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H.R. 5512, THE COIN MODERNIZATION

AND TAXPAYER SAVINGS ACT OF 2008

HEARING

BEFORE THE

SUBCOMMITTEE ON

DOMESTIC AND INTERNATIONAL

MONETARY POLICY, TRADE, AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

MARCH 11, 2008

Printed for the use of the Committee on Financial Services

Serial No. 110–98

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

DEAN HELLER, Nevada

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND

TECHNOLOGY

LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York 

MAXINE WATERS, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

GWEN MOORE, Wisconsin 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

WM. LACY CLAY, Missouri 

KEITH ELLISON, Minnesota 

CHARLES A. WILSON, Ohio 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

RON PAUL, Texas 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JEB HENSARLING, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

DEAN HELLER, Nevada 

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C O N T E N T S 

Page 

Hearing held on: 

March 11, 2008 ................................................................................................. 1

Appendix: 

March 11, 2008 ................................................................................................. 23

WITNESSES 

TUESDAY, MARCH 11, 2008

Brown, Michael J., Vice President, U.S. Public Affairs, Barrick Gold Corporation; Member, Citizens Coinage Advisory Committee; and former Special 

Assistant to the Director, United States Mint ................................................... 16

Geerdes, Richard M., President & Chief Executive Officer, National Automatic Merchandising Association ....................................................................... 18

Johnson, Hon. Jay W., Consultant, Collector’s Universe; former Director, 

United States Mint; and former Member of Congress ...................................... 14

Moy, Hon. Edmund C., Director, United States Mint .......................................... 5

APPENDIX 

Prepared statements: 

Brown, Michael J. ............................................................................................. 24

Geerdes, Richard M. ......................................................................................... 30

Johnson, Hon. Jay W. ...................................................................................... 32

Moy, Hon. Edmund C. ...................................................................................... 35

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Gutierrez, Hon. Luis V.: 

Congressional Research Service memo, dated March 10, 2008, re: Constitutionality of Congressional Delegation of the Authority to Dictate 

the Metallic Composition of Coins to the Executive Branch ..................... 52

Letter from the American Beverage Association, dated March 10, 2008 .... 55

Letter from Bryan D. Anderson, dated March 7, 2008 .................................. 56

Letter from Brinks, Inc. ................................................................................... 57

Letter from Dunbar Armored, dated March 5, 2008 ..................................... 58

Letter from Brinks, Inc. ................................................................................... 57

Letter from NAMA, dated March 6, 2008 ...................................................... 59

Letter from PepsiCo, dated March 10, 2008 .................................................. 61

Statement of Hon. Zack Space ........................................................................ 62

Paul, Hon. Ron: 

Letter to Hon. Michael G. Oxley, former chairman of the Financial Services Committee, from the United States Mint, dated May 1, 2006 .......... 63

Press release from canada.com, dated July 5, 2006 ...................................... 65

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H.R. 5512, THE COIN MODERNIZATION 

AND TAXPAYER SAVINGS ACT OF 2008

Tuesday, March 11, 2008

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DOMESTIC AND

INTERNATIONAL MONETARY POLICY, 

TRADE, AND TECHNOLOGY

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:33 p.m., in room 

2128, Rayburn House Office Building, Hon. Luis V. Gutierrez 

[chairman of the subcommittee] presiding. 

Members present: Representatives Gutierrez; Paul, Castle, 

Lucas, and Roskam. 

Chairman GUTIERREZ. This hearing of the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology 

will come to order. 

The subject of today’s hearing is H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008, an important piece of legislation that could save taxpayers well over $100 million annually by 

granting the United States Mint the authority to alter the content 

of coins if the cost of minting coins does not exceed each coin’s face 

value. 

I want to say good afternoon, and thank you to all of the witnesses for agreeing to appear before the subcommittee. On our first 

panel we will hear from the Director of the United States Mint, 

and our second panel includes a representative from the vending 

machine industry and a former U.S. Mint Director. 

We will be limiting opening statements to 10 minutes per side, 

but, without objection, the record will be held open for all Members’ 

opening statements to be made a part of the record. I yield myself 

5 minutes. 

Good afternoon. The purpose of today’s hearing is to consider leg- islation that has the potential to save taxpayers over $100 million 

annually, by reducing the cost to mint $.01 and $.05 coins. Since 

March of 2003, increasing metal prices caused by high world demand for core metals have driven the cost of copper and nickel up 

by 300 percent, while zinc has increased by 450 percent. As a result, the cost of producing our Nation’s circulating coins has increased dramatically. 

In Fiscal Year 2007, it cost nearly $.02 to make each penny, and 

$.10 to make a nickel, needlessly costing the American taxpayers 

nearly $100 million last year, alone. These losses will continue to 

2

mount unless we act to change the metallic content of our $.01 and 

$.05 coins. 

The penny and the nickel have been in the negative situation 

since 2006. Prior to 2006, the government had never before spent 

more money to mint and issue a coin than the coin’s legal tender 

value. The U.S. Mint anticipates that by changing the composition 

of just the penny and the nickel to less expensive materials, we can 

save the government hundreds of millions of dollars without compromising the integrity or utility of these coins. 

In a July 2007 letter to Congress, the Treasury Department, with 

the support of the Office of Management and Budget, requested 

that legislation be put forward granting the Secretary of the Treasury the authority to change the metallic composition of coins. H.R. 

5512, the Coin Modernization and Taxpayer Savings Act of 2008, 

gives the Treasury Secretary the requested authority. 

Under H.R. 5512, the Secretary will have the power to change 

the metallic content of coins: half dollar; quarter dollar; dime; nickel; and penny. The bill requires the Secretary to consult with related industry and consider factors related to the effect the changes 

in coin content may have on the industry. 

In addition, the bill mandates that the Secretary enter into a formal rulemaking when making changes to the content of coin. The 

bill further requires the Mint to begin production of a steel penny 

within 6 months of enactment. This should result in immediate and 

substantial savings to taxpayers. 

For coins besides the penny, the legislation requires that production costs for a coin would have to exceed the coin’s face value for 

5 continuous years before the Mint’s authority to change the content is effective. This retroactive 5-year look-back not only makes 

certain that the trend in rising metal prices is established in the 

market and not temporary, but also provides some security to companies and their workers who partner with the Mint in creating 

new coins. 

If we continue minting coins with the current metal level, with 

each new penny and nickel we issue we will also be contributing 

to our national debt by almost as much as the coin is worth. These 

losses are mounting rapidly, and with commodity prices forecasted 

to stay near existing levels for several years, we need to act immediately to give the Mint the flexibility to lower the cost of producing 

the penny and the nickel. 

I believe that H.R. 5512 will give the U.S. Mint the authority it 

needs to make the necessary changes to our coins without creating 

an undue burden on the relevant industries or causing a disruption 

in the minting process. As always, I look forward to a vigorous debate, and I yield 5 minutes to the ranking member, Congressman 

Paul. 

Dr. PAUL. Thank you, Mr. Chairman. Mr. Chairman, I have no 

objection to changing the content of the penny. But I do oppose 

H.R. 5512, because it is unconstitutional to delegate the determination of the metal content of our coins to the Secretary of the Treasury. Under Article 1, Section 8 of the Constitution, the Congress 

is given the power to coin money and regulate the value thereof. 

It is a shame that Congress has already unconstitutionally delegated its coinage authority to the Treasury Department. That is no 

3

reason to further delegate our power, and essentially abdicate congressional oversight, as the passing of H.R. 5512 would do. 

Oversight by Members of Congress who have an incentive to listen to their constituents ensures openness and transparency. This 

bill would eliminate that process, and delegate it to unelected bureaucrats. The Secretary of the Treasury would be given sole discretion to alter the metal content of coins or even to create nonmetal coins. 

