[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF MONEY:
COINS AND BANKNOTES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON MONETARY
POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 5, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-113
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
_________
U.S. GOVERNMENT PUBLISHING OFFICE
31-573 PDF WASHINGTON : 2018
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannong McGahn, Staff Director
Subcommittee on Monetary Policy and Trade
ANDY BARR, Kentucky, Chairman
ROGER WILLIAMS, Texas, Vice GWEN MOORE, Wisconsin, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
BILL HUIZENGA, Michigan BILL FOSTER, Illinois
ROBERT PITTENGER, North Carolina BRAD SHERMAN, California
MIA LOVE, Utah AL GREEN, Texas
FRENCH HILL, Arkansas DENNY HECK, Washington
TOM EMMER, Minnesota DANIEL T. KILDEE, Michigan
ALEXANDER X. MOONEY, West Virginia JUAN VARGAS, California
WARREN DAVIDSON, Ohio CHARLIE CRIST, Florida
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
C O N T E N T S
----------
Page
Hearing held on:
September 5, 2018............................................ 1
Appendix:
September 5, 2018............................................ 33
WITNESSES
Wednesday, September 5, 2018
Olijar, Leonard R., Director, Bureau of Engraving and Printing.. 5
Ryder, David J., Director, United States Mint................... 7
APPENDIX
Prepared statements:
Olijar, Leonard R........................................... 34
Ryder, David J.............................................. 84
Additional Material Submitted for the Record
Barr, Hon. Andy:
Written statement from Sonecon............................... 92
THE FUTURE OF MONEY:
COINS AND BANKNOTES
----------
Wednesday, September 5, 2018
U.S. House of Representatives,
Subcommittee on Monetary
Policy and Trade,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:06 a.m., in
room 2128, Rayburn House Office Building, Hon. Andy Barr
[chairman of the subcommittee] presiding.
Present: Representatives Barr, Williams, Lucas, Huizenga,
Pittenger, Love, Hill, Emmer, Mooney, Davidson, Tenney,
Hollingsworth, Moore, Foster, Sherman, Green, Kildee, and
Vargas.
Chairman Barr. The subcommittee will come to order. Without
objection the Chair is authorized to declare a recess of the
Committee at any time. All members will have 5 legislative days
within which to submit extraneous materials to the Chair for
inclusion in the record.
This hearing is entitled, ``The Future of Money: Coins and
Banknotes.'' I now recognize myself for 4 minutes to give an
opening statement.
Despite all the focus on innovative ways to exchange value
or settle transactions, Bitcoin, Apple Pay, Venmo, and dozens
more and with the increasing use of credit and debit cards,
coins and currency still are a major factor in our retail
economy.
Cash may not be king anymore but it is still royalty and
many Americans have a little of it in their pocket or purse
right now. Even so, there is a really large amount of United
States coins and banknotes circulating, all $1.7 trillion or so
of it produced by one of two bureaus of the Treasury
Department: The Bureau of Engraving and Printing, which prints
Federal Reserve notes and the United States Mint, which makes
our circulating coins as well as some investor and collector
coins.
The nearly 4,000 people who work at those bureaus do a
terrific job. That being said, it is up to Congress to ensure
that the Mint and the Bureau of Engraving and Printing remain
effective and efficient and have adequate plans for the future,
a future where innovative payment options are likely to
multiply and usage likely to grow.
To that end, today the Monetary Policy Subcommittee
welcomes the directors of the two bureaus to continue that
discussion. There are real issues, real issues that have real
impacts on both the economy and the Treasury's General Fund in
the near-term and, particularly, in the long-term.
One of those issues, that Congress has been prodding the
Mint on for a decade, is the cost to produce circulating coins.
The penny and the nickel both cost considerably more than their
face value to produce.
Thirty years ago, Canada and the United Kingdom changed to
steel coins plated to look and function like their previous
coins which in turn saved a lot of money and now these
countries contract manufacture coins for a number of other
countries.
Why hasn't the United States been the leader? Why didn't we
emulate them when their move turned out to be successful? Have
we just wasted tens or hundreds of millions of dollars for no
good reason?
There are other coin-related issues, Congressman Mooney has
been a leader in pointing out that there is an increasing
problem of counterfeit copies of the Mint's American Eagle
investment coins, a problem that defrauds both investors and
dealers. Again, other Mints around the world have inserted
anti-counterfeiting technology into their bullion but the U.S.
