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96–545 PDF 2004

MONEY MATTERS: COIN AND

COUNTERFEITING ISSUES

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 28, 2004

Printed for the use of the Committee on Financial Services

Serial No. 108–82

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

RICHARD H. BAKER, Louisiana 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

DOUG OSE, California 

JUDY BIGGERT, Illinois 

MARK GREEN, Wisconsin 

PATRICK J. TOOMEY, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN B. SHADEGG, Arizona 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

MELISSA A. HART, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

TIM MURPHY, Pennsylvania 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

BARNEY FRANK, Massachusetts 

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 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JAY INSLEE, Washington 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

KEN LUCAS, Kentucky 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

MIKE ROSS, Arkansas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

RAHM EMANUEL, Illinois 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

CHRIS BELL, Texas 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY

PETER T. KING, New York, Chairman

JUDY BIGGERT, Illinois, Vice Chairman 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

DOUG OSE, California 

JOHN B. SHADEGG, Arizona 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

TIM MURPHY, Pennsylvania 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

DARLENE HOOLEY, Oregon 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

RAHM EMANUEL, Illinois 

CHRIS BELL, Texas 

(V)

C O N T E N T S 

Page 

Hearing held on: 

April 28, 2004 ................................................................................................... 1

Appendix: 

April 28, 2004 ................................................................................................... 39

WITNESSES 

WEDNESDAY, APRIL 28, 2004

Ferguson, Thomas A., Director, Bureau of Engraving and Printing, U.S. Department of the Treasury .................................................................................... 10

Fore, Henrietta H., Director U.S. Mint, U.S. Department of the Treasury ........ 8

Johnson, Hon. Jay W., former Director of the Mint and now Director of 

Business Development, Collectors Universe Inc. .............................................. 32

Marquardt, Jeffrey C., Associate Director, Reserve Bank Operations and Payment Systems, Board of Governors of the Federal Reserve System ................ 15

McMahon, Thomas C., Senior Vice President and Chief Counsel, National 

Automatic Merchandising Association ............................................................... 29

Noe, Thomas, President, Vintage Coins and Collectibles, and a member of 

the Citizens Coinage Advisory Committee ......................................................... 30

Tam, Chung Chung, Revenue Systems Engineer, Chicago Transit Authority, 

on behalf of the American Public Transportation Association, Chairman 

Revenue Management Committee ...................................................................... 33

Townsend, Bruce, Deputy Assistant Director, Office of Investigations, U.S. 

Secret Service ....................................................................................................... 12

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 40

King, Hon. Peter T. .......................................................................................... 42

Ferguson, Thomas A. ....................................................................................... 43

Fore, Henrietta H. ............................................................................................ 49

Johnson, Hon. Jay W. ...................................................................................... 54

Marquardt, Jeffrey C. ....................................................................................... 57

McMahon, Thomas C. ...................................................................................... 69

Noe, Thomas ..................................................................................................... 74

Tam, Chung Chung .......................................................................................... 77

Townsend, Bruce .............................................................................................. 83

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

King, Hon. Peter T.: 

Letter to Federal Reserve System from Hon. Jim Greenwood ..................... 88

(1)

MONEY MATTERS: COIN AND 

COUNTERFEITING ISSUES 

Wednesday April 28, 2004

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL

MONETARY POLICY TRADE AND TECHNOLOGY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to call, at 2:03 p.m., in Room 

2128, Rayburn House Office Building, Hon. Michael Castle [acting 

chairman of the subcommittee] presiding. 

Present: Representatives Castle, Maloney, Watt, Sherman and 

Bell. 

Mr. CASTLE. [Presiding.] Good afternoon. The Subcommittee on 

Domestic and International Monetary Policy, Trade and Technology 

will come to order. 

I am Congressman Mike Castle, and I am chairing the meeting 

for Subcommittee Chairman Peter King, who has been called to the 

White House on an important matter and hopes to be able to join 

us later. 

So you who go back a little bit will recall that I actually did chair 

this subcommittee a number of years ago for a couple of terms, and 

I still serve on it. 

The subcommittee meets today to discuss a number of matters 

related to the important issues of coin and currency design and the 

related problem of counterfeiting of U.S. currency. 

The hearing is the first of what Chairman King hopes will become a fairly regular series under the broad heading of ‘‘Money 

Matters,’’ dealing with the physical and virtual aspects of money 

and payment systems. 

As well, today’s session will serve as the legislative hearing for 

a bill, H.R. 3916, I introduced last month with the co-sponsorship 

of the gentlelady from New York, to my right, Ms. Maloney, entitled The Presidential $1 Coin Act of 2004. 

The legislation seeks to increase the availability of the $1 coin 

in the economy so that it can fulfill its promise of controlling costs 

for business and thus restraining prices for consumers. I will further describe the bill in a moment. 

Today’s second panel will focus entirely on the Presidential dollar. 

Testifying to us will be four experts: Mr. Chung Chung Tam, a 

cash management specialist for a major public transit agency and 

chairman of the Cash Management Committee of the American 

Public Transportation Association; Tom McMahon, East Coast diVerDate 0ct 09 2002 09:07 Nov 10, 2004 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\DOCS\96545.TXT FIN1 PsN: MICAH
2

rector of the National Automatic Merchandising Association, representing the vending industry with some 7 million machines deployed around the country; Jay Johnson, the immediate past director of the United States Mint, who is now director of business development for Collectors Universe, a company providing collector 

services; and Tom Noe, a coin collector and coin dealer, who also 

serves as vice chairman of the Citizens Coinage Advisory Committee, a panel advising the Treasury Secretary on design proposed 

by the Mint. Mr. Noe is the founder, owner and president of Vintage Coins and Collectibles of Maumee, Ohio. 

First, however, we have a panel of government witnesses, some 

of whom no doubt will address H.R. 3916, but who are to speak to 

the larger issues of coin and currency design. 

We will hear from the current Mint director, Henrietta Fore, who 

no doubt will tell us about the successful 50 State Quarters Program. Everybody is collecting them, and surprisingly, the program 

is now more than half finished. 

I will also be interested to hear about the early successes of the 

temporary redesign of the five-cent coin, an effort spearheaded by 

Mr. Cantor, who formerly sat on the Financial Services Committee, 

and I expect Ms. Fore also will address the redesign proposal for 

the dollar coin. 

The director of the Bureau of Engraving and Printing, Thomas Ferguson, will tell us about the new $50 bank note design that we 

all saw in the news yesterday and about the $20 bank note released last year. 

Both new designs come as part of an ongoing effort to keep ahead 

of counterfeiters who increasingly are turning to inexpensive, readily available digital scanners and printers to make their fakes. 

Mr. Jeffrey Marquardt, associate director of the Reserve Bank 

Operations and Payment Systems at the Federal Reserve Board, 

will address issues relating to counterfeiting, as the Fed is the actually issuer of U.S. currency, and likely also will talk a little about 

the circulation patterns of coin and currency. 

Finally, Bruce Townsend, deputy assistant director of the United 

States Secret Service, who heads the Office of Investigations, will 

talk to us about current trends in counterfeiting at home and 

abroad and about ways to combat the counterfeiters. 

I will be particularly interested in hearing his opinions on the 

new $20 and $50 designs, his anti-counterfeiting efforts, and about 

the Secret Service’s successful efforts at working with other governments to stem the flow of counterfeits. 

I see it is in a slightly different order than you sit. It does not 

make much difference to us which order you go in. 

The issues we will be discussing today are important. Having a 

strong currency that resists attack by counterfeiters is the bedrock 

of a robust, vibrant economy, and having widely available, easily 

identifiable units of coin and currency is the best way to facilitate 

commerce. 

I would like to return to the legislation before us today for a moment. 

The Presidential $1 Coin Act of 2004 I authored with Ms. 

Maloney. This legislation honors each U.S. President by placing 

them on the obverse side of the $1 coin on a rotating basis. 

3

I believe this program is a great opportunity for educating both 

children and adults about the history of our country. 

In addition, although it is not the goal of the program, these new 

coins will likely generate as much as $5 billion for the government. 

I did not write that part about it not being one of the goals. To 

me, it is a goal. 

In many ways, this legislation is modeled after the successful 50 

States Quarter Program, which, at the end of last year, reached its 

halfway point. 

The 50 States Quarter Program, which I was also proud to author, includes five quarters a year bearing images connected with 

one of the States so that over a decade each state will have been 

honored. 

Before the States Quarter Program started, the U.S. Mint was 

making about 400 million quarters a year, but in the first year of 

the 50 States Quarter Program, it minted approximately 1.2 billion 

quarters. 

The Mint estimates that one person in each household is collecting the quarters, and they are collecting a full set, not just their 

own state. 

According to the most recent numbers from the Mint, over $4 billion worth of savings have been created for the Federal Government with an expected $2 billion more through the life of the program. 

I appreciate the time and effort each of our panelists has put into 

their jobs and the time and energy they put into their testimony 

today. I say that very sincerely because I have worked with almost 

all of you in some capacity or another, and you really do an extraordinary job. 

The collectors have always had, I think, the public interest in 

mind here, and we always appreciate that. 

And with that, I yield to a strong supporter of these programs 

and one who has been extremely helpful in bringing all this to fruition, the gentlewoman from New York, Ms. Maloney. 

Mrs. MALONEY. Thank you very much, Representative Castle. 

I am delighted to join him on the dollar coin program. Representative Castle was the architect of the 50 States Quarter Program, 

which most Americans absolutely love and collect, including my 

two daughters. We just had the Florida coin released. We are eagerly awaiting the Texas coin. It has been absolutely a sensational 

success. 

So I applaud Congressman Castle. He is truly a visionary legislator since so many people have enjoyed this program, and I am delighted to be a partner in this new effort. 

At its heart, this legislation creates a massive national American 

history teaching tool. This bill combines all the best elements of a 

successful coinage program: education, collecting interest, a financial windfall for the Treasury. 

Politicians and educators are always searching for a new way to 

boost interest in American history. 

The program also promises to be a boon to the U.S. Treasury. 

Halfway through the quarter program, it has returned more than 

$4 billion to the Treasury. 

4

No doubt a similar popular dollar program would produce another huge benefit as novices and professionals and young people, 

and all people really, collect this coin and are drawn to collecting 

it as a hobby. The Presidential $1 Coin Act would also increase awareness of 

this overlooked coin, the dollar coin. My hope is that we will raise 

interest in the dollar coin, making it all the more popular and increasing its use so that when the great Sacagawea returns at the 

end of the Presidential program, it will be more in circulation. 

Finally, we also called for a coin program that will memorialize 

each First Lady and include symbolism that is representative of 

their time, again a very important teaching tool and awareness 

tool. 

We are also today holding a hearing on counterfeiting. 

Counterfeiting is one of the most important law enforcement 

issues the Congress and the committee faces. In fact, documents 

seized from Al Qaida indicate that this is a means by which they 

carry out terrorist operations. 

So I look very much forward to the testimony to see how our currency stands up relative to efforts in other countries. Just recently, the new $50 bill was unveiled. This is certainly a 

step forward, but it is also my understanding that we will soon be 

unveiling the $100 bill, which is, according to accounts, very vulnerable to counterfeiting. Nearly two-thirds of $100 bills circulate 

overseas. 

While, in the U.S., our primary defense against counterfeiting is 

to use multiple colors, the new euro uses advanced metallic foils incorporated in them during printing. 

So I look forward to the panelists’ discussion of this technique. 

The present budget also includes a proposal to study the advisability of combining the Bureau of Engraving and Printing and the 

United States Mint. 

While I understand the stated goal is to achieve cost savings 

through a reduction in administrative costs, I do have some concerns about the study and the manner in which it is being conducted and will ask a few questions in that area. 

I congratulate the Chairman for his leadership and wonderful 

ideas in coinage, and I hope we will pass this bill and move forward readily with other projects. 

Mr. CASTLE. I thank the gentlewoman from New York. 

Since there are people out in this audience who helped conceived 

the original 50 States Quarter idea and helped with this dollar 

idea, I do not want to take too much credit for being too innovative. 

