier, the suggestion earlier that the 

Mint and its resources be brought to bear to bring about recommendations for the Congress to consider seems it would be the 

most logical approach in our minds, I believe. 

Chairman WATT. I think that was actually my opening statement 

comment as a suggested alternative. 

Mr. Hesch? 

32 

Mr. HESCH. NAMA definitely supports the idea of giving the U.S. 

Mint and the Bureau of Engraving the authority to do research and 

conduct research. 

However, we do hope that Congress will retain the authority to 

allow such changes. 

Chairman WATT. And that is so that it doesn’t get made regularly and have an adverse impact, I suppose, on your industry? 

Mr. HESCH. Yes. 

And we do have a very good working relationship with both, I 

might add, but again, the costs associated to dramatic changes or 

any changes are so large to our industry that we want to be able 

to monitor them. 

Chairman WATT. Mr. Hesch does your industry have a position 

on whether we should retain the statutory requirement that refined gold and silver must first be used to meet bullion demand as 

opposed to being used in numismatic— 

Mr. HESCH. Our association has no position on that at this point 

in time. 

Chairman WATT. I take it, Mr. Clark, you have a bigger dog in 

that fight? 

Mr. CLARK. We do, sir, yes. We believe that the Mint should be 

authorized to produce the Proofs and Uncirculated along with the 

bullion coins. And it would seem logical that it could be done in 

some proportion. But under the current system, the collectors of 

the Proofs and Uncirculated Coins are sort of being shut out of the 

market, quite honestly, because there are no products for them to 

buy from the Mint. 

Chairman WATT. Is the collection of numismatic coins a profit 

center for—we are obviously encouraging collection, but wouldn’t 

the primary role of these agencies be to deal with the circulation 

and economic value as opposed to collection? 

Mr. CLARK. Part of the U.S. Mint’s mission, as I understand it, 

is to satisfy the demands and desires of the collector community as 

well as provide circulating coinage at the same time. So I don’t 

think their mission—that they are mutually exclusive requirements. 

Chairman WATT. One final question. This palladium suggestion 

that you have made, would that help to solve—how much of the 

undersupply would that help to solve, in your estimation? 

Mr. CLARK. We do believe it is an ideal price point for many investors. And as a result of producing a palladium coin, we believe 

it would have the effect of reducing the burden on the Mint for Silver Eagle production because the Silver Eagle coins are priced 

roughly at $20 to $21, $22 right now, whereas the palladium bullion coin would be in the $450 market—price range, excuse me. 

And it would no doubt attract some of the investors who forego the 

higher priced $1,200-plus gold bullion coin and the $1,500-plus 

platinum coin. It would provide us an excellent alternative for the 

lower-priced coin investors. 

Chairman WATT. My time has expired. I was tempted to ask you 

about the value of all of these Kennedy half dollars I have in my 

safety deposit box, but I won’t do that on the record. 

My colleague, the ranking member, is recognized for 5 minutes. 

Dr. PAUL. Thank you. 

33 

Chairman WATT. Diminishing value, I take it. 

Dr. PAUL. They may have some silver left in them. 

I have a question for Mr. Clark. Why do you think the Mint only 

uses three suppliers to provide these planchettes? 

Mr. CLARK. I would like to be able to understand that, but I have 

no firsthand knowledge. 

Dr. PAUL. If you know the business, are there other people who 

can make them in the country? 

Mr. CLARK. I believe there are other companies out there that 

are very interested in offering their services to the Mint. 

Dr. PAUL. And I understand that they are not restricted by the 

law to these three individuals. They have the authority to do it. 

If we get the palladium coin, we are still going to have that same 

problem; where are we going to get the planchettes? Because they 

can’t even supply the demand right now. 

Now, you suggested that we get the GAO involved and take a 

look at all of this and see if we can get recommendations. And I 

am just wondering how much we really need this. Is there any 

other way to get some professional or political advice on this without an audit? Or do you see the audit as something very, very important? 

Mr. CLARK. Are we talking about the planchettes or the palladium coin, sir? 

Dr. PAUL. Your recommendation for the audit to review the 

Mint’s procurement processes for the blanks. 

Mr. CLARK. We thought an outside agency looking at their process and why—to answer your question, why they are restricting 

sources to only three separate entities, someone with a separate set 

of eyes and kind of a fresh look might be able to determine that 

there is a better way to go about it. That is why we are making 

the recommendation. 

