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S. HRG. 107–638

CHALLENGES AND ACHIEVEMENTS OF THE

SACAGAWEA GOLDEN DOLLAR PROGRAM

HEARING

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

SPECIAL HEARING

MAY 17, 2002—WASHINGTON, DC

Printed for the use of the Committee on Appropriations

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

(II)

COMMITTEE ON APPROPRIATIONS

ROBERT C. BYRD, West Virginia, Chairman

DANIEL K. INOUYE, Hawaii

ERNEST F. HOLLINGS, South Carolina

PATRICK J. LEAHY, Vermont

TOM HARKIN, Iowa

BARBARA A. MIKULSKI, Maryland

HARRY REID, Nevada

HERB KOHL, Wisconsin

PATTY MURRAY, Washington

BYRON L. DORGAN, North Dakota

DIANNE FEINSTEIN, California

RICHARD J. DURBIN, Illinois

TIM JOHNSON, South Dakota

MARY L. LANDRIEU, Louisiana

JACK REED, Rhode Island

TED STEVENS, Alaska

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

PETE V. DOMENICI, New Mexico

CHRISTOPHER S. BOND, Missouri

MITCH MCCONNELL, Kentucky

CONRAD BURNS, Montana

RICHARD C. SHELBY, Alabama

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

BEN NIGHTHORSE CAMPBELL, Colorado

LARRY CRAIG, Idaho

KAY BAILEY HUTCHISON, Texas

MIKE DEWINE, Ohio

TERRENCE E. SAUVAIN, Staff Director

CHARLES KIEFFER, Deputy Staff Director

STEVEN J. CORTESE, Minority Staff Director

LISA SUTHERLAND, Minority Deputy Staff Director

SUBCOMMITTEE ON TREASURY AND GENERAL GOVERNMENT

BYRON L. DORGAN, North Dakota, Chairman

BARBARA A. MIKULSKI, Maryland

MARY L. LANDRIEU, Louisiana

JACK REED, Rhode Island

ROBERT C. BYRD, West Virginia

(ex officio)

BEN NIGHTHORSE CAMPBELL, Colorado

RICHARD C. SHELBY, Alabama

MIKE DEWINE, Ohio

TED STEVENS, Alaska

(ex officio)

Professional Staff

CHIP WALGREN

NICOLE RUTBERG

PAT RAYMOND (Minority)

LULA EDWARDS (Minority)

(III)

CONTENTS

Page

Opening statement of Senator Byron L. Dorgan ................................................... 1

Prepared statement of Senator Byron L. Dorgan ................................................. 3

Statement of Amy Mossett, Sacagawea Researcher, Three Affiliated Tribes

of North Dakota ................................................................................................... 4

Prepared statement .......................................................................................... 6

Statement of Henrietta Holsman Fore, Director, United States Mint, Department of the Treasury ........................................................................................... 7

David Pickens, Head of Sales and Marketing, United States Mint, Department of the Treasury ........................................................................................... 7

Prepared statement of Henrietta Holsman Fore ................................................... 10

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

System ................................................................................................................... 15

Prepared statement .......................................................................................... 16

Statement of James C. Benfield, on Behalf of the Coin Coalition ....................... 17

Prepared statement .......................................................................................... 19

Bankers Assail Mint for Deal with Wal-Mart ....................................................... 22

New Coin’s Golden Years? ...................................................................................... 24

Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions ................ 25

Prepared statement of Senator Ben Nighthorse Campbell .................................. 46

Prepared statement of the International Carwash Association ........................... 47

Questions submitted to Henrietta Holsman Fore ................................................. 49

Questions submitted by Senator Byron L. Dorgan ............................................... 49

Questions submitted by Senator Ben Nighthorse Campbell ................................ 53

Questions submitted by Senator Jack Reed .......................................................... 54

Questions submitted to Louise L. Roseman .......................................................... 54

Questions submitted by Senator Byron L. Dorgan ............................................... 54

Questions submitted by Senator Ben Nighthorse Campbell ................................ 56

Questions submitted to James C. Benfield ............................................................ 57

Questions submitted by Senator Byron L. Dorgan ............................................... 57

Questions submitted by Senator Ben Nighthorse Campbell ................................ 58

(1)

CHALLENGES AND ACHIEVEMENTS OF THE

SACAGAWEA GOLDEN DOLLAR PROGRAM

FRIDAY, MAY 17, 2002

U.S. SENATE, SUBCOMMITTEE ON TREASURY AND

GENERAL GOVERNMENT, COMMITTEE ON APPROPRIATIONS, Washington, DC.

The subcommittee met at 9:31 a.m., in room SD–192, Dirksen

Senate Office Building, Hon. Byron L. Dorgan (chairman) presiding.

Present: Senator Dorgan.

OPENING STATEMENT OF SENATOR BYRON L. DORGAN

Senator DORGAN. This is a hearing of the Subcommittee on

Treasury and General Government, Senate Appropriations Committee. My name is Senator Dorgan. We wish to welcome all of you

here.

This morning, we are holding a hearing to discuss the Sacagawea

Golden Dollar. My children are now teenagers, but when they were

younger, we used to play a little game with books that they had

called ‘‘Where’s Waldo.’’ I have outgrown ‘‘Where’s Waldo’’ and so

have my children, but these days I ask the question, where is the

Sacagawea Golden Dollar?

Frankly, since the Golden Dollar was unveiled by the U.S. Mint

nearly 2 years ago, I have never received one in change anywhere

in the United States. It seems to have nearly vanished, and I regret that. It appears to me that at this point, the use of the Golden

Dollar and the introduction of the Golden Dollar has been a failure.

The question is why and what can we do about that?

We are coming up on the bicentennial of the Lewis and Clark expedition, one of the great expeditions in human history in my judgment. Unfortunately, when we unveiled the coin with the Mint, the

new Sacagawea dollar coin, all of us were interested and pleased

at the prospect of this coin becoming common usage in our country

and we had high hopes for it. Well over $60 million was spent on

an awareness campaign and an advertising campaign.

I believe nearly 1.5 billion coins were minted. I believe slightly

over 500 million of those have never been moved in circulation.

They rest at the Federal Reserve Board or the Mint. Around

900,000 are in circulation, but apparently put in places that have

obscured their view from at least this Senator and most others who

I have asked over the recent months. When you ask the question,

have you ever received a Sacagawea Golden Dollar in change, alVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
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most everyone says to me, ‘‘No, I never received one in change.’’

Some people do not know what it is and it certainly is not in common use at this point.

So the question is why. What has happened? What can we do

about it?

I asked Amy Mossett, who is a North Dakotan, a historian, a

member of the Three Affiliated Tribes, and someone who travels

around the United States interpreting the wonderful legacy of

Sacagawea in a way that is quite extraordinary to join us. I asked

if she would come and open the testimony here today.

Then we are going to hear from the Director of the U.S. Mint,

Henrietta Holsman Fore; the Director of the Division of the Reserve Bank Operations and Payment Systems, Louise Roseman;

and the Executive Director of the Coin Coalition, Jim Benfield.

Let me just provide a few moments of history. On July 8, 1998,

the Secretary of the Treasury accepted the Dollar Coin Design Advisory Committee’s recommendations that the new dollar coin authorized in the $1 Coin Act of 1997 bear the image of Sacagawea.

Sacagawea remains an honored historical figure throughout the

United States. Arguably, she played the pivotal role in the success

of Lewis and Clark’s corps of discovery and the opening of the

West.

She was married to French Canadian trader Pierre Charbonneau

when Lewis and Clark hired him to accompany the expedition in

the fall of 1804. Sacagawea’s invaluable contributions to that journey included knowledge of edible plants, recognition of land forms,

and the ability to translate Shoshone and communicate with other

Western Indian tribes’ language.

On October 13, 1805, Captain Clark recognized Sacagawea’s significant role in the journey when he wrote in his journal, ‘‘The wife

of Charbonneau, our interpreter, we find reconciles all the Indians

as to our families, as to our friendly intentions. A woman with a

party of men is a token of peace.’’ And now, of course, her contributions have been commemorated on U.S. currency.

But this is not just about the circulation of a coin. The reason

I recite that is it is also to me the story of Sacagawea, a story that

nearly every American knows.

In June of 1999, I hosted a presentation of the Sacagawea Golden Dollar to the North Dakota Indian Tribes at the Mandan

Onislant village at the mouth of the Heart, near the intersection

of the Heart and Missouri Rivers in North Dakota. Then-Director

of the Mint, Phil Deal, came to North Dakota. He came to the site

of a Mandan village, which was the site of Chief Sheheke Big

White, who came to Washington, D.C., a couple of years following

his introduction to Lewis and Clark and met with President Thomas Jefferson. It is quite a historic place.

The Golden Dollar was unveiled at this event and I was proud

to be associated with the Sacagawea Golden Dollar campaign and

with the initial announcement. I am still proud of that.

But what troubles me is this coin has largely disappeared since

its minting and introduction. The question is why. What kind of

promotion and advertising was done? What kind of research was

done? What kind of focus groups were done that would tell us how

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to introduce this and what to introduce so that it would be in common usage in this country?

I asked the Treasury Secretary, Mr. O’Neill, when he testified before this subcommittee a while back, ‘‘Mr. Secretary, have you ever

received a Sacagawea Golden Dollar coin in change?’’ He said, ‘‘No,

I have not. I had to ask for one to get one.’’ So the United States

Treasury Secretary has not seen a Sacagawea Golden Dollar coin,

either.

I am not expecting that the Golden Dollar coin would circulate

in the same manner that a dollar bill would or in the same quantity that a dollar bill would, nor am I calling for the elimination

of the paper dollar. I believe that both the Sacagawea Golden Dollar and the paper dollar can simultaneously and successfully circulate in this country and be used in this country.

Let me say that my hope from this hearing is to do two things.

One, I want to know what happened to the Sacagawea Golden Dollar. Why was the campaign, so far, not a success? Or said another

way, why has the campaign been a failure, and it has, in my judgment, been a failure. Number two, what can we do to change

things and allow it to succeed?

So that is what we hope to get at this hearing. Let me thank

Amy Mossett. Amy, we appreciate your being here. I asked that

you lead off the hearing with a few comments, and as I have indicated, you are a historian at a college in North Dakota, but more

important than that, representing the legacy of the Mandan Tribe,

you are able to interpret Sacagawea’s life in a manner that no one

that I know of in our country can.

PREPARED STATEMENT

So let me introduce Amy Mossett from the Three Affiliated

Tribes in North Dakota. Amy, you may proceed. Your entire statement will be made a part of the record and you may summarize.

[The statement follows:]

PREPARED STATEMENT OF SENATOR BYRON L. DORGAN

This morning we meet to discuss the future of the Sakakawea Golden Dollar. It

is my hope that during this hearing we will learn what happened to the Golden Dollar after the initial flurry of publicity when this beautiful coin was first launched

and how we can remove some of the obstacles to getting the Golden Dollar in general and active circulation.

Today we will receive testimony from Amy Mossett, a North Dakotan and member

of the X tribe who interprets Sakakawea—who was also a North Dakotan.

Additionally, we are pleased to have testify the Director of the U.S. Mint, Henrietta Holsman Fore the Director of the Division of Reserve Bank Operations and

Payment Systems, Louise Roseman and the Executive Director of the Coin Coalition, Jim Benfield.

On July 9, 1998, the Secretary of the Treasury accepted the Dollar Coin Design

Advisory Committee’s recommendation that the new dollar coin authorized in the

$1 Coin Act of 1997 bear the image of Sakakawea.

Sakakawea remains an honored historical figure in North Dakota and throughout

the Country. Arguably, she played a pivotal role in the success of Lewis and Clark’s

‘‘Corps of Discovery’’ and the opening up of the West. She was married to FrenchCanadian trader Pierre Charbonneau when Lewis and Clark hired him to accompany the expedition in the fall of 1804. Sakakawea’s invaluable contributions on the

journey included a knowledge of edible plants, recognition of land forms, and the

ability to translate Shoshone and communicate with other western Indian tribes.

On October 13, 1805, Captain Clark recognized Sakakawea’s significant role on

the journey when we wrote in his journal: ‘‘The wife of Shabono our interpreter we

find reconciles all the Indians as to our families as to our friendly intentions. A

4

woman with a party of men is a token of peace.’’ Now her contributions have been

commemorated on our U.S. currency.

This is not only about the circulation of a coin. It is the story of Sakakawea—

a story every American should know. In June of 1999, I hosted a presentation of

the Sakakawea Golden Dollar to North Dakota Indian Tribes at the Mandan Ona-Slant village on the banks of the Missouri River. This village was noted by Lewis

and Clark in their journals and the On-a-Slant village is only miles away from

where the Corps of Discovery would spend its first winter. I was joined at the event

by the former director of the Mint, Phillip Diehl. I was proud to be associated with

the Sakakawea Golden Dollar campaign and the initial announcement of this beautiful coin was welcomed by the public throughout the country. It is clear to me that

the initial public awareness campaign for the Golden Dollar was a success.

What troubles me, however, is the sense that the Golden Dollar has disappeared.

I recently did a non-scientific survey of my Washington DC staff. Only two people

said they had ever received a Golden Dollar for change. One staffer received it

through a New York City transit system machine. The other received it at his local

7 Eleven here in the District, but even the cashier was confused about what change

he was supplying. At a hearing with the Treasury Secretary in April 2001, I asked

him if he had ever received the coin in change. He replied, ‘‘No. I had to ask for

one.’’

This is reason for my calling this hearing today.

I am not expecting that the Golden Dollar will circulate in the same volume as

the dollar bill, nor am I calling for the elimination of the paper dollar bill. I believe

that each can circulate simultaneously and successfully. The data I have seen suggests that there is a strong desire to see the dollar coin in routine circulation. This

hearing is designed to have a meeting of the minds and launch new efforts to accomplish that goal.

Additionally, there is a misconception that the Golden Dollar is not in circulation

anymore and that it was just a promotional coin. It didn’t help when the Mint announced earlier this year that it was halting production of the Golden Dollar and

the media jumped on this a proof of the failure of the coin. This clearly indicates

that the awareness campaign must be continued and that factually incorrect messages like this need to be nipped in the bud.

I have also been told that many businesses would like to use the Golden Dollar

and that they have requested them but received a majority of Susan B. Anthony

coins instead.

These are just a few of the obstacles that I know all of you are aware of and are

working to address. I am hopeful that we can lay out the obstacles today and also

put forth ideas to resolve them.

I want to thank all of the witnesses for coming to testify at today’s hearing. I look

forward to your testimony and your responses to our questions. More importantly,

I look forward to resolving these obstacles and to getting the Sakakawea Golden

Dollar in full circulation.

STATEMENT OF AMY MOSSETT, SACAGAWEA RESEARCHER, THREE AFFILIATED TRIBES OF NORTH DAKOTA

Ms. MOSSETT. Thank you. Good morning, Chairman Dorgan. My

name is Amy Mossett and I am Mandan and Hidatsa. I am a member of the Three Affiliated Tribes of North Dakota. Two hundred

years ago, my ancestors lived along the Knife River near present

day Stanton, North Dakota, in a village called Awatixa. That was

the same village from which Sacagawea joined the Lewis and Clark

expedition and it was the same Hidatsa village that she returned

to after that expedition came back through North Dakota in 1806.

I am pleased and honored to be here today to provide testimony on

the Sacagawea dollar coin.

For the past 15 years, I have researched the oral and written histories of Sacagawea and I present various aspects of that research

to audiences all along the Lewis and Clark Trail, audiences of all

ages. People are still so mesmerized and fascinated with the story

of Sacagawea, this young woman who, as a teenager, a wife, and

a mother embarked on an expedition which is now viewed as one

of the greatest epic adventures in American history.

5

Sacagawea’s life remains a mystery in the minds of so many and

it is that element of mystery that has made her story so compelling. Over the years, I have studied so many aspects of her life and

she has become so familiar to me and she has become such an important part of my life, but today, there is only one mystery concerning her that remains in my mind and that causes me to question, what has happened to the Sacagawea Dollar coin?

As I visit audiences across the country, I am quite surprised and

perhaps more dismayed that so many people have never touched a

Sacagawea dollar coin. They certainly know that the coin exists,

but they have never had a Golden Dollar coin in their hand and

they have never had a Golden Dollar coin in their pocket.

I was traveling over here just now in a cab and the cab driver

was asking me questions about my dress, and when I tipped him

with the Golden Dollar coin, he looked at it and said, what is this?

I told him it was the Sacagawea dollar coin. It is the first time he

had ever seen one.

I was really quite startled just recently when I received some emails from friends along the Lewis and Clark Trail that said that

the U.S. Mint was halting production of the Sacagawea dollar coin.

I now know that that is not true, but I also know that I have made

purchases at very few places where I received the dollar coin as

change.

In January of 2003, this Nation will be commemorating the

200th anniversary of the Lewis and Clark expedition. When you

look at the cast of characters among the Lewis and Clark story,

Sacagawea is undoubtedly the biggest star. She is certainly the

leading lady of this American epic and she has left a lasting imprint in American history because of her courage and her selflessness, her selfless contributions as an interpreter, a guide, a food

gatherer, and most importantly, as a symbol of peace for the Northwest Corps of Discovery.

Today, there are more landmarks, statues, monuments, rivers,

parks, schools, women’s organizations, Girl Scout organizations,

businesses, products named in honor of Sacagawea than for any

other woman in American history. All of these memorials and tributes bear an image of Sacagawea that we can carry in our hearts

and in our minds. The Sacagawea dollar coin bears an image of

Sacagawea that we can carry in our hearts, in our minds, and in

our hands.

As we near the kickoff of the Lewis and Clark bicentennial commemoration next January, it would be unfortunate if we missed

this one major opportunity to promote the dollar coin and to celebrate this young Native American woman who exemplifies the

character and spirit of a true American hero. She demonstrated

and now symbolizes courage, tenacity, resourcefulness, wisdom,

and strength.

I hope to see more of Sacagawea on the dollar coin as I continue

my travels along the Lewis and Clark Trail and beyond, and I

thank you, Senator Dorgan, for inviting me and allowing me this

opportunity to present testimony on behalf of my Native American

friends and relatives from across the country, on behalf of women

across the country, on behalf of American teenagers—Sacagawea

was a teenager, on behalf of the Three Affiliated Tribes and my felVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
6

low North Dakotans, and most importantly, on behalf of

Sacagawea. Thank you very much.

Senator DORGAN. Ms. Mossett, thank you very much. Let me just

say that North Dakota will have its second statue in the Capitol—

each State is authorized two statues in the Capitol, and our second

statue, which will be a statue of Sacagawea, will be placed in the

United States Capitol within the next 2 years or so and my expectation is that you will be here to be a part of that wonderful ceremony.

As you were testifying, I was thinking that I believe the last living full-blooded Mandan Indian was Maddie Grinell, who came to

Washington, D.C., at age, I believe, 104 to be participating in the

Poor People’s March a good many years ago.

PREPARED STATEMENT

We thank you for being with us as a descendant of the Mandan

Indians and thank you for your testimony. If you would be willing

to stay around for the rest of the hearing in case the photographer

would want to get a picture of you with the displays, I would appreciate that. Thank you very much. You are excused.

Ms. MOSSETT. Thank you.

[The statement follows:]

PREPARED STATEMENT OF AMY MOSSETT

Good Morning, Chairman Dorgan. My name is Amy Mossett. I am Mandan and

Hidatsa and a member of the Three Affiliated Tribes of North Dakota. Two hundred

years ago, my ancestors lived along the Knife River near present day Stanton, North

Dakota. They lived in a Hidatsa Village called Awatixa. This was the Hidatsa village that Sakakawea called home before and after she was involved in the Lewis

and Clark Expedition from 1804 through 1806. I am pleased and honored to be here

today to provide testimony on the Sakakawea dollar coin.

For over 15 years I have researched the oral and written histories of Sakakawea

and I present various aspects of my research to many audiences of all ages at many

points along the Lewis and Clark Trail. People are mesmerized and fascinated with

the story of Sakakawea—the young woman who—as teenager, a wife, and a motherembarked on an expedition which is now viewed as one of the greatest epic adventures in American History. Sakakawea’s life remains a mystery in the minds of

many and it is that element of mystery that makes her story so compelling. Over

the years, I’ve studied many aspects of this young woman’s life and she has become

such a focal point in my life. But today, there is only one mystery concerning her

that remains in my mind and causes me to question, ‘‘What has happened to the

Sakakawea dollar coin?’’

As I visit audiences across the country, I am quite surprised and perhaps more

dismayed that so many people have never touched a Sakakawea dollar coin. They

certainly know the coin exists but they have never had a Golden Dollar coin in their

hand or in their pocket. I was quite startled by some recent e-mails from friends

along the Lewis and Clark Trail who reported that the U.S. Mint was halting production of the Sakakawea dollar coin! I now know this is not true, but I also know

that I have made purchases at very few places where I received the Golden Dollar

coin as change.

In January 2003, this Nation will begin commemorating the 200th Anniversary

of the Lewis and Clark Expedition. Within the cast of characters of the Lewis &

Clark story, Sakakawea is undoubtedly one of the biggest stars—she is certainly the

leading lady of this American epic. She has left a lasting imprint in American history because of her courage and selfless contributions as an interpreter, guide, food

gatherer, and most importantly, as a symbol of peace for the Northwest Corps of

Discovery.

Today, there are more landmarks, statues, monuments, rivers, parks, schools,

women’s organizations, girl scout organizations, businesses, and products named in

Sakakawea’s honor than for any other woman in American history. All of these memorials and tributes bear an image of Sakakawea that we can carry in our hearts

7

and in our minds. The Sakakawea dollar coin bears an image of Sakakawea that

we can carry in our hearts, our minds, and our hands.

As we near the kick-off of the Lewis and Clark Bicentennial Commemoration, it

would be unfortunate if we missed this one major opportunity to promote the Golden Dollar coin and to celebrate this young Native American woman who exemplifies

the character and spirit of a true American hero. She demonstrated and now symbolizes courage, tenacity, resourcefulness, wisdom, compassion, generosity, and

strength.

I hope to see more of Sakakawea on the dollar coin as I travel throughout the

Lewis and Clark Trail and beyond. I thank you for allowing me the opportunity to

present testimony on behalf of my Native American friends and relatives, on behalf

of women across this country, on behalf of American teenagers, the Three Affiliated

Tribes, North Dakota, and most importantly, on behalf of Sakakawea.

STATEMENT OF HENRIETTA HOLSMAN FORE, DIRECTOR, UNITED

STATES MINT, DEPARTMENT OF THE TREASURY

ACCOMPANIED BY DAVID PICKENS, HEAD OF SALES AND MARKETING,

UNITED STATES MINT, DEPARTMENT OF THE TREASURY

Senator DORGAN. Let me next call on the Director of the U.S.

Mint, Henrietta Holsman Fore; the Director of the Division of the

Federal Reserve Bank Operations and Payment Systems, Louise

Roseman; and the Executive Director of the Coin Coalition, Jim

Benfield.

Let me thank all of you for being with us today. The Senate has

a vote starting at 10:30 and that will extend perhaps until ten to

or five to 11:00. My hope would be that we could conclude the hearing within the next hour, hour and 10 minutes, so that I can conclude the hearing before the end of the vote.

Let me again state to the Director of the Mint, I appreciate your

being here today. This Golden Dollar, of course, is the subject. I seldom ever see one. I certainly never get them in change. But the

first question is, why has the campaign thus far failed, and at least

that is my judgment. You are welcome to take issue with that. And

then what can we do to make it succeed?

Your entire statements will be made a part of the record. What

I will do is ask all three of you to testify and then we will have

questions. Ms. Fore, why do you not proceed.

Ms. FORE. All right. We will hope, Chairman Dorgan, that you

will get one in change soon.

Thank you very much for inviting me to discuss the Golden Dollar program and the United States Mint’s efforts to market the

Golden Dollar, as well as discuss the challenges that lie ahead. I

certainly appreciated Ms. Mossett’s presentation and I look forward

to our other panelists’ presentations also.