Mrs. MALONEY. Well, you pushed it through Congress. 

Mr. CASTLE. Well, I was just smart enough not to get in the way. 

I did for about six months, but then I learned my lesson and wised 

up and realized we had a good program in hand. 

Does the gentleman from North Carolina, Mr. Watt, wish to 

make an opening statement? 

Mr. WATT. Thank you, Mr. Chairman. I will be brief because I 

know you want to move on with the hearing and the markup. 

I do want to applaud the Chairman for convening the hearing because it is an important hearing both as a prelude to the markup 

of the bill that we are considering today and to establish a prediVerDate 0ct 09 2002 09:07 Nov 10, 2004 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 G:\DOCS\96545.TXT FIN1 PsN: MICAH
5

cate for moving forward on a bill. I just always think it is a good 

idea to build a public record about what the bill is about. 

But I also think this is an important hearing because counterfeiting has become and is becoming more and more a problem in 

our society and I hope that we are doing everything that we can 

do to address that as a problem. 

Three or four years ago, Chairman Oxley and I and a couple of 

the other members of the Financial Services Committee traveled to 

Europe and looked at some of the advanced processes that they 

were beginning to implement and look at—perhaps this was before 

the euro, I guess it must have been—to incorporate into the euro, 

and I came away deeply impressed with the efforts that they were 

making to try to combat counterfeiting. 

At that time, I did not realize that some of the cutting-edge technology that was being used in their effort, or that was in use combat counterfeiting internationally, actually was being generated 

from my congressional district right in North Carolina. 

When I got back, I got more proactive in actually going out and 

looking at some of that technology and trying to understand how 

the technology worked. 

So I am going to ask forgiveness, Mr. Chairman, for sounding 

like I know more about this than I probably do. You know what 

they say about a little knowledge is a dangerous thing. 

But with that kind of background, it is hard not to get interested 

in something when the magnitude of the problem is as severe as 

it is. Because my service on this committee is also parallel with my 

service on Judiciary, and I know that counterfeiting is a major 

component of criminal activity and an emerging component apparently of terrorism and acts that are taking place around the world. 

So I hope that some of my concerns about whether we are doing 

enough in the area of anti-counterfeiting to combat the ability of 

counterfeiters, and to make it possible for ordinary citizens, not 

just businesses, that have the kind of equipment and machinery to 

evaluate the quality of currency, to make it possible for ordinary 

citizens to be able to get involved in this anti-counterfeiting effort. 

I thank the Chairman for convening the hearing, and I will yield 

back the balance of my time and look forward to the question-andanswer period and the testimony. 

Mr. CASTLE. Well, thank you, Mr. Watt. I must comment on your 

comment that you may sound as if you know more about something 

than you do. I think that is the true mark of a real congressman 

when we get in that position. We work hard to get to that point 

in our life. 

The gentleman from California, Mr. Sherman, is yielded to if he 

wishes to make an opening statement. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

I have always thought that the only skill I bring to Congress is 

how to be ignorant without looking stupid, and sounding like I 

know more than I do is an important part of that. 

Mr. Chairman, I thank you for holding these hearings. 

There are important issues as to whom we commemorate on our 

coins and States and localities and people. Putting those aside, I 

see two important issues about our currency, one dealing with 

coins, one dealing with printed money. 

6

With coins, we ought to be talking about abolishing the penny. 

We are always often talking about abolishing the penny. People do 

not want to abolish the penny. This is because they think that 

somehow when they buy something at the store that they are paying exactly the amount they agreed to pay, which is not true. 

Every transaction at every store in every state that has sales 

tax—and I speak as the former head of the largest sales tax agency 

in the country—is rounded to the nearest penny. So, in fact, you 

buy a bunch of things at the store. California imposes 8 and a 

quarter percent sales tax. You then owe $99.123 cents or $99.128 

cents. That is rounded to the nearest penny. 

Certainly in a sophisticated, computerized age, we could round to 

the nearest nickel. There would be no way for stores to try to get 

an advantage out of this because, when I go to the 99-cent store, 

they do not know how many things I am going to purchase. So 

whether I buy six or eight or 10 with the applicable sales tax either 

means things are rounded up or down. 

Furthermore, they do not know at many stores whether I am going to pay with a credit card. If the bill came to $108.12, I could 

pay with a credit card and pay only 12 cents. If I paid cash, they 

would round down to 10 cents. I save two cents. Boy, I hope I have 

more important things to worry about. 

So we can abolish the penny and round to the nearest nickel. 

The savings on the pants pockets alone would more than be 

worth it, not to mention what we would save as a country and how 

we would find another use for the zinc and copper involved. 

We probably will not do this because if you poll on it, it does not 

poll well. 

This is not ‘‘Profiles in Courage.’’ Perhaps our subcommittee 

could actually look at this independent of the polling and perhaps 

save an awful lot of our natural resources, not to mention pants 

pockets. 

Now, let us talk about printed currency. 

We have $700 billion of printed currency in circulation. This is 

because the dollar is a storehouse of value and a medium of exchange around the world, and that is an important thing for the 

United States to preserve and an important benefit. 

Just from the seigniorage, the fact that, in effect, the world is 

loaning our Federal Government $700 billion interest free, that is 

worth at least $15 billion, probably more as interest rates go up, 

to the Federal Government every year. 

You know, when you print a Federal note, a 10-year note, you 

pay interest on it. When you print a Federal Reserve note like the 

one illustrated here, you do not pay interest on it. It is like a noninterest bearing $50 bond. If you are the Federal Government, that 

is a good business to be in. 

So that is just one advantage of our currency, being this storehouse of value. 

It also enhances our status around the world and the status of 

our financial markets. We need to have currency that is not subject 

to counterfeiting. 

As the gentlelady from New York pointed out, there are technical 

means to make our new currency even less counterfeitable than the 

new currency you folks have just come up with, which is wonderful 

7

and beautiful and looks pretty hard to counterfeit, but maybe not 

as good as it could be. 

The issue, though, that comes up is: What about all this stuff you 

printed in the last century? It’s still in circulation. 

Now, I know the average bill is only going to last a couple or 

three years. You figure you are going to pull it all in. But you are 

not. 

A lot of folks are going to have the old bill. As long as it remains 

legal tender, you do not have to counterfeit the new bill. You can 

counterfeit the old bill. That is legal tender too. 

I would hope that you would address in significant detail the 

positives and negatives of having a currency recall, perhaps excluding some of the ancient bills that are valuable to collectors and that 

are worth far more than face value. 

But to recall all the currency that we printed last century, to say 

‘‘You have until 2007 to turn it in for the new stuff’’ would tremendously inconvenience the drug dealers, the terrorists and the tax 

scofflaws around the country and around the world who ought to 

be inconvenienced. 

It will help us catch some of them as they try to launder the old 

money into new money. 

And, by the way, it will put out of business everybody who is still 

counterfeiting the old money that could continue to do so for many 

years to come. 

So I hope you will address the benefits of this. 

But let us not mince words. The tax scofflaws and the drug dealers have powerful friends in high levels around the world, and 

their complaints will be heard on this. But I would think that 

flushing them out would be a good thing to do and also something 

that would protect our currency from counterfeiting. 

I want to hear more about it. I am just reaching initial conclusions based on the ignorance I was so proud of at the beginning of 

this statement. 

I yield back. 

Mr. CASTLE. Thank you, Mr. Sherman. We appreciate your comments. You certainly have the right witnesses here to answer your 

questions, except maybe the pants pockets. I do not know if there 

are any tailors out there, but the rest of them could probably answer a lot of the questions you have raised here today. 

Mr. SHERMAN. Mr. Chairman, if I can just insert one other thing? 

I am told that out of the $700 billion in circulation, only $40 million of it is counterfeit. I hope you folks address that because I believe that is way too low a number. I mean, that is such a small 

percentage, and the world is so filled with so many people who 

would like to counterfeit our currency. 

Thank you. 

Mr. CASTLE. We are going to return to sort of our regular order 

of business, and let me just sort of lay it out for you. I understand 

our last vote is around 3:30 to 4:00. That sometimes changes. 

But we have this panel, and each of you will have five minutes. 

We will have a question and answer, if I just go through whoever 

is here, one time. Then we will go to our second panel, probably 

following the same format. And then we have a markup after that. 

8

So we have a lot of business to get done today, so we are going 

to try to stay as efficient as possible. 

Each of your statements will be made a part of the record, your 

written statements. We hope you can try to live by the clock as 

much as possible in your oral statements. I am looking at this up 

here. We do not have this in the Education Committee. It says: 

talk, sum up, that is one minute, stop. We will not enforce it precisely, but we would like to keep it relatively close. 

Each of us will have five minutes, as most of you know, on the 

back-and-forth. So there is a lot to be done. 

I know if the director of the Mint wants to start with the whole 

penny issue or perhaps other things she was going to talk about, 

but we start with Henrietta Fore, and we will go right down the 

line in order thereafter. 

STATEMENT OF HENRIETTA H. FORE, DIRECTOR, UNITED 

STATES MINT, U.S. DEPARTMENT OF THE TREASURY 

Ms. FORE. Thank you, Mr. Chairman. 

And thank you, Congresswoman Maloney, members of the subcommittee. 

I will, with your permission, give a short summary for oral testimony. 

The United States Mint’s mission is to fulfill our congressionally 

mandated role as the Nation’s coiner of money, and we will proudly 

mint and issue the coins, medals and numismatic items that Congress authorizes in legislation. 

We are working diligently to evaluate the manufacturing processes that the United States Mint would use to execute H.R. 3916, 

The Presidential $1 Coin Act of 2004. 

Working together, I am confident we can deliver to the American 

people the coins provided by the bill. 

With the benefit of 212 years of experience, the United States 

Mint believes that redesign of America’s coinage sparks interest in 

our history, culture and values. 

The enormously successful 50 States Quarter Program and the 

redesign of the nickel have demonstrated that Americans embrace 

coin redesign. 

The United States Mint has passed the halfway point of the 50 

State Quarters Program and the release of the Michigan quarter 

in January. 

More than 130 million Americans collect the 50 States Quarters, 

and at its midpoint, this program is responsible for the United 

States Mints depositing more than $4 billion into the Treasury general fund. 

This coin program is educational. Teachers and students have 

downloaded the United States Mint free lesson plans on the state 

quarters more than 1.5 million times. 

This March, the United States Mint has also delivered the first 

newly designed nickel in 66 years. The American 5-Cent Coin Design Continuity Act of 2003 is the commemoration of two remarkable events in American history: the bicentennials of the Louisiana 

Purchase and the Lewis and Clark expedition. 

We are telling the story through a series of new nickel designs. 

9

New United States Mint nickel lesson plans are also being 

downloaded across the Nation. 

In August, we will release the second new nickel in the series. 

An essential facet of this renaissance in coin design is the United 

States Mint’s new Artistic Infusion Program. With the assistance 

of the National Endowment for the Arts, we have selected 24 professional artists and student artists throughout the country. Along 

with the United States Mint’s sculptors and engravers, they have 

submitted their first-candidate designs for the 2005 nickels. 

Similarly, the United States Mint is evaluating the latest techniques and materials being used to manufacture coins around the 

world. As you know, the specific composition of all United States 

circulating coinage, except the dollar coin, is legislated by Congress. 

With the rise in metal prices this past year, we are renewing our 

commitment to research coinage materials so that Congress has the 

most current information on the best and most economic materials 

for United States coinages. 

Now let me touch briefly upon the piece of legislation to be considered by the subcommittee later during this hearing, The Presidential $1 Coin Act of 2004. 

We applaud the efforts of Congress to honor the history of our 

Nation. 

The United States Mint has learned a great deal from its past 

experiences with coin design and dollar coin programs. A design 

change will make a coin more attractive to collectors and educators, 

but it is not likely to have an appreciable effect on how many are 

used in retail transactions. There are barriers to Golden Dollar circulation, and a design change does not mitigate those barriers. 