Given the history of congressional delegation and subsequent lax 

oversight on issues as important as the conflict in Iraq, it would 

be naive to believe that Congress would exercise any more oversight over an issue as unimportant to most Members as the composition of coins. 

While I sympathize with the aim of Section 4 of this bill, to save 

taxpayers’ money by minting steel pennies, it is disappointing that 

our currency has been so greatly devalued as to make this step necessary. At the time of the penny’s introduction, it actually had 

some purchasing power. Based on the price of gold, what one penny 

would have purchased in 1909 requires $.47 today. It is no wonder, 

then, that few people nowadays would stoop to pick up any coin 

smaller than a quarter. 

Congress’s unconstitutional delegation of monetary policy to the 

Federal Reserve, and its reluctance to exercise oversight in that 

arena, have led to a massive devaluation of the dollar. If we fail 

to end this devaluation, we will undoubtedly hold future hearings 

as the metal content of our coins continues to outstrip the face 

value. 

H.R. 5512 is a sad commentary on how far we have fallen, not 

just since the days of the founders, but only in the last 75 to 100 

years. We could not maintain the gold standard, nor the silver 

standard. We could not maintain the copper standard. And now, we 

cannot even maintain a zinc standard. 

Paper money inevitably breeds inflation and destroys the value 

of the currency. That is the reason that this proposal is before us 

today. 

And, Mr. Chairman, I have a brief unanimous consent request to 

make here, if I could, sir. Mr. Chairman, I also want to introduce 

a few items into the record at this point. 

I have a letter from the Mint to Congress from 2 years ago detailing the cost of production of the penny and the nickel, and a 

news story, about 2 months later, that quotes a Canadian mint official as saying its copper-coated steel penny made in the same factory as a U.S. cent costs 7/10 of a cent. 

I would also like to request that the Mint supply us with some 

things that can be made part of the record: The alternative material study referred to in the 2004 Mint annual record, and work papers leading to the production of that report; also, any other Mint 

internal or public reports since the 1973 report that detailed possible alternative materials. 

I believe there was one in 1980, and summaries of Mint contracts 

with outside firms in the late 1980’s and early 1990’s, as the Mint 

sought other sources of coin materials. I believe there were at least 

three companies involved in that R&D. 

Chairman GUTIERREZ. Without objection, it is so ordered. 

4

Dr. PAUL. Thank you. 

Chairman GUTIERREZ. Has the ranking member concluded? 

Dr. PAUL. You want me to recognize him? 

Chairman GUTIERREZ. It is okay, I will. Mr. Castle, you are recognized for 5 minutes. 

Mr. CASTLE. Well, I will not take more than 1 minute. I would 

like to thank you, Mr. Chairman, for the hearing. 

I am also very concerned about the cost of making the penny. 

The gentleman from Texas, Mr. Paul, raises other concerns that we 

have to think about, as well. 

I am also concerned about the cost of making a nickel and I 

think we do need to address these issues in this country. There is 

no question in my mind that we cannot pay more to make our coinage than it is worth. It is that simplistic, regardless of how things 

are going to be changed. 

So, I think this is an appropriate hearing and an appropriate 

subject. I do not know if I know the exact way correct it, but the 

bottom line is that something clearly has to be done. And with 

that, I yield back. 

Chairman GUTIERREZ. Mr. Roskam, would you like to be recognized, sir? 

Mr. ROSKAM. Thank you, Mr. Chairman. Thank you, Mr. Chairman, for holding this hearing, along with Ranking Member Paul. 

Recently, the humble penny has created quite a controversy. And 

why is it that a copper-coated zinc coin has created such a fuss? 

Well, it’s easy. It costs $.017 cents to make each one, actually more 

than it’s worth, as we’ve heard already. And, at current production 

rates, the Federal Government spends more than $134 million to 

produce 8 billion pennies annually, at a cost of $54 million to the 

taxpayer. 

At the request of the U.S. Mint, legislation was introduced last 

year to transfer congressional authority to determine coin composition and weights to the U.S. Mint. The Mint has argued that Congress is slow to deliberate, and that it currently doesn’t have the 

authority to perform the research necessary, and the development 

on its potential component modifications. 

But the truth is, Mr. Chairman, I think, quite to the contrary. 

The Mint does have the R&D authority. The Mint research leading 

to the change in content of the $.01 coin included work in the Research Triangle Institute in North Carolina, and with the Ball Corporation, which had a division in Tennessee, now a separate company that produces penny blanks. 

Also, it seems to me that the Mint has been the leader in slowing 

down changes to coin components. In the 2004 Mint annual report, 

it was stated that the first comprehensive coinage materials study 

for circulating coins had begun. The objective was to review and 

consider cost-effective alternatives or alternative materials for current and future coin denominations. This study, to my knowledge, 

was never completed. 

Additionally, when the Mint sent a letter to Congress in 2006 

saying the cost to produce the penny would rise to nearly $.017, no 

recommendations from the Mint have since followed. 

I oppose ceding Congress’s constitutional authority, held since 

1792, to the U.S. Mint. And so, I introduced H.R. 4036, the Cents 

5

and Sensibility Act, last fall, along with the gentleman from Delaware, Mr. Castle. I introduced this bill to ensure taxpayer dollars 

are saved in the production of the penny by immediately changing 

the composition of the penny to copper-coated steel, and requiring 

the U.S. Mint to swiftly make recommendations on a comprehensive reworking of the metallic content of other circulating coins, so 

that Congress can consider and vote on the proposals. 

My bill ensures that this will be done, making sure that no 

American jobs are threatened by the changes, without simply 

transferring the cost from the government to business and consumers, and without handing over congressional decision-making 

powers to entities where it doesn’t belong. 

In today’s hearing, we will be discussing newly introduced legislation that was introduced by our colleague, Zack Space, H.R. 5512, 

the Coin Modernization and Taxpayer Savings Act of 2008. 

I was pleased to discover that a section of my bill was incorporated into this one. Some may call that legislative larceny, but 

I call that a compliment, and I am delighted to see it. The inclusion 

of the modification of the components of the penny from coppercoated zinc to copper-coated steel will slash the cost to make the 

penny, and I look forward to hearing the entire testimony today. 

And, with that, I yield back the balance of my time. 

Chairman GUTIERREZ. Thank you, Mr. Roskam. 

We are pleased to have with us the Director of the United States 

Mint, Mr. Edmund Moy. Mr. Moy was sworn in as the 38th Director of the U.S. Mint on September 5, 2006. As Mint Director, Mr. 

Moy leads the world’s largest manufacturer of coins, metals, and 

coin products. 

Prior to becoming Director, Mr. Moy was a Special Assistant to 

the President for Presidential personnel at the White House. Prior 

to his current public service, Mr. Moy spent 8 years working with 

venture capital firms and entrepreneurs, including the Wall Street 

private equity firm Welsh, Carson, Anderson & Stowe. 

From 1989 to 1993, he served in the Federal Healthcare Financing Administration at the U.S. Department of Health and Human 

Services, as Director of the Office of Managed Care. In that position, he was responsible for overseeing $7 billion in annual expenditures to Medicare- and Medicaid-managed healthcare programs. 

From 1979 to 1989, he was sales and marketing executive for 

Blue Cross Blue Shield United of Wisconsin. He graduated from 

the University of Wisconsin in 1979 with a triple major: economics; 

international relations; and political science. 

You are recognized for 5 minutes, Mr. Moy. 