As you know, we temporarily suspended circulating dollar production because we have a sufficient number in inventory to meet

demand. It is a practical discipline that we use to meet the requirements of monetary usage in the country. We regularly slow production in one denomination or another to meet the demands for coinage. This temporary suspension does not mark the end of the Golden Dollar program. In 2002 we have been producing to meet numismatic dollar coin demand, which has already exceed 12 million dollar coins.

Senator DORGAN. Tell us all what that word means.

Ms. FORE. It is for coin collectors and it means that it is something you can buy. It is a Golden Dollar, but it is packaged in a

8

way that it is a proof coin or a collector’s coin. We have a high demand this year for 2002 numismatic products.

Senator DORGAN. All right.

Ms. FORE. We have a good number of Americans that are collecting coins around the Nation, even in the 50 States Quarter Program, 139 million Americans. So there is a good market out there

for coin collecting.

One question keeps coming back to us, which is, how does one

define success in a circulating dollar coin program? In the United

States One Dollar Coin Act of 1997, we were mandated to put dollar coins in circulation. The Act also specified that the United

States Mint adopt a program to promote the use of such coins by

commercial enterprises, mass transit authorities, and Federal,

State, and local government agencies.

It was an unusual task for the Mint. Typically, we do not market

circulating coins. However, knowing the public’s reluctance to use

dollar coins, the Mint created a market development campaign, including a business-to-business outreach and a public education and

awareness campaign. It was designed to, first, integrate Golden

Dollars into coin-operated transit and retail operations in an effort

to create a reliable means for consumers to receive and use the new

coin; second, to promote long-term acceptance by the commercial

sector and consumers; and third, to support changes in consumer

behavior and stimulate usage in commerce.

Following the Golden Dollar’s launch, the Mint entered into partnerships with specific retailers to stimulate everyday Golden Dollar

usage. Eight business segments were identified as distribution outlets: Transit, banking, vending, retail, fast food restaurants, grocery stores, entertainment venues, and government institutions.

We provided detailed descriptions of these efforts in our reports to

Congress in 2001 and 2002.

When I was sworn in as Mint Director in August of 2001, one

of my first priorities was to take a hard look at the effectiveness

of our Golden Dollar Program, assess our marketing strategies and

determine what the next steps should be. We found that the advertising program was successful in reaching targeted audiences and

in raising public awareness, but Americans rarely received the

Golden Dollars in daily commerce.

According to a January 2001 survey, 51 percent of Americans reported receiving a Golden Dollar in change, but only 37 percent reported using it. A September 2001 poll found that the public is

holding two-thirds of the Golden Dollars and not recirculating

them.

Following our review, we are still asking ourselves, how does one

define success for a Golden Dollar Program? There are a number

of yardsticks one could use to measure achievement. Does the

American public like the Golden Dollar? Yes. Seventy-two percent

support its issuance and 83 percent of Americans are aware of the

Golden Dollar.

Is the Golden Dollar profitable for the United States? Yes. In the

program’s first 2 years, the Mint deposited $953.5 million in revenues from seigniorage from the Golden Dollar Program into the

Treasury General Fund. For the first 3 years of the program, we

used the historical standard of measuring the number of coins

9

shipped to the Federal Reserve as a measure of success. Using this

standard, the Golden Dollar is successful. One-point-one billion

have been shipped to Federal Reserve Banks since January of

2000. In comparison, it took 21 years to ship 920 million Susan B.

Anthony dollars to the Federal Reserve.

However, we do not receive the Golden Dollar in change every

day. We do not. Can you find it in every cash drawer in America?

No. Does every bank in America stock Golden Dollars? No. When

we compared it to the $7.5 billion notes used in daily commerce,

the Golden Dollar represents at most 4 percent of the daily activity

in dollar denominations. Because the Golden Dollar circulates with

the dollar note, it is left to the public to decide how many Golden

Dollars and how many dollar notes they use and how often.

Therefore, we must look at how we define co-circulation. Is 4 percent an acceptable portion of the overall market share? What can

we reasonably consider successful? Is it 6 percent? Ten percent?

Twenty-five percent? Or is it 50 percent? These challenges are not

new to us and they were not unanticipated. However, we could not

validate the full impact of our marketing strategies until they were

implemented and tested.

Many of the obstacles we encountered were in the distribution

process. Typically, the Mint ships coins to the Federal Reserve in

bags. While the vending and transit industries prefer to receive

dollar coins in bags, retailers order coins in rolls. Armored carriers

have been reluctant to invest in equipment that can handle Golden

Dollars without some assurance of a return on their investment.

Sometimes it is difficult to get a Golden Dollar at all. Many of

the cash ordering systems do not provide for specification of a dollar coin versus a dollar note. As a result, dollar notes are provided.

To address these issues, we have worked closely with the Federal

Reserve Bank’s Cash Product Office, and in January 2002, they extended a program that they had begun the prior year in distributing Golden Dollars only when customers specify both coins and

Golden Dollars as a preference in placing orders.

The commingling of Golden Dollars and Susan B. Anthony dollars is a concern for business sectors. Retailers and the general

public do not want Anthony dollars because they are easily confused with quarters. Since the Federal Reserve and armored carriers do not separate Golden Dollars from Anthony dollars, retailers cannot be assured that they will get only Golden Dollars.

Therefore, they resist using dollar coins and request dollar notes.

Another hurdle, financial institutions and retailers are charged

fees by armored carriers for wrapping and delivering coins, but not

for paper currency.

We will continue to work with the Federal Reserve Banks, the

financial institutions, and business owners to address coin distribution problems. We will continue to partner with the armored carriers and other major coin handlers to work on issues concerning

fees, coin wrapping and bagging, and transportation to facilitate

the more rapid distribution of Golden Dollars into commerce.

We are also planning to have a study with the Federal Reserve

Bank and the Bureau of Engraving and Printing to determine the

feasibility of reducing the number of Anthony dollars in circulation

or develop a process to automatically separate Anthony dollars and

10

Golden Dollars. However, we are mindful that attempts to remove

the Anthony dollars from circulation could be very costly. Demonetizing Anthony dollars could result in as much as $900 million in

reversed seigniorage. Just the process of sorting and storing them

could be expensive, but it would help retailers.

The Mint is not advocating the elimination of the dollar note. We

realize that we will not change consumers’ spending habits overnight. It is clear we will need to look at the distribution challenges,

fees, packaging, and ordering before we spend funds on media

buys. Addressing these challenges requires working with our partners to determine an agreed-upon approach.

We are proactively now using the product licensing program to

place Golden Dollars in the retail market. We recently signed a licensing agreement with The Source International (TSI), the official

licensee of NASCAR. TSI will be designing and racing cars featuring the Golden Dollar and 50 State quarter designs. Golden Dollars will be dispensed at a number of NASCAR racetracks across

the country and it is projected to place $10 million into circulation.

This agreement requires no outlay of funds by the Mint.

We have also partnered with the U.S. Army Corps of Engineers

in support of the bicentennial celebration of the Lewis and Clark

expedition. Besides using the image of the Golden Dollar on event

materials, we are pursuing opportunities to have Golden Dollars

dispensed at retail areas along the expedition route and in association with the celebration.

These are just two examples of strategies being pursued. Most

importantly, the Mint will continue to work closely with Congress

and the Administration to increase the Golden Dollar’s use in daily

transactions. Unfortunately, few, if any, Federal Government agencies distribute Golden Dollars. If defense installations across the

country used Golden Dollars in their cash registers at base exchanges, commissaries, military banks, and credit unions, if State

and local governments and transit authorities actively pursued its

acceptance in transit, parking, and on toll roads, and if all domestic

agencies used them in cafeterias and gift shops, an additional dynamic distribution channel would be created and the Golden Dollar

would circulate more widely and be used more regularly. We look

forward to working with Congress and the government entities to

encourage use of the Golden Dollar.

Mr. Chairman, the Mint is committed to the Golden Dollar and

to improving its co-circulation in commerce. A Golden Dollar is important to save the Nation money, a Golden Dollar to remind

Americans of their heritage, and a Golden Dollar to co-circulate.

Thank you.

Senator DORGAN. Director Fore, thank you very much.

[The statement follows:]

PREPARED STATEMENT OF HENRIETTA HOLSMAN FORE

Chairman Dorgan, Senator Campbell, members of the Subcommittee, thank you

for inviting me here today to discuss the Golden Dollar Program, the actions the

United States Mint has taken in marketing the dollar coin, and the challenges that

lie ahead.

We have suspended circulating dollar production temporarily as demand has

slowed during the recent economic slowdown and because we have a sufficient number of coins in inventory to meet demand. Contrary to some erroneous news reports,

this temporary suspension does not mark the end of the program. We are producing

11

2002 Golden Dollars to meet numismatic demand in rolls, bags, proof sets, and uncirculated sets which has already exceeded 12 million coins. We regularly slow production of one denomination or another based on demand. However, one question

has been raised recently that needs to be examined: How does one define the success of a circulating coin program?

Having experienced the public’s lackluster acceptance of the Susan B. Anthony

dollar, the United States Mint knew that the next dollar coin needed to be different—both in its appearance and in its introduction to the American people. When

The United States $1 Coin Act of 1997 became law, it was mandated that—upon

the depletion of the Government’s supply of Susan B. Anthony dollars—the Secretary of the Treasury place into circulation $1 coins that are ‘‘golden in color, have

a distinctive edge, and have tactile and visual features that make the denomination

of the coin readily discernable.’’

Congress passed the legislation authorizing a new dollar coin because inventory

of the Susan B. Anthony dollar, at that time, was nearly depleted due to increased

demand for dollar coins in a strong economy.

For the coin’s design, Sacagawea, the young Shoshone woman who assisted Lewis

and Clark on their expedition to the West Coast, was chosen for the obverse. Mr.

Chairman, I understand there are numerous spellings and pronunciations of

Sacagawea’s name. I know that in North Dakota ‘‘Sakakawea’’ is preferred. To keep

things simple, I am going to refer to the coin as the Golden Dollar. The $1 Coin Act also specified that the United States Mint, ‘‘adopt a program to

promote the use of such coins by commercial enterprises, mass transit authorities,

and Federal, State, and local government agencies.’’

This was an unusual task for the United States Mint. Typically, the agency does

not market its circulating coinage. However, knowing of the public’s reluctance to

use dollar coins in the past, the Mint looked for opportunities to encourage use of

the new coin in commerce and to build positive awareness and generate public acceptance of the Golden Dollar.

The Mint created a market development campaign for the Golden Dollar Program

that included business-to-business outreach and a public education and awareness

campaign. These campaigns had several key objectives:

—Integrate the new coin into coin-operated industries, transit, and retail operations in an effort to create a reliable means for consumers to receive and use

the new coin.

—Generate positive awareness of the program among consumers.

—Promote long-term acceptance of the coin by the commercial sector and con- sumers. —Support changes in consumer behavior and stimulate usage of the Golden Dollar in commerce.

Based on market research, the Mint recognized that in order for consumers to use

Golden Dollars, they must have a reliable means to receive them and opportunities

to spend them as they would other coins. Therefore, the Mint began a campaign to

encourage coin-operated businesses to convert their equipment to accept and dispense Golden Dollars. To make the conversion easier, the Mint created a new alloy

to use in the manufacturing of the coin that met the statutory requirement that it

be golden in color, but also matched the electromagnetic signature of the Susan B.

Anthony dollar. This feat meant that vending machines that were capable of accepting Anthony dollars could accept Golden Dollars without causing operators to spend

large sums of money to upgrade and retrofit their machines.

In addition, the Mint worked with retailers in an effort to encourage them to

order Golden Dollars as they do other coinage.

When the Golden Dollar was launched, a number of public events were held to

generate awareness. In addition, a $40 million media campaign was designed to

help promote acceptance of the dollar coin’s use by informing the public that Golden

Dollars are legal tender and that they could be used along with the $1 note. The

program was designed to reach 85 percent of adults between the ages of 18 and 49

nationally at an average frequency of 15–18 times over the course of the campaign.

These efforts yielded encouraging results. In July 2000, the target of 85 percent was

surpassed—91 percent of Americans polled said they were aware of the Golden Dollar and nearly 72 percent supported its issuance. Another poll was taken in December 2001, approximately 6 months after the ad campaign concluded, and while 72

percent of Americans still supported the Golden Dollar’s issuance, public awareness

was at 83 percent.

Following the Golden Dollar’s launch, the Mint moved from its market development program toward creating partnerships with specific retailers in an effort to

stimulate use of the dollar coin in everyday transactions. As part of this program,

eight business segments were identified as distribution outlets: transit, banking,

12

vending, retail, fast food restaurants, grocery stores, entertainment venues, and government institutions.

A few of these business segments regularly use dollar coins—in fact, prefer them to $1 notes. They include transit authorities, vending machine operators, and the

U.S. Postal Service. Seventeen of the 20 largest transit systems in the United States

distribute and accept the Golden Dollar, and a number of major cities across the

country have converted parking meters to accept dollar coins. They include: Chicago,

New York City; Philadelphia, Pennsylvania; Dallas, Texas; San Francisco, California; Fort Worth, Texas; Albany, New York; Wilmington, Delaware; Minneapolis/

St. Paul, Minnesota; Portland, Oregon; Toledo, Ohio; Arlington, Virginia; Cincinnati,

Ohio; New Orleans, Louisiana; and Pittsburgh, Pennsylvania. Vending machine operators not only champion the use of the Golden Dollar; they took an active role in

its development.

Many of the Mint’s partnerships received much media attention—Safeway, General Mills, and IHOP Restaurants, to name a few—and they achieved some success.

The partnership with Wal-Mart resulted in the early distribution of 94.3 million

Golden Dollars. However, these efforts alone were not sufficient to sustain the use

of the dollar coin in daily commerce.

When I was sworn-in as Director of the United States Mint in August 2001, one

of my first priorities was to take a hard look at the Golden Dollar Program and assess which strategies were or were not working, and determine what our next steps

would be.

What we found was the advertising campaign was very successful in reaching targeted audiences and raising public awareness of the Golden Dollar but many Americans rarely receive Golden Dollars in daily commerce. But, according to the Coinstar

National Currency Poll released in January 2002, while 51 percent of Americans reported receiving a Golden Dollar in change when making a purchase, only 37 percent said they actually used the coin to buy something. Some studies have shown

that the public is holding onto two-thirds of the Golden Dollars and not re-circulating them back into the economy.

We also discovered that many of the partnerships, although initially fruitful, had

a limited impact on sustained Golden Dollar circulation. Consumer interest in the

dollar coins was piqued during the promotion’s run, but continued use of Golden

Dollars in retail transactions following these promotions has yet to be consistently

demonstrated. Instead, Golden Dollars were considered by the public to be rare, unusual, and worth collecting. Most of these coins remain in the public’s private collections and do not circulate.

Following our review, we were still asking ourselves the question I posed earlier:

How does one define success for the Golden Dollar Program?

The program generates significant revenue. The United States makes 88-cents in

revenue from seigniorage on each dollar coin produced. The seigniorage is deposited

in the Treasury General Fund and is used to reduce the amount of outstanding interest-bearing public debt. The Mint deposited $2.3 billion in the Treasury General

Fund in fiscal year 2000 and $1.5 billion in fiscal year 2001. In the program’s first

2 years, the Mint deposited $953.5 million in revenues from seigniorage on the Golden Dollar alone. In addition, these coins represent a considerable capital investment

in the resilience of the Nation’s circulating money supply. Over their life span—

which is estimated to be at least 15 times longer than paper notes once the coins

circulate fully—these coins will yield tremendous savings attributable to their durability and utility.

If one uses public awareness as the yardstick, the program was successful by July

2000 when 91 percent of American adults polled said they were aware of the Golden

Dollar—6 percent higher than our target. Seventy-two percent of those polled supported the issuance of the dollar coin.

For the first 3 years of the program, the Mint used the historical standard of

measuring the number of coins shipped to the Federal Reserve to determine

achievement. Using this measure, the Golden Dollar is very successful—1.1 billion

have been shipped to Federal Reserve Banks since January 2000. It took 21 years

to ship 920 million Susan B. Anthony dollars to the Federal Reserve.

However, when compared to the more than 7.5 billion dollar bills that are used

in daily commerce, the Golden Dollar represents 4 percent of daily activity of $1 denominations. Because the Golden Dollar circulates with the $1 note—in accordance

with long-standing Treasury Department policy and the program’s authorizing legislation—it is left to the American public to decide how many Golden Dollar coins and

$1 notes they use and how often.

Based on General Accounting Office studies, ‘‘Australia, Canada, Japan, and the

major Western European economies all now use a coin for their country’s denomination which is closest to the dollar for monetary transactions, at and in many cases

13

well above, the same level for which Americans use the paper dollar.’’ However, all

of these countries also eliminated the equivalent note.

Because it is not our government’s policy, we must look at how we define ‘‘co-circulation.’’ Given the traditional attitudes and behaviors of Americans about their

money, we need to ask ourselves, ‘‘Is 4 percent an acceptable portion of the overall

market share?’’

Clearly we are not satisfied with 4 percent. The Golden Dollar is a circulating coin

and should be used regularly in commerce. However, what can we reasonably consider successful? Is it 6 percent? Ten? Fifteen? Twenty-five?

As I mentioned, there are a number of challenges we have identified that have

inhibited the distribution and circulation of the Golden Dollar. As you have read in

our Marketing Plan, we have developed a strategic approach to increase the potential distribution and use of the Golden Dollar. The challenges we studied were not

new to us, nor were they unanticipated. However, we could not validate the full impact of these strategies until after our marketing strategies were implemented and

tested.

Many of the obstacles we have encountered occur in the distribution process. Typically, coin distribution from the Mint to the Federal Reserve is in bagged form.

While those in the vending and transit industries prefer to receive dollar coins in

bags, retailers order coins in rolls. Armored carriers have been reluctant to invest

in high-speed rolling equipment that can handle Golden Dollars without some assurance of a return on investment.

Not only can it be difficult to get rolls of Golden Dollars; sometimes it is difficult

to get Golden Dollars at all. Many of the cash ordering systems do not provide for

the specification of dollar coins versus dollar bills and generally, by default, $1 notes

are provided. In addition, many bank teller systems do not easily accommodate the

processing of dollar coins, thereby adding to the amount of time it takes to process

a transaction and increasing the possibility of inaccuracies.

To address these issues, the Mint has worked closely with the Federal Reserve

System’s Cash Product Office (CPO). In January 2002, the CPO extended the practice begun in March 2001 of distributing Golden Dollars only to meet dollar coin demand at customers’ request. Customers can specify ‘‘Golden Dollars only’’ when placing their orders.

When the Golden Dollar was launched, the Mint established a toll-free phone

number to assist businesses in securing Golden Dollars by facilitating dialogues

among the Mint, the Federal Reserve Banks, financial institutions, and business

owners. The Mint will continue to facilitate this type of interaction among its customers. We also plan to collaborate with armored carriers, large financial institutions, and other major coin handlers to work on issues concerning fees, coin wrapping and bagging, and transportation to facilitate the more rapid distribution of

Golden Dollars into commerce.

Another area of focus is on commercial users—coin operated industries, retailers,

and other businesses that accept and distribute currency. What we discovered was

even if these businesses had access to Golden Dollars, they were not necessarily

using them.

The issue of commingling Golden Dollars and Susan B. Anthony dollars also is

a concern for some business sectors. Retailers—and the general public—do not want

Anthony dollars because they are easily confused with the quarter. Since the Federal Reserve and armored carriers cannot mechanically separate Golden Dollars

from Anthony dollars, retailers cannot be assured they will get rolls that only contain Golden Dollars. Therefore, they resist using dollar coins at all and instead request $1 notes. Another hurdle: financial institutions and retailers are charged fees

by armored carriers for wrapping and delivering coins, but not for paper currency.

They were charged even when the Mint paid for the wrapping of all Mint-issued

Golden Dollars from August through December 2000.

We have also heard that, although there are five coin compartments in coin drawers, the perception of retailers is that there is no room for dollar coins in their cash

drawers or that they have little space to store coins. Others, such as some convenience stores and fast food restaurants, have special coin and currency security dispensing systems that do not accommodate dollar coins.

In an effort to overcome these barriers, the Mint will be conducting targeted research this year to find ways to improve distribution of Golden Dollars to these businesses. We are also planning to conduct a study with the Federal Reserve Bank and

the Bureau of Engraving and Printing to determine the feasibility of reducing the

number of Susan B. Anthony dollars in circulation and/or develop a process to automatically separate Anthony dollars from Golden Dollars. However, we are very

mindful of the fact that attempts to remove Anthony dollars from circulation could

be very costly. Demonetizing Anthony dollars could result in as much as $900 milVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
14

lion in reverse seigniorage. Just the process of sorting Anthony dollars and storing

them would be costly.

Another obstacle we face is overcoming public perception about dollar coins and

changing human behavior. To this end, the media also has had an impact on the

dollar coin’s success. The focus of news stories about the Golden Dollar has shifted

dramatically from favorable to erroneous declarations that the Mint is no longer

producing Golden Dollars and that it is another Susan B. Anthony dollar. While the Mint is not advocating the elimination of the $1 note, we are realistic

in understanding that the coin is unlikely to circulate in parity with the dollar bill.

We also realize we will not change people’s spending habits overnight. However, because public awareness is high, we are not planning to spend more money on awareness advertising. We have also determined that we need to resolve the distribution

channel challenges before any funds are spent on media buys. Instead, in addition

to our research efforts, we are developing promotional efforts that we will utilize to

meet the following objectives: (1) Increase sustained circulation of Golden Dollars

in focused market segments. (2) Support commercial users’ efforts to obtain Golden

Dollars and promote their use to customers. (3) Increase knowledge about the Golden Dollar.

Among the ways we will meet these objectives is to identify businesses that are

likely adopters of the Golden Dollar and encourage their support in using dollar

coins. We can do this by providing point of purchase materials, offering informational materials to educate employees about the Golden Dollar, and facilitating sustained access to Golden Dollars from the Federal Reserve Banks and local financial

institutions.

We also are planning to use the Mint’s product licensing program to place Golden

Dollars in the retail market. We recently signed a licensing agreement with The

Source International (TSI), the official licensee of NASCAR. TSI will be designing

and racing cars featuring the Golden Dollar and 50 State Quarters coin designs. TSI

also will sell die-cast replica racecars and other NASCAR memorabilia and the

United States Mint will receive royalty payments from the sale of this licensed merchandise. This agreement requires no outlay of funds by the Mint.

TSI also is a global master licensor and key corporate partner in the National

Grand Prix that will be held here in Washington July 19–21. Through our agreement with TSI, the Golden Dollar will be the ‘‘Official Coin’’ of the race and Golden

Dollars will be distributed by concessionaires. The pace car for the races will feature

the Golden Dollar and the United States Mint has been invited to participate in the

race ceremonies. The Mint also will host a sales booth at the Armory with numerous

other exhibitors.

Golden Dollars also will be dispensed at a number of NASCAR racetracks across

the country in 2002 as part of the TSI agreement. We expect that 10 million Golden

Dollars or more could be circulated.

In addition, we are moving forward with our existing agreements with vendors

and businesses. For example, in 2001, we entered into an agreement with nine

minor league baseball teams to dispense the Golden Dollar at concession stands at

their ballparks. We also have partnered with the U.S. Army Corps of Engineers in

support of its bicentennial celebration of the Lewis and Clark Expedition. Besides

using the image of the Golden Dollar on event materials, we are pursuing opportunities to have Golden Dollars accepted and dispensed in retail areas associated with

the celebration.

In our efforts to further educate the public about the Golden Dollar, we will continue to distribute, upon request, promotional materials developed prior to the

March 2000 advertising campaign. In addition, we will continue to seek opportunities to inform the media of favorable news regarding circulation of the Golden Dollar

and businesses that are successfully using it in commerce. This involves working

with trade press and attending key industry meetings and conferences hosted by financial, retail, transit, and coin-operated businesses.

In the longer term, once distribution channels have been addressed, advertising

targeting consumer groups will be pursued to encourage use of the coin; what

venues readily accept it, such as vending and mass transit; and how they can contribute to its ready circulation.