As you know, the United States $1 Coin Act of 1997 authorized 

the Golden Dollar. More than 1 billion coins were produced the 

first two years of production. Since then, however, circulating demand has dropped steadily. 

The United States Mint has more than 262 million Golden Dollars in inventory, and we estimate that about 300 million are in 

commercial circulation. 

Golden Dollars make up only about 4 percent of the total daily 

transactions involving dollars. 

Americans are holding on to two-thirds of their Golden Dollars, 

over 600 million, for their collections and not re-circulating them. 

The change in design of the dollar coin may spark strong enthusiasm and collector interest, but it appears to have had a modest 

effect in circulation. 

We now produce about 10 million Golden Dollars per year to satisfy numismatic demand. 

Barriers for businesses that choose to use the Golden Dollar are: 

the commingling of the Golden Dollar with the Susan B. Anthony 

in mixed rolls and bags; lack of sustained consumer demand; the 

cost of converting coin-operated machines; the high costs incurred 

by armored carriers and banking institutions handling the coins. 

The United States Mint continues to work with the Federal Reserve to improve coin demand forecasting and coin ordering systems. 

10

We want to gain efficiencies, streamline the supply chain, reduce 

order lead time, and preposition the coin. 

In conclusion, I would like to share how our commitment to meet 

our customers’ needs has been recognized. 

The United States Mint received the highest ranking of any Federal agency in the University of Michigan Business School’s American Customer Satisfaction Index for 2003. The ACSI measures 

more than 180 private American corporations and between 60 and 

70 government agencies. 

Thank you, Mr. Chairman. I would be pleased at this time to answer any questions you may have. 

Thank you. 

[The prepared statement of Henrietta H. Fore can be found on 

page 49 in the appendix.] 

Mr. CASTLE. Thank you, Ms. Fore. We appreciate that. 

We will now hear about our paper money. 

Mr. Ferguson? 

STATEMENT OF THOMAS A. FERGUSON, DIRECTOR, BUREAU 

OF ENGRAVING AND PRINTING, U.S. DEPARTMENT OF THE 

TREASURY 

Mr. FERGUSON. Thank you, Chairman Castle. It is also a pleasure to be before all the members of the subcommittee. Thanks for 

holding this hearing. 

The security of the United States currency was enhanced last fall 

with the introduction of the new redesigned $20 Reserve Note, 

which included subtle colors. This marked the culmination of a 

multi-year, cross-agency effort that included unprecedented outreach and collaboration with industry stakeholders to develop a 

new design. 

The new design is aimed at deterring threats to the security of 

the Nation’s currency posed by technology advances in digital 

printing and reproduction technology. 

Counterfeit deterrence efforts continue as we prepare for the introduction of a redesigned $50 note later this year, followed by a 

redesigned $100 note and potentially a $10 note in subsequent 

years. At this time, we have made no decision about a $5 note, and 

we will not be changing the $1 or $2 designs. 

These efforts are coordinated by the Advanced Counterfeit Deterrence Steering Committee chaired by Treasury Under Secretary for 

Domestic Finance Brian Roseboro, and we have participation from 

the Federal Reserve, the Secret Service, Treasury Department, as 

well as the BEP. 

In order to provide the public with the most secure and reliable 

notes, the ACD Steering Committee has developed and follows a 

comprehensive counterfeit deterrence strategy that depends on: 

high-quality currency designs with effective overt and covert counterfeit deterrence features; a well-planned and executed public education campaign; and aggressive law enforcement. 

Fortunately, the United States has one of the finest law enforcement agencies involved in counterfeit deterrence, the United States 

Secret Service, and Mr. Townsend will testify on their efforts following. 

11

So I will focus on the currency redesign efforts and public education campaign. The redesigned Series 2004 $20 note contains an array of sophisticated counterfeit deterrent security features, some of which are 

visible and easily recognized by the public—such things as the watermark, the security thread, color-shifting ink, the new colors, 

fine-line printing, and that traditional feel of U.S. currency—and 

some are covert or machine-readable only. The signature covert feature of the redesigned $20 note is an 

anti-digital counterfeiting system that was developed under the 

auspices of the international Central Bank Counterfeit Deterrence 

Group in cooperation with major digital printer and software manufacturers. This U.S. effort was led by the Federal Reserve system. 

The anti-digital system, which is being used in a number of countries, relies on a hidden marker embedded in the note design that 

can be read or detected by new digital technology printers and software. 

This new system design heralds a vibrant and growing partnership between the public and private sector to protect the Nation’s 

currency. It is intended to thwart increased counterfeiting by 

means of digital reprographic technology. 

This is a significant investment in the future of currency and will 

greatly assist in preventing counterfeiting by anti-digital technology as this technology becomes dominant in our marketplace. To date, more than 1.2 billion of the new $20 notes have been 

issued into circulation, about 25 percent of the total $20s in circulation. 

The BEP worked very closely with manufacturers of vending and 

ATM banking machinery in order to assure that these notes would 

go into circulation without any major inconvenience to the public. 

On April 26, the Secretary of the Treasury, John Snow, unveiled the new $50 note. I have samples I can show the committee later. 

The new $50 will contain the same robust family of counterfeit deterrent features. However, the background colors will be different 

to assist the public in differentiating between the different denominations. 

For redesigned $100 notes, the ACD Steering Committee has directed the BEP to issue a solicitation to the private sector seeking 

additional counterfeit deterrent features that may be added to increase the security of the $100 note. 

The $100 note, which is the most circulated U.S. note internationally, is subjected to the most sophisticated counterfeiting attempts. 

The possible new features will be subjected to adversarial analysis by an interagency working group made up of the Treasury, Bureau of Engraving and Printing, Secret Service and Federal Research system. 

It will also involve using the auspices of the European Central 

Bank to do adversarial analysis to assure that we are providing an 

effective and durable currency. 

The public education program is a critical element of the overall 

anti-counterfeiting effort in the United States as well as around the 

world. The American dollar is the most recognized, trusted and accepted currency in the world. 

12

While the features render the notes more secure, the success of 

government anti-counterfeiting efforts depend foremost on the public and cash-handlers as the first line of defense. 

To defend against accepting counterfeiting, the public must be 

aware of the potential counterfeit threat and, most importantly, 

know how to authenticate their notes. 

Results from research conducted before the issuance of the Series 

2004, based on when we did the 1996 change, indicated that we 

needed to do more to get the word out. 

We also found that the way to get the word out best was to utilize television. 

A media strategy was planned to concentrate the greatest share 

of our paid media dollars in the visual medium that people spend 

the most time with, and that is in fact television. 

Research conducted one month following the fall 2003 paid media 

program revealed public awareness of the impending currency 

changes went from 30 percent to over 80 percent and that the 

public’s ability to describe at least one counterfeit feature increased 

by over 10 percent. 

It is the responsibility of the government to provide the public 

with the information required to protect themselves from fraud or 

economic loss associated from counterfeiting. The public education 

program was designed to provide this information to the public and 

to maintain the integrity of the dollar both at home and abroad. 

The better informed the public is, the less likely they are to fall 

victim to currency counterfeiters. It is our responsibility as stewards of currency to protect the public by enhancing the security of 

our currency through redesigning it, by informing the public of how 

to protect their hard-earned money. With the release of the redesigned $50, the public education campaign will continue. However, due in part to the overall success of 

the $20 program, it will be conducted on a smaller scale than the 

initial campaign and will consist of no paid media in the United 

States. 

This concludes my opening remarks, and I will be happy to respond to any questions. 

[The prepared statement of Thomas A. Ferguson can be found on 

page 43 in the appendix.] 

Mr. CASTLE. Mr. Ferguson, I assume this is the old $50 and the 

new. 

Mr. FERGUSON. The old one, and the new one over on the side. 

Mr. CASTLE. Well, I played basketball. I never knew where my 

left particularly was. I only looked over here at the one on the 

right, and I was trying to figure out the differences in it. I was 

thought it was supposed to be in color, and now I realize what is 

happening. 

Mr. Townsend, the Secret Service has been complimented. We 

appreciate what you do in terms of protection of our money. We 

would like to hear in detail what you can tell us about that. 

STATEMENT OF BRUCE TOWNSEND, DEPUTY ASSISTANT DIRECTOR, OFFICE OF INVESTIGATIONS, UNITED STATES SECRET SERVICE 

Mr. TOWNSEND. Thank you, Mr. Chairman, and good afternoon. 

13

I would like to thank you, as well as the distinguished Ranking 

Member, Ms. Maloney, and the other members of the subcommittee 

for providing an opportunity to discuss currency issues and the role 

of the Secret Service in the enforcement of our counterfeiting laws. 

Let me say at the outset of this hearing that the Secret Service 

has long enjoyed its relationship with this subcommittee, and we 

are extraordinarily grateful for your longstanding support of our 

mission and our employees. 

As this subcommittee is aware, the Secret Service has been responsible for the integrity of our currency since 1865. It is our 

founding mission. And while we recognize that the public today is 

far more aware of our protective mission with regard to the President and Vice President, it is important to understand that every 

special agent on protective detail today began his or her Secret 

Service career investigating counterfeiting and other financial 

crimes cases. 

I want to assure the members of this subcommittee that counterfeit currency investigations remain a high priority for the Secret 

Service. Although our agency was transferred to the Department of 

Homeland Security in March of 2003, we retained all of our personnel, resources and investigative jurisdictions and responsibilities. 

Additionally, we have preserved important ties and relationships 

with key entities in the Department of the Treasury, the Bureau 

of Engraving and Printing, the Mint and the Federal Reserve. 

The Secret Service has maintained that economic security is vital 

to homeland security, and as such, the safeguarding of our financial infrastructure and monetary framework continues to be a cornerstone of our worldwide investigative efforts. It is estimated that some $700 billion of genuine U.S. currency 

is currently in worldwide circulation and as much as two-thirds of 

that is circulated outside the United States. While current levels 

of counterfeiting represent a tiny fraction of this amount and do 

not have a meaningful impact on our economy as a whole, the 

losses incurred by individuals or businesses from these counterfeit 

notes can be significant. 

Because of the dollar’s stability and value, as well as its widespread use overseas, it continues to be a target for transnational 

counterfeit activity. 

The counterfeiting of U.S. currency also continues to be associated with organized crime and drug trafficking. 

Recent trends in the counterfeiting of U.S. currency indicate a 

growing globalization in production and distribution of counterfeit 

notes. Because not all nations report the passing of counterfeit currency, other than their own, it is difficult to provide precise figures 

detailing how much counterfeit U.S. currency is passed on a global 

scale each year. 

The Secret Service estimates that approximately $37 million in 

counterfeit U.S. dollars were passed successfully in the United 

States in Fiscal Year 2003. This would represent about a 14 percent reduction from the amount of counterfeit U.S. currency passed 

in the previous fiscal year. 

Secret Service statistics also show that approximately $63 million in counterfeit U.S. currency was seized last year by the Secret 

14

Service and other authorities worldwide. Of this amount, approximately $11 million was seized in the United States. The remaining 

notes were seized overseas, with over $31 million seized in Colombia alone. 

In recent years, the Secret Service has enhanced its international 

anti-counterfeiting efforts. Today, our agency maintains 17 foreign 

offices and continues to target strategic 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 effective suppression of counterfeiting operations requires a close partnership between our foreign field offices and their local law enforcement counterparts, as well as an immediate response by the law enforcement 

community in order to develop investigative leads generated when 

a new counterfeit note is detected or an arrest is made. 

The Secret Service has long believed that strategic placement of 

personnel promotes more aggressive law enforcement operations 

because agents are able to respond in a timely and consistent manner. 

Additionally, the ongoing presence of our agents in foreign 

locales allows the Secret Service to build the same trusted partnerships with our foreign law enforcement counterparts that we have 

successfully built with our local police partners in the United 

States. 

Today, Colombia is the single largest producer of counterfeit U.S. 

currency in the world, accounting for approximately 26 percent, or 

$10 million, of the $37 million in counterfeit dollars passed in the 

U.S. last year. 