STATEMENT OF THE HONORABLE EDMUND C. MOY, 

DIRECTOR, UNITED STATES MINT 

Mr. MOY. Chairman Gutierrez, Ranking Member Paul, and members of the subcommittee, thank you for inviting me here today to 

testify on the Coin Modernization and Taxpayer Protection Act of 

2008, H.R. 5512. 

Chairman Gutierrez, first a personal note. Thank you for your 

leadership on this issue, to try to save taxpayers money, and I appreciate this opportunity to have a public discourse about it. 

6

Due to the spiraling costs of nickel, copper, and zinc, the United States Mint will lose about $100 million this year on pennies and 

nickels. High metal costs for these low-denomination coins have become an unsustainable and unnecessary drain on the U.S. Treasury and on taxpayers. 

To solve the current problem and prevent it from occurring with 

other denominations, the Treasury Department has asked for the 

authority and flexibility to determine the metal content of all of the 

Nation’s coinage, using an open, transparent, and public process. I 

enthusiastically support legislation that maximizes taxpayer savings, and I am encouraged by several provisions of H.R. 5512. 

Congress has proven that by giving the Secretary of the Treasury 

authority to test and select alternative metals, that is the best solution to the problem of rising metal prices. 

In 1974, Congress authorized the Secretary of the Treasury to 

vary the contents of the penny to save money, authority that the 

Secretary exercised 8 years later, saving the taxpayers money by 

changing the penny from a copper-zinc alloy to copper-plated zinc. 

Eleven years ago, Congress granted the Secretary of the Treas- ury sole discretion to select materials for the $1 coin. This has also 

proven to be cost effective for the taxpayers. 

The Department is asking Congress for the same authority for all circulating coins that Congress granted to the Secretary for the $1 

coin. Consequently, we object to those provisions of H.R. 5512 that 

differ from the Department’s proposal. 

The first provision we oppose mandates sustaining 5 consecutive 

years of losses before taking action to protect the taxpayers from 

rising metal costs. In the current case of the penny and the nickel, 

losses after 5 years would add up to half-a-billion dollars, which is 

just the kind of taxpayer burden that we’re trying to seek to prevent. 

A related concern with this provision is that it may hurt the 

vending and coin handling industries. Under the Treasury proposal, adjustments to vending machines and systems could be accomplished at the same time, rather than denomination-by-denomination. 

A second provision of the bill mandates that pennies be made 

primarily of steel 180 days after the law’s enactment. We oppose 

this provision because it leaves the public out of the process of selecting coinage materials, and because of several practical considerations. 

The Treasury Department’s proposal would employ an open, 

transparent, and deliberative public process to consider new material for all of the Nation’s coinage, including the penny. What is 

good for all of the other denominations is also good for the penny. 

Also, steel may not be the panacea. It is significantly harder than 

zinc, so we must test the life of our dies to determine whether the 

cost can be reduced by switching to steel. It doesn’t make sense to 

reduce the cost of materials used in the penny if they are offset by 

higher manufacturing costs by replacement dies. 

The United States Mint will also need 90 to 150 days to provide 

specifications to potential vendors for a copper-plated steel penny 

blank, with the potential of reducing the penny’s cost. Potential 

vendors supplying penny blanks will need at least 18 months to 

7

procure steel feedstock, and to make machinery investments. A reasonable timeframe for us to properly implement a steel penny mandate would be 18 to 24 months. 

I applaud and thank the subcommittee for seeking to solve the 

penny issue quickly. I only caution that several other countries 

have tried to resolve this problem of high metal prices with steel, 

and it has not proven to be a long-term solution. 

The subcommittee and the Treasury Department desire to save 

taxpayers money, and serve the very best interests of the country. 

So I am confident that, by working together, we will find the best 

solutions to the rising cost of our coinage. 

The Department of the Treasury and the United States Mint can 

support H.R. 5512 if two objectionable provisions are removed. 

And, if they are removed, the United States Mint is poised to begin 

implementing the legislation the instant it is approved. 

So, thank you, Mr. Chairman, for the time provided for me today, 

and I look forward to discussing this with you and your colleagues. 

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

35 of the appendix.] 

Chairman GUTIERREZ. Thank you, Director Moy. I ask unanimous consent that the following documents be entered into the 

record: Number one, the memorandum to me from the Congressional Research Service regarding the constitutionality of congressional delegation of the authority to dictate the metallic content of 

coins; number two, a written statement from Congressman Zack 

Space; and number three, letters from related industries interested 

in the bill. 

Without objection, it is so ordered. And now I will yield myself 

5 minutes. 

Director Moy, first, some comments on your testimony. Regarding the 5-year look-back provision, you state that because of this 

provision, H.R. 5512, ‘‘assures that a significant portion of the $782 

million in seigniorage we return to the taxpayer in Fiscal Year 

2007 will be put at risk over time.’’ 

I think that statement could be misleading because it includes, 

as I read your testimony, the negative seigniorage for the penny 

and the nickel for 2007. So it may be open to debate to state that 

a substantial portion of that amount would be put at risk, when 

it already includes the losses for negative seigniorage. 

Furthermore, your statement ignores any savings or positive seigniorage from the penny, and ignores the fact that your provision 

is retroactive, and that we are already in the third year for the 

nickel. So, unless the Mint could simultaneously and immediately 

alter the content of the penny and the nickel—and you have testified that it will take at least 2 years, just to change the penny—

I think that statement might not be helpful. 

Finally, your assessment of this section of the bill fails to note 

that nothing in the bill prevents the Secretary from coming to Congress with specific recommendations on changing the content of 

other coins, prior to the 5-year coin. 

We are here to work with you, Director, and I understand that 

the Mint wants flexibility. But Congress needs to maintain some 

control over the process, and we believe the 5-year provision allows 

8

for some spikes in the metal markets that may not be long-term 

trends. 

Congress isn’t giving the Secretary a free ticket to change the 

content of coins without justification; there has to be substantial 

justification. And if that presents itself in a period of less than 5 

years, then the Secretary can come to Congress to ask for specific 

changes at that point. 

Let me ask the Director, would the Mint support the 5-year loss 

test if the Mint had research and development authority during the 

interim? In other words, let us say that the Mint could conduct 

R&D at any time on new composition of any coin. Then, when the 

coin goes into negative seigniorage, the Mint is ready. And if the 

Mint believes that it has the best alternative already for the full 

production, it requests that Congress waive the 5 years, or whatever is remaining in the 5 years. Is that something that would 

make you more comfortable, as Director? 

Mr. MOY. Thank you, Mr. Chairman. That is a very good point. 

I am open, as you know, to working through that particular issue. 

What we are trying to do—and I have a great respect for Congress, and so, you know, part of what has been institutionally an 

issue has been whether the Mint has explicit or implicit authority 

to act on its own in research and development. What you propose 

helps clear that up. And, as a result, I would be supportive. 

But, overall, what I am concerned about is—and I think your 

point kind of addresses this—not only am I concerned about negative seigniorage, I am also concerned about the erosion of seigniorage. So, I don’t want to just wait until the coin begins losing 

money, meaning it costs more than the face value to make, but, 

like on the quarter, where it only costs us $.09 to make a quarter, 

I don’t want to see that $.09 go to $.25 and lose that benefit to the 

taxpayer before making a change. 

Chairman GUTIERREZ. Thank you very much. I recognize my 

ranking member, Congressman Paul, for 5 minutes. 

Dr. PAUL. Thank you, Mr. Chairman. I only have one question, 

and it has to do with who makes the final decision. And you understand the problem, we understand the problem, and I am just concerned about how we do it, and the process. 

So, what would be wrong with you just offering your suggestions 

to the committee, and we put it in a piece of legislation and pass 

it? That would satisfy me, as far as the responsibility and authority 

goes. What would be wrong with doing it that way? 