Most importantly, the United States Mint will continue to work closely with Congress and the Administration to increase the Golden Dollar’s use in daily cash

transactions.

The General Accounting Office, in its April 7, 2000, report about the dollar coin,

noted that ‘‘sustained administrative and congressional support would be necessary’’

in order to have a successful dollar coin program.

Unfortunately few, if any, Federal government agencies distribute Golden Dollars.

If every defense installation across the country used Golden Dollars in their cash

15

registers at base exchanges, commissaries, military banks and credit unions; if State

and local governments and transit authorities actively pursued its acceptance in

transit, parking and on toll roads; and if all domestic agencies used them in cafeterias and gift shops, an additional, dynamic distribution channel would be created

and the Golden Dollar would circulate more widely and be used more regularly.

Mr. Chairman, the United States Mint is committed to the Golden Dollar and to

improving its co-circulation in commerce. We continue to research and study the

economy, consumer behavior, and our customers’ needs to establish an efficient and

effective way to increase its use in commerce.

That includes developing and executing a sustainable marketing effort that includes the cooperation and support of commercial and financial institutions, the Administration, and Congress.

We look forward to receiving approval of our marketing plans from the Appropriations Committees—per the 2002 report language—in order to make the Golden Dollar the workhorse it was intended to be: A dollar coin to save the Nation money,

a dollar coin to remind Americans of their heritage, and a dollar coin that will cocirculate.

STATEMENT OF LOUISE L. ROSEMAN, DIRECTOR, DIVISION OF RESERVE BANK OPERATIONS AND PAYMENT SYSTEMS, BOARD OF

GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Senator DORGAN. Next, we will hear from Louise Roseman from

the Federal Reserve Board. Ms. Roseman, thank you. You may proceed.

Ms. ROSEMAN. Mr. Chairman, thank you for this opportunity to

report on the Federal Reserve’s activities supporting the Golden

Dollar coin. Before I discuss our experience with the Golden Dollar,

I thought it may be helpful to first provide a brief overview of the

Federal Reserve’s role in coin distribution.

One of the Federal Reserve’s responsibilities is to ensure that

enough currency and coin are available to meet the public’s needs.

In that role, the Federal Reserve provides cash services to over

11,000 of the Nation’s 20,000 banks, savings and loans, and credit

unions. The depository institutions that choose not to obtain their

cash directly from the Federal Reserve obtain cash services

through correspondent banks.

Reserve Banks order coin on a monthly basis and the Mint pays

to transport the coin from its production facilities to Reserve Bank

offices and to the more than 100 coin terminals that are operated

by armored carriers acting for the Federal Reserve. These coin terminals handle nearly 80 percent of the Reserve Banks coin volume

and help create an efficient coin distribution system by reducing

duplicative processing and transportation between the Reserve

Banks and their customers.

Let me turn now to our experience with the Golden Dollar. The

Federal Reserve and the Mint worked together to meet the public’s

strong initial demand for the Golden Dollar following its introduction in early 2000. To support this introduction, the Reserve Banks

changed their normal practice of first paying out circulated coin

and using new coin to meet the demand once the inventory of previously circulated coin is depleted. Instead, the Reserve Banks paid

only Golden Dollars from their introduction in January 2000

through the end of 2001.

Net payment of dollar coins by the Fed to depository institutions

peaked at nearly $95 million in March 2000. Demand remained

strong throughout 2000, but declined to an average net payment of

$16 million per month in 2001 and is averaging slightly less than

$10 million a month so far this year.

16

The Reserve Banks returned to their normal practice of first paying out circulated coin this January. They have continued to accommodate, however, the request of any depository institution for Golden Dollars only. The Reserve Banks will continue filling requests

for Golden Dollars until their inventories of the new coin are depleted, which could be within months.

Most major dollar coin customers, such as the transit authorities

and the U.S. Postal Service, however, have been satisfied by shipments of commingled Golden Dollars and Susan B. Anthony dollars.

As you know, legislation requires that the Golden Dollar and

Susan B. Anthony dollar have similar metallic properties and be

the same size. Because the Reserve Banks and armored carriers do

not have processing equipment to distinguish between these two

similar coins, excess coins returned to the Reserve Banks cannot be

mechanically segregated between the Golden Dollars and the

Susan B. Anthony dollars. As the public continues to return its excess dollar coins, the Reserve Banks are accumulating considerable

amounts of commingled inventory.

At the end of April, Reserve Banks had sufficient inventories to

fulfill all dollar coin orders for nearly a year, assuming demand

stays at its current level, even without taking into consideration all

the future dollar coin deposits that will be returned to the Fed from

the banking industry. This inventory of slightly more than $200

million consists of about 70 percent commingled dollar coins and 30

percent new Golden Dollars that have not yet been paid out to depository institutions.

Normally Reserve Banks strive to maintain about 30 days’ payable inventory of coins of all denominations. Because the Reserve

Banks are holding such a large inventory of dollar coins, they have

not ordered new Golden Dollars since January but will once again

begin ordering new dollar coins when their inventories reach levels

that they would typically hold.

I appreciate this opportunity to discuss these issues and would

be happy to answer any of your questions following the remaining

panelist.

Senator DORGAN. Thank you very much.

[The statement follows:]

PREPARED STATEMENT OF LOUISE L. ROSEMAN

Thank you for this opportunity to report on the Federal Reserve System’s activities supporting the Golden Dollar coin. Before I discuss the Federal Reserve’s experience with the Golden Dollar coin, it may be helpful to describe briefly the Federal

Reserve’s role in coin distribution.

One of the Federal Reserve’s responsibilities is to ensure that enough currency

and coin are available to meet the public’s needs. In that role, the Federal Reserve

provides cash services to over 11,000 of the 20,000 banks, savings and loans, and

credit unions in the United States. The depository institutions that choose not to

obtain their cash directly from the Federal Reserve obtain cash services through correspondent banks. As of March 31, 2002, coin in circulation represented $32 billion,

or about 5 percent of the total $642 billion of U.S. currency and coin in circulation.

The U.S. Mint is responsible for manufacturing an adequate volume of coin to

meet the public’s demand for transactions. It determines annual coin production and

monitors Reserve Bank inventories to identify trends in coin demand. The Reserve

Banks order coin on a monthly basis and the Mint pays to transport the coin from

its production facilities to Reserve Bank offices. In addition, the Reserve Banks use

more than one hundred coin terminals to handle nearly 80 percent of the Reserve

Banks’ coin volume. These coin terminals are operated by armored carriers, acting

17

for the Federal Reserve, and help create an efficient coin distribution system by reducing duplicative processing and transportation between Reserve Banks and their

customers.

The Reserve Banks primarily act as wholesalers by providing coin to depository

institutions in minimum quantities of two thousand pieces or more, depending on

the denomination. Independent of their role as Federal Reserve coin terminal operators, armored carriers often provide coin in smaller increments and also provide

wrapped coin for a fee to depository institutions and retail customers. Depository

institutions order coin from the Reserve Banks to meet their customers’ demand.

Reserve Banks normally fill these orders from their inventories by first paying out

circulated coin, and once the inventory of previously circulated coin is depleted,

using new coin to meet demand.

Golden Dollar Demand

The Federal Reserve and the Mint worked together to meet high public demand

for the Golden Dollar during the first months following its early 2000 introduction.

To support the introduction, Reserve Banks changed their normal practice of first

paying out circulated dollars and paid only Golden Dollars from January 2000

through December 2001. Net payments of dollar coins to depository institutions

peaked at nearly $95 million in March 2000. Demand remained strong throughout

2000 but declined to an average monthly net payment of $16 million during 2001.

The Reserve Banks returned to their normal practice of first paying out circulated

coin in January 2002, reflecting their general practice of treating all designs of circulating coin as interchangeable to satisfy requirements for the public’s transactions. They have continued to accommodate, however, the request of any depository institution for Golden Dollars only. Reserve Banks will continue filling requests

for Golden Dollars until their inventories of new coin are depleted, which could be

within months. Most major dollar coin customers, such as transit authorities and

the U.S. Postal Service, have been satisfied by shipments of commingled Golden

Dollars and Susan B. Anthony dollars. Chart 1 at the end of my testimony illustrates the Reserve Banks’ dollar coin payments and receipts since 1976; chart 2

shows net payments since 1998.

Because legislation requires that the Golden Dollar and the Susan B. Anthony

dollar have similar metallic properties and the same diameter, and because the Reserve Banks and armored carriers do not have processing equipment to distinguish

between the two, excess coins returned to Reserve Banks cannot be mechanically

segregated between Golden Dollars and Susan B. Anthony dollars. As the public

continues to return its excess dollar coins, the Reserve Banks are accumulating considerable amounts of commingled inventory. At the end of April, Reserve Banks had

sufficient inventories to fulfill all dollar coin orders for more than a year, assuming

demand stays at its current level, without taking into consideration future dollar

coin deposits that will be returned to the Federal Reserve from the banking industry. This inventory consists of approximately 70 percent commingled dollar coins

and 30 percent new Golden Dollars that have not yet been paid out to depository

institutions. Normally Reserve Banks strive to maintain about thirty days of payable inventory of coins of all denominations. Because Reserve Banks are holding

such a large inventory of dollar coins, they have ordered no new Golden Dollars

since January 2002, but will begin ordering new coin again when their inventories

reach levels they would typically hold.

I appreciate the opportunity to discuss these issues with you and would be happy

to answer your questions.

Senator DORGAN. Finally, we will hear from Mr. Jim Benfield.

He is the Executive Director of the Coin Coalition. I note in your

resume, Mr. Benfield, you were previously a founder of the Daylight Savings Time Coalition, so it seems to me you are coalitionminded.

Mr. BENFIELD. That is right.

Senator DORGAN. Let me ask you to present your testimony, following which we will have some questions.

STATEMENT OF JAMES C. BENFIELD, ON BEHALF OF THE COIN COALITION

Mr. BENFIELD. Thank you very much and thank you for holding

this hearing. Again, my name is Jim Benfield and I am speaking

18

on behalf of the Coin Coalition, which is a group of trade associations and companies who are enthusiastic supporters of the Golden

Dollar.

The Golden Dollar is rarely seen in everyday retail transactions

and, thus, is perceived as a failure, but in this case, failure is not

reality.

In the mid-1990s, the annual business demand for dollar coins

was about 60 million per year. Last year, that demand tripled to

180 million. That is a success by any manufacturing measure.

Where are they circulating? In Goshen, Indiana, where Matt

Jerlecki’s Northern Pride Carwash consumes between 20,000 and

30,000 dollar coins per week. That is well over a million per year.

And in Reading, Pennsylvania, at Goodman Vending, where

owner Bill Buckholz needs 1.3 million coins per year to keep his

full-line vending and cafeteria operation humming.

Jim Opitz owns two Subway restaurants in Wisconsin. He loves

Golden Dollars. They reduce his shortages because coins do not

stick together like bills do, and it reduces transaction time at his

cash registers. Jim pays out about 200,000 dollar coins a year.

Joe Jacobson operates amusement games, like pool tables and

vending machines, in 400 taverns in Wisconsin and he has been

converting his machines to accept dollar coins over the past year.

All the bartenders, of course, give change in dollar coins, partly because tip revenue goes up.

These are not isolated examples. The word is getting around that

dollar coins work. Wall lockers made by American Locker Security

Systems are found in amusement parks and ski resorts all over the

country, including, I think, Disney World, and they accept dollar

coins. They dispense dollar coins in change machines and then

those drive the wall lockers.

And there are other industries that, with the slightest bit of encouragement, will jump on board. One untapped market is public

pay phones, some of which allow you to call any country in the

world for $1, or any city in the United States for 25 cents per

minute. The Mint should study these examples and build on them.

But in most of these examples I have just given, a dollar coin replaces not the dollar bill, but rather four quarters. This means less

weight to handle for consumers, fewer coins to process for the businessman, and the cost of minting a dollar coin is less than the cost

of minting four quarters, so it is a win-win-win.

One area where the Mint should not waste its resources is on the

cash retail sector. I have a chart. I do not want to spend too much

time on that, but if it was the intention to have coins circulate

heavily, then the dollar bill should have been removed. That was

the experience of all European countries and every country. We are

the only country to ever attempt it with the Susan B. Anthony, and

we have tried it twice in a row now. Why? Because retailers do not

have room for both cash for the dollar bill and dollar coin in their

cash registers. If you look at the design and you study when you

spend money, they really do not have a place for the dollar coin.

And if a retailer does not stock dollar coin in the morning, you are

never going to get it in the afternoon.

We do not expect the dollar bill to be pulled anytime soon, but

we continue to hope.

19

Public opinion is interesting on this subject. When asked, ‘‘Do

you support replacing the dollar bill with the dollar coin?’’ you will

get a resounding ‘‘No,’’ I think maybe 75 to 80 percent. But when

told that the government would save over $500 million per year if

this were done, then the majority supports the idea, and the GAO

estimates these savings at $522 million per year.

Many banks refuse to inventory the Golden Dollar even though

there are lots of them in Federal Reserve Banks in inventories.

This problem needs to be addressed, and there is a very complex

set of reasons why the banks are not crazy about this.

The major barriers right now, the biggest problem, the most

phone calls I receive from angry potential users is the mixed Susan

B. Anthony. This is not a concern, this is a deal killer, and Ms.

Fore addressed this in some detail, so I will skip over those sections. But the SBA should be taken out of circulation either by exporting them to countries that have dollarized their currencies—

Ecuador, by the way, just released five million dollar coins on April

15 into their economy—or by melting them down, and the scrap

metal from the Susan B’s are worth more today than the cost of

making them 30 years ago, or 25 years ago. So the government will

actually make a profit on melting them down. They will take a loss

on the seigniorage, but they will make a profit from the scrap

metal.

Another problem, once again addressed by the Mint Director, is

packaging. Pennies, nickels, dimes, and quarters are usually paid

out by cash retailers. Dollar coins today are paid out by machines

and the user, whether it is mass transit or a car wash operator,

used to get them in these bags of 2,000 and he would just go to

the hopper and pour these guys in. Now, he has to get dozens of

little rolls of 25 and break them open, being very careful not to

have any paper shards wind up in his machine or it will gum up

the works. So this is not only an inconvenience but it is an added

cost, so this should be addressed.

To summarize, the dollar coin is extraordinarily convenient for

many transactions and its use will continue to grow. The Mint

must find ways to provide dollar coins free from Anthony dollars

in packaging and quantities that are convenient for its customers.

The Mint must learn from the successes that I have talked about

and build on them. With a targeted marketing effort, the Mint can

double the annual use to almost 400 million coins per year, I believe within the next 2 years, and redouble the usage every 2 years

thereafter.

A couple of weeks ago, some reporters declared the dollar coin

dead. They are wrong, and like it or not, the Golden Dollar is not

going away. Thank you very much.

Senator DORGAN. Mr. Benfield, thank you very much.

[The statement follows:]

PREPARED STATEMENT OF JAMES C. BENFIELD

My name is James C. Benfield, and I am speaking on behalf of the Coin Coalition,

a group of 30 trade associations and companies who are strong believers in the

Golden Dollar. I am a partner with the consulting firm of Bracy ‘‘Tucker’’ Brown,

and I have served as the Coalition’s executive director since its founding in 1987.

The Golden Dollar is rarely seen in everyday retail transactions and, thus, is perceived as a failure. But in this case, perception is not reality. The coin is a qualified

20

success. If it was the intention to have the coin circulate heavily, then the $1 bill

should have been removed.

Failure to Remove the $1 Bill.—In other parts of the globe, where the central

banking and/or the treasury function are not subjected to legislative oversight, the

smallest denomination of currency has been successfully replaced by a coin similar

to the Golden Dollar. These countries include all of western Europe (except Italy),

Japan, New Zealand, Australia and others. The Golden Dollar would be a tremendous success if the Treasury would take a different position.

Why must the $1 bill be removed? Retailers do not have room for both a $1 bill

and a $1 coin in their cash registers. And if the retailer does not stock $1 coins in

the morning, they will never enter circulation later in the day. Had the $1 bill been

pulled in 1979, the Anthony dollar would have circulated. It might have been unpopular, but it would have circulated.

We don’t expect the $1 bill to be pulled anytime soon, but we continue to hope.

Public opinion polling is interesting on this subject. When asked ‘‘Do you support

replacing the $1 bill with a $1 coin?’’ you will get a resounding ‘‘no.’’ But when told

that the government would save over $500 million per year if this were done, then

a majority supports the idea.

The General Accounting Office, using an economic model developed by the Federal

Reserve, estimates the savings to the government of replacing the $1 bill with a coin

to be $522 million per year.

The following three quotes succinctly capture the essence of the importance of removing the $1 bill.

‘‘No one can possibly understand many social phenomena unless he constantly

bears in mind the force of habit and social conventions. This is strikingly true in

our subject of money. Over and over again in the course of history, powerful rulers

have endeavored to put new coins into circulation or to withdraw old ones; but the

instincts of self interest or habit in the people have been too strong.——W. Stanley

Jevons, Money and the Mechanism of Exchange, 1875

‘‘The experience of this country with the Anthony dollar and the experience of

other countries with the introduction of large denomination coins indicates that a

successful change in coinage requires broad public acceptance, withdrawal of the

equivalent value note, and the government’s commitment to a long-range plan for

its currency structure.’’——(draft) The One Dollar Coin Proposal: Impact on Treasury Operations, Department of the Treasury, Office of Planning and Management

Analysis, June 30, 1988.

‘‘. . . the experience in every foreign country which has introduced a high denomination coin has been that the circulation of the coin must be forced by eliminating the corresponding note. The element of choice must be removed for a coin

to succeed. However, I want to reemphasize that the Treasury Department does not

endorse the elimination of the dollar bill.’’——Mint Director Donna Pope before the

Senate Banking Committee, June 20, 1990

‘‘As our theory of coin/note substitutions shows, even a well-designed coin is unlikely to succeed unless the government orchestrates the transition. In fact, because

of the failure of the Anthony dollar, people will be particularly skeptical of the success of future efforts. Such skepticism will increase resistance to paying any transition costs until businesses and individuals are convinced that the new dollar coin

will become widely used. Consequently, future attempts to introduce a dollar coin

will likely fail, unless the government organizes a concerted switch to the new currency by a large segment of the economy. The simplest way to do this is to withdraw

the dollar bill from circulation.’’——John F. Caskey and Simon St. Laurent, Journal

of Money, Credit, and Banking, The Ohio State University Press, August 1994.

Angry banks.—The Golden Dollar got off to a robust, but troubled start in January 2000. Commercial banks wanted to wait until at least March 2000 to stock the

new $1 coins because they wanted to focus on potential Y2K problems, not on a new

coin. In December 1999, the Federal Reserve and Mint were almost out of Susan

B. Anthony $1 coins and were faced with the prospect of minting even more in January 2000, unless Golden Dollars could be released. The Mint, in fact, did strike and

place into circulation 41 million 1999—dated Anthony dollars late in 1999.

The banking community said they would order $1 coins as needed. The Mint,

wisely, sought another avenue for distribution—Wal-Mart. That introduction received so much publicity, and the coin was so popular that initial demand could not

be met. A marketer’s worst nightmare resulted—huge demand, no inventory. Worse

yet, the banks were furious at being left with no Golden Dollars to meet consumer

demand.

21

Today, many banks refuse to inventory the Golden Dollar, even though there are

plenty of them in Federal Reserve and Mint inventories. This problem needs to be

addressed.

Hoarding of Golden Dollars?—This is a non-issue. The public has been hoarding

upwards of 500 million 50-State Commemorative quarters every 10 weeks, and

there is not a shortage of quarters in circulation. Whatever Golden Dollars have

been collected has little bearing on the failure of the retail sector to use them. Commingled Anthony $1 coins.—The main issue blocking increased use of the $1 coin is the continued presence of Susan B. Anthony $1 coins in circulation. Over half

the $1 coins received by many self-service carwash operators and vendors consist

of SBA $1 coins.

Consumers hated the Anthony dollar 20 years ago, and they continue to hate the

coin today. Many self-service carwash operators are considering shifting back to

quarters in their operations. And what few cash retailers are using the Golden Dollar likely will stop unless they can receive only Golden Dollars.

A few months ago, the MTA New York Transit subway system received 500,000

previously uncirculated Anthony dollars. They came in rotting cotton bags covered

with rat feces. Those coins continue to sit in the MTA’s vaults unopened.

Unless the SBA problem is addressed in a strong, substantive manner, any marketing effort to increase the use of Golden Dollars in the retail sector would be a

total waste of time and money.

Consideration should be given to taking the SBAs out of circulation by either exporting them to countries that have dollarized their currencies to some extent (Ecuador placed 5 million Golden Dollars into circulation on April 15, 2002) or by melting the SBAs down, and recovering their metal value, which is worth more now

than when the coins were struck. That metal can be recycled into to other circulating coinage.

The aforementioned 1988 Treasury ‘‘recommends an exchange of one dollar coins

so that the new one dollar coins would replace the Anthony dollars in inventory.

The Anthony dollar would be melted down. The exchange would be handled as an

accounting entry. Seigniorage realized from the minting of the new one dollar coins

would be used to offset any seigniorage loss resulting from the melting of Anthony

dollars. This is the same procedure used in accounting for the melting of coins of

the other denominations which are no longer current.’’

When the Bureau of Engraving & Printing began issuing new currency a few

years ago, they had a plan for removing old currency. The Mint needs to study that

plan.

Packaging.—Another problem is packaging. Most $1 coins enter circulation as

change from a bill changing machine, a subway ticket vending machine, a Postal

Service stamp vending machine, or a foodservice vending machine. Many of these

machines have hoppers into which one pours loose coins. Until recently, the Mint

shipped all $1 coins in bags of 2,000. This worked very well. But now the Mint has

standardized the shipping of coins in bulk bags. The armored carriers break these

large bags, which hold 140,000 $1 coins and weigh 2,500 pounds, down into wrapped

rolls of 25 coins each.

So the first thing a businessman has to do is break open the rolls, being careful

to remove all the scraps of paper. The coins are then ready for use in the machines.

This additional step adds costs and inconvenience to using $1 coins.

The Mint must ship coins that are ready to use and cost efficient for its customers. I have attached two letters from carwash operators who explain this problem in detail.

Mr. Chairman, now for the good news.

In the mid-1990s, the annual business demand for $1 coins was about 60 million

per year. In 2001, the demand was about 180 million. In other words, the demand

for $1 coins has tripled since the Golden Dollar’s introduction. That is a success by

any measure.

Dollar coins are being used in large volumes in subway transit authorities, the

Postal Service, full-line vending and self-service carwash operators. At least 16

major cities, including New York, Chicago and Philadelphia have or are in the process of fitting on-street parking meters to accept $1 coins.

Cities using or planning to use $1 coins in parking meters: Albany, NY; Baltimore; Chicago; Cincinnati; Clearwater, FL; Dallas; Fort Worth; Minneapolis; New

Orleans; New York; Philadelphia; Pittsburgh; Portland, OR; San Francisco; St. Paul,

MN; Toledo, OH; Wilmington, DE.

Bartenders in hundreds of taverns are making change with $1 coins for use in

pool tables, amusement games and vending machines.

Dollar coins are being dispensed for use in wall lockers at amusement parks and

ski resorts.

22

Even a few retailers have discovered that using $1 coins reduces errors and short- ages because they don’t stick together like $1 bills, and transaction time is reduced

at the counter.

With a highly targeted, low cost marketing effort, I believe the Mint can double the annual usage of $1 coins to almost 400 million coins within the next 24 months

and redouble the usage every 24 months, thereafter.

One New Market.—Many public pay phones now allow you to call any country in

the world for 3 minutes for $1. Or to call any city in the United States for 25-cents

per minute. With phones adapted to accept $1 coins—and placed where they circulate, like the taverns and ski resorts I just mentioned—the quickly dying public

telephone industry could be reenergized.

To summarize, the $1 coin is extraordinarily convenient for many transactions

and its use will continue to grow. The Mint must find ways to provide Golden Dollars—free from Anthony dollars—in packaging and quantities that are convenient

for its customers. The Mint must learn from the successes where the coin is circulating, build on these successes, and develop plans to exploit new market sectors.