Public education and training continues to play a large role in 

the Secret Service’s efforts to suppress the manufacturing, distribution and sale of counterfeit U.S. currency both domestically and 

abroad. 

Secret Service personnel conduct training seminars on topics 

such as combating counterfeit, financial crimes and computer 

forensics, in an effort to assist our domestic and foreign counterparts in their local law enforcement communities and augment the 

Secret Service’s mission. 

Mr. Chairman, this concludes my prepared remarks. I would be 

pleased to answer any questions you or other members of the subcommittee may have. 

[The prepared statement of Bruce Townsend can be found on 

page 83 in the appendix.] 

Mr. CASTLE. Thank you very much, Mr. Townsend. As I indicated, we appreciate what you all do, and it is a good education for 

every member of Congress. 

Ultimately, Mr. Marquardt, all the money goes to the Federal 

Reserve, as I understand it. If you can share with us in five minutes how you manage all that, we would appreciate it. 

15

STATEMENT OF JEFFREY MARQUARDT, ASSOCIATE DIRECTOR, RESERVE BANK OPERATIONS AND PAYMENT SYSTEMS, 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

Mr. MARQUARDT. Thank you, Mr. Chairman, and thanks to the 

subcommittee for inviting me to report on the Federal Reserve’s activity in support of new currency design and coin distribution. 

My statement contains a number of observations on currency design and counterfeit deterrence. Given today’s focus on coins, in the 

interest of time, the rest of my remarks will be addressed to this 

topic. 

The Federal Reserve worked with the Mint to implement the 

popular 50 States Quarter Program in 1999, the Golden Dollar Program in 2000 and most recently the Westward Journey Nickel Program. 

The 50 States Quarter and Westward Journey Programs have 

been both innovative and challenging, as implied by the term ‘‘commemorative circulating coin’’ that is sometimes used to describe the 

coins in the programs; innovative because the goal is to satisfy the 

demand for both a transactional and commemorative coin in a single coin, which is distributed through normal wholesale distribution channels and whose design changes frequently; challenging because frequent design changes have affected the Reserve Banks’ inventory and payment processes that are designed to meet wholesale demand very efficiently; challenging also because of heightened public interest, the other side of this heightened public interest, is that expectations for commemorative circulating coins that 

may be widely available can place added pressure on the wholesale 

distribution system. 

To adjust to these new commemorative circulating coins, the Reserve Banks have changed their payment practices. 

For example, as the Mint issues each new coin design, Reserve 

Banks have suspended their normal payment practice of first paying out previously circulated coins to depository institutions and instead have paid out the new designs for initial introduction periods 

ranging from a few weeks to two years, in the case of the Golden 

Dollar. 

The recent experience of the Reserve Banks with changes in coin 

design has generally been that inventories and operating costs 

have increased. Reserve Banks acquired enough dollar coins in the 

first two years of the Golden Dollar Program to satisfy demand by 

depository institutions for the following two years. 

Despite efforts by the Reserve Banks, the Mint and depository 

institutions to manage this demand, inventories of quarters at the 

Reserve Banks are now more than triple their 1999 level. 

From 1999 to 2003, total Reserve Bank direct costs for distributing coins have increased at an average annual rate of more than 

12 percent, three times the increase in similar costs for distributing 

notes. 

The Reserve Banks and the Mint have used lessons learned from 

the Golden Dollar and States Quarter Programs to help manage 

the distribution of the new Westward Journey nickels. 

Several factors have led to a more orderly initial rollout of the 

first new nickel in the program: Modest initial publicity about the 

new design tempered public demand, and perhaps most imporVerDate 0ct 09 2002 09:07 Nov 10, 2004 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 G:\DOCS\96545.TXT FIN1 PsN: MICAH
16

tantly, there will be no more than two new nickel designs this year 

and next; slower rates of introduction, which is particularly important for the nickels because they have lower payout ratios than the 

quarters. 

Although the initial introduction of the nickels has gone smoothly, it is still a bit early to fully assess the impact of the program 

on nickel inventories. 

Turning to the demand for dollar coins, the GAO has reported a 

number of barriers to widespread circulation of dollar coins, including the following, which I will just tick off, that are widely known 

from the GAO report. 

Obviously, the public generally appears to prefer at this point 

notes because they weigh less; network effects, the interdependency 

of demand in that individuals are unlikely to use dollar coins until 

retailers stock them and retailers will not stock them until the 

public uses them; banks and armored carriers may not invest in inventory equipment to handle the coins, particularly to meet spikes 

in demand because they do not yet perceive significant benefit, and 

there may be higher fees in some cases for distribution of coins and 

notes. 

Nevertheless, on this point, there is regular use of dollar coins 

in certain markets, and I think the second panel will address this. 

The Reserve Banks report average monthly dollar coin payments of 

$15.2 million, average monthly receipt of $9.2 million, and average 

monthly net payouts of dollar coins of about $6 million. 

Overall, it is important to recognize that there are significant uncertainties about the effects of additional changes to circulating 

coin designs, particularly to the dollar coins. The Federal Reserve’s 

experience since 1999 suggests that flexibility in implementing new 

coin programs, along with care in publicizing them, will allow us 

to better address the inventory and distribution challenges of these 

programs. 

For example, the smooth introduction of the first new nickel and 

experience so far suggests that there are advantages to releasing 

no more than two new designs per year. This rate of introduction, 

at least for widely circulating coins, allows the Reserve Banks more 

lead time to draw down inventories of old designs and build up 

stocks of new designs for the initial distribution. More time can 

also allow for more flexibility to wrap coins, which I know is an 

issue on the committee’s mind, to meet initial demand for these 

coins. 

If experience shows over time that higher rates of introduction 

can be managed effectively, the Reserve Banks and the Mint could 

increase the rate of introduction in accordance with carefully prepared plans, which are so important to the logistical issues. 

In addition, alternative distribution strategies that complement 

wholesale distribution could be explored. 

Finally, we would advise against unduly stimulating public interest in new designs, which appears to cause an intense initial interest and to place significant pressure on the Reserve Banks and depository institutions, with limited long-term changes in transactional demand. If long-term demand grows slowly, depository institutions and the Reserve Banks may need to limit the amount of 

17

dollar coins they order each year in order to manage ever-growing 

inventories that can occur because of this problem. 

We are very concerned that there could be significant public frustration with both depository institutions and the Reserve Banks if 

some expectations are not met for the distribution of new coins, 

and if and as long-run demand does increase, of course, the Reserve Banks will work closely with the Mint to meet demand in accordance with our obligation to provide for an elastic currency. 

I thank the committee. 

[The prepared statement of Jeffrey C. Marquardt can be found 

on page 57 in the appendix.] 

Mr. CASTLE. Well, thank you. It has all been very interesting, 

and we will try to probe into this a little bit. 

I will yield to myself for five minutes to begin. I am looking for 

fairly swift answers on this. 

First of all, Mr. Ferguson, on the $50 bill, was that all earned 

media? Was that all free media? Or did you have a PR allotment 

for the publicity you have gotten in recent weeks on the $50 

issuance? 

Mr. FERGUSON. All the publicity that we have gotten on the $50 

bill has been free. It has been news media as a result of the events. 

Normally, the problem is, you do not get exactly your message 

out, but, yes, that has been free. 

Mr. CASTLE. Well, I congratulate you because I think the message is both out and seems to be delivered correctly. 

Mr. FERGUSON. Thank you. 

Mr. CASTLE. So it seems to have worked out pretty well. Mr. Townsend, with the issuance of the new $20—you may not 

be able to judge this yet, I do not even know how much counterfeiting there is on $20 bills. 

But with that issuance, have you noticed a decrease—you may 

have even mentioned this at some point—a decrease, or is that just 

not a bill that is very often counterfeited, with the issuance of the 

new $20? Obviously, the $50 is too early to tell yet. 

Mr. TOWNSEND. What we have seen is to be viewed in context of 

really the last redesign, because that was our first experience in 50 

or 60 years with redesign. 

After the last redesign, the 1996 redesign, which I believe appeared in 1998, we did see a spike in counterfeiting, which was not 

unexpected. Counterfeiters like to take up a challenge, and we 

have seen that same spike right now. 

However, I want to emphasizes that the data is very preliminary 

and that these numbers are still coming in. We are taking a real 

close look at it. 

We also believe—and I do not want to get over into the design 

features too much and out of my expertise—that the investment 

has been made in securing the design of the note and the technology with which it would be counterfeited on is not yet fully realized. 

So we think that investment to be a good one for the future, but 

we will keep a close eye on this and keep the subcommittee advised. 

Mr. CASTLE. Good. I mean, I think it is an important subject, and 

we should be advised on that. I appreciate that. 

18

Let me turn to a subject of some concern, and I am going to get 

in an area of which I do not understand it well enough to even perhaps articulate the question correctly. 

I think I am asking the question of you, Mr. Marquardt, but I 

think that Ms. Fore may be involved in this as well, and I want 

to try to straighten some things out. 

I am concerned about some of the things that you spoke about 

when you spoke in terms of the inventory and the ordering and depository banks being concerned about being able to get things or 

whatever. Because I would get complaints at home about people 

being unable to get—because they knew I would have been involved with the quarters-be unable to get the quarters and, of 

course, you get the mix of the quarters after they have been around 

the first time and that kind of thing. 

What people essentially want to do is order, you know, the quarters and whatever denominations that there are, and obviously 

that will probably be true of the dollar coins as well. 

Apparently it comes down to order forms—and this is where I get 

a little confused about exactly who is preparing these things and 

how they are going out and how you actually make a decision on 

what you are going to deliver to a bank. 

In the past, I know there has been some finger pointing between 

the Mint and the Fed, and I do not much care about all of that. 

I just want to make doggone sure that we do not add to some of 

the concerns that you have about overinventorying and not being 

able to make your deliveries as is needed. 

What can we do, particularly with the use of computers, et 

cetera, in terms of making sure we understand what is being ordered, getting that out so that the banks will get them out the door 

and keep things moving, particularly in terms of some of these 

forms that have been in question? 

I do not have them in front of me, I cannot sit here and tell you 

how to change it or whatever, but I assume you know what I am 

talking about. Perhaps you could help me. 

Mr. MARQUARDT. Mr. Chairman, I think the forms have been discontinued. That was part of the history with the Golden Dollar. 

Let me just quickly describe the strategy for payouts of the new 

quarters and the nickels. 

Basically, the idea is: The Reserve Banks pay out only the new 

issue, and they accumulate a stock. 

The figure for the quarter program is on the order of 450 million 

initially of the new coin. That is what they pay out then for about 

a two-to four-week period, and so that is the effort, is to meet that 

initial spike in demand, particularly by coin collectors and general 

households. 

In overall management of inventories, we have worked much 

more closely in the last few years—and the activity at the Fed is 

centered at the San Francisco Fed—with our Cash Product Office. 

They have daily phone calls, weekly planning sessions to manage 

coin ordering on a national basis, and we are working right now 

on changing the lead time of these orders from 30 days to, you 

know, twice a month. 

So that is going on, and I think inventory management overall 

has improved significantly over the last few years. 

19

Mr. CASTLE. Would you agree with that, Dr. Fore? Or do you 

have any comments about that or anything else that we should be 

doing? I am just trying to resolve a problem; I am not trying to 

start a fight. 

Ms. FORE. We have been working very closely with the Federal 

Reserve on inventory management and it is improving. 

There probably is still some difficulty for many banks to be able 

to order the type of quarter, or in this case, of what is proposed 

in the bill, the type of $1 coin. So it is something that we would 

have to work on with the Federal Reserve Bank to see if there is 

a way that we can handle that. 

Mr. CASTLE. Okay. Well, we think it is important. 

My time is up, but I do want to put one thing on the record because Director Fore and I have had a couple of meetings in the last 

couple of days. 

One of the adjunct aspects of the dollar coin legislation is to have 

a spousal coin—generally referred to as First Ladies, but you never 

know in the time this all goes along—and part of it was to have, 

I guess, a .999 bullion coin and then some discussion later of cutting that in half. 