Mr. MOY. It has been done several ways throughout history. But, 

most recently, Congress has given a considerable amount of flexibility to the Mint, and to the Secretary of Treasury, to make these 

decisions. 

What would be helpful to the Mint is if Congress specifically 

tasked the Mint to address this question. And since I have been 

Mint Director, I have not been specifically asked to come up with 

a solution. But once tasked with that, that would then give us the 

ability to have an open proposal process. 

Number one is to get the best ideas in the country to solve that 

problem within the criteria that we lay out. And then, secondly, 

once we determine what the best solution might be, then to get the 

lowest bid for that particular solution, which is why what you’re 

9

saying is, I think, doable. But what the Mint right now is proposing gives us the most flexibility in getting there. 

Dr. PAUL. So what I am suggesting has been done that way in 

the past? 

Mr. MOY. It has. 

Dr. PAUL. And, although it has been done in the current—the 

way you are suggesting, it has been done both ways—technically, 

I think the responsibility is here. 

So, I would strongly urge the committee to consider us, you 

know, respecting that responsibility, and maybe asking the Mint to 

actually offer the suggestions, and maybe we can put it in the form 

of legislation. I yield back my time. 

Chairman GUTIERREZ. Thank you very much. Mr. Castle? 

Mr. CASTLE. Mr. Director, has there been any study with respect 

to the elimination of the penny? I mean, I have done my own little 

surveys on it, but I don’t know if anything official has been done. 

Mr. MOY. Yes. That is probably a bit above my pay grade— 

Mr. CASTLE. A bit above mine, too, by the way. 

Mr. MOY. —to talk about the elimination of the penny. But I will 

say a couple of brief things about this. 

First of all, the Mint is a government agency, so we are here to 

serve the American people. If the American people decide that 

there should be no penny, then the Mint will do its best to accommodate that. 

Second, the purpose of the Mint is to satisfy the demands of the 

American people. Currently, the American people continue to demand the penny. And so, therefore, our priority, then is—if we 

have the obligation to make it, we need to make it as efficiently 

and as cost effectively as possible, which is why we’re discussing 

this in the hearing. 

The elimination of the penny would have a minimal impact on 

the Mint, from a human resources perspective, because most of our 

circulating coins are run through a very automated process. But it 

would have an effect on costs, a long-term for the rest of the Mint, 

because last year we produced 16 billion coins; 8 billion of them, 

half of them, were pennies. And if we don’t make pennies any 

more, you have a lot of idle presses, of which you have to spread 

those fixed costs around the rest of the coins you make. 

Mr. CASTLE. Let me tell you what I do, and I will bet you 75 percent of the people in this room do it, and 75 percent of the people 

in the country do it. When I get change, particularly low-level 

change, I stick it in an old beer mug I have from college, and it 

sits there. And, you know, maybe after 2 or 3 years, my wife will 

change it in, somehow or another. But it takes the pennies out of 

circulation almost as immediately as they are put into circulation. 

Do we ever make an effort to try to keep them recirculating so 

we do not have to make as many pennies, or is that a PR campaign 

that we just don’t want to undertake? 

Mr. MOY. You know, one of our observations has been that yes, 

that is the case. My wife is extremely organized, so I have the 

penny tube, the nickel tube, the dime tube, and then she packs it 

up and brings it to the bank once it gets full. But, yes, they’re out 

of circulation for a while, whether for a week or for 3 years—as in 

your case. 

10

But what we have seen over time, is with coin sorting companies 

like Coinstar, they have set up and, you know, people can’t hold 

coins forever. And so, eventually, they turn them in. And these coin 

sorting companies have been for around for a long time now. Eventually, all the pennies out of circulation are getting back into circulation again. 

And so, what we have seen, though, is in the past 5 years or so, 

penny production has been very consistent. We constantly replace 

about 5 percent of the penny supply out there, which means consistently there is a slight increase in demand from year to year. 

Mr. CASTLE. Just a final question. I realize that the cost of producing pennies is higher than their actual value, and the same 

goes for the nickel, I guess. Is this correct? 

Mr. MOY. Yes. 

Mr. CASTLE. Where are we with the dime and the quarter? How 

close are they at this point? 

Mr. MOY. Let’s see. The dime is probably around $.07 right now, 

the quarter is about $.10. Why we’re also proposing that all coinage 

be looked at is if there is a possibility of reducing the quarter’s cost 

from $.10 to $.05, and yet not affect the vending industry, etc., that 

is a greater savings to the taxpayer. 

And so—but right now, both the dime and the quarter and the 

dollar coin are still in positive seigniorage. 

Mr. CASTLE. Thank you, Mr. Chairman. I yield back. 

Chairman GUTIERREZ. You know, we will be right back. We have 

one vote. So why don’t we go vote, and we will be right back. That 

way, Mr. Roskam can have his full 5 minutes. I want to be sure 

that he gets to ask all of his questions. 

This hearing is recessed. 

[Recess] 

Chairman GUTIERREZ. Congressman Roskam, for 5 minutes. 

Mr. ROSKAM. Thank you, Mr. Chairman. Director, just a quick 

question for you. 

Can you tell me the nature of your understanding of the authority to do research and development as it relates to the mix of coins? 

Because it seems to me that there is some ambiguity right now. I 

am sensing in your answer previously to Mr. Paul that you didn’t 

feel like you had the research and development authority but I am 

also—you know, it seems like, in the past, the Mint has had that, 

in terms of aluminum coins, you know, some of those types of 

things. 

Mr. MOY. Yes. 

Mr. ROSKAM. Is there an ambiguity in your—in the authority? 

Has it never been resolved? Or was authority granted by Congress 

in one instance and not the other? Could you speak to that? 

Mr. MOY. Yes, I certainly can. And I think it is all of the above. 

There certainly is ambiguity— 

Mr. ROSKAM. Wrong answer. 

Mr. MOY. Okay. But, let’s see, maybe the best place to start is 

we certainly believe that we have the authority to do internal research, which we have done. 

We have examined over 70 different alloy combinations that fall 

roughly into 12 different categories. We have a general idea of 

what may work and what might not work. Where we don’t think 

11

we have the authority is to take it to the next step, which is begin 

the testing on it, which requires us to procure, you know, test 

blanks, and all this experimentation, which ends up costing a lot 

of money, doing that. 

And then, you also have the issue of, once we start doing that, 

you have existing suppliers and vendors who may feel threatened 

about it, don’t think we have the authority, and may file to have 

us slow down, etc. And so, part of this is to help clarify whether 

we have explicit authority to do what. 

I think it is a worthy question for us to be discussing— 

Mr. ROSKAM. That makes sense to me. Can you speak to the authority that the Mint has had in the past to do things? In other 

words, on other mixes of metals, have you had the ability to explicitly—have you explicitly had the authority of Congress, or did you 

get an opinion from counsel that said, ‘‘Hey, we can do this, just 

go ahead and sin boldly?’’ 

Mr. MOY. No, I tend to be kind of a cautious person, especially 

when it relates to Congress, because I want to get it done right— 

Mr. ROSKAM. Listen, if you are putting nickels, dimes, and quarters in a row, you are very cautious. 

Mr. MOY. Yes. And so, regarding taking a look at that authority, 

our research has shown that there have been a couple of explicit 

instances where Congress has said, ‘‘Mint, you have the authority 

to vary the metal content.’’ 