Mint hasn't, why not? To be sure in our discussions with the
Secret Service, there are anti-counterfeiting measures that
have been put into place but we want to explore improvements in
that area.
Additionally, the Bureau of Engraving and Printing would
like a new printing plant to replace its well-known one just
down the street. That is potentially a reasonable request but
more work probably needs to be done on cost controls and on
pinpointing future banknote demand. Right now, spending close
to $1.5 billion dollars to save $40 million a year makes sense
if demand for banknotes stays the same until maybe 2050 but not
everyone imagines that demand will hold up.
Finally, I hope that we will hear that the bureaus have
contingency plans for the possibility that the demand for all
cash and coins could dry up fairly quickly. It is unknown
whether we are moving that rapidly to a cashless society but it
is worthy of exploration.
If that were to happen over just a few years, we would have
about 4,000 employees and four major factories to think about
repurposing. Additionally, the ability of the U.S. Mint to
collect seigniorage from coins could be greatly reduced,
ultimately increasing the Federal Government's deficit by
hundreds of millions of dollars annually and there may be
logistical difficulties with converting paper and coin money
into another currency medium.
I don't see that happening anytime soon, if at all, but
someone needs to be thinking about it and I hope the directors
can give us a hint about such plans.
The Chair now recognizes the Ranking Member of the
subcommittee, the gentlelady from Wisconsin, Gwen Moore for 5
minutes for an opening statement.
Ms. Moore. Let me join the Chairman in welcoming our
esteemed witnesses for the day.
As I was cleaning my bedroom and picking up all the pennies
on the floor, this is a very appropriate time to talk about
this matter, finding a little jar to put them in.
I would yield the balance of my time to Mr. Sherman from
California.
Mr. Sherman. Thank you.
Most transactions are through an electronic payment system.
We have to make sure that remains in U.S. control. If we push
Europe too hard they will invent a system to close major oil
and other major transactions without touching U.S. soil or
perhaps U.S. currency.
``Future of Money'' is not cyber and as the Chairman points
out the seigniorage is very valuable to the United States, we
should not lose it nor should we create a method of payment
that, while it can be used and is often used for legitimate
transactions, is particularly well designed for tax evasion and
the evasion of sanctions legislation.
As to the currency we can actually touch, as long as we
have a paper dollar people will not use a dollar coin. We would
save an awful lot of money at the Federal level if people would
use a dollar coin because it costs so much to make a paper
dollar, it doesn't last that long or doesn't last nearly as
long as a coin, after all we have coins from the Roman Empire;
coins last a long time.
But the real savings of having a society in which people
carry dollar coins will be its use by transit systems and
vending machines, although gradually our technology is taking
us beyond the need for a coin in either of those cases.
We ought to abolish the penny. It is not inflationary. If a
merchant is going to charge you 23 cents for an orange and
round it up to 25, then buy two oranges for 46 cents and round
it down to 45 cents.
Every transaction we engage in is actually a rounded
transaction because when you apply State and local sales tax to
a transaction, you never bought anything at a store that was
exactly $6.92, there was tax, it was six dollars ninety-two
point three cents and the merchant rounded it to the nearest
penny. If we can round to a penny, we can round to a nickel.
I know the Illinois delegation has historically favored
retaining the penny because it has Abraham Lincoln on it. Back
when a penny was worth something, as it was in Lincoln's day,
it was an honor to be on the penny. Today if you were to
scatter pennies around the room you would not be enriching
those who walk by, a penny on the ground is litter.
So if we abolish the penny there is room in the cash
register for a dollar coin, we save a lot of zinc, a little bit
of copper, or a fair amount of money and we do not make
transactions at the store more difficult nor do I think that
any merchant will calculate the price of an orange on the
theory that you will buy just one and that you will owe 23
cents and it will get rounded up to 25 cents which you can
always buy two oranges, they are delicious and they come from
California.
I will yield back the balance of my time back to the
Ranking Member.
Ms. Moore. I am excited to hear your testimony and I yield
back.
Chairman Barr. The Ranking Member yields back the balance
of her time.
The Chair now recognizes the gentleman from West Virginia,
Mr. Mooney for 1 minute for an opening statement.