Then we have had some further discussions since then of doing, 

I guess, brass—is brass the right expression, is that right? 

Ms. FORE. Bronze. 

Mr. CASTLE. Bronze, excuse me—bronze coins in a much lesser 

figure to make them more collectible for young kids, et cetera, or 

that kind of thing, or maybe some combination of all these. 

We will probably go ahead with the legislation today without addressing that particular issue. 

But I think it is important to put on the record that we have had 

this discussion so that if we develop a better way of doing this that 

would be of more interest to coin collectors in America, that we can 

step into that at some point before the legislation goes through on 

the floor. 

I thought you might want to comment on that. 

Ms. FORE. Yes. We have a very popular bronze metal program 

for the Presidents, and Presidential spouses would also be very fine 

in bronze metal, both the large three-inch size as well as the smaller size. It would be very collectible and affordable and, thus, a very 

good educational tool in classrooms and across America. 

Mr. CASTLE. Thank you. This is just a comment, no question, and 

then I will turn to Ms. Maloney. 

But this may sound a little like a wish list, so do not take this 

as gospel or fact, but my hope is that we are going to sort of derive 

the use and commerce of the dollar coin to a degree with this. 

It is my hope that when little Johnny who is 9 years old and little Mary goes into McDonald’s, they are going to insist on getting 

the Presidential coins in change. If they are going to go next door 

to Burger King instead and get them there, maybe they are going 

to have to stock them at McDonald’s or whatever the store may be. 

Maybe we will even have the various other retail establishments 

around the country think about having a place where they can actually keep dollar coins because there is going to be hopefully 

enough collector demand for them so that the average collector, 

20

people like me who are not really coin collectors, hopefully, will 

start to drive a little bit of that. 

I agree that we are not going to do anything with the dollar bill. 

It is still going to be there. We do not intend to do anything about 

it. I have looked at that issue, and I do not intend to touch it ever 

again. 

But on the other hand, there is no reason they cannot coexist, 

and hopefully that will work out. 

As I said, that is a little bit of a wish list and a dream as opposed to potential reality, but my hunch is, based on what I have 

seen with the quarters, it might happen. So we will just have to 

see how it all works out. 

I yield to Ms. Maloney. 

Mrs. MALONEY. Thank you very much. 

Dr. Fore and Mr. Ferguson, could you please comment on OMB’s 

expectations for this study? 

According to the RFP that Treasury circulated for its study of the 

BEP/Mint merger issues, ‘‘Treasury needs to address OMB expectations on Mint/BEP that were raised in the OMB fiscal year 2005 

budget pass-back.’’

What specific concerns has OMB conveyed to you about the operations of BEP and Mint? And how do you expect this study to address those concerns? 

Mr. FERGUSON. The OMB pass-back did not have any specific 

concerns with either of our agencies or bureaus, but rather the potential of cost savings that could possibly be derived by combining 

some or all of the functions of the bureau and the Mint, everything 

from the potential of administrative services at the headquarter 

level to potentially operating facilities, getting within a single security environment, et cetera. 

At this point, the study has just I think been going on for a little 

over a month and is due to be completed by the beginning of July. 

That may be a little premature. 

I believe that OMB and the department feel that if there is significant efficiencies that can be obtained that they should be looked 

at. It is something that has been looked at a number of times over 

the years, and we have not yet identified great savings, but there 

is always the potential out there. 

Mrs. MALONEY. Well, Mr. Ferguson, in testimony before Congress 

in 1997, the General Accounting Office indicated that neither of the 

studies done to date on merging the operations of the U.S. Mint 

and the Bureau of Engraving and Printing nor any of the Treasury 

officials that GAO interviewed for its testimony provided information on the savings that would accrue from a merger of the two entities. 

I am all for saving money. That is one reason why I like the Castle-Maloney bill. It will actually make money for the Treasury. I 

think that is a good thing, particularly when you have a $500 billion deficit. 

But in addition, the 1987 Treasury study also did not provide 

support for cost savings from a Mint/BEP merger. 

Does the Treasury Department or OMB or your office have any 

new cost-savings information, since both of these studies were conducted that would now justify a merger of these two entities? 

21

Maybe Dr. Fore would like to start this time. 

Ms. FORE. Well, I think what is envisioned here is that it be a 

fresh look at both of these two entities. 

We are both manufacturing bureaus, we both manufacture the 

money used in the United States. And so if there are cost savings, 

we would like to deliver those savings to the taxpayer. 

So that is the hope of this study, and it will be done by the Department of Treasury. 

Mrs. MALONEY. Thank you. Getting to the new dollars, or the $50 and the $100 bill, that we 

are working on, what is the effectiveness of the anti-counterfeiting 

features on the recently redesigned $20 bill? 

Specifically, Mr. Ferguson, did the color change really get to the 

heart of the problem, especially since so many counterfeits are 

made using computers and color printers? 

I think this is particularly important, given the testimony of 

Bruce Townsend about the high degree of counterfeiting, particularly outside of our country, and that Al Qaida types and drug 

dealers, et cetera, are counterfeiting it and using it really against 

our citizens and against our people. 

So we really need to really crack down on counterfeiting. 

I am stunned at these numbers. $31 million received in Colombia? You wonder how much went through the hands. 

So did the color really deter counterfeiting? 

Mr. FERGUSON. Thank you, Congresswoman Maloney. With the addition of the color to the $20 and now to the $50, the 

color itself has never been claimed as a security feature in itself. 

In fact, U.S. currency maintained its lack of color for a number of 

years. 

Mrs. MALONEY. Well, then why are we doing it if it does not 

deter? I thought the whole purpose was to deter counterfeiting. 

Mr. FERGUSON. I am going to get to that. 

Mrs. MALONEY. Okay. 

Mr. FERGUSON. As I mentioned in my testimony, the hallmark of 

that design and of this design is the inclusion of this new system 

which we have worked out in conjunction with computer manufacturers, hardware manufacturers, and software manufacturers so 

that there is a code built into that color print. We had to use color, 

had to use offset-type printing, which is that type of tint printing. 

Mrs. MALONEY. But this code I could not see or a counterfeiter. 

A regular person could not see it, but if you put it in the machine, 

you could see it? Is that what you are saying? 

Mr. FERGUSON. No. When a person tries to scan the note and reproduce the note on a machine that has been built in the last few 

years, the machine will stop printing. It will only print a portion 

of the note. It will stop. It will tell you that the system does not 

support that type of reproduction. 

It gives you a Web site to go to, www.rulesforuse.org, which will 

tell you which country to go to. So the note cannot be reproduced 

on that type of equipment. The $20——

Mrs. MALONEY. So our note cannot be reproduced with this code 

in it. Is that what you are saying? 

Mr. FERGUSON. On a system that has been manufactured and 

sold in the last couple of years. 

22

Mrs. MALONEY. Well, I just Xeroxed a $50 and, you know, with 

the color you can really Xerox it very well. 

I just got back from Iraq. I have a counterfeit Iraqi dinar. I did 

not know when I bought it there. I thought it was a real one. But 

this has color in it. Someone just told me it is a counterfeit one. 

But the euro has the magnetic deal on it. When I was in Iraq, 

in Afghanistan, in Kuwait, they are all using the magnetic code. At 

first, I thought it was a decoration, and apparently we are paying, 

meaning our government is paying, to print the Afghani dollar or 

currency and the Iraqi currency, and they apparently are having 

a more sophisticated form of deterring counterfeiting than we have 

in our own country. 

So I am wondering why we do not have the same standard. 

And to a second point, because I know the Chairman likes to 

raise money for the Treasury, I have a bill in with my Republican 

colleagues that would allow our country to print currency for foreign countries. 

Why in the world are we giving a contract to another country to 

print currency that we are paying for, in this case Iraq and Afghanistan? 

By all accounts, they say this magnetic field deal is a deterrent 

and, quite frankly, I think a deterrent in counterfeiting has become 

a national security priority. 

We are always trying to fight drugs. Well, if we can crack down 

on the money, you can crack down on the drugs. You are out of 

business if you do not have the currency, and anything we can do 

to crack down on counterfeiting. 

I thought the numbers that Mr. Townsend threw out on what 

was being done overseas was incredible. 

And then, lastly, because my time is running out, the new dollar 

bill, I read in the paper and I cut it out, and it was in the New 

York Post, a big article on it yesterday—this is The Washington 

Post. 

But it said that the most counterfeited piece of currency in the 

world is our $100 bill, the U.S. $100 bill. Though we like to counterfeit the $20 bill here in the U.S., the $100 bill is the most counterfeited currency in the world. 

Are we going to use this new magnetic code to, you know, prevent counterfeiting? 

Mr. FERGUSON. Congressman Maloney, I am not exactly sure on 

the magnetic code you are talking about. We will have to check. 

I was involved somewhat with the design and production of that 

Iraqi currency, so I do know——

Mrs. MALONEY. Well, then let’s just go to the euro since that is 

more well known, the strip on the euro, or the English note? 

Mr. FERGUSON. On the issue of the $100 note, as I mentioned in 

testimony, given the type of counterfeiting that happens with 

$100s, which does tend to be international and much more sophisticated than the type of the digital counterfeiting that we see on 

$20s and $50s domestically, the ACD Steering Committee has directed us to go out for the solicitation to look at what additional 

security features are available. 

That solicitation will be out within the next two weeks on the 

street. It will be open for everyone out there with technology to 

23

submit so that we can in fact look at what technologies are available. 

We will test all those technologies looking for what will gives us 

the most efficient, against-counterfeiting, durable, cost-effective, 

good, security features that we can add to the $100 bill so that we 

can have a sophisticated, secure, well-circulated $100 bill. 

Mrs. MALONEY. All I can say—my time is up—why in the world 

are we paying to print in foreign countries a currency that is more 

secure than the one that we have here—referring to the Afghani 

bill that has a metallic code on it, like England and like the euro? 

It does not make sense. 

Mr. CASTLE. Thank you, Ms. Maloney. 

Do you want a response to that? 

Mrs. MALONEY. Yes. Well, if he——

Mr. CASTLE. Yes. Do a brief response, please. 

Mr. FERGUSON. I would not necessarily agree with that supposition on some of those currencies being more secure than ours. For 

the counterfeiting of all those currencies, the statistics have to be 

looked at, a number of the features. 

Again, as I said in testimony, if the public is not well educated—

some of these very sophisticated features, if the public does not 

know how to use them, are not very effective. You need to have 

this combination of good features, good public education and outstanding law enforcement. 

Mrs. MALONEY. Well, I think this is critically important. Congressman Castle and I have spent a lot of time on the Financial 

Services Committee on cracking down on money laundering, on 

drug money and on the movement of terrorist money around the 

world. And if something can be done as simple as putting a magnetic field on it so that you cannot counterfeit. 

I have the Saudi money, it has that magnetic field, and then I 

have one that they tried to counterfeit. You cannot copy the magnetic field. 

I just would like to ask that the record remain open on this question so that I and others can submit further questions in writing. 

I truly do believe that this is a security issue. It is an issue of 

combating terrorism and drug laundering of money. Since counterfeiting is so prevalent, particularly in foreign countries, if we do not 

do everything to crack down on it, then we are not being responsible. 

Mr. CASTLE. The record will remain open for a while. 

Mr. Ferguson, you suggest that perhaps you could have a conversation, too, which might be helpful. 

Mr. FERGUSON. I would certainly be available at any time. 

Mr. CASTLE. Good. 

All right. With that, thank you——

Mrs. MALONEY. Excuse me. I said magnetic, I meant metallic. 

Mr. FERGUSON. Actually, that helps, Congresswoman, thank you. 

Mr. CASTLE. Thank you, Ms. Maloney. 

At this time, we will yield five minutes to the gentleman from 

North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. I actually did not come in to ask any questions about the $1 coin, 

but my lawyer background kicked in when I heard the testimony. 