The first was in 1974, with the penny, which allowed the Mint—

which basically said, ‘‘Pennies have to be made out of zinc and copper, but the Mint can choose what percentage of each.’’ Originally, 

it was mostly copper and a little bit of zinc, and, because of the rising price of copper, all the Mint did was reverse the percentages, 

so it was mostly zinc with the copper plating. So, on that one, Congress specifically said, ‘‘Mint, you have that authority.’’ 

The second one was with the dollar coin. With Sacajawea in 

1999, the legislation that authorized that specifically said it was up 

to the Secretary of the Treasury to figure out what the best metal 

content is: ‘‘We are even going to throw out the weight and a number of other things, to give you the most amount of flexibility.’’ 

Now, in exercising that flexibility, we were very careful to make 

sure we consulted with industry, tried to make sure there was 

enough materials, etc., etc., which narrowed the scope of things you 

can look at. But we did have complete authority. 

Mr. ROSKAM. Could you live with just the authority to do that 

research and development to that next step, not just internal but 

external, so that is not ambiguous, but with Congress retaining the 

ultimate authority for what the content is? You could live with 

that, right? 

Mr. MOY. Yes. You know, certainly that—yes, I could live with 

that, because it moves us in the right direction. 

But it is also not optimal, because we have not really had to deal 

with this issue for a long time, because metal prices have been very 

stable for 30 or 40 years. They have been relatively a flat line. 

Really, take a look at the last 3 years. They have gone dramatically 

upwards, and then spiked a lot. 

So, what the concern here is, you know, what might be right 

today might not even be right 6 months from now. And that is a 

12

lesson that we have learned from Canada. Canada has gone to a 

steel penny, but not exclusively. Canada’s mint has the authority 

to switch to whatever metals. 

And they frequently go from zinc to steel, back to zinc again, for 

two reasons: First, cost—sometimes zinc is cheaper, sometimes 

steel is cheaper; and second, accessibility, which—plated steel is 

not easily accessible, or you can’t get enough quantities. 

Mr. ROSKAM. I got it. 

Mr. MOY. Yes, right. 

Mr. ROSKAM. Is there a third way, and that would be to come up 

with an approved—that Congress would give the authority for X, 

Y, and Z, and then you choose within that mix, but then you don’t 

have the authority to act as a Lone Ranger, and come up with 

something on your own? You could live with that, couldn’t you? 

Mr. MOY. Yes. And, again, I—you know, what you have proposed 

moves us in the right direction. You know, from the Mint’s perspective, it doesn’t give us optimal flexibility, but it does give us some. 

And certainly that is better than where we are today. 

Chairman GUTIERREZ. The time of the gentleman has expired. 

Congressman Lucas, you are recognized for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman, and I appreciate you 

holding this hearing on this important topic. I apologize for my late 

arrival, but as always, there are lots of things going on at once 

here in Congress. 

Director, first off, let me say that, as one of the many Members 

of Congress, and certainly the public out there, I take with great 

interest the things that you and your staff do at all of the facilities 

of the United States Mint. And I have been very impressed with 

the efforts to become more open, to catalog your historic records, 

and in effect, to open your attic up to America’s numismatists. That 

is a very important thing to do. 

Ironically, as we look at this proposed piece of legislation, the 

Coin Modernization and Taxpayer Savings Act, I can’t help but 

think that perhaps we need to look at the entire picture for just 

a moment, if you would, Director, about how your agency’s function 

has changed in the last couple of centuries, how our very monetary 

system has changed. 

When your predecessors began in 1793, every coin had that value 

of metal in it. A one cent piece had one cent worth of as close to 

pure copper as they could find. Every silver dollar had a dollar’s 

worth of silver in it, or as close as they could possibly get. 

But things have changed. After 2 centuries of inflation, the world 

is not what it once was. We don’t make half cents any more, we 

don’t make $.02 pieces, or $.03 pieces. I don’t think you make very 

many $.50 pieces for actual commerce any more. Things have 

changed. 

So, I guess my observation to you is perhaps, Director, maybe in 

addition to looking at the metal content of our various coins, maybe 

we need to sit down and reassess what we make, and how it fits 

in the commerce stream, and whether we should be making certain 

items or not. And I know that fires up the emotion in certain places 

around the country. 

But, clearly, the $.01 piece that would have been used when my 

father was born in 1931 doesn’t go very far, compared to the purVerDate 0ct 09 2002 15:20 Apr 30, 2008 Jkt 041729 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\41729.TXT TERRIE
13

chasing power of a $.01 piece at this day and time. And I am not 

so sure that those $.50 pieces that the public doesn’t want to carry 

in their pockets would buy what that $.01 piece would have bought 

the year my father was born. 

So, I guess what I am asking you is, looking in your crystal ball, 

have you considered at the Mint at what point in time certain denominations simply aren’t practical to make any more? Have you 

considered that in your overall scheme of analysis? 

Mr. MOY. Yes. I have, from a very informal perspective, but not 

a very formal studied and researched perspective. 

The two comments that I would offer is, you know, one indicator 

of the demand for coins is how many coins banks order to the Federal Reserve and the Federal Reserve places with us. And currently, there is still demand for all denominations. And so that is 

at least one indicator that the American people like the current 

mix of coinage. 

But the broader issue that you bring up—which I think is a 

worthwhile question, and I’m not sure we’re going to get to an answer in this particular forum—is like the European Union had a 

chance to start from scratch, their currency. And what we have 

seen worldwide is a trend toward higher denomination coins, because they last longer, and a movement away from lower denomination coins. 

And so, I think if there is any crystal ball that is relatively accurate, that is a worldwide trend. 

Mr. LUCAS. Very good point, Director. I would agree, wholeheartedly. If you look at the things that we have made in the 

past—and, of course, we didn’t start out making this size of a $.01 

piece, we certainly didn’t start out making something we refer to 

commonly as a nickel. 

And the question not necessarily for you to answer, but the question I think we have to consider as Congress, since it is, as I assume—my friend, Congressman Paul has clearly noted—our constitutional responsibility on these issues, to consider whether we 

need to make $.01 pieces. Should we return to the half-dime of the 

days of old, which was half the weight of a $.10 piece, and step 

away from the nickel? Do we even need to make $.50 pieces any 

more? Should we be looking at $5 or $10 coins? 

I think that that is outside of the realm of this bill, but it is 

something that this committee/subcommittee/full committee/Congress should be looking at. Do we need to truly modernize the system, as opposed to put Band-aids on, and patch around the edges? 

And, with that, I appreciate my chairman’s very patient time allocation here, and would note that I would like to, Mr. Chairman, 

submit some written questions to our friends at the Mint at the 

conclusion of this hearing. And thank you for having a hearing. 

Chairman GUTIERREZ. Without objection, it is so ordered. Thank 

you very much, Director Moy. 

Mr. MOY. You are welcome, Mr. Chairman. 

Chairman GUTIERREZ. I appreciate your testimony here today. 

And maybe we can figure out how the government does like the 

private sector, you know, they account for fluctuations in the market. They buy futures, and they get stock, and they kind of figure 

it out. 

14

But, in the interim period, we’re going to continue working with 

you. Thank you so much for your testimony today. 

Mr. MOY. I appreciate your leadership on this. 

Chairman GUTIERREZ. Thank you. And we have—testifying on 

our second panel, we have got a change, and thank you so much. 

Testifying on our second panel, we have a former Mint Director 

and former Member of Congress, Jay W. Johnson. Mr. Johnson was 

appointed by President Clinton as the 36th Director of the U.S. 

Mint in May of 2000. During his tenure, the Mint set new records 

for the total amount of coins produced, and total revenue for the 

U.S. Treasury. 

In 2000, Mr. Johnson also served as Chief Advisor to the Executive Director of Marketing for U.S. savings bonds, responsible for 

nationwide marketing, promotion, and publicity. Previously, Mr. 