To all those reporters who declared the Golden Dollar dead a couple of weeks ago,

I have news for you. You got it wrong. Like it or not, the Golden Dollar coin is not

going away.

Finally, in the interest of full disclosure, I want to note the following: At various

times from November 1998 until September 2001, I served as a paid consultant to

Oxford Associates (now MarketBridge), Double Eagle Market Development Company and Fleishman Hillard, Inc., all of whom were consultants to the United

States Mint for promotion and marketing of the Golden Dollar.

[From the Wall Street Journal, Feb. 9, 2002]

BANKERS ASSAIL MINT FOR DEAL WITH WAL-MART

Bank tellers at First State Bank in Middlebury, Ind., have recently been going

to unusual lengths to fill their coin drawers. While on lunch break, they would

sprint to the local Wal-Mart store to buy the government’s newly minted $1 coin.

When a bank goes to Wal-Mart to get its money, something odd is going on. In

this case, it’s a new strategy the U.S. Mint adopted when it issued the new goldencolored dollar, featuring the image of Native American heroine Sacagawea, at the

end of January. Prompted by the flop of the Susan B. Anthony coin 20 years ago,

the Mint crafted an agreement with Wal-Mart, the Nation’s largest retailer, allowing it to essentially have first dibs over most banks on the new coin.

The U.S. Mint says it shipped the coins to 3,000 Wal-Mart and Sam’s Club stores

and the 12 regional Federal Reserve Banks on the same day, Jan. 27. But it mailed

the coins to Wal-Mart, while it sent the coins to the Fed branches by truck. Many

community banks are reporting a 5-week wait for the coins that they have ordered

from the Federal Reserve. Copyright Dow Jones & Company Inc Feb 9, 2000

Bank tellers at First State Bank in Middlebury, Ind., have recently been going

to unusual lengths to fill their coin drawers. While on lunch break, they would

sprint to the local Wal-Mart store to buy the government’s newly minted $1 coin.

‘‘We thought if we could get 50 or 100 coins, then maybe we could give them to

our customers,’’ says Sara Baker, the bank officer that organized the tellers.

When a bank goes to Wal-Mart to get its money, something odd is going on. In

this case, it’s a new strategy the U.S. Mint adopted when it issued the new goldencolored dollar, featuring the image of Native American heroine Sacagawea, at the

end of January. Prompted by the flop of the Susan B. Anthony coin 20 years ago,

the Mint crafted an agreement with Wal-Mart, the Nation’s largest retailer, allowing it to essentially have first dibs over most banks on the new coin.

The U.S. Mint says it shipped the coins to 3,000 Wal-Mart and Sam’s Club stores

and the 12 regional Federal Reserve Banks on the same day, Jan. 27. But it mailed

the coins to Wal-Mart, while it sent the coins to the Fed branches by truck. Many

community banks are reporting a 5-week wait for the coins that they have ordered

from the Federal Reserve.

The delay has caused a furor among some bankers, who are embarrassed that

they have to send coin-seeking customers to Wal-Mart, and among some business

owners, who complain they can’t get the coins from banks.

‘‘Wal-Mart doesn’t need any more advantages over a little business like mine,’’

said Bill Taylor, owner of Boiling Springs Hardware & Rental in South Carolina,

who tried unsuccessfully to get some dollar coins from his local banks.

The American Bankers Association has fired off an angry letter to the U.S. Mint

on behalf of its members, protesting the agreement with Wal-Mart and asking the

23

Mint to speed delivery to community banks of the golden coins. Dubbed the Golden

Dollar by the Mint, the new coin is actually made of an alloy of manganese, brass

and copper.

‘‘The U.S. Mint has done an end run around the whole banking system,’’ says

Anne McKenna, vice president for finance at Tioga State Bank in Spencer, N.Y. ‘‘It’s

very disappointing.’’

In fact, the Mint planned the Wal-Mart agreement as a way of encouraging U.S.

banks to order the new Golden Dollar coin in larger numbers than their orders for

the Susan B. Anthony. And it has worked. The demand for the new coin has reached

200 million in the first month. It took the Susan B. Anthony 4 years to reach that

level.

U.S. Mint Director Philip Diehl says he doesn’t mind the controversy as long as

the coin is a success. ‘‘I’d rather have a noisy success than a quiet failure,’’ he says.

Mr. Diehl says the U.S. Mint got a lukewarm response from most banks when

it first approached them about potential demand for the coin last summer. In response, he says, the Mint decided to talk to some retailers about putting the coin

into circulation. Only two retailers showed interest: Wal-Mart Stores Inc., of

Bentonville, Ark., and 7-Eleven Inc., of Dallas. At the same time, the Mint also

crafted an agreement with General Mills Inc. to distribute the coin in selected

Cheerios boxes—11 million in all—beginning last month.

Because of the logistical difficulties of distributing coins to its stores, 7-Eleven

dropped out of the agreement, says Dana Manley, marketing communications manager for the convenience-store chain. However, Wal-Mart was willing to buy 100

million coins and promote them nationally in its stores.

Wal-Mart spokeswoman Laura Pope says the company was excited to work with

the Mint. ‘‘Our goal is to offer customers something unique that they can only find

at Wal-Mart and Sam’s Club stores,’’ she says. Wal-Mart promoted the new coin in

a mailing distributed to 90 million customers at the end of January.

The Mint’s Wal-Mart strategy seems to have worked, helped by the coin’s golden

color, to make the new dollar more popular than its Anthony predecessor. Most

banks in search of the coin have started referring their customers to Wal-Mart.

Even Ms. Baker eventually gave up on her quest to buy coins from the local WalMart for her bank branch.

After 2 days of buying a few coins at a time (each Wal-Mart has its own policy

of how many coins it will give out at one time), her tellers rebelled. ‘‘Some employees went out and said, ‘I could only get three coins and I’m keeping them,’ ’’ she

says. ‘‘Frankly, now we’re telling customers to go to Wal-Mart.’’

24

[From the Washington Post, Jan. 13, 2001]

THE NEW COIN’S GOLDEN YEARS?

Each week, when I take money out of my bank account, I ask for $10 in the new

Golden Dollar coins, and then I spend those coins instead of saving them. The Jan.

1 news story ‘‘New Dollar Coin Hard to Find’’ pointed out some hurdles to the coin’s

success: low demand, hoarding and people’s conservative approach to change.

But although the U.S. Mint has learned some lessons from the failed Susan B.

Anthony, (a golden color, not silver; a smooth edge, not ridged like the quarter), it

seems to be implementing a policy that will hamper the success of the Sacagawea.

When attempting to fulfill my weekly routine of buying 10 of the new dollars for

use this week, I was given five Sacagawea dollars and five Susan B. Anthony coins.

The teller said that the coin rolls had begun to arrive loaded with the old dollar

mixed in, and the bank was forced to distribute the Susan B. Anthony coins with

the Sacagawea coins.

Lots of things have to happen before the Golden Dollar becomes a fact of America’s everyday expenses. Vending machines, Metro card machines, etc., will need updating, and the paper dollar may even need to be phased out. But until such grand

overhauls can be implemented, the Mint should not undercut its own strategy for

promoting use of the new dollar by forcing Americans to accept what it has already

rejected.

People will not use the new Sacagawea or any other dollar coin until they are

forced to for lack of an alternative. Putting the new ‘‘Golden Dollar’’ in cereal boxes

and buying expensive ads is a waste of the taxpayers’ money.

If the authorities really want to put this coin in circulation, then let them do so

aggressively and at the same time phase out paper dollars. Nothing less will ever

work.

HI-PERFORMANCE CAR WASH,

Denver, Colorado, February 26, 2002.

Hon. HENRIETTA HOLSMAN FORE,

Director, U.S. Mint, Washington, DC.

ANTHONY DAZZO,

Cash Products Office, Federal Reserve Bank of San Francisco, Los Angeles Branch,

Los Angeles, CA 80015.

DEAR MS. FORE AND MR. DAZZO: Hi Performance Car Wash operates about 100

self-service car wash bays at 18 locations in the Denver area. Soon after the introduction of the new Sacagawea Golden Dollar in January 2000, we began to convert

our coin operated equipment to dispense, and accept $1 coins.

We now use the $1 coin at nine locations and are in the midst of converting the

other locations. Currently, we need to replace 12,000 $1 coins per week (or about

600,000 per year) from Bank One which is served by Loomis Fargo armored carrier.

When we have completed converting all locations we anticipate our annual demand

to be 1.2 million $1 coins.

Sadly, this business model is being placed at risk because, with the expiration of

the December 31, 2001 moratorium, the Federal Reserve is placing SBA $1 coins

into circulation. Our customers confuse them with quarters and generally have a

visceral dislike for these coins. Our staff is spending hours of valuable time separating the SBA’s from the coin shipments we receive.

Additionally, in our last shipment of 12,000 $1 coins, we received 35 pieces of foreign coins, tokens and other U.S. coins. This was an effective surcharge of $35

against $11,965 worth of $1 coins.

I am writing to both the Mint and the Federal Reserve, as you know that many

of our issues are handled by one or the other institution—or are shared.

We have learned through Jim Benfield, a consultant to the International Car

Wash Association, that the Mint plans to stop shipping $1 coins in bags of 2,000

and, instead will ship $1 coins in bags of 140,000. This is a potential further inconvenience to how we handle $1 coins. We prefer to obtain coins in 2,000 coin bags.

We have been told that most if not all armored carriers likely will feed the bulk

coins directly from a hopper into wrapping machines. When we receive $1 coins

wrapped, we must destroy the wrappers before the coins are emptied into our

change machines. Thus, we are paying for a wrapped product, which reduces the

productivity of our operation.

Has the Mint or Federal Reserve queried vending operators to learn if they; prefer

wrapped, or loose coin. The Mint and Fed may be surprised to learn that the $1

25

coin is unique, in that most current users prefer loose $1 coin. It appears that most

$1 coins are dispensed mechanically rather than by hand.

Although we would prefer to receive loose coin, our top priority is to be able to

obtain the Golden Dollar, without the SBA. The wrapped coins are an inconvenience; the SBA dooms our conversion effort to fail.

Many self-service carwash operators I have spoken to have also undertaken the investment of converting their operations to the $1 coin. We all agree that the Mint

launched a wonderful campaign to promote the Golden Dollar, but we feel that the

government has abandoned this effort. Many other countries of the world have had

success with a dollar coin. If the SBA is taken out of the picture, I believe the Golden Dollar will be a success in this country. The business argument for using the $1 coin in the self-service sector is extremely

strong. Yet, the Mint and Federal Reserve seem to be sabotaging this success story

by forcing a product (the SBA $1 coin) upon a public that has resoundingly rejected

it.

What plans is the Mint making to help our industry? With monthly demand for $1 coins falling, and with ever increasing numbers being consumed by our industry,

we feel self-service carwash is one of the best things going for the Golden Dollar

movement at this time. We were surprised to see that our industry was not even

mentioned in the Mint’s report to congress last year.

Please tell me how we can work together to keep the Golden Dollar available. 1

can be reached at (303) 934–4970. I look forward to hearing from you.

Sincerely,

EUGENE J. MILLER,

Owner.

SCOTCH SUPER WASH, INC.,

Oakland, California, February 29, 2002.

Hon. HENRIETTA HOLSMAN FORE,

Director, U.S. Mint, Washington, DC.

ANTHONY DAZZO,

Cash Products Office, Federal Reserve Bank of San Francisco, Los Angeles Branch,

Los Angeles, CA 90015.

DEAR MS. FORE AND MR. DAZZO: I am the owner of Scotch Super Wash, which

owns and operates seven self-service car washes located in Oakland, Concord and

San Ramon, California.

In the Spring of 2001 we converted our entire operation to use the new Golden

Dollar only. Until the Fall of 2001 I was receiving the $1 coins in bags of 2,000.

Our operation generally must replenish $1 coin inventories at a level of about

10,000 per week.

Now we can get our $1 coins only rolled. I understand that the local Federal Reserve Terminal receives the coins bulk and then rolls them. They are then delivered

to our bank (United California bank) via Brinks in rolls. We then have to unroll

them for our use.

We like using the $1 coin and we put many into general circulation. However, receiving them rolled is a waste of time and money for us. I have talked to other operators who have converted to the $1 (and some who are planning to do so). Receiving

the Golden Dollar rolled is a cloud on the feasibility of this change.

It seems that a local armored carrier could easily package some coins in $1,000.00

bags and make a run of $1,000,000 to $2,000,000 and have them on hand for specified accounts. This would be much easier than rolling $200,000. I would appreciate

your considering the needs of large bulk users in the packaging of the Golden Dollar.

Respectfully,

PAUL LIPKIN.

[From the Journal of Money, Credit & Banking, August 1994]

THE SUSAN B. ANTHONY DOLLAR AND THE THEORY OF COIN/NOTE SUBSTITUTIONS

(John P. Caskey and Simon St. Laurent)

No one can possibly understand many social phenomena unless he constantly

bears in mind the force of habit and social conventions. This is strikingly true in

26

our subject of money. Over and over again in the course of history, powerful rulers

have endeavored to put new coins into circulation or to withdraw old ones; but the

instincts of self interest or habit in the people have been too strong . . .——(W.

Stanley Jevons 1875, p. 77)

On July 1, 1979, the U.S. government introduced the Susan B. Anthony dollar

coin. The government expected to realize long-run cost savings from replacing dollar

bills with dollar coins and it believed the new coin would better serve many privatesector transactions. It expected, for example, the public to discover that the coin

would speed small retail transactions and would enlarge the range of services and

goods available through vending machines. Accordingly, the government predicted

that within a few years the coin would replace the dollar bill in many transactions

and eventually might totally replace it.

The public, however, refused to use the coin and the media soon dubbed it the

‘‘Susan B. Edsel.’’ 857 million of the coins were produced between 1978 and 1980,

but only 430 million are currently in the public domain. A small fraction of these

coins circulate; most lie hidden in drawers as souvenir pieces awaiting the distant

day they might become valuable collector’s items. Over 400 million Anthony dollars

are in government storage, to be eventually circulated or, more likely, melted down.

By any criterion, the government’s attempt to introduce the Anthony dollar coin

was a colossal failure. Because of this failure, the United States stands out among

advanced industrialized countries for the unusually low purchasing power of its lowest denomination bill and its highest denomination circulating coin (see Table 1).

Some policy analysts claim that this makes vending machine and small retail transactions awkward and wastes government funds, and they advocate that the government try again to introduce a dollar coin. Calls to try again make it imperative to

review the Anthony dollar experience as well as the success of coin/note substitutions in other countries to determine where the U.S. government went wrong in

its effort.

TABLE I.—THE HIGHEST-DENOMINATION COIN AND LOWEST-DENOMINATION NOTE OF VARIOUS

COUNTRIES

Country Highest Coin Lowest Note

Australia ...................................................................................................................... A$2 ($1.56) A$5 ($3.90)

Britain ......................................................................................................................... £1 ($1.69) £5 ($8.45)

Canada ........................................................................................................................ C$1 ($0.87) C$2 ($1.74)

Germany ...................................................................................................................... DM5 ($2.90) DM10 ($5.80)

Japan ........................................................................................................................... ¥500 ($3.65) ¥1000 ($7.30)

United States .............................................................................................................. quarter ($.25) $1 ($1.00)

SOURCE: The Economist (2/25/89, p. 20). Exchange rates 8/15/91.

The popular explanation for the public’s rejection of the coin emphasizes that the

new coin too closely resembled the quarter (see Figure 1). Another explanation

faults the government for not being more aggressive in marketing the advantages

of the new coin to the public. We argue, however, that the fundamental reason the

Anthony dollar failed was that the government lacked a sound understanding of the

economic theory underlying coin/note substitutions. The government believed that

the Anthony dollar would better meet the transaction needs of the public. It therefore concluded that if it offered the Anthony dollar to the public, the public would

learn of the coin’s advantages and begin to use the coin in place of the dollar bill.

This simple view of the coin/note substitution process ignores the presence of ‘‘network’’ externalities in a currency system, which mean that the benefit an individual

attains from the use of a particular currency form depends on how many others are

also using that currency form. For example, a new high-denomination coin can increase the range of vending machine transactions open to individuals, but only if

vending machine owners convert the machines to accept the coin. Vending machine

owners can increase sales from converting their machines to accept the coin, but

only if the public commonly carries the coin. Similarly, retailers who learn to distinguish quickly the new coin can make small transactions more rapidly, but only if

their customers have also learned to distinguish the coin quickly.

27

Had the government recognized these network externalities, it would have fundamentally altered its view of the currency substitution process. In the presence of

network externalities, an individual who doubts that a new coin will become widely

used by others will see little to gain from adjusting to use the coin. Even if an individual believes others will eventually begin to use the coin, he may decide it is better to wait for others to switch before switching himself. If everyone behaves this

way, the coin will fail. Thus, it is not sufficient for a government simply to make

available a new coin that it believes better serves the transaction needs of the public

and expect it to be adopted. Rather, the government may need to provide an incentive for a large block of the public to initiate the conversation to the new coin or,

alternatively, the government may need to force the use of the coin by withdrawing

the competing bill from circulation.

In this paper, we examine the failure of the Anthony dollar and develop a theory

of coin/note substitutions based on the existence of network externalities. We begin,

in the following section, by reviewing the relative advantages of coins and bills. In

the second section, we outline the failed attempt to replace the dollar bill with the

Anthony coin, and we examine the lessons that have been drawn from other countries’ successful coin/note substitutions. In the third section, we present a theory explaining why governments must sometimes actively induce the private sector to

make a currency substitution even when the private sector stands to gain from the

change. We conclude with a brief review of lessons for any future attempt to substitute a coin for the dollar bill.

BILLS VERSUS COINS

A government must consider the relatively advantages of bills and coins in deciding what form a particular currency denomination should take. The main advantage

bills have over coins is that they are lighter and more compact, and therefore are

easier to carry. Coins, on the other hand, are far more durable than bills, which

can bring long-run government budget savings. U.S. coins, for example, have about

a 20- to 30-year life span while one dollar bills last only about 1.4 years. Consequently, although $1 bills are cheaper per unit to produce than $1 coins, the additional costs of destroying and replacing them at frequent intervals are high enough

so that the government could save about $318 million annually by replacing 75 percent of $1 bills with $1 coins and 25 percent with $2 bills (U.S. GAO 1990). Coins

are also easier to sort manually than are bills, making small transactions using

coins quicker than transactions using bills (U.S. Senate 1990, pp. 90–91). This advantage is most important for retail stores that make frequent small transactions.

It also benefits their customers waiting in lines to make purchases. Moreover, because coins are differentiated by weight and electromagnetic properties, bulk sorting

of coins is faster than that of bills (Buetow and Rubin 1991). Coins are also better

for automated transactions. Mechanical coin acceptors easily and rapidly differentiate various coins and reject counterfeits, or ‘‘slugs,’’ using weight, size, edge, and

electromagnetic properties. Although bill acceptors now allow vending machines to

take bills up to $20, the cost of the acceptors, the need to dispense coins as change,

28

1 A very high inflation rate can lower the relative advantage of coins. In a hyperinflation, new

higher-value currency units must frequently be introduced and older lower-value ones removed

as they become worthless. When this process is frequent, the durability of a new currency unit

is not important. Consequently, in a hyperinflation coins usually cease to circulate and new currency units are created as bills. 2 In 1976, the Treasury Department introduced a $2 bill, intended to displace some one dollar

bills. Because this new bill was unfamiliar, lacked any place in retailers’ cash drawers, and

faced severe competition from an unchanged quantity of $1 bills, the $2 bill never circulated

widely. Moreover, for the public, the difference between a $2 bill and a $1 bill was apparently

too insignificant to warrant the additional denomination (Hough 1978).

and the generally poor quality of low-denomination currency combine to make them

expensive and impractical relative to coin acceptors (U.S. Senate 1990, p. 91).

Because of the different relative advantages of bills and coins, businesses and individuals who use coins and bills in different circumstances can disagree over

whether a particular currency unit should be produced as a coin or bill. Vending

machine operators favor coins, while those in the money transporting business tend

to favor bills. Governments prefer to produce coins for small denominations because

of the favorable fiscal impact. Among consumers, even women and men, who often

carry coins differently, may differ in their preferences for coins relative to bills.

After considering the relative advantages of coins and bills, major contemporary

countries have chosen to produce low-denomination currency units as coins and

higher denominations as bills. Low-denomination currency units circulate rapidly,

making durability and speed of use paramount. Higher-denomination units are used

less often, so the light weight and compact form of bills become more important.

Governments tend to keep currency structures relatively stable over time, presumably because events that alter the optimal currency structure are relatively rare

or develop gradually. Moreover, there can be significant transition costs associated

with changing the currency structure. The longer an established currency structure

remains unaltered, the greater these transition costs are likely to be, because a

physical payments infrastructure tailored to a particular currency form and the

public’s familiarity with that currency develop over time.

Inflation is the primary factor that changes a country’s optimal currency structure. Following sustained declines in the purchasing power of a currency, countries

have often sought to substitute coins for low-denomination bills. A decline in the

purchasing power of a bill increases its speed of circulation, as it is more commonly

used in smaller transactions.1 For such transactions, the durability and sorting

speed of the currency become important, characteristics in which coins have a relative advantage.

THE SUSAN B. ANTHONY DOLLAR AND THE CANADIAN ‘‘LOONIE’’

Between 1935 and 1975, the purchasing power of the U.S. dollar fell by 65 percent, and by 1975 the dollar was commonly used in even the smallest transactions.

Consequently, in the mid-1970s, the U.S. government decided the time had come to

produce a dollar coin, expecting it would eventually replace the dollar bill. That effort failed, and today the Anthony dollar is an insignificant part of the U.S. currency

system. Responding to similar developments a decade later, the Canadian government successfully replaced its dollar bill with a coin, popularly known as the

‘‘loonie’’ because of the image of a loon on its face. This section briefly examines

these experiences in an attempt to identify the key factors differentiating the Canadian success from the U.S. failure.

The U.S. Experience

Toward the end of the Ford Administration, the U.S. Treasury Department and

the Federal Reserve began to argue that inflation had lowered the purchasing power

of the dollar to such a degree that a dollar coin would better serve the transaction

needs of the economy (Simon 1977).2 Early in the Carter Administration, the Treasury argued that a ‘‘conveniently sized [dollar] coin would be acceptable to the general public and would ultimately gain widespread usage as a circulating medium of

exchange’’ (Blumenthal 1978). The Treasury also calculated that the replacement of

the $1 bill by a $1 coin could reduce government costs over the long run by up to

$50 million per year in 1979 dollars (U.S. House 1979, p. 47).

In 1975 the Treasury Department commissioned a private research group, the Research Triangle Institute (RTI), to undertake a comprehensive review of the U.S.

currency structure and issues linked to the introduction of a dollar coin (RTI 1976).

At the same time, the Mint began technical studies on a possible dollar coin. Both

the Mint and the Treasury knew that a badly designed coin would not be used voluntarily by the public. Few Kennedy half-dollars circulated, and most of the public

29

3The Eisenhower dollar coin was introduced in 1971, but the government created the coin

only to sell it to the casino industry, which was using its own dollar tokens in slot machines

(Rochette 1986). The government never intended the coin for general public use. The Kennedy

half-dollar was introduced in 1964, primarily as a commemorative coin honoring the assassinated President. Little concern was given to whether it would circulate or not. 4 A branch bank of the Federal Reserve Bank of Chicago did commission a marketing study

of the attitudes of consumers and retailers toward a new dollar coin. Claude Martin (1980 and

1981), the principal researcher in this study, reported that most of the public and retailers did

not perceive a need for the coin and were doubtful that the public would use it. This report,

however, was completed after production of the coin was underway and it had no impact on the

design or marketing of the coin.

had never used an Eisenhower dollar in transactions. The govemment attributed the

unpopularity of these coins to their relatively large size and weight.3 The Mint believed that the public would find a new, smaller, and lighter $1 coin convenient for

many transactions. It was confident that such a coin would be accepted by the public and it did not ‘‘feel the expenditure of funds for a full public opinion survey

would be justified’’ (U.S. Senate 1979, p. 20).4

In planning the new $1 coins design, both the Mint and RTI gave primary attention to the needs of vending machine manufacturers. Since a major advantage of the

coin would be its potential use in automated transactions, the coin would have to

be compatible with the industry’s electrical and mechanical coin sensors. Although

the Mint and RTI asked representatives of other economic sectors heavily involved

in money handling for opinions on the coin’s design, their responses had little effect

on the coin’s final form. However, the desire to produce a coin suitable for the visually impaired led to the adoption of the eleven-sided ridge on the interior of the

coin. An eleven-sided coin had been considered initially, but vending machine manufacturers objected that such a design would make it more difficult to distinguish between coins and slugs (U.S. Mint 1978, p. 8).