24

Because I got the distinct impression from Ms. Fore’s testimony 

and Mr. Marquardt’s testimony that you did not necessarily think 

this was a good idea to be doing this coin. 

Can you just tell me whether my impression is correct or not? 

Just say yes or no. 

I do not want to get you into dutch with the Chair and the Ranking Member. They are not listening anyway. You can just whisper 

it. 

[Laughter.] 

You can just whisper your answer to me. 

Ms. FORE. All right, I will start. 

Mr. WATT. Yes or no? 

Ms. FORE. It will be very popular among the numismatic collectors, the series coin collectors, and it will be very——

Mr. WATT. No. My was question is: Do you think this is a good 

idea or not? 

Ms. FORE. Design change is always a good idea. It encourages 

Americans to look at their money. 

Mr. WATT. So you support the $1 coin? 

I know I am putting you on the spot, but I thought that is why 

you came over here, to tell us whether you thought this was a good 

idea or not. I guess this a policy consideration, a political consideration. 

But it sounds to me like it is going to be terribly cumbersome to 

move this coin around. There are some real disadvantages. 

Am I misreading what you are saying, Mr. Marquardt? 

Mr. MARQUARDT. Mr. Watt, first of all, let me say our board does 

not have a position on this at all. 

Mr. WATT. Okay, well, that is fine. 

Mr. MARQUARDT. So our remarks today are——

Mr. WATT. Fine, okay. 

Mr. MARQUARDT.—designed to provide the committee with, you 

know, in a straightforward way, technical information about some 

of the challenges. 

Mr. WATT. I appreciate it. 

Mr. MARQUARDT. There are also positives——

Mr. WATT. Let me get on to what I came here for. I am obviously 

not going to get a direct answer to that question because this is a 

political hearing. 

But, Mr. Ferguson, is the $100 bill the most counterfeited currency in the world? 

Mr. FERGUSON. I would give that question to Mr. Townsend. 

Mr. WATT. Okay. Yes or no. I am just trying to get a straight answer here. 

Mr. TOWNSEND. Outside the United States, the $100 Federal Reserve note is the most counterfeited U.S. bank note. 

WATT: Okay, that is fine. That is the answer I am looking for. 

Mr. Ferguson or Mr. Townsend, is the $50 bill that we just produced the most secure bill that could have been technologically produced. Or is there something beyond that that we should have been 

doing? 

Mr. FERGUSON. Mr. Watt, we believe that that is against the type 

of threat that was posed against the $50, the type of counterfeiting, 

25

that the package of features are the most effective, giving us a 

solid base of security, durability——

Mr. WATT. Yes, but you keep talking about security enhancements and deterring when it seems to me we ought to be talking 

about preventing, if we have the capacity to prevent and there is 

technology available to make that possible. 

While it is nice to have a wonderful law enforcement backup, 

that is like saying I should not put the best security on my front 

door because there is a police station down the street. 

Isn’t it my responsibility to make my own situation as secure as 

I can possibly make it? Isn’t that our responsibility? 

Mr. FERGUSON. Yes, sir. 

Mr. WATT. I mean, is not our currency the most counterfeited 

worldwide? 

Mr. FERGUSON. Actually, I do not believe that is true, but I will 

leave that up to Mr. Townsend. 

Mr. WATT. Is an optically variable device embedded in a piece of 

currency better than what we have done with this color stuff, or 

is it not? 

Mr. FERGUSON. Sir, we have an optically variable device on our 

currency. 

Mr. WATT. Can I read it? 

Mr. FERGUSON. Yes. The lower number on that note—in fact, if 

I gave you this note, it changes color from copper to green. 

Mr. WATT. All right. So I could pick that up and I would be able 

to tell that that was a counterfeit in my own daily living? 

Mr. FERGUSON. Yes. The vast majority of counterfeit notes do not 

reproduce the watermark that is in the paper, the security strip 

that is in our paper, it says USA——

Mr. WATT. A guy in my neighborhood is going to be able to pick 

up this $50 bill and determine by looking at it whether it is a counterfeit, or is he not? 

Mr. FERGUSON. Yes, should be able to. 

Mr. WATT. All right. So you are saying what you did on this $50 

bill is as effective or more effective as an optically variable device, 

if you put it in there? 

Mr. FERGUSON. Sir, again, it does have an optically variable device, that being the color-shifting ink. It has several features that 

are not reproduced by typical printing means in the strip and the 

watermark that area available for the public. It also has——

Mr. WATT. Let me ask this question directly since you did not 

necessarily answer it when Ms. Maloney asked it kind of circuitously. 

Is our $50 bill as secure as the one that we just approved and 

are putting into circulation in Afghanistan? Isn’t it a fact that currency is more secure than this $50 bill that we just made? 

Mr. FERGUSON. Sir, I would have to say I am not familiar with 

Afghanistan’s currency. 

Mr. WATT. Mr. Townsend? 

Mr. FERGUSON. Iraqi currency, yes. Not Afghanistan’s. 

Mr. TOWNSEND. Well, if I could make a couple of observations, 

I——

26

Mr. WATT. Would you mind answering my question and then 

making observations, rather than making observations instead of 

answering my question? 

Mr. TOWNSEND. I have to tell you that the Secret Service does 

not routinely investigate cases of counterfeit Afghani currency. 

Therefore, I am not in a position to discuss its security features, 

nor do I have statistical data on how much it is counterfeited, nor 

do we have data on the counterfeiting of many of the world’s currencies because those countries do not make it available to us. 

Mrs. MALONEY. Would the gentleman yield? 

Believe it or not, I happen to have counterfeited Saudi Arabia 

money with the original where there is a metallic—it is called the 

optically variable device-a metallic thing shines at you, and, when 

you reproduce it, it comes out like paper. 

So I would be glad to let you look at it, if you would like. 

Thank you. I yield back. 

Mr. WATT. I am not trying to be argumentative, but it seems to 

me that our obligation is to try to produce the most secure currency 

that we can produce, and it does not seem to me that we are doing 

that currently. 

While this $50 bill seems to be a step to enhance the security, 

it does not seem to me that the $50 bill has gotten us anywhere 

close to the gold standard that we ought to be seeking to achieve 

to secure our currency when counterfeiting is such a serious issue 

and a growing terrorist issue and a growing gangster issue. 

I do not know, maybe I am missing something here. If I am, tell 

me what it is I am missing. 

Don’t we want the most secure currency we can get? 

Mr. FERGUSON. Yes, we do, sir. And I believe that there is no single security feature out there, including the ones that are out 

there, which are not counterfeited regularly. There is no silver bullet. There is no panacea. 

We have to look at having a layered effect, having multiple security features, and building a very secure design that in fact stops, 

as you said, counterfeiting, putting things in, working with the digital industry so that we stop counterfeiting before it occurs, providing features in there that people on the street can recognize. 

We are looking at all those features. 

As I said, we have a solicitation going on the street to look at 

all those features you mentioned, that Congresswoman Maloney 

had up there, and others that potentially could be added. But they 

have to be features that are going to last on the currency, features 

that in fact are going to add security, that while they may not be 

copied on a copying machine, cannot be very easily simulated with 

other features and, thus, in fact remove security from the design. 

Mr. WATT. Thank you. 

Mr. FERGUSON. So we need to have a whole sophisticated package. 

Mr. WATT. The Chairman has told me my time is up. 

I think you are missing one very obvious thing, though, which is 

the first line of defense against counterfeiting is the people who receive a counterfeited piece of currency, and if there were some obvious way to make that determination, people would not accept the 

currency. 

27

Mr. FERGUSON. We agree completely, Congressman. 

Mr. CASTLE. Thank you, Mr. Watt. 

Mr. King actually had three questions he wanted to ask, and I 

think what Ms. Maloney and Mr. Watt have asked actually answered two of them, and I am trying to wrap this panel up so we 

can get to the next one. 

So I am going to ask Director Ferguson the one question that I 

think is left. 

Then I do want to reinforce one or two points very briefly. 

‘‘The House has passed nearly identical versions of the foreign 

currency printing bill in four or five Congresses now with little or 

no action on the Senate side. We feel pretty strongly here that it 

is important for this to be signed into law. What plans do you have 

to meet with senators to get this legislation moving? And is there 

any chance that Under Secretary Bodman will meet with senators 

about it, or Under Secretary Designee Levy?′′ Mr. FERGUSON. Thank you, Mr. Chairman. 

And I do thank this committee. We fully support that bill. We 

feel that it would be a great boon to our being able to look at other 

security features. If we had done some other production, we would 

have even more knowledge of security features, how they could be 

incorporated into U.S. currency. So we appreciate that. 

We are attempting to work the issue on the Senate side. I cannot 

speak for Deputy Secretary Bodman or the Secretary on this issue 

but will pass along your comments to them. 

We are meeting with the Senate Banking Committee in order to 

attempt to get this moving in committee. 

Mr. CASTLE. Mr. King’s comments might have been more 

strength than my comments. 

I am just wondering about something Mr. Watt asked. I want to 

make sure that we are on the same page here before we get off on 

this. 

But, Director Fore, with respect to the support of the dollar coin, 

you and I have had a number of conversations about this, I want 

you to state—and I will be leading you, if you will—where your 

support level is for the Presidential $1 Coin Program, if you would, 

please. 

Ms. FORE. Coins provide many facets in an economy. 

One is for trade and commerce. So one piece that the dollar coin 

provides in our economy is as a coin that is the dollar denomination. We have been working diligently in the past few years to try 

to get the coin into greater circulation so that you receive it in your 

change every day. You have been hearing from Mr. Marquardt and 

myself that that is a continuing challenge. 

Coins also are very important to collectors. It is a worldwide 

international market. It is a source of profits for us and for the 

general treasury of the United States. Any coin design immensely 

helps that, and we hope that a coin design will help increase the 

circulation, but it cannot guarantee it. 

Coins can also be used for education. A design change is an enormously powerful educational tool. Children across America and 

adults across America will learn about the Presidents of the United 

States and about first spouses and what they can possibly contribute to their own lives, and that is a very powerful symbol. 

28

So coins have many uses in American society. They reflect our 

values and they reflect also the currency of the nation. 

So any design change is enormously popular and effective in the 

United States. 

Mr. CASTLE. Thank you. 

And, Mr. Marquardt, I understood exactly what Mr. Watt is saying because your comments hit me a little bit the same way, too. 

But I sort of interpreted a little bit differently, and that is that at 

the Fed, you have to manage inventory, you have to manage the 

speed of change and getting things out the door, part of inventory 

management, but I did not take that as opposition to a coin change. 

It is a question of how it is done and how it is managed and that 

kind of thing. I would just like you to expand on that slightly, if 

you would, to make sure that we are at a comfort level with that. 

Mr. MARQUARDT. Thank you, Mr. Chairman. 

As I said to Mr. Watt, our board does not have a position on the 

bill itself. What I was trying to do is present to the committee the 

technical issues, as you say. But, in general, one of our missions 

is to provide for an elastic currency. We work very closely with the 

Mint on a daily basis, and we will work if the bill passes. Of 

course, we will work closely, just as in the case of the nickels, the 

quarters, the Golden Dollars, with them to implement the bill. 

Mr. CASTLE. Okay. Well, if you will do that and keep our interest 

rates down, we will be very pleased with the performance of the 

Federal Reserve. 

I just wanted to make sure that the points are clear. Because, 

obviously, you are very significant people in this, and we want to 

make absolutely sure that we understood where you were. 

If there are no further questions, I would like to move along to 

the next panel. Let me thank all of you again for your service and 

for being here today, and we will take just about a minute break 

to shift name plates around and get the next panel up. 

Thank you. 

Okay. We are ready to proceed with the second panel. We are 

going to try to move along fairly rapidly here, so we are going to 

try to stay as close to that five minutes as we can. I may start 

ratcheting things up here simply because of the session on the 

floor, et cetera. 

However, having said that, your testimony is very valuable. We 

will go in the order in which you are seated, and we will start with 

Mr. McMahon—I have already mentioned all of you in the earlier 

introductions; I think you are all here—who is the East Coast director of the National Automatic Merchandising Association. 