Johnson was Deputy Assistant Secretary for Congressional Relations for the Department of Agriculture. From 1997 to 1999, Mr. 

Johnson served as U.S. Congressman from Wisconsin’s eighth district. 

Mr. Johnson currently serves as an independent communications 

consultant and an advisor on coin and information technology matters. His broadcast media communications experience was garnered 

throughout his career while working as a television and radio anchorman, reporter, and producer for various stations in Wisconsin, 

Florida, Indiana, and Michigan—over 30 years, between 1965 and 

1996. 

Mr. Johnson received his master of arts degree in radio, television, and political science from Michigan State University; a 

bachelor’s degree in speech and radio television from Northern 

Michigan; and he also served in the U.S. Army from 1966 to 1968. 

Please, would you give your testimony, Mr. Johnson? 

STATEMENT OF THE HONORABLE JAY W. JOHNSON, CONSULTANT, COLLECTOR’S UNIVERSE; FORMER DIRECTOR, UNITED 

STATES MINT; AND FORMER MEMBER OF CONGRESS 

Mr. JOHNSON. Thank you very much, Chairman Gutierrez, and 

Ranking Member Paul. And, again, other members of the committee, I appreciate very much your having this hearing. 

When I was Mint Director in 2000 and 2001, it still cost us less 

than a penny to make a penny. But even then, the margins were 

slim. And we all knew that, inevitably, the cost of the minting of 

$.01 coins would result in negative seigniorage. It hasn’t taken long 

for the cost of metals, materials, and manufacturing to overtake 

the actual value of the $.01 and $.05 coin. 

So, it makes good sense to give the Department of the Treasury 

and the U.S. Mint the power to make the appropriate coin composition changes, so the Mint will not continue to lose money by minting our smallest coins. 

In fact, it has happened many times before, as we have heard in 

the testimony. In the 1960’s, the Mint acted very quickly—in fact, 

within a matter of months—as it saw the rising price of silver, to 

change the metal composition of coins to eliminate the costly silver 

from the current circulating coinage, and replace it with the socalled sandwich metal composition, which we have in use today. 

Congress passed a bill September 5, 1962, to give authority for the 

15

95 percent copper and 5 percent zinc coins, eliminating tin from the 

make-up of the coin. 

In terms of the $.01 coin, I wanted to quote a recent book, ‘‘History of the U.S. Mint and its Coinage,’’ by David Lange, who writes 

of a period in the 1970’s as he says, ‘‘Inflation continued to plague 

the lowly cent, as its metallic value periodically approached its face 

value, though the cost of recovering this copper negated any potential profit. The threat of rising copper prices prompted Congress to 

grant the Mint permission to change the cent’s composition whenever needed, to avert a crisis. And history has shown that the 

changes in coin composition can be made quickly and easily when 

the need and desire to make that change are deemed important.’’ 

Since I left the Mint and the government, I remained in the coin 

and numismatic business, and I have noted the interest among coin 

collectors as to the future of the penny and the nickel. Their concern is exactly the same as most citizens, that the government is 

losing money by continuing to make $.01 and $.05 coins that nearly 

double their face value to manufacture. 

They have also a numismatic interest, in that any change in 

coinage, whether it be the obverse or reverse design, or metallic 

make-up, creates a new variety or type of coin, and thus another 

numismatic change which, perhaps not noticeable by the general 

public, will become another turning point in the history of the $.01 

and $.05 coins. 

In fact, what will mark next year the 100th anniversary of Lincoln’s image on the obverse of the $.01 coin, the internal make-up 

or metal content of this coin has changed many times, all of this 

of interest to collectors, because every change, even slight ones, create a new type or subset of the penny, which continues to look essentially the same to the average consumer. 

As one collector told me, all of the changes in coinage, be they 

design change, or metal composition changes, enhance the collectability of that coin, and that is good for the numismatic industry. 

One thing they might not like, they told me, is a metallic change 

which will change the appearance too much, since collectors, like 

a lot of folks, appreciate tradition. 

They also will not like a metallic composition which will not wear 

well, or tarnish easily, or not even look or feel like the traditional 

penny. 

All changes in coinage, said another numismatist, are just intriguing to the collector, and another reason for saving them. It is 

this changing history of the penny that is the so-called Indian 

Head Penny, or the Wheat Years Penny, or, indeed, the metal composition, which just adds to the numismatic history of the penny. 

During a time of war, the Mint had the power and used it to find 

the most economical and feasible ways to save money by making 

coins of different materials. Again, the Mint, acting on the wishes 

of Congress, moved quickly. Congress approved the steel cent December 18, 1942. Production of the new steel cent began less than 

3 months later. I brought a visual example of one. 

In 1944, because many $.01 coins were still in use for parking 

meters and other coin operated mechanical devices, the Mint heard 

the complaints of citizens and owners of coin-operated devices, and 

16

went back to using a form of brass. The brass cents were regularly 

seen as late as the 1970’s. 

Today, also in a time of war, the Mint and Treasury need the 

power and authority to make the best use of its own staff and the 

resources, as well as suppliers, to find the most inexpensive way 

to continue to make the $.01 and $.05 coins for less than their face 

value. I have no doubt the U.S. Mint will do its best work to accomplish this. 

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

32 of the appendix.] 

Chairman GUTIERREZ. Thank you very much. Next, we have Michael Brown, currently at Barrick Gold Corporation, vice president, 

U.S. public affairs in Washington, D.C., and Nevada. He formerly 

served between 1981 and 1989, at the United States Mint as Special Assistant to the Director, and press secretary in Washington. 

He has a bachelor of science degree from Ohio State University, 

and an MBA from George Washington University. 

You are recognized for 5 minutes. 

STATEMENT OF MICHAEL J. BROWN, VICE PRESIDENT, U.S. 

PUBLIC AFFAIRS, BARRICK GOLD CORPORATION; MEMBER, 

CITIZENS COINAGE ADVISORY COMMITTEE; AND FORMER 

SPECIAL ASSISTANT TO THE DIRECTOR, UNITED STATES 

MINT 

Mr. BROWN. Thank you, Mr. Chairman. I had the pleasure of 

working for many years with the former Subcommittee on Consumer Affairs and Coinage, and working closely with Chairman 

Frank Annunzio of Chicago during that time, and I also worked 

with Congressman Paul during his first term of service in the 

House, to help make the American eagle gold bullion coin a reality. 

I come to you today as a private citizen. I have been involved in 

coinage since 1981. And, after meeting Mr. Johnson, I have now 

known every Mint Director since Eva Adams in the Kennedy Administration. I am registered to lobby for Barrick, here in Washington, D.C., but they have no interest in this legislation, or any 

other coinage matters before Congress. 

I am a huge fan of Director Moy. The technical innovations he 

has brought to the United States Mint are phenomenal, and I 

would encourage the committee to visit the Philadelphia Mint, to 

see that. 

Today we are experiencing what is called a super cycle in the demand for commodities, particularly in base metals. The rapid industrialization of China and India has fueled a demand for precious and base metals that we have not seen since the industrial 

revolutions of the United States and the United Kingdom. 

Prices for base metals are at record highs. Recycling rates for 

metals are at record levels. I have spent a lot of time in Nevada. 

I see, regularly, reports of people stealing copper from construction 

sites, including stealing copper from energized electrical lines. 

No one knows when or if this cycle will subside. But a consequence of this super cycle is the effect it is having on our domestic coinage, particularly the penny, a coin that Chairman Annunzio 

would call the ‘‘Kleenex of coins,’’ because it was disposable, but 

when you need it, nothing else would do. 