The Mint and Federal Reserve gave little thought to how the dollar coin would

become integrated into the currency system. Because they were confident that the

public would use it if it were made available to them as a currency option, the Mint

and the Fed devoted most of their efforts to arranging for the distribution of the

coin. They each allocated $300,000 for promotional pamphlets and the employment

of a public relations firm. Most of the marketing efforts were aimed at banks and

retail businesses, which were expected to play a critical role in distributing the new

coin to the public (U.S. GAO 1990, pp. 20–21). Ultimately, however, the Fed and

the Mint believed that the success of the coin depended on the individual choices

of consumers. This viewpoint was succinctly enunciated by Federal Reserve Board

Governor Phillip Coldwell, who explained, ‘‘If the American public doesn’t find it a

useful piece of currency or coin, then it will not circulate. If they do find it useful,

it will circulate’’ (U.S. House 1978, p. 30).

In presentations to Congress prior to the introduction of the coin, Mint and Federal Reserve officials predicted that initially only a small percentage of the public

would use the coin, but that its use would grow over time as more people became

accustomed to the coin and began to see its advantages (U.S. House 1979, pp. 32–

33). They estimated that it would probably take 3 to 4 years to achieve widespread

circulation.

Congress considered the advisability of the dollar coin over the summer of 1978.

After bitter feuding over whom the coin should honor, Congress passed legislation

providing for the Anthony dollar and President Carter signed the legislation on October 11, 1978. Production of the coin began 2 months later in Philadelphia. The

Mint released the coin with ceremonies and publicity on July 1, 1979. There was

such an initial surge of demand that many banks briefly ran out of the coin

(Klemesrud 1979).

The honeymoon was short. Despite the Mint’s emphasis on designing a coin suitable for vending machines, most machines were not recalibrated to accept it. Vendors had begun updating their machines before the law passed, but only 250,000

of 4 million machines accepted the coin by July 1979 (New York Times, ‘‘Machines’’

1979; U.S. House 1979, p. 161). The cost for updating old coin acceptors ranged from

$25 to $350 per acceptor. Given these costs and doubts about the coin’s success,

most vendors preferred to wait to see if the coin would become widely used before

converting their machines (Reiter 1980a).

The media, the public, and retailers criticized the coin for looking like a quarter,

making it hard to distinguish rapidly. Although the Anthony dollar weighs 43 percent more than the quarter, has almost the same size relation to the quarter that

the quarter has to the nickel, and has distinctly different engraving than the quarter, none of these differences seemed to matter. Consumers and retailers complained

of the coin’s similarities to the quarter in size, color, reeded edge, and thickness.

30

5The failure of the Anthony dollar emphasizes the limited applicability of Greshman’s Law

in an economy where the form of the money stock is determined by public demand. The central

bank readily exchanged the dollar coin and the dollar bill at the same face value. Since people

preferred to hold the dollar bill, they returned the coin to banks which in turn returned it to

the Fed. This process took the coin out of circulation. The ‘‘bad’’ money did not drive out the

‘‘good,’’ rather the bad money disappeared from the economy. 6 It is rumored that people in the Reagan Administration viewed the coin unfavorably because

they thought it endorsed a feminist ideology.

Because many customers did not want the coin, cashiers rarely offered it as change.

In fact, some businesses had their cashiers drop the coins into a safe under the register to be returned to the bank, but never used as change (U.S. House 1979, p. 11).

Consumers declined to accept the coin from retailers as change, merchants returned

the coins to the banks, and the banks, unable to redistribute them to merchants and

facing high storage costs, sent them back to the Federal Reserve and did not order

resupplies.5

Congress held hearings in September 1979 to investigate why the dollar coin was

failing. Mint, Treasury, and Federal Reserve officials testified before a hostile Congress that the coin was not yet the failure the public thought it was, and argued

for more patience. Stella Hackel, Director of the Mint, defended the coin before Congress, saying:

We knew it would take time for the American people to get adjusted to a new

coin. It is the first change in the size of coinage in 122 years... Whenever we

reach in our pocket now and find anything larger than a nickel, we assume it is

going to be a quarter . . . . But in fact, Congress realized from the committee reports that it would take 3 to 4 years, and it is taking some time. (U.S. House 1979,

pp. 49–50)

A Treasury Task Force recommended that the dollar bill be removed from circulation in order to force the public to use the coin, but Congress believed that such

a move would be highly unpopular and soundly rejected the proposal (U.S. House

1979, p. 78).

By January 1980, only 291 million of the 750 million dollar coins produced were

in circulation. In March 1980, the Mint stopped production as a ‘‘temporary measure.’’ The Mint’s Assistant Director for Technology claimed that ‘‘in no way are we

abandoning the coin. . . . We’re simply shifting gears a bit. . . . We intend to resume production’’ (Reiter 1980a). U.S. Post Offices and Defense Department Post

Exchanges, in the United States and abroad, tried to place the coin in circulation

but, despite these efforts, the coin’s circulation spread only slightly (New York

Times, ‘‘Metal’’ 1980; ‘‘Troops’ Use’’ 1980).

The Mint did not give up for another year. In November 1980 it had a new design

ready to try. It proposed changing the color of the coin from silver to bronze and

replacing the eagle on the reverse side with a distinctly raised ‘‘1’’ (Reiter 1980c).

With the arrival of the Reagan Administration, however, a new Director of the Mint

was appointed who promptly dropped the Anthony dollar from the proof set and suspended all research to redesign the coin (Reiter 1981).6

The Canadian Experience

Canada’s more recent experience in substituting a coin for its dollar bill differs

from that of the United States in several respects, but also has significant parallels.

In response to the declining purchasing power of its $1 bill, Canada introduced the

‘‘loonie’’ dollar coin on July 1, 1987. Conscious of the rejection of the Anthony dollar

by the U.S. public, the Royal Canadian Mint (RCM) devoted considerable attention

to the design of the coin, with an eye to minimizing both the conversion costs for

vending machines and the learning costs for the public. The Mint decided to make

the coin the same size as the Anthony dollar to facilitate compatibility with U.S.-

made vending machines. However, unlike the Anthony coin and other Canadian

coins, the Canadian dollar coin has a distinctive eleven-sided outer edge and is goldcolored. The outer edges of the coin are slightly arched so that the coin will not skip

or slide in vending machines. It was such behavior that led the U.S. vending machine industry to object to the U.S. Mint’s initial plan to produce an eleven-sided

dollar coin.

In launching the coin, the Canadian govemment heavily marketed its advantages

to the public. Despite these efforts and the distinctive appearance of the coin, the

public was slow to adopt it. While it co-circulated with the dollar bill, the coin was

used in less than 15 percent of all non-machine cash transactions (RCM 1989a, p.

7). The Canadian Mint had expected this and had argued even before legislative approval of the coin that it would not succeed unless the dollar bill were removed from

circulation. Following this advice, the Bank of Canada announced in 1988 that it

31

7To overcome the objection that carrying several dollar coins would be too heavy, the Canadian government also introduced a $2 bill. About 75 percent of the $1 bills were replaced with

$1 coins and the remainder with $2 bills. In the United States, contemporary proposals to replace the $1 bill with a $1 coin generally also include a provision to promote the $2 bill (U.S.

GAO 1990). After the $1 bill is removed from circulation, retailers can place $2 bills in the cash

drawer slot currently occupied by $1 bills.

would begin gradually withdrawing the $1 bill from circulation starting in June

1989. Vending machine owners and transit authorities, believing that the note

would be removed, quickly converted their machines—110,000 of 170,000 by May

1989 (RCM 1989a, pp. 5–11).

The announced phasing out of the $1 bill brought complaints from some banks

and small businesses (Underwood 1989, pp. 44–45). However, following the Mint’s

extensive marketing efforts, opinion polls showed that committed opponents of the

transition to the coin among the general public were in the minority: one-third opposed the new coin, one-third supported it, and one-third had no feelings either way.

Facing a divided public, the government was able to fulfill its promise to withdraw

the dollar bill from circulation. Today the ‘‘loonie’’ is the only circulating dollar in

Canada.7

In 1990, the U.S. General Accounting Office investigated the successful efforts of

Canada and five other western industrialized countries to replace low-denomination

bills with coins. As part of the study, the GAO asked monetary authorities in the

six countries what lessons they had learned from their experiences in converting to

coins. According to the GAO (U.S. GAO 1990, p. 23), they offered the following lessons (number of countries indicating lessons learned in parentheses);

—Notes must be eliminated. (6)

—Have a public-awareness campaign. (5)

—Government must expect public resistance and be strong in its campaign to convert. (4)

—Ensure sufficient coins are available. (4)

—Coins must have a distinct appearance. (4)

THE THEORY OF COIN/NOTE SUBSTITUTIONS

With hindsight, it is clear that the U.S. government should have more clearly differentiated the Anthony dollar from the quarter and more extensively marketed its

advantages to the public. However, the experience of other countries shows that

even a well-designed and well-marketed coin will generally fail to replace a circulating low-denomination bill, unless the government actively induces the public to

switch to the new coin. in this section we offer a theoretical explanation for this observation.

The theory is based on the idea that there are significant network externalities

in a currency system. These arise from two principal sources. First, there is an externality that arises from the public’s familiarity with the most commonly used currencies in a society. Over time people learn to distinguish commonly used currencies

very rapidly with only a casual glance. If both parties in a transaction are intimately familiar with the currencies used, the payment is likely to be rapid and accurate. There is an externality, however, because it is not sufficient for only one

party to have this familiarity. If the other party needs to examine closely the currencies to verify the accuracy of the payment, the transaction will be slowed. Someone choosing a currency for common retail transactions has an incentive, therefore,

to choose currencies with which others are familiar.

A second externality arises from the physical payments infrastructure, including

cash registers, money-counting and- wrapping machines, and automated vending

machines. A payments infrastructure tailored to a particular currency system

speeds payments and increases the range of transactions permitted by the monetary

system. This creates an incentive for individuals to use currencies compatible with

this infrastructure and for those designing the infrastructure to do so around the

currencies widely carried by the public.

Figure 2 illustrates the effect of these network externalities on the benefit to an

individual from choosing to use a $1 bill or $1 coin for transactions. The percentage

of the public commonly using a dollar bill for transactions is measured across the

horizontal axis from left to right. The percentage commonly using a dollar coin is

measured from right to left. To reflect positive network externalities, the benefit to

32

8The benefit function can be nonlinear, but we assume the benefit to an individual from using

a particular currency form is a constantly increasing function of the percentage of the public

also using that currency form.

the individual from using either currency form increases as the percentage of people

also using that currency form increases.8

In explaining the implications of network effects, we initially assume for simplicity that everyone in the economy has the same benefit function. Under this assumption, Figure 2 illustrates a case where society’s welfare would be maximized

if the government produced dollar bills rather than dollar coins: the benefit individuals receive from using the note, assuming everyone else does too, exceeds the benefit they would attain from using the coin.

As discussed earlier, inflation raises the average value of small retail transactions

and increases the use of dollar bills. Because coins are more durable, more rapidly

sorted than bills, and more convenient for vending machine purchases, the price increase can increase the relative benefit to producing a particular currency denomination in the form of a coin rather than a bill. The effect of an increase in the price

level is illustrated in Figure 3 as shifting the benefit function for a coin up from

its original position, Bcoin, to the new position B′coin. In the illustrated case, the price

increase changes the optimal currency structure, whereas before the price increase,

the greatest benefit would be attained if society opted to produce a $1 bill. After

the increase, the coin would be optimal.

33

9Farrell and Saloner (1985) present a formal model illustrating this idea with two actors.

Postrel (1988) extends the model to cases with more than two actors.

In deciding whether to switch from a bill to a coin, transition costs should also

be taken into account. For consumers, the transition costs are learning to use the

new coin quickly and accurately. Businesses also face this cost and in addition, costs

associated with adjusting their payments infrastructure, such as converting vending

machines to accept the new coin or restructuring cash registers. It is possible that

once the transition costs are accounted for, it would not be beneficial for a society

to switch to a coin. In Figure 3, the benefit from using the dollar coin after allowing

for the transition costs (t) is shown as B′coin–t. In the illustrated case, the transition

costs are small enough that it would still be optimal for the society to switch from

using the bill to using the coin, that is, Z is greater than X.

Even though everyone would gain in the illustrated case if the coin were to replace the bill, there is no guarantee that the coin would be adopted in a decentralized decision-making process. This is true for two reasons. First, individual decision

makers may doubt that others will also adopt the coin, or, second, they may believe

that others will eventually adopt the coin, but think the process will be so slow that

it does not pay to switch early. Both of these points can be illustrated in Figure 3.

Consider an individual starting out at point X. When she evaluates whether she

should switch to the coin, she must form an expectation of how many others will

also switch. If she expects no others to go along, then she would expect to move from

point X to point Y if she were to switch to the coin, clearly an inferior position. As

drawn, even if she expects 20 percent of the population to switch, it would be optimal for her to stay with the note. Only if she expects 40 percent or more of the

population to switch, will it be optimal for her to switch as well. This process can

lock a society with decentralized decision making into an inferior currency structure.9 If people doubt others will adopt the new currency, then it does not pay for

them to do so either. If everyone thinks this way, the expectations will be correct

because they are self-fulfilling.

If the costs associated with switching to the new coin can never be recouped, then

it is reasonable for individuals to wait to see what others do before deciding whether

they should themselves switch. In the illustrated case, if less than 40 percent of the

public switches, then such fence-sitters would stay with the bill. If enough people

follow this wait-and-see strategy, the Nash equilibrium remains at point X rather

than the social optimum Z. However, if for some reason 40 percent or more of the

public switches to the coin, then there will be a bandwagon effect where the fenceVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
34

10Farrell and Saloner (1986) develop a formal model illustrating this idea. People might expect a gradual coin/note substitution process for several reasons. Perhaps businesses will prefer

to wait for their existing payments infrastructure to depreciate or require maintenance before

converting it to accommodate the new coin. Moreover, consumers may need to use the new coin

numerous times before they learn to distinguish it rapidly, and this learning process may spread

through the economy at an uneven rate. 11 A marketing campaign may also aim to communicate to the public the benefits from switching to the new coin. Without such a campaign, the public might underestimate the gains because the full benefits from the new coin will occur only after the payments infrastructure has

been altered, people have learned to use the coin, and the government begins to realize budget

savings. 12 In the case of the Anthony dollar, the government took some of these steps. For example,

it encouraged vending machine owners to convert their machines early and it tried to initiate

use of the coin by pushing the Anthony coin on soldiers, postal customers, and others. 13 Because it would distract us from our main point, we do not analyze a general model with

differing benefit functions. We should note, however, that such a model could produce a rich

sitters follow in switching. In this case, the equilibrium will be the optimal point

Z.

Even if everyone in the economy believes that eventually everyone else will switch

to using the new coin, it is possible for the economy to remain locked in to using

the note. To see this, once again consider the decision facing an individual at point

X. He can switch to point Y, knowing that as others eventually also switch the benefit he obtains from using the coin will gradually increase, illustrated in Figure 3

as a movement along the coin benefit schedule from point Y to point Z. If the move

from Y to Z is expected to be very gradual, then those who switch early and start

the process may end up as net losers. This is because they will experience an early

loss as they jump from X to Y, which must be compared to the present value of the

expected gains from moving to point Z. If the use of the coin is expected to grow

very slowly, or if individuals have high discount rates, early losses could outweigh

discounted future gains, and those starting the conversion to the coin would be net

losers.10 Once the gains of later converts are taken into account, however, society

as a whole might experience a net social gain.

If early converts to the coin are net losers, it will be optimal for individuals to

wait for the transition to be well underway before themselves switching. If everyone

adopts this strategy, the process will never begin and the economy would remain

locked in to the inferior equilibrium X.

If the economy is locked in to an inferior equilibrium, there are a number of noncoercive steps a government can take to try to attain the better equilibrium. If the

inertia is caused by individuals’ expectations that others may not switch, the government could use propaganda to attempt to change these expectations.11 Alternatively, the government might try to solicit pledges, committing all to switch at

once. If the government is itself a significant proportion of the economy, it could try

to start the bandwagon rolling by itself switching to the coin. The government might

also try to identify other large economic sectors that could initiate the conversion

process, perhaps in concert with the government.12 It might also start the process

by subsidizing those that switch early.

Such noncoercive means could be prohibitively expensive. They also might not

work because, unless they completely eliminate individuals’ doubts that others will

switch, everyone may wait to see if others switch before switching themselves. Moreover, the government may be too small a part of the economy to initiate a bandwagon effect, even if it could find other large economic actors to join it in switching

to the coin.

A government can also use coercive means to attain the superior equilibrium. Specifically, the government could force the movement from equilibrium X to equilibrium Z by withdrawing the note from circulation. In doing so, the government

might encounter resistance even if the public stands to gain from the change. Some

people, for example, might doubt that the government can or will carry through

with its promise to withdraw the note from circulation. Such individuals might resist switching for fear that they will switch, the government will abandon its policy,

and others will not switch, leaving the switchers at or near point Y in Figure 3. In

addition, even if the public does not doubt the government’s ability or willingness

to carry through with the policy, it might still resist because no one wants to switch

first if the move from point Y to point Z will be slow. Finally, if we drop our assumption that everyone has identical benefit functions, then there could be individuals (such as money transporters) for whom the switch to the coin, even assuming

everyone else switches, would lower their welfare. These individuals will nevertheless switch if others do and if network effects are strong enough. However, they

would prefer that society stayed with the bill.13

35

range of results. For example, if network effects were weak and society was composed of a group

that benefiued from a $1 bill and a group that benefitted from a $1 coin, the two currency forms

could cocirculate in equilibrium. Empirically, however, most cases of co-circulation are explained

by restrictions on the availability of the preferred currency form.

Forcing a new currency system on the public, of course, has its dangers. Governments that do so bear the responsibility of clearly demonstrating that the change

benefits the economy as a whole. It is not enough simply to show that the change

will result in government budget savings, for these savings could be at the expense

of even greater costs in the private sector. A government must also decide on the

speed of a forced coin/note substitution. A gradual change could lower transition

costs. On the other hand, if the proposed change is too gradual, the public could

doubt the government’s resolve to follow through with the withdrawal of the bill and

might resist initiating the conversion process.

CONCLUSION

The officials responsible for launching the Anthony dollar believed that the new

coin would benefit society, and that over time the public would discover this and

begin to use the coin in place of the dollar note. Their reasoning, however, failed

to recognize and communicate the implications of network effects in the currency

system. Consequently, even if they were right about the gains from a coin/note substitution, they did not realize that there would be little incentive for anyone in the

private sector to begin using the coin without the assurance that others would follow. They also did not realize that the more slowly people expect the use of the coin

to spread, the more likely it is that individuals would not want to initiate the transition process.

To be fair, some governmental measures, such as efforts to place the Anthony dollar into circulation through post offices and to encourage vending machine owners

to convert their machines early in the process, did show some implicit understanding of network effects. Moreover, some government officials, prior to the introduction of the coin and contemporaneous with its failure, did suggest that the coin

would only succeed if the dollar bill were withdrawn from circulation. No one, however, explained in any detail why this was the case. This led some policymakers to

conclude that the need to force the coin on the public through the withdrawal of

the note proved the dollar coin did not benefit the public (U.S. House, 1979). Our

theoretical analysis shows that this is not a necessary implication. However, because network externalities were neither understood nor explained by the Mint or

Federal Reserve, it is not surprising that people drew such an erroneous conclusion.

This misunderstanding assured that there was almost no political support for withdrawing the dollar bill.

The low and declining purchasing power of the dollar bill as well as Federal Government budget pressures make it likely that there will be future attempts to replace the dollar bill with a dollar coin. In fact, a lobbyist group is currently pushing

for such a change and several legislators have announced their support (Blau 1991).

Although it is important not to repeat the design errors of the Anthony dollar, good

design alone will not bring success to a future dollar coin. As our theory of coin/

note substitutions shows, even a well-designed coin is unlikely to succeed unless the

government orchestrates the transition. In fact, because of the failure of the Anthony dollar, people will be particularly skeptical of the success of future efforts.

Such skepticism will increase resistance to paying any transition costs until businesses and individuals are convinced that the new dollar coin will become widely

used. Consequently, future attempts to introduce a dollar coin will likely fail, unless

the government organizes a concerted switch to the new currency by a large segment of the economy. The simplest way to do this is to withdraw the dollar bill from

circulation.

LITERATURE CITED

Blau, Eleanor. ‘‘The Penny Plague.’’ The New York Times, December 31, 1991, II–

1. Blumenthal, W. Michael. Letter to the Speaker of the House of Representatives,

April 17, 1978.

Buetow, William, and Tom Rubin. ‘‘A $1 Coin: Farebox and Cash Room Considerations.’’ Passenger Transport, May 27, 1991.

Farrell, Joseph, and Garth Saloner. ‘‘Standardization, Compatibility, and Innovations.’’ Rand Journal of Economics 16 (Spring 1985), 70–83.

———. ‘‘Installed Base and Compatibility: Innovation, Produce

Preannouncements, and Predation.’’ American Economic Review 76 (December

1986), 940–55.

36

Hough, John. ‘‘The Selling of the Two-Dollar Bill.’’ The New York Times, January

15, 1978, III–2.

Jevons, W. Stanley. Money and the Mechansim of exchange. New York: D. Appleton & Co., 1875.

Klemesrud, Judy. ‘‘Suffragette Enshrined on the Face of a Dollar Coin.’’ The New

York Times, July 2, 1979, II–10.

Martin, Claude R., Jr. ‘‘The Susan B. Anthony Dollar: Hypotheses Regarding Consumer and Retailing Reactions.’’ Developments in Marketing Science 1 (1980) 209–

12.

———. ‘‘The Situation Confronting the introduction of the Anthony Dollar.’’ In

The Situation in Government Marketing, edited by E. Permit and E. Mowka, pp.

186–98. New York: Praeger Press, 1981.

New York Times, The. ‘‘Machines Ready for Dollar Coin.’’ May 12, 1979, p. 27.

———. ‘‘Metal Dollar.’’ April 13, 1980, p. 41.

———. ‘‘Troops Use of $1 Coin is Deplored by Proxmire.’’ November 11, 1980, IV–

19. Postrel, Steven R. ‘‘Bandwagons and the Coordination of Standardized Behavior.’’ Manuscript, June 1988.

Reiter, Ed. ‘‘Down, But Not Out.’’ The New York Times, March 16, 1980, 11–46

(a).

———. ‘‘Can the Anthony Dollar Still Win Acceptance?’’ The New York Times,

July 13, 1980, II–26 (b).

———. ‘‘A Possible Reprieve for the Anthony Dollar?’’ The New York Times, November 9, 1980, II–41 (c).

———. ‘‘Is This Really the End of the Anthony Dollar?’’ The New York Times,

September 13, 1981, II–52.

Research Triangle Institute. A Comprehensive Review of U.S. Coinage System Requirements to 1990. North Carolina: Research Triangle Institute, 1976.

Rochette, Ed. ‘‘The Rise and Fall of the Eisenhower Dollar.’’ Antiques and Collecting Hobbies 90 (January 1986), 71–72.

Royal Canadian Mint. ‘‘Note to the Media.’’ Press release, May 10, 1989.