Mr. Mooney. Thank you very much Mr. Chairman.
Welcome Director Olijar and Director Ryder, I really
appreciate you being here, look forward to working with you in
the future, getting a better understanding of how the Bureau of
Engraving and Printing and the U.S. Mint view the future of the
U.S. currency.
I thank the Chairman for his comments.
I have taken a special interest in coins and fraudulent
attempts from other countries. I have been concerned about what
has been without question a lack of attention to address the
growing problem of high-quality counterfeits coming from China
and elsewhere but especially China. They seem to want to hack,
steal our intellectual property, counterfeit, they seem to be
very, extra, extra good at coming to this country and causing
problems.
It is important that we secure U.S. coins, minted of gold,
silver, platinum, and palladium which happens to be the only
sound money currency minted in the United States.
I did recently meet with the Secret Service to discuss
their role in combating counterfeit currency flooding our
market. During our meeting they reported they have been working
on at least 15 major cases over the past 2 years.
The Secret Service did voice some frustration about
obtaining support from the U.S. Mint when it comes to
investigating and curtailing the growing counterfeiting
problem.
Since that meeting and sharing information with the U.S.
Mint, I have really not seen evidence that the U.S. Mint
intends to meet the standards set by several foreign mints who
have adopted various anti-counterfeiting technologies that are
in existence and in use very effectively.
In addition to discussing the anti-counterfeiting measures,
I hope to hear from both of you, both directors, regarding the
stability of the U.S. currency, how we can ensure a strong and
stable currency for the American public, through sound Monetary
Policy which may also include a discussion of returning to the
gold standard; I have a bill that does that, ``and not relying
solely on the full faith and credit of the U.S. Government,''
quote/unquote.
Again, I appreciate the opportunity to hear from Director
Olijar and Director Ryder on this important issue.
Chairman Barr. The gentleman's time has expired.
Today we welcome the testimony of Director Olijar, who
became the Director of the Bureau of Engraving and Printing in
May 2015, after serving as the BEP's Deputy Director, from 2012
to 2014.
Mr. Olijar began his career at the BEP 30 years ago in 1988
as a Systems Accountant and rapidly advanced. In 2006 Mr.
Olijar was appointed the Chief Financial Officer of the Bureau
of Engraving and Printing. Mr. Olijar graduated magna cum laude
from the University of Colorado in 1987. He received the Gold
Medal Award for the highest score in Virginia on the Certified
Public Accountant Exam and scored in the top 1 percent in the
Nation. Mr. Olijar resides in Northern Virginia with his wife
and two daughters.
We also welcome Director Ryder, who is the 39th United
States Mint Director. Mr. Ryder also led the Mint as its 34th
Director from September 1992 to November 1993, during the
Administrations of President George H. W. Bush and President
Bill Clinton.
Most recently Ryder was the Global Business Development
Manager and Managing Director of Currency for Honeywell
Authentication Technologies. Previously, Ryder served as the
CEO of Secure Products Corporation which was acquired by
Honeywell in 2007.
In addition to the United States Mint, Ryder's prior
government service included Deputy Treasurer of the United
States; Deputy Chief of Staff to Vice President Dan Quayle; and
Assistant to Vice President George H. W. Bush. Mr. Ryder
attended Boise State University and is married with two
children.
Each of you will be recognized for 5 minutes to give an
oral presentation of your testimony. Without objection each of
your written statements will be made part of the record.
Director Olijar you are now recognized for 5 minutes.
STATEMENT OF LEONARD OLIJAR
Mr. Olijar. Thank you. Good morning Chairman Barr, Ranking
Member Moore, and distinguished members of the Subcommittee.
Thank you for inviting me here today to testify about the many
improvements underway at the Bureau of Engraving and Printing.
The BEP produces United States currency notes in Fort
Worth, Texas, and downtown Washington, D.C. I am honored to
lead BEP. I am proud to say we continue to be very successful
at meeting the Nation's and the world's demand for currency.
Demand for U.S. currency remains strong. There are now more
than 42 billion notes in circulation with a value of more than
$1.7 trillion and cash in circulation continues to grow almost
5 percent per year. Approximately 7 billion notes have been
ordered annually for the past decade.