Actually, you people shifted around the order almost entirely 

here. 

Mr. Noe is a coin collector and coin dealer who has served as the 

vice chairman of the Citizens Coinage Advisory Committee. 

Jay Johnson, a former member, is the immediate past director of 

the United States Mint, who is now director of Business Development for Collectors Universe. 

Mr. Tam is the cash management specialist for a public transit 

agency. 

So all your testimony is very important. We are pleased to have 

you here. 

29

And with that, we will start with you, Mr. McMahon. 

STATEMENT OF THOMAS C. MCMAHON, EAST COAST DIRECTOR, NATIONAL AUTOMATIC MERCHANDISING ASSOCIATION 

Mr. MCMAHON. Thank you, Mr. Chairman. 

My name is Tom McMahon. I am senior vice president and chief 

counsel of the National Automatic Merchandising Association. 

I realize that we are running late, so I am going to summarize 

very briefly my statement. 

The vending industry has been a strong proponent of a circulating dollar coin for about 25 years. 

We very much support H.R. 3916. We think that it stands a pretty good chance of stirring up interest in the dollar coin, and we 

hope that it might lead to more use of that dollar coin. 

Our industry sells about $30 billion a year of food and beverages 

to the American people through vending machines. We think that 

if this legislation works and it leads to the circulation of more dollar coins, it could have a positive impact on our industry of about 

$1 billion per year. 

That would be about an increase of $300 million in sales because, 

right now, we lose sales to degraded or worn-out $1 bills, and all 

of those sales would be captured if the American people had a dollar coin in their pocket or purse. 

We also spend about $700 million a year on service calls due to 

jammed bill acceptors. A lot of that cost would be eliminated if the 

American people had a circulating dollar coin. 

So we support the legislation because it would have a positive 

economic impact on our industry. 

We have four suggestions that we think would lead to a circulating dollar coin which would help our industry. 

One is enact the Presidential Coin Act of 2004. As I said earlier, 

we think it stands a good chance of stimulating interest in the $1 

coin and getting more people to use. 

Two—and this is very important—get the Susan B. Anthony dollar coin out of circulation. Too many people do not know what it 

is. It is not a problem for our industry. Vending machines accept 

both the Susan B. and the Golden Dollar coins. But the over-thecounter retailer who wants to try the program ceases the program 

as soon as he goes to a bank and gets a role of coins half of which 

are Susan B’s. 

So the second step after enacting H.R. 3916—I think that is the 

number of it—would be get the Susan B. Anthony dollar coin out 

of circulation. 

The third step that you can take to ensure the success of this 

coin is make the Golden Dollar coin available to the American people. And you can start with Federal buildings. 

This government cannot go to McDonald’s or 7-Eleven or WalMart or anybody else in the private sector and urge them to use 

dollar coins and make coins available to their customers if the Federal Government itself does not do it. And, right now, except for 

stamp vending machines in post offices, it is not doing it. 

So that is the third step. Make the coin available and start with 

the Federal Government itself. 

30

And the fourth is, engage the Nation’s retailers in the Presidential Coin Program. If Wendy’s offers Presidential coins to its 

customers, and those coins bring business in the door, you can bet 

McDonald’s will follow suit. And if Target offers Presidential coins 

to their customers, and those coins bring business in the door, you 

can bet Wal-mart will follow also. 

If you take those four steps, I think we will have a reasonably 

successful circulating dollar coin that will help our industry, and 

the American people will then have a convenient, useful, cost-efficient alternative to the $1 bill. 

Thank you. 

[The prepared statement of Thomas C. McMahon can be found 

on page 69 in the appendix.] 

Mr. CASTLE. Thank you, Mr. McMahon. Thank you for the suggestions. 

We will go down the line. 

Mr. Noe? 

STATEMENT OF THOMAS NOE, VINTAGE COINS AND COLLECTIBLES AND A MEMBER OF THE CITIZENS’ COINAGE ADVISORY COMMITTEE 

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

Representative Maloney, thank you so much for letting me speak 

here today. 

Good afternoon, everyone. 

My name is Tom Noe. I am president of Vintage Coins and Collectibles located in Maumee, Ohio. 

As a collector of coins and other historic memorabilia since 1962 

and a full-time numismatist, or coin dealer, for over 30 years, I am 

truly honored to address this committee on a number of issues related to H.R. 3916. 

Let me begin by congratulating Congressman Castle for his continued leadership on behalf of all of the collectors and dealers of 

United States coinage. 

I think an editorial by Beth Deisher in the March 22 issue of 

Coin World sums it up best: ‘‘The 50 States Quarters Program has 

become the most successful coinage program in U.S. history.’’

I see no reason why a new circulating $1 coin depicting the 

former Presidents of the United States will not be as successful. 

Furthermore, the size of the dollar coin will allow larger images 

and more relief and details than that of the quarter dollar. 

As chairman of the Ohio Commemorative Quarter Commission, 

I learned that people do care about our coinage. We had over 7,000 

design suggestions for the Ohio quarter alone. The healthy debate 

within the state on which design to ultimately recommend for the 

governor’s approval caused many citizens to analyze the state’s rich 

heritage and history. 

More importantly, the increase in the U.S. collector base has 

been too large to even measure. Grandparents, parents and children flock to banks and coin shops looking for the newly minted 

state quarter. It has given a father and son or a mother and daughter a reason to collect something together. This is something I have 

not seen since my childhood over 40 years ago when U.S. silver 

31

coinage and the occasional Indian head penny or buffalo nickel 

were still available. 

The final point to the States Quarter Program has been the tremendous demand for those coins from teachers who wish to use all 

of them in their classrooms as tools to teach American history of 

all 50 States. That is why I think a $1 coin depicting U.S. Presidents is an idea whose time has come. What better way to teach 

children about our U.S. heritage than to issue four new coins annually that can be used as an impetus to learning? 

Another portion of 3916 I would like to address is the design portion. 

The ability to design a larger portrait by moving required dates, 

mint marks and mottoes to the coin’s edge will enhance the historical significance by making the President the focal point of each 

and every coin. 

As vice chairman of the Citizens Coinage Advisory Committee, 

the number one complaint we hear from our members is the lack 

of relief and details on many of the state quarters. The $1 coin will 

give the artists and designers the ability to work with the U.S. 

Mint and their sculptors to create dramatic and dynamic coins we 

can all be proud of. 

The last area I would like to comment on is Section 4 of H.R. 

3916, regarding the introduction of the First Spouse Bullion Coin 

Program. 

As we learned from the success of the States Quarter Program, 

U.S. citizens like new coinage and paper money. 

In a recent Internet poll, people were asked, ‘‘What do you think 

about the new $50 design?’’ With over 250,000 responses in a day, 

80 percent said they liked it and only 4 percent responded that 

they did not like it. 

A new gold bullion coin depicting America’s First Ladies will be 

very successful and a welcome change. I also project that the sales 

will be extremely high due to not only the design change, but also 

the fact that the content will be .9999 percent pure gold. 

We will finally have a gold bullion coin to compete directly with 

the Canadian maple leaf and other world .999 percent gold coins. 

I would be remiss if I did not take a moment to comment on U.S. 

coinage in general. 

I look at the States Quarter Program as a good start in the total 

redesign of U.S. coinage. H.R. 3916 takes it all one step further. 

This would be a great opportunity to analyze all U.S. coinage in regards to design, size, content and use for the visually impaired. 

It has been almost 100 years since the Lincoln penny was introduced in 1909. Let us all work together—Congress, the United 

States Mint, the dealers, the collectors and the media—to plan the 

future of U.S. coinage for the next 100 years. 

In conclusion, I would like to commend the sponsors of this bill 

and offer any assistance that you might require to ensure the successful passage of this bill and the subsequent minting and marketing of these coins. 

I know I speak for the millions of collectors and thousands of 

dealers when I say that we look forward to these new coins and 

the future total redesign of all U.S. coinage. 

32

Mr. Chairman, thank you very much, and I would be happy to 

answer any questions. 

[The prepared statement of Thomas Noe can be found on page 

74 in the appendix.] 

Mr. CASTLE. Thank you, Mr. Noe, we appreciate that. 

Jay Johnson, it is a pleasure to have you back with us, sir. 

STATEMENT OF JAY W. JOHNSON, FORMER DIRECTOR OF THE 

MINT AND NOW DIRECTOR OF BUSINESS DEVELOPMENT, 

COLLECTORS UNIVERSE, INC. 

Mr. JOHNSON. Thank you, Mr. Chairman, Ranking Member Congresswoman Maloney. I thank you very much for this opportunity 

to testify before you and the committee on this exciting piece of legislation. And I said it is exciting because of reaction I have heard 

from coin collectors, coin dealers, and folks I have talked to in recent weeks since this legislation was announced. 

Let me say that, for the most part, all of the reaction has been 

positive. Naturally, as anyone who is involved with coin collectors 

knows, you can find a lot of varied opinions about any coin redesign. 

But, overall, collectors like the idea of new designs on U.S. coins. 

Many have called for redesign for years. 

What I think is an obvious goal of this legislation is more than 

just coin redesigns. The multiple goals of trying to re-ignite the interest in coin collecting, increase the use of the dollar coin in regular circulation and help promoting the educational history of our 

Nation are all excellent reasons to make changes to a relatively 

new coin, like the Golden Dollar or the Sacagawea Dollar. 

I can tell you, as Mint Director, I made it one of my goals to be 

a booster, a promoter, a strong advocate for the Golden Dollar. It 

debuted prior to my arrival at the Mint with what we remember 

was a spectacular TV advertising campaign and promotion at some 

stores. 

Despite this—and for many other reasons, which have been enumerated today—the general public has not seen nor have they used 

regularly the dollar coin on a circulating basis. 

Yet, the amazing popularity of the Mint’s 50 States Quarters Series increased the circulation, the personal accumulation, the collectibility and the popularity of not just quarters but all coins. And 

that is just one reason, I believe—one reason alone—that the dollar 

Presidential Coin Program will help to do much the same for the 

little-used Sacagawea Dollar. 

Also, as a former member, I also appreciate the sense-of-Congress language in this legislation, which gives the Mint directives 

to promote the new Presidential dollar coins in all areas of commerce. 

Coin collectors—indeed, many in numismatic businesses—have 

urged for years there be new designs. The 50 States Quarter Series 

proved the ultimate correctness of their views. It was an idea that 

helps generate new revenue for Federal coffers. It also generates 

new collectors who come to appreciate the story that new and old 

coins tell about our history. 

I also applaud the legislation for the addition of the bullion part 

of this dollar coin program and the additional revenues it can bring 

33

to government coffers, as well as an interest in innovative coinage 

from the U.S. Mint. 

Other mints of the world produce bullion coinage, but you should 

know the U.S. leads all the other countries in its bullion production 

and is the most prized of bullion coins. 

So new, collectible and valuable gold coins can and should be another source of revenue for Federal coffers. 

To those who collect U.S. gold coins, this offers another numismatic addition as a collectible, as well as another choice for gold 

buyers who appreciate these gold coins for their bullion value, their 

beauty and their value. 

And this concludes my testimony. I would be happy to answer 

questions. 

[The prepared statement of Hon. Jay W. Johnson can be found 

on page 54 in the appendix.] 

Mr. CASTLE. Thank you very much, Mr. Johnson, we appreciate 

it. 

Mr. Tam, you are the cleanup there. 

STATEMENT OF CHUNG CHUNG TAM, REVENUE SYSTEMS ENGINEER, CHICAGO TRANSIT AUTHORITY, REPRESENTING 

THE AMERICAN PUBLIC TRANSPORTATION ASSOCIATION, 

CHAIRMAN, REVENUE MANAGEMENT COMMITTEE 

Mr. TAM. Thanks. 

Mr. Chairman and members of the subcommittee, on behalf of 

the American Public Transportation Association, APTA, thank you 

for this opportunity to testify for the Presidential $1 Coin Act of 

2004, which would provide for the issuance of new $1 coins and 

other purposes. 