Dr. PAUL. And your other recommendation was that we require 

all the planchettes be made here in this country. 

Mr. CLARK. We believe there is sufficient capacity within the 

U.S. borders to do so. 

Dr. PAUL. Do you think there is a lot of difference, a net difference in making these coins if we didn’t require that the gold 

came from this country? Isn’t gold generally pretty fungible? Does 

that make a big difference? 

Mr. CLARK. I think the interest in—Congress’ interest at the 

time they passed that requirement, of course, back in 1985, was to 

promote the sale, the job creation amongst American mining companies that domestically produced gold be used for the American 

bullion coin programs. 

But you are right, obviously, gold is fungible, and conceivably it 

could be acquired anywhere. I don’t think that is part of the problem. I think there is a sufficient gold supply. It is just the actual 

fabrication of the planchettes for some reason is limited to three 

separate sources at the current time. 

Dr. PAUL. Yes. It just seems to me, like I mentioned earlier in 

our hearing, that this problem seems to be unique to government. 

If the private industry is doing this, they just don’t run into this. 

Some of this, I think, just like the emphasis in 1985 to—I use domestic gold and all, I can understand that. But it certainly is—we 

34 

are a long way away from a business person adjusting for supply 

and demand and doing it at the best price. There is no way that 

the government can compete with private industry in even making 

a coin these days. But I was just wondering about how strongly you 

felt about that. But I really don’t have any other questions, and I 

am going to yield back my time. 

Chairman WATT. I thank the gentleman. 

The gentleman from Texas is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. I thank the witnesses as 

well. 

Mr. Hesch, your testimony was very insightful. You provided a 

lot of intelligence that I think a good many people were just not 

aware of in terms of the costs associated with making a transition 

from one coin to another. Your industry went for a very long time 

without accepting currency within the automated machinery, and 

then you made that transition to currency. And currently, I assume, if you—not all have, but you are making a transition now 

to plastic or alternative forms of promoting these transactions. How 

rapidly is this taking place from the coinage, to the currency, to 

what I am going to call plastic? 

Mr. HESCH. It kind of depends upon what generation you are 

from, to be quite honest. What we have experienced is the younger 

generation obviously does not carry cash and coin. I have two 

daughters, 28 and 26, and they don’t carry cash with them. I understand that. Our industry is definitely moving toward a cashless 

or a credit-based system. 

Up until not that long ago, it was very expensive for microtransactions to take place on the cost that we had to issue back for the 

credit card usage. So as that barrier has been breaking down, we 

have becoming more intrigued and putting out more credit card acceptance devices on equipment. It is a cost that we encumber both 

on the up-front charge as well as on the back-side charge. 

But we have to obviously take care of all of our customers. So, 

yes, cash and credit are coming on every machine. As far as acceptance, that is kind of tough. It depends upon the generation. 

Mr. GREEN. I understand that. I think I am with your daughter’s 

generation. I rarely carry cash; I use credit cards, for various and 

sundry reasons. 

Now, you talked about the costs associated with making the 

change. Do you have an adequate means by which you can convey 

your concerns to those who have the hands-on experience with 

making the change? Is this the means by which you communicate 

your message, primarily through us in hearings like this? Or is 

there some other means by which you can adequately convey your 

message? 

Mr. HESCH. Actually, both; here in front of you to convey our 

message to you, who actually are telling or are letting them do 

what they want. But we do have a working relationship with the 

BEP as well as the Mint. We know both gentlemen very well as 

far as our President. We do work on both sides, if you will, sir. 

Mr. GREEN. And to this end, you made mention of the costs associated with this. Are you of the opinion that these things are given 

consideration when changes are made such that your industry is 

35 

not adversely impacted to some astronomical degree? I am confident that you are always adversely impacted. 

Mr. HESCH. Absolutely, sir. We did go through. When the BEP 

did come up with the new bills, our industry did get them for a period of time to be able to test them, to be able to find out what 

changes needed to be made on our currency acceptors, etc. So, yes, 

we do have a working relationship. 

As far as coins, we haven’t gotten to that point yet. Obviously, 

we don’t take pennies; we take nickels and above. But the electronic signature is of concern to us because not only will we have 

to accept what we currently have, we will have to accept potentially what is being manufactured. And again, in my statement, the 

alloy is a concern, not as much of a concern on the lower denominational coin, but when you start talking size, shape, diameter, that 

impacts our industry on a much more larger level, much more larger. 