Up to two-thirds of the value of U.S. currency is held
overseas where our currency is the world's currency. It is the
most trusted international store value and serves as a hedge
against uncertainties, natural disasters, and political
turmoil.
In the U.S. the use of cash has been resilient. While
several small countries set a goal of going cashless, they have
recently recognized that a cashless society presents a
significant economic risk and neglects to serve those who do
not have access to smartphones, computers, banks, and credit.
I believe the 21st century warfare has a significant cyber
component and these countries are now recognizing the risks. If
your enemy is able to take down your electronic infrastructure
or a natural disaster hits, there will be no way to conduct
commerce in a cashless environment, crippling the economy.
The FDIC estimates that 7 percent of U.S. households are
unbanked and almost 20 percent are under-banked, as a result
over 45 million U.S. households do not have access to the
payment systems that are most often used in lieu of cash.
In my 30 years at BEP, the composition of our currency has
changed significantly with the addition of complex, covert, and
overt security features to address domestic and international
counterfeiting threats. It is the development of these security
features that drives the timeline for introduction of a new
currency series. I am happy to say that less than one one-
hundredth of 1 percent of notes in circulation are counterfeit.
BEP works collaboratively through the Advanced Counterfeit
Deterrent Steering Committee, with the Board of Governors of
the Federal Reserve System, the Secret Service, and the
Treasury Department to develop counterfeit deterrent features
for U.S. currency.
Potential features are subject to adversarial analysis at
our national labs. The ACD Committee recommends security
features and designs to the Secretary of the Treasury, who has
final authority.
BEP continues to implement more efficient, cost-effective,
manufacturing processes. We develop custom machines that
combine four manufacturing steps into one and, now, transition
printing $1 notes from 32-subject sheets to 50-subject sheets
and ultimately every denomination will be printed on a larger
sheet size.
Other strategic investments include robotic palletizers and
new equipment that allows BEP to reclaim good notes from
defective sheets. Together these efficiencies have saved us
over $100 million.
Currency production equipment has grown dramatically in
complexity and size over the past 20 years. Moreover, the next
family of currency will have new overt and covert security
features which will require new production equipment to apply.
We are expanding the Fort Worth facility to accommodate
this equipment, it will not fit inside the current Washington,
D.C. facilities, two obsolete, six-story, multi-wing buildings
that have no security perimeters.
We are seeking statutory authority to use the BEP revolving
fund to construct a smaller, more efficient, and more secure
production facility to replace our existing Washington
facilities. Our legislative proposal has strong support from
OMB. Director Mulvaney has listed it as a critical priority for
the Administration and of course it is budget neutral. A new
facility will cost almost $600 million less than renovating the
existing space. It will shrink our Federal footprint by 27
percent and lower operating costs by at least $38 million
annually.
The GAO (Government Accountability Office) looked at the
Bureau's most recent facility study and, in a report released
this year, GAO's own review and analysis strongly supports the
Bureau's recommendation to construct a new facility, in lieu of
renovating existing space.
No action has been taken on facility studies over the past
25 years and doing nothing is no longer an option without
jeopardizing BEP's mission and the U.S. currency program. Our
currency program returns more than $50 billion a year to the
Treasury and is a cornerstone of the global economy.
It is our hope that this committee will support the need
for a smaller, more efficient facility.
Mr. Chairman, this concludes my remarks about some of the
initiatives of BEP and I will be happy to take questions from
you or the committee members.
Thank you for your time this morning.
[The prepared statement of Mr. Olijar can be found on page
34 of the appendix.]
Chairman Barr. Thank you, Mr. Olijar.
Mr. Ryder you are now recognized for 5 minutes for an
opening statement.
STATEMENT OF DAVID RYDER
Mr. Ryder. Thank you, Chairman Barr, and Ranking Member
Moore. It is a privilege for me to be here today address your
concerns.
The Mint performs three primary missions. We produce coins
at sufficient levels to meet daily needs of Commerce. We also
manufacture numismatic and bullion products as well as
safeguard our national assets.
I visited and held town hall meetings in all four
production facilities since being appointed Director about 5
months ago.
This workforce is well-equipped, enthusiastic, engaged, and
committed. At any one of these facilities you will find safety
statistics and a level of morale that rivals the very best in
private industry.
Our employees make use of cutting-edge technology in three
key production phases: Design, manufacturing, and packaging.