17

This is not the first time Congress has had to consider the effect 

of rising commodity prices on the coinage system. In the mid1960’s, the dollar, the half-dollar, the quarter-dollar, and the dime 

were made of silver. Much of that came from mines in Nevada. 

However, rising demand for silver and electronic and photographic 

applications elevated silver prices to levels that there was massive 

withdrawal and melting of silver coins. This caused the government to look for alternatives to that. 

There was significant public debate involving the Executive and 

Legislative Branches, plus the Federal Reserve Bank. Congress 

held five separate hearings, and eventually even created a Joint 

Commission on Coinage, with members appointed by President 

Johnson. 

Instrumental in resolving this situation, though, was a report the 

Treasury and the Mint contracted with from Battelle Memorial Institute of Ohio, that they prepared that recommended the conversion from silver coinage to the copper/nickel clad coins that we use 

today. That became part of the Coinage Act in 1965. 

Sensitive to the silver price, and facing a need to construct a 

costly new mint in Denver—a mint that, actually, was never 

built—the Federal Reserve and the Mint produced a report in 1973 

on alternative materials for $.01 coins. There was a brief consideration of the aluminum cent. In fact, there were some even distributed, I believe, in this room at that time. But, for a variety of reasons, the idea of an aluminum cent was shelved. 

In 1974, because of the oil embargo that was occurring, we had 

a surge of inflation in the economy, and we faced a serious penny 

shortage as copper prices rose to then what were record levels. This 

caused the Mint to take a much larger look at our coinage system, 

and, through the Research Triangle Institute, did a comprehensive 

study of America’s coinage and currency systems. 

It was a very bold step for the Mint in an era where hiring independent contractors by a government agency was an exceptional 

undertaking. Clearly, the Mint was trying to get ahead of the 

curve, and avoid a crisis like it had experienced in the 1960’s. 

In response to the 1970’s shortage, Congress granted the Mint a 

measure of discretion to adjust the copper content of the $.01 coin, 

if necessary to avoid shortages. A former Mint executive, Dr. Alan 

Goldman, whom I had the pleasure of knowing, worked in the 

1970’s on alternative alloys for the $.01 coin. 

And they took a recommendation to the Congress in the latter 

part of the Carter Administration, recommending converting from 

a copper penny to a zinc-copper-plated zinc cent. That decision was 

shared with the six leading members of the Banking Committee. 

The Mint was under an appropriation at that point, so I presume 

that would have been the chairman and ranking minority members 

of the banking committees, the subcommittees, and the appropriation committees. 

The decision, though, to go to the zinc cent then fell to Buchanan, the incoming treasurer. It was implemented by my boss, 

Donna Pope, in 1982. We successfully converted to the zinc cent. 

It worked for us for quite a long time. Chairman Annunzio, when 

he retired, recounted it as one of the successes that he had during 

his chairmanship. 

18

I think we now find ourselves in a situation where rising metal 

prices again compel the Mint and the Congress to look for new alternatives. And, I think as evidenced by the experience with silver 

and the experience with zinc, a collaborative process can be 

reached to resolve this problem. Thank you. 

[The prepared statement of Mr. Brown can be found on page 24 

of the appendix.] 

Chairman GUTIERREZ. Thank you very much. Next, we have Mr. 

Richard M. Geerdes? Good. I try to get close. We also welcome him. 

He is the president and CEO of the National Automatic Merchandising Association. Mr. Geerdes assumed the leadership of 

NAMA on January 1, 1999. A native of Chicago, Mr. Geerdes holds 

an MBA in finance, and a bachelor’s degree in management information sciences from Western Illinois University. His education 

was completed in 1975, after several years of service in the U.S. 

Army domestically, and in Vietnam. 

Mr. Geerdes has worked at NAMA since 1988 in various capacities. He joined the staff of NAMA following his experience as a 

vending operator in a series of senior management positions with 

Interstate, United, and Canteen Corporation. He serves as president of the foundation of NAMA, and is a member of the foundation’s board of directors. He also serves as a director on the board 

of the Worldwide Vending Association, based in Brussels. 

He, and his wife, Joan, raised two sons and reside in Hickory 

Hills, southwest of Chicago. Welcome, Mr. Geerdes. 

STATEMENT OF RICHARD M. GEERDES, PRESIDENT & CHIEF 

EXECUTIVE OFFICER, NATIONAL AUTOMATIC MERCHANDISING ASSOCIATION 

Mr. GEERDES. Thank you, Mr. Chairman. And I thank you and 

the other distinguished members of the committee for the opportunity and the invitation to testify in support of H.R. 5512. 

As you said, I am the CEO of NAMA, a 501(c)(6) national trade 

association headquartered in Chicago, and I am here on behalf of 

NAMA’s nearly 1 million members nationwide, in an industry that 

exceeds $40 billion a year. NAMA’s membership is composed of the 

key elements of our Nation’s vending industry, the small and midsized businesses who are the owner-operators of millions of coin-operated machines across our country in public and private locations, 

and the small, mid-sized, and large businesses who are the suppliers of bottled cans, cup beverages, packaged foods, and other 

packaged products sold to the public in those coin-operated vending 

machines. 

H.R. 5512 is very important and NAMA supports its passage. 

The coin modernization process and needs of our Federal Government and country, the productive operation of our industry, and 

meeting the needs and best interests of the taxpayer/consumer/customers who use our country’s vending machines and purchase our 

suppliers’ products are all vital aspects of this bill. 

I am here to offer NAMA’s specific and unique perspective on it, 

and discuss why this legislation should be passed. 

In its current form, and after very productive collaboration with 

the committee’s staff, the bill now provides that future coins, while 

reducing production costs for the taxpayer, must work in existing 

19

coin acceptance equipment in our country’s vending machines, and 

anywhere where coins are used, without modification to that equipment. 

NAMA, on behalf of the food and refreshment vending industry, 

appreciates very much this fine tuning of the bill, from both a practical and a cost-to-the-industry standpoint, and the opportunity to 

work with the committee staff to make the bill as practical and 

beneficial as possible. 

Section 3 of the bill is important to us because, in its current 

form, it provides two key benefits. First and foremost, it will result 

in keeping costs down for customers who use our country’s vending 

machines. Vending is an industry with a very low profit margin, 

and a very high capital investment ratio, without a lot of room to 

absorb cost increases without asking customers to pay more. Of 

course, these customers are also taxpayers, so this bill will help 

make their dollars stretch further in meeting their personal and 

family needs. 

Second, it avoids millions of dollars of additional expense for our 

Nation’s small business owner-operators who run the vending industry. It’s a mature, but a very key retail channel of convenience 

to consumers. Those dollars are vitally needed now, for the viability 

and modernizations underway in the industry that will ensure that 

it can continue to meet the needs of consumers in the future, as 

well as maintain and grow the jobs it supplies to taxpayers across 

the country. 

NAMA believes that H.R. 5512 thus promotes both the financial 

interests of our country’s consumers and the taxpayers, as well as 

those of our economy. Today it is even more apparent that every 

effort to assist small businesses to operate more productively, and 

to invest more dollars to that end, and to help keep vending machine user costs down for the American consumers and taxpayers, 

is vital for the economy’s growth and health. 

We at NAMA share your committee’s interest in protecting consumers from unnecessary higher prices, and in saving the taxpayer 

money. We are pleased to be part of this process in which your 

committee develops legislation to make those goals a reality. 

Of course, we agree that rising prices for the commodities require 

an examination of the alloys used in making U.S. coins, but we respectfully submit that such an examination should be just one element in a broader, more fundamental coin and currency reform 

evaluation. Any such reform might include—and should include, in 

our opinion—replacing dollar bills with dollar coins, which would 

save the taxpayer hundreds of millions of dollars a year. 