———. ‘‘Mint Act to Help Prepare for Withdrawal of $1 Bank Note: Strategy

Aimed at Those Who Order Cash.’’ Press release, May 31, 1989.

Simon, William E. ‘‘The State of the United States Coinage.’’ U.S. Treasury Department report, January 5, 1977.

Underwood, Nora. ‘‘A Loonie’ Revolt,’’ Maclean’s 102 (June 5, 1989), 44–45.

United States Bureau of the Mint. Annual Report of the Director of the Mint.

Washington D.C.: Bureau of the Mint, 1978 and 1979.

United States Department of the Treasury. An Assessment of United States Currency and Coin Systems with Long-Range Planning Recommendations. Washington,

D.C.: GPO, 1979.

United States General Accounting Office. National Coinage Proposals: Limited

Public Demand for New Dollar Coin or Elimination of Pennies. Washington, D.C.:

GPO, May 1990.

United States House of Representatives. Proposed Smaller One-Dollar Coin. Hearings before the 95th Congress, Washington, D.C.: GPO, 1978.

———. Susan B. Anthony Coin Act of 1978: Report, Together with Additional and

Dissenting Views. Washington, D.C.: GPO, 1979.

United States Senate. Susan B. Anthony Dollar Coin Act of 1978. Hearings before

the 95th Congress, Washington, D.C.: GPO, 1978.

———. Reprogramming for the Susan B. Anthony Dollar Coin Program. Hearings

before the 96th Congress, Washington, D.C.: GPO, 1979.

———. United States Coinage Report Act of 1989. Hearings before the 101st Congress, Washington, D.C.: GPO, 1990.

Senator DORGAN. Amy Mossett, why do you not pull your chair

up in the middle of that table, if you would.

Let me begin a series of questions to try to understand what we

have heard and perhaps what we have not heard. Director Fore,

how much money was spent on the promotion or advertising for the

Golden Dollar coin?

Ms. FORE. As you mentioned in your opening remarks, a little

over $60 million, $62.3 million, was for three firms in four separate

contracts covering a period of approximately 2 3/4 years. The first

one was a contract for market research and partnerships and advertising. It was a little over $4 million and it was to increase cirVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
37

culation in seven sectors: retail, fast food restaurants, grocery,

transit, vending, entertainment, and banking. The second was the largest contract, $48 million, that included a $40 million advertising campaign with George Washington. It

was to oversee public relations and promotions. The third contract was for $8 million and it was to develop and

execute a sales and marketing plan for coin-operated retail and

banking businesses. The fourth was $1.5 million to identify and prioritize means and

opportunities for increasing circulation.

To my right is David Pickens, the head of our Sales and Marketing area for the Mint. He has prepared a forward-looking marketing plan for moving forward in thinking through what the opportunities are for the future.

Senator DORGAN. I will ask Mr. Pickens a question in a moment.

First of all, Ms. Fore, we have, as I understand it, minted 1.5 billion Golden Dollar coins. But I understand that roughly 500 million-plus have not been put out into circulation and the Federal Reserve Board has how many in stock at this point, Ms. Roseman?

Ms. ROSEMAN. A little over 200 million.

Senator DORGAN. Tell me, what does that mean, that the Federal

Reserve Board has 200, 250 million coins? Where do you have

them?

Ms. ROSEMAN. The inventory is largely in the Reserve Bank offices around the country and some of our coin inventory are actually located at various armored carriers that we contract with to

act as coin terminals for us.

Senator DORGAN. And so you respond to a request from a bank

in Mott, North Dakota, or Devils Lake, North Dakota, or Toledo,

Ohio, and you send currency out based on their request. If they request dollar bills, dollar coins, is the request that specific?

Ms. ROSEMAN. Yes. They would request either notes or coins.

Senator DORGAN. And so the fact that you now have over 200

million in inventory that is not out there in circulation, that is because people are not requesting it, is that correct, or the banks are

not requesting it, member banks?

Ms. ROSEMAN. Yes, and I should clarify. The inventory we have

is a combination of both Golden Dollars and the Susan B. Anthonys.

Senator DORGAN. So it is not an inventory that is described as

one coin versus another, it is commingled?

Ms. ROSEMAN. Part of it is commingled. About 70 million or so

are Golden Dollars that we have gotten from the Mint that we

have not yet paid out. The rest of it are coins that we have received

back in from the banking industry, and when we receive it back in,

they are commingled.

Senator DORGAN. Okay. Now, I started this hearing saying I

think it is a failure at this point because I have never received one

in change. I do not know of many people that have ever received

one in change. The Secretary of the Treasury has never received

one in change. Amy Mossett paid a taxi driver today in a Golden

Dollar coin and he had no idea what it was.

So my contention is that this is a failure. Mr. Benfield, you say

no, it is not a failure, and Ms. Fore, you say, well, how do you deVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
38

fine success? So let us try to figure out whether this is a success

or a failure because a marketing strategy that Mr. Pickens may

want to employ certainly has to understand what has happened up

to this point.

Director Fore, do you think that what has happened so far is a

success or a failure?

Ms. FORE. I think it has been a success in some ways. People like

the coin. I think it has been successful in terms of bringing in seigniorage into the United States Treasury.

Where it is not a success is in circulation. It is not in everyday

commerce and what we need to try to improve is that people have

easy access to the coin, that they receive it in everyday transactions and that they have places to use it. Coins, after all, are to

be used in everyday trade and commerce in this country. So that

is what we need to get to for it to be a complete success. It is a

partial success, but it is not a full success.

Senator DORGAN. Mr. Benfield, you say it is a success and you

describe some car washes and various things. I guess my own feeling is that you define success in large part with respect to the Mint

if you are going to develop a new coin for widespread circulation,

you define success by whether that coin becomes a part of widespread circulation. With respect to the Golden Dollar coin, the answer is, no, absolutely not. It is not part of widespread circulation.

Am I wrong about that?

Mr. BENFIELD. Well, my members would love customers to be

able to walk in and have the coin already in his or her pocket. That

is not the case. That is disappointing. But let me give you a little

more of a picture of how the coin works.

Jim Stansfield, LaCrosse, Wisconsin, and also Zog’s Vending in

Appleton, Jim Stansfield is in Toro, which makes the lawnmowers.

That is where they are manufactured. He told me, he says, ‘‘Jim,

I love this coin. I make 30,000 dollar coin sales per week.’’ I said,

‘‘Wow, 30,000 sales per week. What is your replacement? What do

you have to go replace from the bank?’’ He says, ‘‘Oh, 2,000 or

3,000.’’ Well, I am disappointed because I like them to create more

demand and more seigniorage and wish more of them were walking

away, but if you contemplate the implications of what is going on

there, it is fabulous.

It means that people are putting a $10 bill into a bill changer.

They will get eight dollar coins, eight quarters. They will buy their

sandwich and a bag of chips and a soft drink. Then they go back

to their work station and they will keep those dollar coins at their

work station. They will not take them home and spend them. Why?

Because when they go back in the afternoon for their candy bar,

that dollar coin is fast, it works every time, all the time. They have

a longer break because they are not standing in lines.

Jim Stansfield, he is not going back to have to count boatloads

of dollar bills in his cash room. He is taking back fives, tens, and

twenties and he is not having to replenish quarters and deal with

mountains of quarters. So he is dealing with dollar coins instead

of mountains of quarters and he is processing five, ten, and twenty

dollar bills instead of a dollar coin. He is a happy camper.

Senator DORGAN. I understand that, but that is anecdotal. I

could tell you of someone who loved the Edsel, just loved it, but

39

that would not suggest the Edsel was a success. It was a failure.

I guess my point is, if the Golden Dollar coin is a way to replace

four quarters in someone’s pocket, why are they not rushing to the

system to say, get these four quarters out of my pocket and get me

a Golden Dollar coin? You cannot find the Golden Dollar coin.

Mr. Benfield, do you have a coin dish in your bedroom?

Mr. BENFIELD. There are two kinds of people in the world. There

are spenders and savers. I happen to be a spender and I personally

have put about 8,000 dollar coins into circulation. I have never gotten one in change, either, because I never accept the dollar bill in

change. I always make sure I have enough dollar coins to make

that exact transaction.

Senator DORGAN. I see. I was just curious whether you have one

of those little dishes where at the end of the day you put your

coins.

Mr. BENFIELD. No little dish.

Senator DORGAN. You do not?

Mr. BENFIELD. No.

Senator DORGAN. You are unusual.

Mr. BENFIELD. I am a spender.

Senator DORGAN. I understand that, but you cannot spend between the time you go to bed and wake up.

Mr. BENFIELD. Oh, I see what you are saying. Actually, you

caught me. You are a really good cross examiner. I do have a beer

mug on a rail around our dining room. We live in a craft revival

house, and it is a Chicago Symphony beer mug because my dad

was in the Chicago Symphony and it says George Shulte and the

coins go in there.

Senator DORGAN. See, I knew you had that, and I have never visited your——

We have not met before, have we?

Mr. BENFIELD. No, no, no, this is not staged.

Senator DORGAN. The reason I ask that question is that at lot

of the coins we make, not just Golden Dollars, end up in somebody’s dish or cup someplace and they cannot go to a bank to redeem them. I mean, they have got to go order some paper rolls

someplace or go to a machine at a grocery store that takes a certain percentage. That is a different issue, but when people have all

of this change moving around that they then take out of the system, you have to replace it because you need sufficient coinage of

all types, right?

Ms. FORE. Correct.

Senator DORGAN. Now, Mr. Benfield says that one of the reasons

that the Golden Dollar coin is probably not in great circulation is

there is no place in the cash register for it. Did the Mint contemplate that? Or I wonder if Congress when it considered the legislation did. Did you talk to retailers about how they would deal

with the cash register issue?

Ms. FORE. Yes. The Mint did at that time. I believe that most

cash drawers have a spot that they can put Golden Dollars in, dollar coins. What most cashiers do is put rolls of coins in that slot,

so that slot is used to put their rolls in for breaking apart and filling up the other bins. So if we can get them to get in the habit

40

of using that as their dollar coin slot, then we have gone a step forward here.

Senator DORGAN. So let us assume that I am a retailer and I say,

what I want to do is I want to use Golden Dollar coins routinely.

I like them. I want my customers to feel good about getting a Golden Dollar. So in my business, I want to use Golden Dollar coins.

How hard is that for me to do?

Mr. BENFIELD. Let me answer. I mentioned this fellow, Jim

Opitz. When I called him and when I first talked to him in Wisconsin, he says, ‘‘I am never going back to dollar bills. This is fabulous.’’ And I said, ‘‘Will you talk to me? When somebody comes in

and gives you seven or eight dollar bills, do you pay those out first

and then use the dollar coin as reserve?’’ He said, ‘‘Oh, no, no, no,

no. The dollar bills go under the cash register. I only pay out dollar

coins. I deposit all dollar bills. That is where the efficiency comes,

and I cannot ask my cashiers to pay dollar bills sometimes and pay

dollar coins sometimes or they will get confused.’’

I talked to Southern Wisconsin Foods, a chain of 19 Burger

Kings, and they allow their store manager to make the decision.

About half of them use dollar coins. And I said, what about dollar

bills? They are retired and deposited when they come in. So what

they do is, this dollar bill, it does not go up here. They take this

clip out. They put the spare rolls not here, but over here, and the

fifth position is now used for dollar coins.

Senator DORGAN. My question was more specific than that. I run

a business in a small town someplace and I want to use Golden

Dollars and I want to use a lot of them. How hard is that, because

then I want to go to my local bank and I want them to contact Ms.

Roseman and the Federal Reserve and I want a steady supply of

Golden Dollars for my cash register. Some will say it is impossible.

Mr. BENFIELD. I got a call yesterday from Galveston, Texas, a

small—and I forget, Zigler, I think the guy’s name is—who runs a

small family-owned restaurant and he loves the Golden Dollars and

he pays out about 6,000 or 7,000 per week, I think, or several thousand per week. He says, ‘‘Jim, I cannot get Golden Dollars. When

I get a box of 1,000, I get about 400 or 500 Susan B.s,’’ and that

is what the numbers are, over half. I have had some guy say, ‘‘I

got 1,500 and I got 873 Golden Dollars.’’

Senator DORGAN. Ms. Roseman, why can you not separate them

when you send them out? If the bank, reflecting the interest of a

small business who says, ‘‘I want Golden Dollars,’’ the bank comes

to you, to the Federal Reserve Board and says, ‘‘I want Golden Dollars. I want a bag of 2,000.’’ Why can you not accomplish that?

Ms. ROSEMAN. Well, today, the way we handle coin orders—we

get the deposits in the bags that Jim had shown you, 2,000. We

will weigh that bag to make sure it is within our tolerance and we

will pay it out. We will not do any processing of the coins today

at all. Now, if——

Senator DORGAN. Why?

Ms. ROSEMAN. Because there is really no need to. We are trying

to minimize the cost to the government of coin distribution.

Senator DORGAN. Yes, but if you have commingled coins, Susan

B. Anthony and Golden Dollar coins, and your member bank—the

41

Fed serves its member banks, serves at the pleasure of its member

banks.

Ms. ROSEMAN. Well——

Senator DORGAN [continuing]. Wants a good number of Golden

Dollars, why will you not separate them and send them the Golden

Dollars?

Ms. ROSEMAN. Well, we currently have no technology or processing equipment that is capable of doing that.

Senator DORGAN. Why do you not get it?

Ms. ROSEMAN. There has not been a demand thus far for that.

I guess one issue that we would need to confront is if we did separate out the Susan B. Anthonys, what to do with them if they are

not going to be used as circulating coin.

Mr. BENFIELD. A Treasury study in 1988, in fact, suggested melting them down, so I am not making this up. This is something that

existed in an internal Treasury study.

Senator DORGAN. I understand that, but it is a different issue.

The issue of retiring the Susan B. Anthony was not what I was

asking about. If the Fed has an accumulation of coins which include Susan B. Anthonys and Golden Dollars and I am a business

person and I go to my bank and my bank goes to the Federal Reserve Board, which is there to service the banks, and says, ‘‘I want

Golden Dollars,’’ and all you have is commingled coins, my question

is, why will you not satisfy the requirements of the local bank?

They want Golden Dollars.

Ms. ROSEMAN. We have traditionally treated all designs of a particular denomination as pretty much interchangeable for transactional purposes. For the same reason, we do not try to segregate

out different State quarters, where there are a number of people

who are still looking for, say, the Delawares or whatever for their

collection. We say that for that program, the same way we do with

the Golden Dollars, when each new State comes out, we will issue

only that State for a period of time to be able to meet the initial

demand, but as we get them back in, they are all commingled and

that is what we subsequently provide.

We have taken that tact with all denominations of coins, that we

will try to support initial introductions of either the State quarter

or the Golden Dollar, but as we build up these inventories, assuming that they are all legitimate coins for transactional purposes, we

just treat them as interchangeable for that respect.

Senator DORGAN. I want to come back to that, but Director Fore,

how many Susan B. Anthony dollars are in circulation? How many

were minted?

Ms. FORE. Nine-hundred-and-twenty-three million were minted.

Senator DORGAN. So about two-thirds of the Golden Dollar were

minted, right? The dollar coin are 1.5 billion, Susan B. Anthony

represents about two-thirds of that?

Ms. FORE. Yes, and the Susan B. Anthonys tend to be located in

certain geographic areas in the United States, so they have concentrations.

Senator DORGAN. How long has it been since you have received

a Susan B. Anthony dollar in change?

42

Ms. FORE. I am a Postal Service customer, so I am one of the

lucky ones who has received Golden Dollars and Susan B. Anthonys.

Senator DORGAN. But outside of the Postal Service?

Ms. FORE. Maybe 5 or 10 years.

Senator DORGAN. And that describes the fact that the dollar coin

is not in great use and the Susan B. Anthony was largely described

as a failure by everybody. Would most all of you agree the Susan

B. Anthony was a failure?

Mr. BENFIELD. Although technically, of all the dollar coins ever

made by the United States Mint, the Susan B. Anthony was the

most successful. It is far more successful than the Eisenhower dollar.

Senator DORGAN. Mr. Benfield, you just have trouble with the

word ‘‘failure,’’ do you not?

But I think almost everyone believes that the reason we went to

the Golden Dollar and tried to develop a new coin was the Susan

B. Anthony coin was not working.

Mr. BENFIELD. That is true.

Senator DORGAN. It was not in circulation. It was too close to the

size of a quarter, it looked like a quarter, and people did not use

it. Am I wrong about that?

Ms. FORE. That is correct.

Senator DORGAN. All right. And if that is the case and we have

900 million of them having been minted somewhere out there in

circulation and Ms. Roseman has them somewhere deep in some

darkened vault commingled with Susan B. Anthonys and she’s

never ordered equipment to try to separate them if some business

and bank wants them separated, then how do you create a success

of this if Mr. Benfield says, this is a great thing for some businesses who want these coins, but you actually cannot get these

coins in the way you want them? When you order Golden Dollars,

you do not want to get from the Federal Reserve Board gunny

sacks full of money that has some Susan B. Anthonys, some Golden

Dollars. So——

Mr. BENFIELD. As recently as the past year, though, when there

were lots of Golden Dollars—Cross Sinclair is a cash manager for

the NT and New York City Transit, and they, by the way, pay out

four million per month, so they are a huge user. Occasionally, their

armored carrier would call up, and you just could see the wheels

turning. They had these Susan B. Anthonys sitting back gathering

dust forever. Wow. Here is the opportunity to get rid of these guys

after 20 years.

They would say, ‘‘Cross, we do not have any dollar coins handy

right now, but would you mind taking some all Susan Bs?’’ It is

New York. He does not care. ‘‘Sure, I will take them for you.’’ So

he was one of the chief minglers, if you will, in the country. The

Fed and the armored carriers were still shoveling out fewer Susan

B. As a matter of fact, within the past 6 months, he got 500,000

pure Susan B’s in rotting cotton bags like this, covered with rat

feces.

Senator DORGAN. From where?

43

Mr. BENFIELD. From CDC. That is a nickname of a huge armored

carrier in the New York City area. And he says, ‘‘I have not asked

my employees to touch those coins.’’

Senator DORGAN. Would an armored carrier have kept them in

inventory? They would not have done that, would they?

Mr. BENFIELD. The armored carrier, understand——

Senator DORGAN. I mean, a carrier transports.

Mr. BENFIELD. The armored carrier manages a coin terminal——

Senator DORGAN. Oh, I see.

Mr. BENFIELD [continuing]. For the Federal Reserve. So that was

Fed coins.

Senator DORGAN. Director Fore, was the decision early on the

Golden Dollar to begin an exclusive marketing arrangement

through Wal-Mart a mistake?

Ms. FORE. I do not think it was a mistake. Since I was not in

this position at that time, maybe I could turn to David Pickens,

who was.

Senator DORGAN. Mr. Pickens?

Mr. PICKENS. The Mint believes that it was not a mistake. The

intent then was when you are introducing a new product to get it

out quickly, and about $96 million in Sacagawea dollars were distributed through the Wal-Mart arrangement. We felt it got them

out weeks ahead of when they may have been available through

the Federal Reserve.

Senator DORGAN. I am going to submit a few questions to you in

writing on that subject.

Let me ask the question of Director Fore, have you considered

bringing the Susan B. Anthony coin back in and doing as Mr.

Benfield suggests, melting them down and making some money, so

that you have only one dollar coin left in circulation?

Ms. FORE. Yes.

Senator DORGAN. Have you studied that issue?

Ms. FORE. We have, and we are working on it now as there are

several options for how to do this. We have to separate them. We

have to figure out where we are going to place them. Working with

the Federal Reserve Bank, we would try to see what the options

were and come up with something that might be a viable alternative.

Senator DORGAN. Do you have a time on that analysis? Are you

active in that study now and does that study include, if you decide

not to pull the Susan B. Anthony out of circulation, to see if we

can find a way to require the Fed to actually segregate those coins

for distribution purposes?

Ms. FORE. We certainly could look at all of that. Perhaps we

could submit to you the questions that we would be looking into

and see if you had any supplementals.

Mr. BENFIELD. I know that you cannot back the Susan B’s easily

from a final user all the way back through the system. That is difficult. But a lot of vendors, car wash operators, cash retailers like

the ones I have mentioned, when they get dollar coins, the first

thing they do is they gather their family around. They throw them

out on the table and they do all the sorting. They only use Golden

Dollars. They put all the Susan B’s back in a bag, take it back, deposit it to the bank, which then goes back to the armored carrier,

44

and I have got a sneaking suspicion that the armored carrier

throws them back into a big bin with other Golden Dollars, they

rewrap them, and they send them right back with the next shipment back to that retailer again.

So there is separation going on every day, if there could be a way

that they could manage the separation exercise that is being done

by private citizens.

Senator DORGAN. Two questions. The minting of these Golden

Dollars, the Sacagawea Golden Dollar, is at 10 million coins this

year, is that correct?

Ms. FORE. Right now, we are at 12 million. We will probably

move above 13 million.

Senator DORGAN. All right. With a coin that has had 1.5 billion

produced, you have reduced production levels—this 10, 12, 14 million production level is not a robust level to increase circulation, is

it?

Ms. FORE. No. As you mentioned earlier, we have quite a few

Golden Dollars in inventory, about 300 million. So we would first

hope to run down those inventories. So if any orders come in, we

are ready.

Senator DORGAN. Director Fore, you also said in your testimony

that it is up to the public how many they use, how often they use

it, but it really cannot be up to the public if they cannot find them,

would you not agree with that?

Ms. FORE. Yes. The public has to be very proactive to get a Golden Dollar. They have to ask for it.

Senator DORGAN. I am only one person, but if I had the opportunity to get a Golden Dollar in change today and use it later in

the day, I would enjoy that opportunity and do it gladly, but I

know that will not happen today. So when you say it is up to the

public, it cannot be up to the public if this is not in wide circulation, and that relates to the structural issues that have been raised

here today, going back to both the Fed—I think you have a quantity of coinage that does not readily lend itself to satisfying the

order from a bank responding to a customer, is that not the case?

Ms. ROSEMAN. Well, if you look at what our experience has been

to date, for the first 2 years, essentially, the Reserve Banks only

paid out Golden Dollars, and even going into this year, where a depository institution explicitly asked for Golden Dollars, we will give

them Golden Dollars as long as we still have any of them segregated in our inventory.

Senator DORGAN. In rolls?

Ms. ROSEMAN. In bags.

Senator DORGAN. In bags, 2,000?

Ms. ROSEMAN. Yes.

Senator DORGAN. Okay.

Ms. ROSEMAN. And so I am not sure how much that issue has

really affected the overall demand, because for the first 2 years, we

have only paid Golden Dollars. This year, if they ask, we will provide Golden Dollars and the demand has still, as far as our net

payments, gone down dramatically since the initial introduction.

Mr. BENFIELD. There is kind of a running joke among some coin

insiders on how to deal with the Susan B. Anthony and one of

them is to just simply announce that you are going to melt them

45

down, melt down what is already readily identifiable, put out a

press release and say, let us destroy all those Susan B. Anthonys,

and let the public go hoard them as collectibles, and they will probably do half the job for us.

Senator DORGAN. Mr. Benfield, we will consider that.

Here is what I would like to do. A vote has just begun in the

Senate and I will have to go vote at some point here.

First of all, I would like to have the Mint provide for me a report,

if you would within the next 30 days or so, prior to our work on

our appropriations bill in which we will consider appropriations for

the Mint, I would like you to provide for me a report on the future

strategy with respect to the Sacagawea Golden Dollar coin. What

is your marketing strategy, promotional strategy, how will you

work with the various entities in our country to find a way to make

this dollar more widely accepted and used? If you would submit

that to me within 30 days, that would be very helpful, and we will

be able to consider that.

I would also like, if I could from the Federal Reserve Board, to

get a report with respect to your coinage inventory, the kind of orders you are getting from banks, and how you are satisfying those

orders and whether there is an issue of commingling. You heard

Mr. Benfield say, and I have in my notes, as well, anecdotal evidence from people who say, ‘‘I have to order a lot of dollar coins

in order to get the sufficient stock of Sacagawea Golden Dollars

that I need because I get intermingled coins with Susan B. Anthony and Sacagawea Golden Dollar coins.’’