Mr. GREEN. My final question would be this: In making the transition to what I am calling plastic or electronic credit, if you will, 

what is the most significant obstacle that you are having to deal 

with that we here in Congress might have an opportunity to give 

some assistance with? 

Mr. HESCH. We are talking to Members of Congress as far as initiatives that we are looking at for equipment investment to be able 

to do certain things, such as credit card acceptance. Not only do we 

have that, we also are on the green side, if you will, because we 

are bringing something to people at either where they work or a 

place where they are at. We are bringing a convenience to them so 

that they don’t have to go somewhere else. So in reference to that, 

we are trying to look for places through initiatives here in Congress 

to be able to get some capital to be able to improve what we are 

able to offer. 

Mr. GREEN. Thank you, Mr. Chairman. My time has expired. 

Chairman WATT. Thank you. 

And the gentleman from Oklahoma, my friend Mr. Lucas, is recognized for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. 

Mr. Hesch, I apologize for being out of the room for part of your 

oral testimony. But reading your statements here, in an earlier 

panel, I inquired about the nature of what would be defined as obsolete coins and what is not. You are the best example of an industry that is using them each and every day. 

Mr. HESCH. Yes, sir. 

Mr. LUCAS. What percentage would you guess that go through 

your machines are half dollars, quarters, dimes, nickels? 

Mr. HESCH. The majority of the coinage that goes through our 

machines would be quarters. 

Mr. LUCAS. Followed by dimes? 

Mr. HESCH. Followed by dollar coins. I would say quarters, 

dimes, dollar coins, nickels. No half dollars. We don’t even take 

half dollars, sir. I am sorry. 

Mr. LUCAS. Absolutely. And you make the point in your testimony that whatever we do, it is important to maintain that consistent alloy, that electronic signature that you referred to. 

Mr. HESCH. Consistency is key. 

36 

Mr. LUCAS. So, in fact, thinking to the earlier discussion, if the 

1-cent piece went away, the half dollar went away, your folks 

wouldn’t notice it at all—minimally. 

Mr. HESCH. Minimally. If the penny went away, no. 

Mr. LUCAS. And on the 5-cent piece, which we have had much 

discussion here, historically we have not always used this particular combination, this particular size in the past. The 5-cent 

piece was of the same alloy as the larger ones. Fair enough. 

Let me turn to Mr. Clark and anyone on the rest of the panel. 

Let us expand for just a moment on the counterfeit issues. I think, 

Mr. Clark, in your testimony, you mentioned that the estimation 

on sales of products that were alleged to be legitimate U.S. legal 

tender, perhaps defined as collector coins but not, could be as high 

as $5 billion? 

Mr. CLARK. Yes, sir. By some industry estimates, it could be as high as $5 billion. 

Mr. LUCAS. Could you expand for a moment on that problem? 

Since we are talking about not just a few thousand dollars or a few 

hundred thousand dollars, but billions, could you expand on that 

issue and what your folks are encountering and seeing? 

Mr. CLARK. There have been written reports and discussions at 

our gatherings, estimates made of as many as 1 million counterfeit 

in numismatic coins being brought into the U.S. marketplace last 

year. They come primarily from the Far East, as you mentioned 

earlier. There are some very sophisticated and extensive capabilities in certain parts of the Far East, where it is legal to produce 

replicas, which we would probably consider as counterfeits once 

they come into this country. And the issue is critical within our industry, because even our own experts sometimes have a difficulty 

distinguishing an authentic coin from a replica or a counterfeit. 

Mr. LUCAS. And, Mr. Clark, I have seen reports that on occasions 

these pieces come into the country packaged or encapsulated in 

what are purported to be systems to verify the authenticity by 

third-party grading services not only counterfeiting the coin, but 

counterfeiting the package that implies the coin is real. Have you 

seen those reports? 

Mr. CLARK. We have. And this is correct. It is happening. There 

have been reports of the exact same coin with the exact same serial 

number. 

Mr. LUCAS. As long as they have a verification package. 

Mr. CLARK. Yes, exactly, on the package having been replicated. 