With the full concurrence of the NAMA board of directors, NAMA 

fully supports this legislation as written, and we have communicated our support nationally to our membership, and asked them 

to contact you, in Congress, to do likewise. 

We look forward to working with you and all the members of the 

committee, as well as the committee staff, on continuing initiatives. 

And, again, I thank you for the opportunity, and I would be happy 

to answer any questions. Thank you, sir. 

[The prepared statement of Mr. Geerdes can be found on page 30 

of the appendix.] 

20

Chairman GUTIERREZ. Thank you so much, Mr. Geerdes. I have 

a question for Mr. Johnson. 

In your testimony, you mention the changes made in the alloy 

content of the penny of 1974. Your conclusion is that coin composition changes can be made easily and quickly if the need and desire 

are present. 

But the Mint has argued that much of the delay with going to 

a steel penny is the possibility of additional wear and tear on dies, 

because steel is a stronger alloy. I can see where that might be an 

issue over a period of time, once minting the steel penny has started. But do you see why that would delay the actual starting of 

minting a steel penny? 

Mr. JOHNSON. Well, I think the bill gives a lot of flexibility, in 

terms of this. And, as I mentioned, you know, this is not an issue 

that has not been studied, or we haven’t seen coming for a while. 

So I think there has been some research done on this. 

I am certainly not a metallurgical expert, but I think in terms 

of giving the authority and the flexibility, that there is still congressional control, yet it gives enough authority and flexibility and 

broad range to the Mint that it accomplishes a lot in this bill, and 

what we want to accomplish. 

Chairman GUTIERREZ. Thank you, Mr. Johnson. Mr. Geerdes, in 

your testimony you mentioned the importance of future coins produced by the Mint working in existing coin acceptance equipment 

and vending machines, without modifying the equipment. We have 

tried to accomplish that in H.R. 5512; I think we have. Can you 

elaborate on the importance of this provision? 

Mr. GEERDES. Mr. Chairman, as I said, the industry has a very 

low margin and high capital intensive investment. And it is made 

up of—the majority are very small owner-operators. 

The cost of a vending machine at this point in life, for a brand 

new piece of equipment, a stripped-down model is approximately 

$5,000 for the equipment. The coin mechanism itself, which does 

not come as part of that, is an option which can run into several 

hundred dollars. And then, the coin acceptance equipment for the 

paper money acceptance is another $200 or $300 on top of that. So 

you probably have $1,000 additional cost in payment acceptance 

equipment on the machine. 

In order for—if the Mint made coins that did not work in the 

equipment right now, in effect what we would be doing is turning 

away our customers from this over 6 million machines every year. 

When many of us go up to a machine, we expect the coinage and 

currency will work in that machine, and be accepted. 

And so, the first concern would be— 

Chairman GUTIERREZ. How many machines did you say there 

are? 

Mr. GEERDES. There are over 6 million machines in the United 

States. That’s a very conservative estimate. 

So, first of all, we would be losing sales in an industry that can 

ill afford to do that, and is in a very mature state in its life. So 

we have to be very competitive, and watch our costs closely, in 

order to make sure that the prices are as competitive as possible. 

And the other aspect of it is, of course, the aspect of cost that 

the business owner would incur. Because, just to modify the equipVerDate 0ct 09 2002 15:20 Apr 30, 2008 Jkt 041729 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\41729.TXT TERRIE
21

ment will cost them a labor visit of perhaps $50 to $75 to visit each 

vending machine they own, in order to update it, to obtain—you 

know, whenever Congress, or whenever the government introduces 

new currency, that is a requirement. 

If the coins needed to be changed out, the mechanisms needed 

to be changed out, you’re looking at 6 million machines times several hundred dollars per machine, which is basically a cost that the 

industry cannot sustain. 

Chairman GUTIERREZ. Thank you very much. Mr. Lucas, you are 

recognized for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. Mr. Geerdes, on those 

machines, if—and, as you probably observed in my earlier comments—looking at it from a slightly different perspective, as long 

as a new $.05 piece had the same metal qualities as a dime, a 

quarter, whatever, it would be more a matter of adjusting to accept 

the size—because that’s one of the challenges, you have to have 

certain metallistic characteristics to go through—so it’s—I guess 

what I am asking is it is certainly possible that, if we adopted a 

$.05 piece that was similar in metallistic qualities to a dime or the 

quarter, it wouldn’t—it would cost to make adjustments to your 

machines, to your people’s machines, to accept the smaller size, but 

it would be less complicated than other alloy changes, perhaps. 

Mr. GEERDES. Congressman, I believe that is true, yes. 

Mr. LUCAS. What percentage of the sales through vending ma- chines in this country are $.01 transactions? 

Mr. GEERDES. To the best of my knowledge, certainly in the food 

and refreshment side of the industry, which NAMA represents, 

zero. 

Mr. LUCAS. Okay. So the majority—the issue here we’re looking 

at, from the perspective of your people, are the effect on the $.05 

pieces. 

Jay—and I call you Jay, because we served together on the 

House Agriculture Committee—when you were director of the 

Mint, how many $.01 pieces did we make, on an annual average? 

Just off the top of your head, a guesstimate. 

Mr. JOHNSON. I guess it was about 10 to 15 billion at the time. 

Mr. LUCAS. Billion? 

Mr. JOHNSON. Yes, billion. 

Mr. LUCAS. So, we were literally turning out billions every year, 

and have continued to turn out billion after billion after billion 

after billion. Okay— 

Mr. BROWN. Coinstar made a big difference. Coinstar is putting 

back into the industry—I think when I was a Mint Director, at that 

point, they returned almost an equal amount of $.01 coins that the 

Mint made. Now I think they return about 3 times the amount that 

the Mint makes. 

Still, people stash so many coins, and it’s easier for banks and 

stores to just order new coins, rather than recirculate the old ones. 

Mr. LUCAS. Mr. Brown, from your historic perspective, in the 

past, on what occasions, if so, have we looked at the overall question of our coinage in sum total? 

Mr. BROWN. The Congress looked in 1965, when they had to deal 

with the silver issues. The Research Triangle Institute actually 

looked at currency and coinage in their report that they presented 

22

for the Mint. But it is—there has not been a comprehensive look 

at the coinage system since, really, 1965. 

Mr. LUCAS. Thank you, sir. And, once again, Mr. Geerdes, in your food industry’s part of the vending machines, $.01 pieces are 

not a factor. It’s how we handle the $.05 pieces that have a potentially dramatic economic impact on your clientele? 

Mr. GEERDES. Right, Congressman. And, of course, quarters and 

dimes, as well. 

Mr. LUCAS. Quarters and dimes, as well. With that, once again, 

thank you, Mr. Chairman. 

Chairman GUTIERREZ. Thank you. 

Mr. LUCAS. And this is going to be a wonderful bill to work with. 

I can see some good amendments coming here. 

Chairman GUTIERREZ. Okay. I look forward— 

Mr. LUCAS. And mark-ups, sir. Thank you, Mr. Chairman. I yield 

back. 

Chairman GUTIERREZ. I look forward to working with you, Mr. 

Lucas. I want to thank the witnesses and the Members for their 

participation in this hearing. 

The chairman notes that some Members have additional questions for the witnesses, which they may wish to submit in writing. 

Therefore, without objection, the hearing record will remain open 

for 30 days for Members to submit written questions to the witnesses, and to place their responses in the record. This subcommittee hearing is now adjourned. Thank you all so much. 

[Whereupon, at 4:06 p.m., the hearing was adjourned.] 

(23)

A P P E N D I X

March 11, 2008

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