Well, that is not a way of satisfying the demand, and I think in

order for this coin to be successful—and I want it to be successful—

we are going to have to make it easy for people to get them, easy

for business, easy for banks. Then I firmly believe that once this

coin is in wide circulation, people will enjoy the opportunity to handle them and use them. It, as Mr. Benfield says, can replace four

quarters and can be used in vending machines. We do need some

support and some work in those areas, as well, including, as I understand it, the Washington, D.C. subway system, and even some

Federal agencies, which I am going to work on as a result of this

hearing.

Amy Mossett, you have heard all of this. What is your impression

of what you have heard this morning?

Ms. MOSSETT. I think it is hopeful that the Sacagawea dollar will

continue to be in circulation and I think, in listening to everything

here, it is apparent to me that there are things that can be done

to put this dollar into circulation. Back in Newtown, North Dakota,

with our Tribal Business Council, we are presenting a resolution

asking the tribe to encourage all of our tribal businesses to use the

dollar coin. I was surprised to find out, for example, that our casino

does not use the dollar coin. But I think the issue of the ease of

obtaining the coin is a main concern, and if it is made easier for

retailers and businesses to obtain the coin, then I think we will see

more in circulation.

I think one of the things as far as the public holding on to the

dollar coin, there certainly has to be a reason for that, and it is

probably because they do not know what the future of the dollar

46

coin is and so they are hanging onto the coins that they do get instead of spending them.

Senator DORGAN. Thank you.

Let me ask one additional question. The 500-plus million coins

that are not now in circulation, part of those coins are coins intermingled with Susan B. Anthonys. Part of them are at the Fed in

bags with only Sacagawea Golden Dollars in the bags. And then

part of them are still at the Mint, is that right? What

quantities——

Ms. FORE. Correct, and ours are only Golden Dollars.

Senator DORGAN. What quantities remain at the Mint?

Ms. FORE. About 300 million.

Senator DORGAN. All right. And as a result of that, you have decreased production to roughly 12 million coins?

Ms. FORE. That is right.

Senator DORGAN. And that is not an ‘‘I give up’’ strategy?

Ms. FORE. That is not a——

Senator DORGAN. An ‘‘I give up’’ strategy?

Ms. FORE. Oh, absolutely not.

Senator DORGAN. In light of that, then, if you will provide me

with the report so that we can evaluate where do we go from here.

I want all of us to think through this.

This coin was developed with great fanfare at substantial cost

and with great hope. My own view, despite Mr. Benfield’s irrepressible optimism, my own view is that it has failed at this point and

I want it to succeed. I believe you all do, as well.

So what I hope will come from this hearing is a kind of a wakeup call to all of us to say this coin exists. We want this coin to be

part of our coinage in this country and widely circulated and widely

used. I especially want it to become a significant part of our coinage and circulation leading up to the bicentennial of the wonderful

Lewis and Clark expedition and I hope this hearing can be a catalyst to rivet all of the attention that needs to be paid to this issue.

I want to insert in the record a statement from Senator Campbell, who was unable to be with us this morning.

[The statement follows:]

PREPARED STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL

Thank you Chairman Dorgan. Good morning, I too would like to welcome our witnesses here today.

Today we will hear from all parties involved in the circulation of the Sacajawea

$1 coin.

Historically, we haven’t had much success with the dollar coins, the Susan B. Anthony or the 1969 Eisenhower dollar. Collecting a coin is one thing, spending it

every day is another. When the Sacajawea coin was released in 2000, the common

expression was that ‘‘everybody wants one, but nobody wants two.’’

According to the March 29, 2002 Mint report to Congress, the Mint spent $62.3

million to promote the dollar coin and that amount was just to persuade Wal-Mart,

Coin Star, SFX entertainment, International House of Pancakes and others to use

the dollar coin in their establishments or facilities.

I would presume that a great deal of this amount was for awareness. What we

are looking for now is not awareness, but answers on how to get the coin to co-circulate with the $1 note and to determine what percentage of the circulating market

will determine if the coin is successful.

I look forward to your testimonies to address these issues and possibly some type

of resolution to the problems.

Thank you.

47

[CLERK’S NOTE.—We have received a written statement that will

be included in the record.]

PREPARED STATEMENT OF THE INTERNATIONAL CARWASH ASSOCIATION

The International Carwash Association and the Car Wash Industry

Founded close to 50 years ago, the International Carwash Association (ICA) represents over 3,000 members who own and operate over 18,000 car wash facilities

and detail shops across the country and around the world. Over 90 percent of ICA

member car wash facilities are family-owned and operated small businesses. ICA

also represents over 400 suppliers, manufacturers, and distributors to the car care

industry.

The International Carwash Association serves as the official voice of the car wash

industry, providing marketing, market research, public relations, and advertising

support programs, car wash safety training programs, and special bulletins for its

members. ICA also serves as the industry liaison with automobile manufacturers,

publishes a monthly newsletter and provides access to an annual Membership Directory & Buyer’s Guide, as well as coordinating the ICA Annual Convention & Exposition and management seminars held throughout the world.

As a Nation of over 135 million cars, the American car care industry has expanded into a multi-billion dollar annual industry. In the United States, the car

care industry employs an estimated 500,000 people. There are an estimated 75,000

car wash operations in the United States; of these, 30,000 are coin-operated, selfservice facilities. One community car wash can serve more than 100,000 customers

each year.

The Dollar Coin and Customer Service at Car Wash Facilities

The car care industry has been an ardent supporter of the new Golden Dollar coin

since its inception. Of the various segments of the professional car care industry,

the coin-operated, self-service car washes and in-bay automatic car washes, have the

ability to automatically receive and dispense the new Golden Dollar coin.

The car care industry was quick to support the introduction of a new dollar coin

because of its distinctive look. The golden appearance of the new dollar coin makes

it easily distinguishable from the quarter. That single factor alone was responsible

for car wash operators to begin retrofitting their facilities to accept the Golden Dollar. Previously the Susan B. Anthony (SBA) coin had not been used in our industry

because it was easily confused with the quarter. The car washes most readily suited

to the dollar coin are those that do not employ customer service attendants. As a

result, car wash operators were concerned, and this concern has since been borne

out, that the confusion between the SBA and the quarter would create customer dissatisfaction. This is made more problematic when the customer interaction is limited to coin-dispensing equipment, with no opportunity for operators or attendants

to help the customer distinguish the SBA from the quarter. Complaints to our customer service telephone lines and vandalism to our coin changing equipment provide

clear evidence of the problem with the SBA.

The migration from accepting a single coin (the quarter) to accepting multiple denominations of coins is both time-consuming and expensive. The equipment required

to accept multiple coin denominations requires a significant investment to purchase

and install. Petty cash reserves must be more than quadrupled. Nonetheless, the

coin-operated car washes began this conversion process based upon the Mint’s marketing campaign for the new Golden Dollar coin and a belief that we would not be

faced with the unpleasant customer service issues created by the SBA.

he Need for an Uncontaminated and Bulk Supply of Golden Dollars

The conversion process at car wash facilities was progressing with strong commitment until the concern with the SBA turned into a reality. Orders for the Golden

Dollar became contaminated with inclusion of the SBA and immediately our customers became angry because they believed they were being ‘‘shortchanged’’ by our

change machines. It appears that the Mint was successful in educating the public

to believe that the dollar coin was golden in color, not silver, but the Mint has failed

to ensure the availability of Golden Dollars, free of SBA contamination. It has also

failed to support the needs of businesses relying on the dollar coin for commerce.

Today, faced with contaminated Golden Dollar orders, car wash operators across

the country have stopped their conversion process. These, as well as other coin-operated businesses that order and dispense the dollar coin as an essential component

to their business models, can not be expected to make additional investments in conversions until the Mint gives a clear signal that the new Golden Dollar will be the

48

only dollar coin received when Golden Dollar-only orders are placed at our financial

institutions. For those of us relying on coin-operated equipment to provide our business services, this decision is not an easy one. Do we abandon the financial commitment we have made to the Golden Dollar’s acceptance and return to dispensing and

accepting only quarters at our self-service facilities? How do we respond to the dissatisfaction expressed by our customers who have accepted the Golden Dollar and

have been enjoying the ability to use a single coin to purchase services, but who

will have to return to using four coins for the same services? Certainly an unacceptable option, one contrary to best business practices, would be to dispense random

combinations of SBA and Golden Dollar coins, accepting customer dissatisfaction

and their confusion between the SBA and the quarter.

The contaminated supply of Golden Dollar coins is causing more than just customer relations nightmares for our service sector. When an operator receives dollar

coins from a local bank, they are received from the armored carrier wrapped in rolls,

not loose in bulk. These business people are primarily owner/operator small businesses whose time is already at a premium. Under the current delivery system, they

must take the time to unwrap the coin rolls, manually separate the SBA coins (because the SBA has the same diameter as the Golden Dollar, automated sorting

equipment will not work), and make another trip to the bank to buy more Golden

Dollar coins to meet their petty cash requirements. This process is repeated as much

as four to five times before, for example, 2,000 Golden Dollars are secured from an

initial $2,000 purchase. It is not at all unusual for 50 percent, or as much as 85

percent, of the coinage to be the SBA. A car wash operator may purchase, and

manually process, as many as 5,000 dollar coins just to get 1,000 Golden Dollars.

And this process is repeated every week to meet our petty cash demands.

One car wash operator in Denver planning conversions at 14 car wash facilities

has stopped after completing 9 conversions. If the inconvenience and burden on a

small business resulting from SBA-commingling with Golden Dollar deliveries were

not enough, calls on his customer service line have certainly discouraged him from

making conversions at the remainder of his locations.

A survey of nine operators who have converted 24 coin-operated, self-service car

washes to accept the new Golden Dollar indicates that 35,000 Golden Dollars are

put into circulation each week! These are not the Golden Dollars dispensed, some

of which are used at the car wash facility; these are the Golden Dollars leaving our

facilities and being used elsewhere in our local economies. That amounts to

1,820,000 Golden Dollars being placed into circulation each year by 9 small businesses alone. Based on the Mint’s estimate of a profit of $0.82 per Golden Dollar

sold, that represents revenues to the national treasury of $1,492,000. Imagine for

a moment that the more than 30,000 coin-operated, self-service car washes, with reliable sources of the Golden Dollar, would convert to the new Golden Dollar. One

segment of the car wash industry could circulate 2,275,000,000 Golden Dollars each

year! That’s one segment of one industry! That represents the potential of $1.8 billion in revenues to the national treasury.

A Commitment to the Golden Dollar with a Golden Dollar-Only Policy

Car wash operators are surely not alone in their struggle with the barriers to conversion created by the contaminated supply of the Golden Dollar. The customer dissatisfaction and business costs related to the current dollar coin delivery system are

both unnecessary and easily solved. To help the coin-operated, self-service business

sector help make the Golden Dollar a real success, the Mint must respond to the

contamination issue and the needs of those businesses that both rely on the dollar

coin and are in the best position to enhance its circulation. The Mint’s efforts to promote the Golden Dollar must now become more attentive to the practical, business

needs of the coin-operated, self-service sector of our economy that relies on Golden

Dollar-only dispensing.

Orders for dollar coins placed at local financial institutions must be delivered

without contamination by the SBA and in bulk format. To further avoid confusion

in the general public, the SBA should be taken out of circulation for purposes of

commerce. The SBA should become the collector’s item, not the Golden Dollar. To

this end, the SBA should not be delivered by the Federal Reserve to local financial

institutions.

Golden Dollar-only deliveries, in bulk, based on Golden Dollar-only requests at

local financial institutions where small businesses bank, will result in the use of the

Golden Dollar not only at our car wash facilities and other coin-operated, self-service

facilities, but also at retail businesses throughout our communities. As part of one

industry sector with great potential to help place the Golden Dollar into circulation

and promote public use and acceptance, car wash operators will do their part, but

49

reliable, business-friendly sources of Golden Dollars will be essential to our success

and the success of the dollar coin.

ADDITIONAL COMMITTEE QUESTIONS

Senator DORGAN. I want to thank all of you for being here. Amy

Mossett, thank you not just for coming today but for keeping the

spirit of Sacagawea alive as you travel around the country. Director

Fore and Mr. Pickens, thank you. Ms. Roseman, thank you for representing the Federal Reserve Board. And Mr. Benfield, thank you

for being an optimist.

[The following questions were not asked at the hearing, but were

submitted to the Agencies for response subsequent to the hearing:]

QUESTIONS SUBMITTED TO HENRIETTA HOLSMAN FORE

QUESTIONS SUBMITTED BY SENATOR BYRON L. DORGAN

Question. During the recent hearing before the Senate Appropriations Subcommittee on Treasury and General Government, the United States Mint Director

testified that the United States Mint and the Federal Reserve are working together

to increase the circulation of the Golden Dollar by defining options and resolving

issues in several key areas that are barriers to increasing circulation. These key

areas and related matters are discussed in more detail in the United States Mint’s

responses to the following Questions for the Record.

After receiving Congressional approval, the United States Mint proposes to focus

on eliminating four of the five barriers to increasing the circulation of the Golden

Dollar during the next 18–24 months. We will work with our partners, the Federal

Reserve Banks, armored carriers, financial institutions, and commercial users to ensure that businesses can obtain Golden Dollars.

As we proceed, we are mindful of the recommendation by the House Appropriations Subcommittee on Treasury, Postal Service, and General Government that the

United States Mint make all applicable modifications and improvements to its Golden Dollar marketing plan based on the results of the current General Accounting

Office (GAO) studies and on all other pertinent economic and policy factors prior to

the plan’s implementation.

Why were these obstacles not considered and addressed before the initial launch

of the Golden Dollar?

Answer. Many of the obstacles were considered and discussed at the Financial Institutions Advisory Council (FIAC). The United States Mint and Federal Reserve

formed FIAC as a forum for financial trade associations concerning the Golden Dollar. Members included the American Bankers Association, America’s Community

Bankers, Independent Community Bankers of America, and the National Association of Federal Credit Unions. The Federal Reserve’s Cash/Fiscal Product Office was

also represented. Although this group identified some issues, plans were not made

to address them all.

While the FIAC considered the issues associated with wrapping and ordering options, its efforts did not go far enough to totally eliminate these obstacles. The three

remaining barriers (commingling, extra fees and co-circulation) were not considered

or specifically identified as barriers limiting circulation. We now believe that the following barriers may contribute to limited circulation of the Golden Dollar:

—Commingling.—The Federal Reserve Banks and armored carriers currently receive commingled Golden Dollars and Susan B. Anthony dollars from depository

institutions. Retailers reject using the Susan B. Anthony dollars because they

too closely resemble the quarter. They are reluctant, therefore, to order dollar

coins if they cannot be guaranteed Golden Dollars. Transit authorities and the

Postal Service however, have accepted commingled dollar coins. We did not anticipate commingling as being a problem because the FIAC believed that collectors would have pulled the Susan B. Anthony dollars from circulation once they

knew that the coin was no longer in production.

—Bags versus rolls (Wrapping capacity).—Different industries want the coins

packaged in formats that satisfy their business needs. Retail commerce will

usually request wrapped coins. Armored carriers told us that they were reluctant to invest in modern, high-speed rolling equipment without assurance of a

return on their investment. We could not guarantee sustained levels of circulation for the coin in every geographic region. Therefore, the armored carriers conVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00053 Fmt 6633 Sfmt 6621 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
50

1Fleishman-Hillard Consumer Awareness, Acceptance and Potential Use Tracking Survey—

July 2000. 2 Coinstar National Currency Poll dated January 8, 2002.

tinued to use older technology to wrap the dollar coin. To meet the initial peak

demand when the United States Mint first introduced the Golden Dollar, it contracted with a private vendor to supplement the rolling capacity of the armored

carriers. Given current circulation of the dollar coin, the armored carriers can

meet demand with existing equipment.

—Extra fees.—Financial institutions and retailers are charged fees by carriers for

wrapping and transporting coin. We expected that this barrier would not

present a problem because it is the industry practice to pay wrapping fees for

coin. However, our research and advisory groups did not anticipate that the

market would simply decline to pay this fee because they had an enormously

powerful alternative in the one-dollar currency note.

—Ordering options.—Some commercial banks’ cash ordering systems do not provide for the specification of dollar coins versus dollar bills and, by default, bills

are generally ordered. Between the United States Mint and the Federal Reserve

System, we were unaware of the deficiencies in some of the cash ordering systems when we launched the coin.

—Co-Circulation with Dollar Bill.—Historically, research consistently indicates

that a dollar coin would have limited success when co-circulated with the dollar

bill in the majority of market segments. Because the Treasury Department is

committed to supporting both the dollar note and coin, the United States Mint

and the Federal Reserve System will work under this longstanding policy to

find ways to increase the Golden Dollar’s sustained use in commerce.

Question. Does the United States Mint have adequate resources and staff to direct

a marketing effort to increase circulation of the Golden Dollar?

Answer. The United States Mint will assess any additional resource requirements

based on the approved marketing plan submitted for Congressional approval. However, as advised by Chairman Istook in his May 20, 2002, letter, the United States

Mint is waiting to review the GAO study on the Golden Dollar that is scheduled

to be completed in late summer. Upon receipt, the United States Mint will review,

and if appropriate, revise its marketing plans for fiscal year 2003 to consider GAO’s

recommendations and all other pertinent economic and policy factors before resubmitting them to Congress.

Question. What would be the pros and cons to contracting this effort to a private

firm that specializes in marketing?

Answer. The biggest benefit to be derived from contracting this effort to a private

firm is the opportunity to draw upon the expertise of a company with extensive experience in the field of marketing. Of course, there is an expense associated with

hiring this expertise from the private sector.

Question. During the initial launch of the Golden Dollar, Wal-Mart was a major

participant. That partnership resulted in the distribution of 94.3 million Golden Dollars. What is their role today? What has changed and why?

Answer. Once the original agreement was fulfilled, Wal-Mart did not express any

interest in continuing to drive the use the new dollar coin in its operations. Specifically, given the difficulty in obtaining the coin from local financial institutions, WalMart felt that there was insufficient customer demand to warrant the continued use

of the coin in its daily commerce. In addition, the Golden Dollars were being privately shipped to Wal-Mart, outside of normal distribution channels, during the promotion period. This process was too costly and too cumbersome to be sustained in

normal business. It is more expensive for Wal-Mart to use Golden Dollar coins than

dollar notes due to shipping expenses and extra wrapping fees charged by carriers.

Question. What were the goals of the initial marketing campaign? How were they

met? What are the goals of the new marketing campaign?

Answer. In 2000, the United States Mint created and executed a marketing campaign for the Golden Dollar Program that had several key objectives:

—Generate positive awareness of the program among consumers.

—Promote long-term acceptance of the coin by the commercial sector and the public.

—Support changes in consumer behavior and stimulate usage of the Golden Dollar in commerce.

This campaign yielded encouraging results for Golden Dollar awareness and acceptance. In July 2000, 6 months after launching the new dollar coin, 91 percent

of Americans polled were aware of the Golden Dollar.1 However only 37 percent said

they have actually used the coin to make a purchase.2

51

The United States Mint has proposed a 2-year plan that, if approved by Congress,

would focus its efforts and investments on eliminating four of the distribution barriers while proactively participating in selected programs to improve circulation of

the Golden Dollar coin. We tentatively plan to focus on usage in military, federal,

state, and local government agencies, and large urban transportation districts, as

well as in selected private sector activities and at retail establishments such as

NASCAR events and retail businesses located on the Lewis and Clark expedition

route.

Question. Can Public Service Announcements be used to aid the circulation of the

Golden Dollar?

Answer. While public service announcements can create and maintain public

awareness, studies have shown that they do little to influence or change public behavior. To increase the circulation of Golden Dollars, the United States Mint’s marketing campaigns have tried to educate consumers and help change their behavior.

Because the Mint’s studies show that public awareness of the Golden Dollar is

already high, we do not believe that public service announcements are the most effective use of resources at this time. We will continue to monitor this and reevaluate

this decision if events warrant.

Question. What were the needs of the initial promotion partners in terms of packaging (rolled vs. bags), availability, commingling, storage and delivery expenses?

How would the United States Mint rate itself in meeting these needs?

Answer. The initial Golden Dollar promotions were in support of the Wal-Mart

and the Small Bank Programs. Our partners required the following for their promotional efforts:

—All coins were to be in rolls.

—All coins were readily available to meet the promotional requirements.

—There were no commingling issues during the promotional efforts because Golden Dollars were distributed directly from the United States Mint.

—There were no storage issues because each promotional partner received limited

quantities as required for each promotion.

—The United States Mint paid for all distribution and promotional expenses.

We performed well in meeting the needs of our original promotional partners. Because the Mint’s efforts are to promote a successful dollar coin that circulates

through traditional distribution channels, we do not believe that direct shipment

programs are the most effective use of resources at this time. We will continue to

monitor this and reevaluate this decision if events warrant.

Question. It is my understanding that the former United States Mint Director

went around to all federal agencies requesting their adoption of the Golden Dollar

in their service centers and restaurants. All, including the Senate, said no thanks.

According to your recently submitted marketing report, encouraging the use of the

Golden Dollar through government agencies is one of your ideas for increasing circulation. How will you approach this differently than the past Director?

Answer. The former Director of the United States Mint did visit many federal

Government agencies to encourage their use of the Golden Dollar. These meetings

did not create sufficient interest in using the coin. As you requested at the hearing,

the United States Mint would welcome your support and the help of Congress in

requesting that federal agencies and the military use the Golden Dollar.

Question. What can be done to remove the Susan B. Anthony dollar coin from circulation?

Answer. To eliminate commingling of dollar coins the United States Mint would

engage in a two-step process. The first step would be to remove Susan B. Anthony

dollars from the existing inventories of dollar coins. The second is to take the necessary steps to ensure that inventories are replenished only with Golden Dollars.

Remove Susan B. Anthony dollars from circulation

The technology exists to rapidly sort items by color, density, temperature, heat capacity, optical refractive index, or electromagnetic field intensity. The United States

Mint could acquire the necessary sorting capacity to automatically separate the

Susan B. Anthony dollars from the Golden Dollars.

If Congress adopts this program, sorting could take place with privately contracted companies, armored carrier coin depots, or non-profit companies. This sorting program is expected to run for 2 years, however, this time frame could be reduced or extended based on the success of the program. The percentage of Susan

B. Anthony coins removed from circulation depends on the demand for the dollar

coin and the velocity of payments and receipts between the Federal Reserve and the

depository institutions. Our current projections indicate that after 2 years, approximately 90 percent of the dollar coins in circulation will be Golden Dollars. The cost

52

associated with program is being analyzed and will be documented in the United

States Mint’s Golden Dollar report to Congress.

As Susan B. Anthony coins are removed from the inventories, the United States

Mint would replenish dollar coin supplies with Golden Dollars as the Federal Reserve Banks order more coin. Susan B. Anthony coins returned to the United States

Mint as ‘‘uncurrent coin’’ would be melted and reworked into other denomination

coinage. The United States Mint will buy back the Susan B. Anthony coins from

the Federal Reserve Banks at face value. However, as I mentioned in my testimony,

we are mindful of the fact that attempts to remove Anthony dollars from circulation

could be costly. Demonetizing Anthony dollars could cost in the hundreds of millions

of dollars in reverse seigniorage. Just the process of sorting Anthony dollars and

storing them could be expensive.

Sorting and melting Susan B. Anthony coins is likely to increase collector demand

and therefore increase the likelihood that the public will remove the remaining

coins from circulation. This would have the effect of removing additional Susan B.

Anthony coins from circulation and further increase the ratio of Golden Dollars

coins in commerce.

Issuing only Golden Dollars when dollar coins are ordered from the Federal Reserve

or their coin terminals

The long-standing policy of the Federal Reserve is to pay re-circulated coin first

before using new coin to fill orders. However, the Federal Reserve Banks and their

coin terminals have modified their standard coin distribution policy to support the

Golden Dollar program. If Congress approves this plan, the Federal Reserve Banks

will be able to continue this practice.