The two most well-known services are NGC, the Numismatic Grading Company, and PCGS, which is the Professional Coin Grading 

Service, are the most widely recognized throughout the world actually, and are the most replicated in that country, counterfeited in 

ours. And we have seen multiples of the same replicated coin packaged in the exact same container, bearing even the same serial 

number, but they are so good and they are so authentic looking, as 

I said, it is sometimes difficult for the experts to distinguish between the two. 

Mr. LUCAS. And for the benefit of the panel, Mr. Clark, we are 

talking about things that, by creating this appearance, by adding 

the appearance of this packaging, we are not just talking about a 

$20 gold piece selling for whatever an ounce of gold is selling for, 

37 

we are talking about potentially for thousands of dollars above and 

beyond metallic value. 

Mr. CLARK. Yes. They can range from several thousand dollars 

to—I have seen certified coins in excess of $1 million in value, in 

market value. 

Mr. LUCAS. So clearly, this is an area where law enforcement and 

all of the appropriate entities need to be aggressive. And this is not 

just selling to tourists on the street somewhere, these are Internet 

marketers, these are a variety of sources moving this product. Is 

that a fair statement? 

Mr. CLARK. That is correct. Yes, sir, I agree with that. 

Mr. LUCAS. Thank you, Mr. Chairman. 

Chairman WATT. The gentleman’s time has expired. 

Mr. Cleaver is recognized. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

This is an amazing place to be, because if somebody had told me 

that there was an Automated Merchandising Association in the 

world, I would have challenged it. Since I have been here, I have 

never seen anything that does not have an association. And I also 

would contradict your industry. 

I am in an industry where people leave their change at a higher 

level. I am in the church, and more change is left in the church 

than in any of the machines. People are adverse to a silent offering 

in church. 

The other thing is that—and I don’t want to be insensitive, but 

most of the industries, when we proposed seat belts, the automobile 

industry said, this is going to collapse our industry. And then when 

we required air bags, they said, this is going to do it for sure. And 

in any industry, we always hear that. So I don’t mean to suggest 

that there won’t be costs involved, because obviously there will be. 

And the other issue—and I said this to the last panel—it would 

seem to me—and you did speak on the issue of sustainability, I 

think, for a lot of people, certainly for me, is a much more sellable 

issue if the coins could be melted and then reformed into strip 

metal for making new coins. And it seems to me that is something 

that we ought to be involved in. I wouldn’t be surprised if some of 

the Treasury stimulus money does not deal with sustainability, 

even in the coins. 

My question is, I have a stack of coins. My grandfather used to 

give us silver dollars for Christmas. And my generation, which is 

the younger generation—you earlier suggested that this might not 

be it, but this is it, the younger generation. We got silver dollars 

for Christmas. It was a big deal. And so, I am wondering about the 

Peace silver dollar and then the one with Eisenhower and the Liberty Bell on the back. I am wondering, what are we going to—this 

is a question for the people who left, but I am just hypothetically 

just throwing it out. What do we do with all of those coins? How 

would your industry deal with all those coins? 

Mr. HESCH. As far as the coins that are not in true circulation, 

those actually go to the bank, and the bank either deposits them 

through the Fed or retains them. That is how our industry deals 

with them. 

Mr. CLEAVER. With a $1 value. 

38 

Chairman WATT. You need to ask Mr. Clark, because they may 

be valuable. 

Mr. CLEAVER. Do I have more money coming? 

Mr. CLARK. The question is, what happens to the coins if new 

coinage was to be introduced? 

Mr. CLEAVER. Yes. 

Mr. CLARK. Undoubtedly, they would become collector’s items. 

Mr. CLEAVER. Worthless? 

Mr. CLARK. Collector’s items, meaning they might be worth more 

than their face value, depending on things like the mintage, the 

number produced in any given year, the condition of those coins. 

But if they are no longer being produced or circulated, they will 

find their way into hobbyists’ collections and just amateur collectors. 

Mr. CLEAVER. I am for this, Mr. Chairman. That is my last question. Thank you. 

Chairman WATT. You should give up now. I just made you a millionaire, see? 

The Chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. And 

without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. If everything has been done for 

the good of the order, I think I will thank these gentlemen for your 

testimony and encourage you to respond, if you get written questions, as promptly as you can. 

The hearing is adjourned. 

[Whereupon, at 4:50 p.m., the hearing was adjourned.] 

(39) 

A P P E N D I X 

July 20, 2010 

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