My name is Chung Chung Tam. I am chair of the APTA’s Revenue Management Committee, and I also chair APTA’s Financial 

Management Committee of the Universal Transit Fare Card Standards Program. 

I am a revenue systems engineer with the Chicago Transit Authority, CTA. 

Transit systems have been longtime supporters of efforts to increase the use of dollar coins, and they strongly support the efforts 

of this committee in that regard. The use of dollar coins clearly reduces costs for operators of public transit systems. 

APTA’s 1,500 public and private member organizations serve the 

public by providing safe, efficient and economical public transportation service and by working to ensure that those services and 

products support national economic, energy, environmental and 

community goals. 

APTA member organizations include public transit systems and 

commuter railroads; design, construction and finance firms; product 

and service providers; academic institutions; and State associations 

and departments of transportation. 

More than 90 percent of the people who use public transportation 

in the United States and Canada are served by APTA transit system members. 

Mr. Chairman, in the face of budget constraints at the local, 

State and Federal levels, the Nation’s transit systems are operating 

in the most cost-effective ways they can. In the past, APTA was 

34

pleased to be a member of the Dollar Coin Coalition that advocated 

broader use of the dollar coin. Our members have backed up their 

rhetoric with action. 

Most transit systems around the country accept the dollar coin. 

In that regard, a September 2002 GAO report on the new dollar 

coin includes an appendix showing that 19 of the top 20 transit 

systems in the country accept the dollar coin. 

Our transit system members do so for practical reasons. The dollar coin is very cost effective in transit operations. Transit systems, 

especially those in major metropolitan areas, are some of the largest processors of $1 bills in the country. On an annual basis, they 

can collect and process millions of pieces of currency. 

One transit system has quantified the cost of processing dollar 

bills. They determined that the cost to process $1,000 worth of $1 

bills is approximately $10.11. The cost to process the same amount 

in dollar coins is $1.22. 

The difference is that handling paper currency is much more 

labor intensive. Coin processing is more efficient due to the use of 

technology and the availability of counting machines. 

In addition, the processing of coins by fare boxes and vending 

machines is faster than bill processing. Since the Federal Reserve 

requires that paper currency be face up when stacked, transit 

agencies must stack and face all bills by hand. 

In addition, more agencies are procuring fare boxes which can 

validate currency and coins. This validation may increase boarding 

time on buses due to bill condition, bill rejections and bill jams, 

which could require scheduling more buses and increase operating 

costs. 

The expense of theft-deterrent equipment and associated resources also result in increased costs. 

If transit agencies were able to realize the cost savings associated with the use of dollar coins, they would be able to use those 

resources to keep fares stable and promote the increased use of 

public transportation. 

Mr. Chairman, we are thus very supportive of efforts to increase 

the use of the dollar coin. But there clearly are barriers to widespread use of the dollar coin, and the GAO report I cited earlier 

identifies a key one. 

The report States as follows: ‘‘The most substantial barrier is the 

current widespread use of the dollar bill in everyday transactions 

and public resistance to begin using the dollar coin.’’

The report goes on to say that: ‘‘Until individuals can see that 

the government intends to replace the dollar bill with the dollar 

coin, they will be unlikely to use the coins in everyday transactions.’’

Therefore, Mr. Chairman, while we support this and other efforts 

to increase the usage of the dollar coin, APTA would also support 

efforts to phase out the use of $1 bills as part of the effort to implement the exclusive use of $1 coins in the country. 

Having said that, we are supportive of efforts such as the Presidential $1 Dollar Coin Act of 2004, which we trust would increase 

the public’s acceptance of dollar coins in general and thus increase 

the use of the dollar coins to pay for transit fares. 

35

In addition to the savings realized by public transit agencies and 

other businesses that deal in small denominations, there would be 

significant cost savings to the Nation if the $1 bill were replaced 

with the $1 coin. 

Both the Federal Reserve and the GAO have projected savings of $456 million annually on average over 30 years, in addition to 

the savings for public transportation systems, if the dollar bill were 

replaced with the dollar coin. 

Mr. Chairman, we appreciate and thank you for your efforts to increase the use of $1 coins and to promote the public’s acceptance 

of dollar coins in everyday use. 

Clearly, the counting and handling of paper currency is much 

greater than the cost of counting and handling coins. Just as clearly, increased use of dollar coins in public transportation systems 

would reduce operating costs at those systems and permit more of 

the limited resources available to public transit to go to improving 

transit service. 

We believe this legislation, which is modeled on the minting and 

introduction of the successful 50 States Quarter Program, has a 

good chance of increasing the use of dollar coins. 

We agree that minting coins that identify Presidents and their 

terms of service would increase awareness of our Presidential history and increase the popularity of the new coins. 

We appreciate the thoughtfulness with which you have developed 

this legislation and its objectives. 

We look forward to working with you and the members of this 

committee in advancing this legislation that could be very cost effective for the Nation’s transit systems. 

Thank you. 

[The prepared statement of Chung Chung Tam can be found on 

page 77 in the appendix.] 

Mr. CASTLE. Thank you, Mr. Tam. 

Let me do a couple of things. 

One, Mr. Greenwood, a member of Congress, has written a letter 

to the Federal Reserve and a letter to Chairman King asking that 

his letter be submitted for the record. I will just summarize it 

briefly. 

It just basically expresses concerns that they have had with the 

Federal Reserve about the lack of cooperation with respect to obtaining of Sacagawea coins and Susan B. Anthony coins-a concern, 

by the way, I have heard otherwise. 

Without objection, it is part of the record. 

[The following information can be found on page 88 in the appendix.] 

We welcome Mr. Bell from Texas to the subcommittee hearing. 

We are going to go pretty fast and maybe almost waive our questions, unfortunately, because of several things. We are going to be 

voting shortly. We want to do the markup. Secretary Rumsfeld and 

others are coming over here at 4:30. 

So I apologize for that. I just want to say a couple of things. We 

thank you. Your testimony is of vital importance. 

I do want to ask, though, Mr. Johnson and Mr. Noe, if I can, to 

comment on something you may have heard me comment on to Ms. 

Fore, and that is, in a addition to the .9999 bullion, there is some 

36

discussion now of doing the spouses in a lower-cost type of coinage 

that could be used for collectors items, part of the educational aspect of it, in addition perhaps to doing a limited number of bullion 

coins. 

Are there concerns with that? Do you embrace it? I know you 

may be hearing it for the first time today, but I would be interested 

in your almost offhand comments because you have not had a 

chance to really study it. 

Mr. NOE. Mr. Chairman, Representative Maloney, I think there 

is always concern with the low cost as far as the collectibility goes. 

I think it might be good for schoolchildren to be able to use these 

for an educational tool. 

But we found, if you go back to even 1976 when they did bicentennials bronze metals, that type of thing, they do not sell for any 

premium. They are probably worth considerably less than what 

they came out in 1976 for. 

So, as far as collectibility and value added down the road, I 

would say there is not a lot. Educationally, there may be some 

merit to it. 

Mr. CASTLE. What if you did the bullion coins, too, which would 

be the collectible part of it? 

Mr. NOE. I think the bullion coins would be important to go 

along with it. I will tell you that the bullion coins will get collected 

whereas the other issues probably will not be collected as readily, 

I would not think. 

Mr. CASTLE. Mr. Johnson? 

Mr. JOHNSON. I agree that the metals, they have the metal program now for the Presidents, and it is not as popular as I think 

it should be. It is a great program. 

But I think all the alternatives that you can provide in terms of 

collectibility are great for the numismatic business. It is something 

that you give a variety of choice to people. If you made this a coin, 

it would be even more popular. 

It is difficult at a half-ounce of gold to have kids have a collection 

of First Ladies. That is going to be difficult for children. But, you 

know, I do not know that that bullion program is aimed at children. 

As I say, I think it will increase revenues and it will increase interest in all aspects of the U.S. gold coin program. 

Mr. CASTLE. If that bullion program is aimed at children, they 

have a heck of an allowance, is all I can say. 

In the interest of time, I am not going to pursue questions, except I want to say to Mr. Tam, that we may want to get back to 

you on some issues of where you get your coins and circulation. 

Staff may get in touch with you on follow-up written questions on 

that particular subject. 

Mr. McMahon, as you might imagine—again, you may want to 

do this in writing as well-but we are very interested in your whole 

business’s involvement in furthering the use of coins. 

You and I had that conversation before. I want to make sure that 

we are on the same wavelength if we do this, that you are going 

to be able to be helpful in that area in terms of advertising and 

the use of it. I just was not as comfortable with that last time as 

I would like to be, so we would like to get into that. 

37

But I am going to skip that for now, if we may, because it would 

take us several minutes to go through it. 

And let me just make sure that Ms. Maloney or Mr. Bell does 

not have anything they wish to ask before we go to the markup. 

Mrs. MALONEY. I just want to thank particularly the Chairman 

and all of the panelists. 

And I would like to be associated with the Chairman’s comments 

on the quarter program and the possibility that a lower-cost one 

would be very effective with children. 

Who would have believed that every school child in America is 

now collecting the quarters? And the most asked question I get 

from my daughters’ friends, ‘‘Can you get me this quarter? Can you 

get me that quarter? Can you get me the quarter book?′′ If this type of thing took off with schoolchildren with the First 

Ladies or with the Presidents at a lower-cost coin, it is true, in the 

past it has not worked, but it has not been targeted for schoolchildren. So, possibly, it would work. 

In any event, it is a very exciting field. And it is a bill that actually raises money for the Treasury, which is important in these 

days. 

Thank you. I yield back the balance of my time. 

Mr. CASTLE. Mr. Bell? Do you have any comments, sir? 

Mr. BELL. Thank you, Mr. Chairman. 

I would join with Congresswoman Maloney. My kids are constantly asking me can I get them a quarter. But since they are only 

6 and 8, they are just taking the quarter and putting it in the gum 

machine and they are not collecting them as her kids are. 

The only question I have is to the design of the dollar coin and 

its impact on use. The bill, as its stated, a national survey and 

study by the General Accounting Office has indicated that many 

Americans who do not seek or who reject the new dollar coin for 

use in commerce would actively seek the coin if an attractive educational rotating design were to be struck on the coin. 

And that’s really the only question I have for the panelists and 

perhaps in the earlier testimony addressed it, but I missed it. 

Has it really been a design problem? Or has it also been somewhat of a marketing problem in regard? 

Mr. MCMAHON. A marketing problem insofar as our industry is 

concerned. 

Mr. CASTLE. We have a problem. 

Mr. BELL. I am sorry, is there a problem with the sound reproduction or the——

Mr. MCMAHON. Can you hear me now? 

Mr. CASTLE. No, something died. 

Mrs. MALONEY. Just talk loud. 

Mr. CASTLE. Yes. 

Mrs. MALONEY. Just talk loud at this point. 

Mr. BELL. Yes, we have got to keep moving. Can you answer it 

briefly and loudly? 

Mr. MCMAHON. Yes. 

Mr. CASTLE. I am sorry, Mr. McMahon, we are going to have to 

suspend. 

Mr. MCMAHON. Okay. 

Mr. CASTLE. We do need to get this straightened out. Is it back? 

38

Do you want to reiterate that or briefly summarize? 

Mr. MCMAHON. Yes, yes. 

If you want the coin to work, if you ever have another hearing 

on this, have someone from the retail community here testifying 

and see if you can figure out from them if they are going to back 

this program or not. If they do, the coin will succeed; if they don’t, 

the coin will fail. 

Mr. CASTLE. I think based on that, if you have any further questions, it will have to be yes or no at this point. 

If not, we appreciate very much all of you testifying. It is of vital 

importance in terms of building where we are going on this. 

And with that we will adjourn the panel. And the subcommittee 

will turn to its markup at this point, after we get everybody in 

place. 

We will take a moment or two. 

[Whereupon, at 3:58 p.m., the subcommittee was adjourned.] 

(39)

A P P E N D I X

April 28, 2004

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