Question. Does the Federal Reserve have the storage capacity to do so?

Answer. According to the Federal Reserve Banks, if Congress approves the commingling plan referenced in the answer to the above question, the Susan B. Anthony

coins could be melted and used for other coinage rather than stored in inventory.

Question. What can the Federal Reserve do to ship/distribute more Golden Dollars

and fewer Susan B’s?

Answer. As discussed in the answers above, sorting and exchanging circulating

Susan B. Anthony dollars with Golden Dollars, while maintaining an inventory of

strictly Golden Dollars for shipments to financial institutions, would significantly reduce if not eliminate, the commingling problem for those businesses whose banks

are serviced by the Federal Reserve. In addition, the Federal Reserve System has

temporarily modified its long-standing coin distribution policy and is currently shipping only Golden Dollars when filling orders to financial institutions. As referenced

in our prior response, it will be able to continue this practice if Congress approves

the plan to eliminate commingling.

Question. I understand that retail businesses, particularly those in self-service,

are not able to secure uncontaminated (a mix of Sakakawea and Susan B) supplies

of the Golden Dollar. For example, in order to meet a weekly demand of $1,000 to

$2,000 in Golden Dollars, one coin operated car wash owner reports having to make

on average four trips to his local bank, manually separating out the Susan B. Anthony coin from the roll of dollar coins during each trip. On average, this operator

will have to purchase $5,000 in dollar coins to secure $1,000 in Golden Dollars.

These same operators report that they have stopped making investments in their

conversion of change equipment to accept the dollar coin until the contamination

issue is solved. Of course, those operators who have made the commitment and invested in the conversions are incurring significant costs of doing business resulting

from the contamination issue.

Answer. As referenced in prior questions, if directed by Congress, we have a plan

that would significantly reduce, if not eliminate, the commingling of the Susan B.

Anthony dollar with the Golden Dollar. If Congress authorizes this process, bags

and rolls of pure Golden Dollars will be more readily available to businesses.

Question. What can the United States Mint do to help secure an uncontaminated

supply of Golden Dollars for the self-service sector and coin-operated businesses?

Answer. If directed by Congress, there is a plan to eliminate the commingling of

the Susan B. Anthony dollar with the Golden Dollar. If Congress authorizes this

process, bags and rolls of pure Golden Dollars will be more readily available to businesses.

Question. Can financial institutions still order uncontaminated supplies of Golden

Dollars directly from the United States Mint at the same cost as they pay the Fed?

Answer. No. The United States Mint does not have the infrastructure to efficiently distribute circulating coins directly to financial institutions.

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Question. What role can the Fed play in securing an uncontaminated supply of

Golden Dollars when it receives an order from a financial institution like a local

bank or a small business?

Answer. The plan to significantly reduce, if not eliminate, the commingling of

Susan B. Anthony and Golden Dollars, if directed by Congress, will ensure a steady

supply of Golden Dollars to those banks serviced by the Federal Reserve. In order

for this plan to be successful, the Federal Reserve will need to order Golden Dollars

from the United States Mint as demand dictates and distribute only Golden Dollars

to its customers.

Question. How can the Fed, working with the custodians who deliver orders to

banks for the Golden Dollar, help create a reliable, uncontaminated supply of the

Golden Dollar?

Answer. This question has been answered in our responses to questions above.

Question. What more can be done to encourage armored carriers like Brinks to

invest in the equipment necessary to roll the Golden Dollar?

Answer. Brinks and other armored carriers will develop and install adequate capacity to process and distribute the Golden Dollar coin if they are assured that the

coin will circulate and be ordered consistently by the banks. In other words, the armored carriers have indicated that they will make an investment to increase their

dollar coin processing capacity if they believe that they will get adequate business

to offset their investment and make a reasonable profit. They currently are reluctant to invest capital in dollar rolling equipment because they do not believe there

will be sufficient, sustained business to justify the expenditure. The coin depots

have adequate capacity to handle current demand for dollar coins.

Question. The Federal Reserve Bank states that within months, their inventories

of Golden Dollars could be depleted. With approximately 250 million Golden Dollars

currently in their inventories, how is this likely?

Answer. According to the Federal Reserve Banks, since it has re-instituted its policy of filling all orders for dollar coins with only Golden Dollars, its remaining inventory of non-commingled Golden Dollars is expected to last no more than 2 to 3

months. The United States Mint will manufacture additional Golden Dollars as required to meet the demand of the Federal Reserve Banks.

QUESTIONS SUBMITTED BY SENATOR BEN NIGHTHORSE CAMPBELL

Question. Since the Golden Dollar coin is still not circulating to its maximum capacity, what plans and expenditures do you have in mind for the future?

Answer. We will focus our efforts and investments on eliminating four of the distribution barriers while actively participating in selected programs to improve circulation of the Golden Dollar coin. We plan tentatively to focus on usage in military,

federal, state, and local government agencies, and large urban transportation districts, as well as for selected private sector sustainable activities and at retail establishments.

Question. The United States Mint spent $62.3 million to promote the Dollar coin,

what exactly did we get in return for this vast expenditure?

Answer. The United Sates Mint contracted with three firms to help educate the

public about the Golden Dollar and raise awareness of its availability and utility.

This effort included:

—Fleishman-Hillard.—Spending $4 million during 2000–2001 for the purpose of

conducting market research, develop partnerships, and handle advertising campaigns.

—Fleishman-Hillard.—Spending $48.8 million during 1999–2001 for the purpose

of overseeing public relations and promotional efforts. This included a $40 million advertising buy for the George Washington advertising campaign.

—Double Eagle.—Spending $8 million during 1999–2000 for the purpose of developing and implementing a marketing and sales plan.

—Marketbridge—(formerly Oxford).—Spending $1.5 million during 1998–2002 for

the purpose of conducting early market analysis and market research to determine the effectiveness of our marketing efforts (surveys).

As a result of all the Mint’s efforts, and in no small part due to the success of

the investments listed above, the Mint has returned over $1 billion to the General

Fund from the seigniorage from the Golden Dollar since the inception of the program.

Question. In the past, we haven’t had good luck with our Dollar coins, what evidence do you have now that would indicate that the American people would like to

have this coin and that they actually plan to use it in their daily business?

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Answer. While we understand that the Golden Dollar will never achieve the same

velocity as our one-dollar currency note while co-circulating, the coin has potential

when being used for transit districts, small purchases, and vending. If we can overcome some of the major barriers preventing general circulation today, then the public may accept the coin in everyday use. The future report from the GAO may shed

more light on this question.

QUESTIONS SUBMITTED BY SENATOR JACK REED

Question. Director Fore, some believe that the Sakakawea Dollar coin has not

been successful because people prefer to use the dollar bill. Others believe that the

coin has not been circulated sufficiently. What steps does the United States Mint

believe should be taken to foster greater use of the Sakakawea Dollar coin? Does

the United States Mint believe that the paper dollar must be eliminated in order

for the dollar coin to succeed?

Answer. In order to foster greater use of the dollar coin, the United States Mint

believes that it is necessary to eliminate the barriers and increase circulation in certain key markets as previously noted in our responses.

Historically, research consistently indicates that a dollar coin would have limited

success when co-circulated with the dollar bill in the majority of market segments.

Because the Treasury Department is committed to supporting both the dollar note

and coin, the United States Mint and the Federal Reserve System will work under

this longstanding policy to find ways to increase the Golden Dollar’s sustained use

in commerce.

Question. Director Fore, can you elaborate a bit on what further plans the United

States Mint has to promote the dollar coin in the future?

Answer. The United States Mint seeks to eliminate the barriers preventing the

coin from being distributed widely. These barriers include the inability of businesses

to receive rolls or bags as preferred, the commingling of Golden Dollar and Susan

B. Anthony coins, the fees incurred in rolling and transporting coins, the inadequate

commercial bank ordering systems which do not differentiate between coin and

paper dollars, and the co-circulation of dollar coins and notes.

The United States Mint’s plan, if approved by Congress, would focus efforts and

investments on eliminating the distribution barriers we can control while

proactively participating in selected programs to improve circulation of the Golden

Dollar. We tentatively plan to focus on usage in military, federal, state, and local

government agencies, and large urban transportation districts, as well as selected

private sector retail establishments and events.

Question. Director Fore, what are your thoughts regarding assertions that the

Federal Reserve Bank did not adequately distribute the dollar coin at the beginning

of the rollout process, and therefore quite possibly contributed to a lack of interest

in the coin?

Answer. After the first 6 months, the Federal Reserve Banks were able to fill all

orders for Golden Dollars as they were received. The Federal Reserve Banks did everything within their power to meet orders coming in from financial institutions.

However, during the first 6 months of the program, demand for the Golden Dollar

exceeded supplies coming from the United States Mint. Many Federal Reserve

Banks were required to implement an allocation program in order to achieve an equitable distribution of Golden Dollars from their limited inventory.

In addition, the United States Mint’s decision to bypass the banking industry and

distribute coins directly to Wal-Mart stores may well have contributed to the lack

of enthusiasm on the part of the banks to embrace the Golden Dollar.

The United States Mint now is committed to sustainable, long-term, cost effective

distribution approaches. Thus, working with the banking industry and the Federal

Reserve System is essential to our new approaches.

QUESTIONS SUBMITTED TO LOUISE L. ROSEMAN

QUESTIONS SUBMITTED BY SENATOR BYRON L. DORGAN

Question. What can be done to remove the Susan B. Anthony dollar coin from circulation?

Does the Federal Reserve have the storage capacity to do so?

What can the Federal Reserve do to ship/distribute more Golden Dollars and

fewer Susan B’s?

Answer. The Susan B. Anthony (SBA) dollar coins could be removed from circulation with a program in which the Mint reacquires SBAs that have been placed into

55

1 All circulating coins, regardless of design, are legal tender and satisfy the need for coins used

in transactions. The Reserve Banks do not have the storage capacity to hold indefinitely noncirculating coins. As of May 31, 2002, Reserve Banks reported that coins filled 69 percent of

dedicated coin storage capacity in their vaults and coin terminals. Demand for coins is seasonal,

and Reserve Bank coin inventories are low going into summer months. During the fall and winter of 2001–2002, more than 90 percent of Reserve Bank dedicated coin storage capacity was

filled.

circulation. The premise of such a program is that the public’s total demand for dollar coins would increase if unmixed Golden Dollars were available rather than commingled SBAs and Golden Dollars. In general, an evaluation of such a program

would need to consider the seigniorage that would be gained from greater circulation of Golden Dollars in relation to the operational and other costs the program

would incur. Further, an evaluation would need to consider the potential for savings

to society from an overall increase in the use of dollar coins relative to bank notes.

The Federal Reserve’s role in coin distribution is generally to hold and distribute

coins to meet the needs of the public. The Reserve Banks perform this function by

providing coin to depository institutions, which, in turn, meet the needs of their customers. As a result, if a program to remove SBAs from circulation were implemented, the Reserve Banks would no longer have a reason to hold these non-circulating coins in their vaults.1

There are several key issues that need to be addressed as part of an evaluation

of a program to withdraw SBAs. First, there needs to be an effective technology to

sort SBAs from Golden Dollars. Currently the Reserve Banks have no equipment

that can mechanically distinguish between these coins. The Federal Reserve understands that the Mint is researching potential technologies that could sort commingled coins. Second, the program will, at a minimum, involve transportation and

some storage of SBAs. For example, SBAs would need to be shipped from Reserve

Bank facilities back to the Mint to be stored or destroyed.

Third, there are different methods by which the Mint could pay the Federal Reserve for SBAs that it reacquires. One approach would be for the Mint to pay Reserve Banks directly for the SBAs that the Reserve Banks return to it. Under a second approach, which we understand that the Mint is suggesting, the Mint would

pay Reserve Banks for SBAs that it acquires by exchanging new Golden Dollars for

SBAs. Either approach would address the issue of removing the SBAs from the Reserve Banks’ inventories and books once they are no longer used to meet the public’s

demand for dollar coins. The first approach, however, would enable the Reserve

Banks to better manage their coin inventories by allowing them to order Golden

Dollars only to the extent necessary to meet demand. An exchange of SBAs for Golden Dollars would not address the very large inventories that have built up in the

Reserve Banks, unless demand for the dollar coin were to increase significantly due

to the withdrawal of SBAs from circulation. It is not clear the extent to which withdrawal of SBAs from circulation would affect demand for dollar coins.

Neither payment approach would pose a material economic cost to the government. In the first approach, all other things held constant, the Reserve Banks would

invest the proceeds they receive from the Mint in government securities. The

present value of the earnings stream on these securities would equal the value of

payments made by the Mint for the SBAs, and would be returned to the Treasury

over time as part of the Federal Reserve’s excess earnings. Thus, the earnings on

the securities in which the Mint proceeds are invested would offset the reverse seigniorage. In the second alternative, we understand that the Mint would not recognize reverse seigniorage on the SBAs returned to it and would not recognize seigniorage on the Golden Dollars used in the exchange.

Overall, if the Congress authorizes the Mint to undertake and fund a program to

withdraw SBAs, the Reserve Banks will cooperate fully. As part of the comprehensive program, the Reserve Banks would resume paying out only Golden Dollars as

depository institutions order them.

Question. I understand that retail businesses, particularly those in self-service,

are not able to secure uncontaminated (a mix of Sakakawea and Susan B.) supplies

of the Golden Dollar. For example, in order to meet a weekly demand of $1,000 to

$2,000 in Golden Dollars, one coin operated car wash owner reports having to make

on average four trips to his local bank, manually separating out the Susan B. Anthony coin from the roll of dollar coins during each trip. On average, this operator

will have to purchase $5,000 in dollar coins to secure $1,000 in Golden Dollars. The

same operators report that they have stopped making investments in their conversion of change equipment to accept the dollar coin until the contamination issue is

solved. Of course, those operators who have made the commitment and invested in

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2The Reserve Banks do not provide cash services directly to businesses.

the conversions are incurring significant costs of doing business resulting from the

contamination issue.

What role can the Fed play in securing an uncontaminated supply of Golden Dollars when it receives an order from a financial institution like a local bank or a

small business?

How can the Fed, working with the custodians who deliver orders to banks for

the Golden Dollar, help create a reliable, uncontaminated supply of the Golden Dollar?

Answer. As explained in the answer to the first question, Reserve Banks could

resume issuing only Golden Dollar coins to depository institutions if the SBAs are

sorted and exchanged for new Golden Dollars. While the Reserve Banks provide

wholesale cash services directly to depository institutions that account for the large

majority of the nation’s coin volume, about half of the nation’s 20,000 depository institutions obtain their cash through correspondent banks.2 In addition, coins circulate among depository institutions, retail establishments, and armored carriers for

long periods without being handled by a Reserve Bank. Consequently, we would expect some SBAs to continue circulating in commerce even if Reserve Banks sort all

SBAs from their deposits.

The Federal Reserve informally surveyed its largest depository institution customers about their customers’ demand for dollar coins. The ten survey respondents

represent large correspondent banks that provide coins to depository institutions not

served by Reserve Banks. All respondents reported that their organizations do not

have equipment to sort dollar coin designs, and nine of them would not invest in

sorting equipment because it would increase expenses and create operational issues

not justified by customer demand. The respondents reported that their largest volume customers that most frequently order dollar coins, such as the transit authorities, vending companies, and U.S. Postal Service, do not prefer one coin design to

another; other customers occasionally want only Golden Dollars, but not in quantities sufficient to justify investing in sorting equipment.

Question. What more can be done to encourage armored carriers like Brinks to

invest in the equipment necessary to roll the Golden Dollar?

Answer. Reserve Bank customers report that their large-volume users of dollar

coins want coins in 2,000-piece bags, while smaller-volume retail customers use rolls

of dollar coins. The Federal Reserve understands that most armored carriers have

wrapping equipment that can roll all denominations of coin. The Mint reports, however, that armored carriers would need to invest in additional high-speed wrapping

equipment if demand for rolled dollar coins significantly increases.

Question. The Federal Reserve states that within months, their inventories of

Golden Dollars could be depleted. With approximately 250 million Golden Dollars

currently in their inventories, how is this likely?

Answer. The Federal Reserve does not have 250 million Golden Dollars in inventory; rather, Reserve Banks held approximately 203 million in total dollar coins as

of May 31, 2002. Based on an April 2002 survey of all Reserve Bank offices, the

Federal Reserve estimates that at most 30 percent, or 60 million, of the coins are

unmixed Golden Dollars. At current payment rates, Reserve Banks would exhaust

their unmixed Golden Dollar inventories in about 3 months. Because Golden Dollar

inventories are not evenly distributed across the country, it is likely that some Reserve Bank offices will exhaust supplies before others. Reserve Banks will begin ordering new Golden Dollars again after they have paid out previously-circulated

mixed dollar coins and reduced inventories to normal levels.

Question. Will the Federal Reserve commit to aiding in the effort of circulating

the Golden Dollar?

Are you prohibited legislatively?

Will you agree to sit down with the U.S. Mint and coordinate efforts?

Answer. The Federal Reserve will continue to coordinate with the U.S. Mint to

support circulation of Golden Dollar coins to satisfy our customers’ requirements

and is not legislatively prohibited from doing so.

QUESTIONS SUBMITTED BY SENATOR BEN NIGHTHORSE CAMPBELL

Question. Does the Federal Reserve System have a direct role in the distribution

of the Golden Dollar other than providing cash services to the banks, savings and

loans, and credit unions?

Answer. The Federal Reserve does not have a direct role in the distribution of

Golden Dollars other than providing cash services to depository institutions. CurVerDate 21-JUN-2000 15:00 Oct 29, 2002 Jkt 081563 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 U:\13HEAR\2003\81563.XXX DORISJ PsN: DORISJ
57

rently about half of the nation’s depository institutions, accounting for the large majority of coin volume, deal directly with the Reserve Banks.

Question. Is there more of a problem in the distribution of the Golden Dollar than

any of the other coin denominations?

Answer. To support the introduction of the Golden Dollar coin, the Reserve Banks

varied their normal distribution policies for the first 2 years after the introduction

and paid out only new Golden Dollar coins rather than first paying out previously

circulated coin. Consequently, as of the end of May, Reserve Banks held about 203

million dollar coins in inventory, less than 60 million of which were segregated

Golden Dollars. This dollar coin inventory is more than six times the Federal Reserve’s target inventory of 30 days-payable, or about 20 to 30 million for dollar

coins.

Similarly, the Reserve Banks modified their distribution policy to meet public demand for the Fifty State Commemorative Quarters Program. As each new quarter

design is issued, the Reserve Banks pay out the new design for a short period—typically two to three weeks. After collector demand is satisfied, however, about 600 million quarters are added to the circulating stock every 10 weeks. These additional

coins exceed amounts needed to meet transactional demand. Consequently, Reserve

Bank inventories of quarters continue to grow and occupy significant portions of

their dedicated coin storage space.

Question. What is the cost associated with transporting coins especially the Golden Dollar to and from the Federal Reserve?

Answer. Depository institutions pay the transportation cost of coin to and from

Reserve Banks and the U.S. Mint pays the transportation cost of coin to Reserve

Banks. The Federal Reserve, therefore, has no specific information about coin transportation costs.

Question. Has the Federal Reserve considered investing in processing equipment

that could separate the Golden Dollar and Susan B. Anthony dollar coins?

Answer. We understand that the Mint is investigating sorting equipment that it

would acquire; if the Mint acquired the equipment, the Mint and Federal Reserve

would work collaboratively to locate it wherever it would be most cost-effective from

a transportation, processing, and storage perspective.

QUESTIONS SUBMITTED TO JAMES C. BENFIELD

QUESTIONS SUBMITTED BY SENATOR BYRON L. DORGAN

Question. Mr. Benfield, you are here today on behalf of approximately 30 trade

associations and companies who are strong supporters of the Golden Dollar. What

benefits would be gained by these companies if there was wide distribution of the

Golden Dollar?

Answer. The savings are unique to each company or industry sector, depending

on how change is obtained from banks and how cash receipts are counted processed

and deposited at banks.

For example, all $1 bills received in thousands of municipal bus fare boxes must

be hand straightened. If $1 coins were received instead, the collective savings to all

transit agencies would exceed $100 million annually, according to an analysis by

University of Chicago economist George McCandless.

Some municipal parking authorities are converting on-street parking meters to accept $1 coins because $1,000 worth of quarters weighs 50 pounds while $1,000

worth of $1 coins weighs only 17 pounds. The total reduction in number of coins

and weight would bring significant savings in processing of revenue while bringing

convenience to consumers.

The National Association of Convenience Stores is a member of the Coin Coalition

because it advocates the removal of the penny from circulation. Using $1 coins instead of $1 bills in addition to removing pennies from circulation would reduce

transaction time at the point-of-purchase.

Two fast food operations in Wisconsin have discovered that standardizing their

cash registers in favor of $1 coins speeds transaction. Subway restaurant owner Jim

Opitz found that fewer errors were made because $1 coins do not stick together.

Question. Mr. Benfield, in your testimony you suggest that distribution could be

improved by specific targeting with a concurrent low cost marketing effort. How did

you make that assessment?

Answer. My views are based in part on my work with the Mint’s marketing consulting firms, Oxford Associates (now known as MarketBridge), Double Eagle and

Fleishman Hillard. Oxford Associates identified the self-service carwash industry as

having the largest potential for growth in the use of $1 coins of any market sector.

58

By that time, I also had previous experience working with a carwash operator in

Windsor, Connecticut, who had converted a family-owned operation to use Susan B.

Anthony $1 coins.

Working with Double Eagle and the publisher of the Self-Service Carwash News,

we prepared a 20-page special edition on ‘‘New Money’’—$1 Coin and More!’’ The

core of the publication was a 9,500 word article on the new Golden Dollar written

and researched by Tom Coutre, a successful operator in the Chicago area. The feature article was complemented by a strong opening letter from Mint Director Philip

Diehl, an article on the new $10 and $5 bills, and several full-page advertisements

from the leading coin mechanism manufacturers in the carwash industry.

The publisher later told me that reader response from this publication was the

strongest of any issue he had ever printed.

The proof of the special edition’s success was the conversion by dozens of carwash

operators of their retail locations, many of which operate only with $1 coins. Some

operators are now placing more than 1 million $1 coins into circulation annually.

The total cost to the Mint for this publication was under $10,000. The cost-benefit

to the government was staggeringly positive.

This type of model can be replicated with other industry sectors.

Who should pay for the costs?—The Mint should fund these projects from profits

realized from the sale of Golden Dollars into the marketplace.

What can your coalition do to help this endeavor?—Coin Coalition members can

help to identify businessmen who currently are using the Golden Dollar in their operations. We also will bring 15 years of experience on this issue to the table to make

the Mint’s marketing efforts more targeted and effective.

QUESTIONS SUBMITTED BY SENATOR BEN NIGHTHORSE CAMPBELL

Questions. Other than eliminating the Golden Dollar [$1 BILL????], do you have

suggestions on how to increase the circulation of the Golden Dollar?

Answer. The Mint, working with various trade associations and individual entrepreneurs and governmental entities, should create demonstration projects to test

and prove the viability of $1 coin usage in new markets, such as coin Laundromats,

public pay phones, cafeterias, vending break rooms, commissaries and post exchanges operated at government and military facilities. Some research already exists ON pilot programs in these sectors. I believe they can be brought to fruition,

studied and sold to a broader market for a modest investment by the Mint.

Questions. Since the Golden Dollar has surpassed the Susan B. Anthony by a surmountable amount, what do you consider as success or failure for the Golden Dollar? What do you base your findings on?

Answer. As I testified on May 17, the demand for SBAs during the mid-1990s was

about 60 million per year. The demand during 2001 was about 180 million, or triple

the 1990’s baseline for the SBA. With a sustained marketing plan over the next 5

years, the annual movement of Golden Dollars entering circulation should increase

to at least 600 million.

CONCLUSION OF HEARING

Senator DORGAN. This hearing is recessed.

[Whereupon, at 4:27 p.m., Friday, May 17, the hearing was concluded, and the subcommittee was recessed, to reconvene subject to

the call of the Chair.]

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