Robotic technology has improved production in die
manufacturing. While a series of robotic arms boosted proof-
coin packaging from 600 to 1,800 units per hour.
By the end of this year we should expect to produce 13.9
billion circulating coins and more than 2.8 million numismatic
items. The Federal Reserve demand for currency coins will
continue to fluctuate due to economic cycles.
To manage market uncertainty, the Mint has identified and
executed state-of-the-art manufacturing processes. Although the
unit cost for pennies and nickels is above face value, lean
practices have put the Mint on track to return $250 million to
the Treasury General Fund in Fiscal Year 2018.
The Mint is collaborating with the Federal Reserve to
explore cost-reduction strategies for the penny. We are also
evaluating potential savings from alternative metals with the
5-, 10-, and 25-cent denominations.
Since 1982, Congress has authorized 71 commemorative
programs that have generated more than $522 million in
surcharges. In order to continue the success of these programs,
I feel that it is necessary for the Mint to work closely with
Congress during the legislative development process to identify
Commemorative Coin programs that actually work better for our
customers.
We are also eager to start a dialog for a successor of the
circulating Commemorative Quarter program before the current
America the Beautiful Quarters program ends in 2021. Over the
past 10 years, the Mint's numismatic customer base has declined
from 1.2 million customers to approximately 500,000 today.
The Mint is developing and marketing a sales strategy aimed
at increasing awareness and promoting our products much more
broadly to our depleting customer base that we need to take
care of.
The United States Mint is the world's largest manufacturer
of gold and silver bullion coins. Beginning in 2017, demand for
both gold and silver bullion coins worldwide slumped
dramatically as investors apparently focused on other
investments. In the last couple of months, demand has shown
signs of stabilizing. We have adjusted our production levels to
be in line with market demand.
I believe that for the foreseeable future, coins will
remain important instruments for settling financial
transactions. However, with expanded cryptocurrency options on
the horizon the importance of their seriousness, studies cannot
be underestimated.
The Mint is developing anti-counterfeiting measures for our
bullion products. I have assembled a team within the Mint who
will develop a multilevel approach including customer
awareness, new secure product-packaging features, as well as
product integration protections.
As part of the alternative metals research and development,
the Mint is actively seeking feedback from industry
stakeholders who may be impacted in areas such as vending,
parking meters, coin-operated laundry, amusement, public
transportation, banking, and supermarkets.
Helping our youth understand the role of coins can be a
gateway for financial awareness. The Mint has developed a
first-class website at www.usmint.gov. The site contains lesson
plans and interactive activities that help kids understand the
importance of saving their hard-earned money and enable them to
take control of their own economics.
The Mint is privileged to connect America through coins and
medals which reflect the remarkable history, values, culture,
and natural beauty of our Nation.
Mr. Chairman, I thank you for your interest in the mission
of the United States Mint. I will be happy to answer any
questions you have. Thank you.
[The prepared statement of Mr. Ryder can be found on page
84 of the appendix.]
Chairman Barr. Thank you, Mr. Ryder for your testimony.
The Chair now recognizes himself for 5 minutes for
questioning. Let me start with you Mr. Ryder.
Congress has been prodding the Mint for a decade or more to
find a less expensive way to produce circulating coins that
could and would co-circulate with existing ones.
Many other countries notably Canada, and the United
Kingdom, as I pointed out in my opening statement, figured out
how to do this seamlessly and effectively as much as 30 years
ago. What is the current status of this effort at the Mint and
how much taxpayer money could be saved if the Mint were to move
to steel or some other less expensive formulation?
Mr. Ryder. Yes, sir. Thank you for the question.
The Mint is actively and has actively been researching
alternate metals. We have identified one particular metal that
we call our 80-20 composition, that it is 77 percent copper, 20
percent nickel, and 3 percent zinc. The cost savings of that
program would be about $4.1 million if we introduced that
program with the nickel, dime, and the quarter.
Another alternative metal that we are looking at is more of
a 50-50 blend. We are in the initial stages of trying to run
that product through its courses with the vending machine
industry and other stakeholders.
That particular program we believe would save over $16
million a year in cost savings. It is probably 1-1/2 to 2 years
away from being realized but we are endeavoring to undertake
those two issues and try to move them out to the general
public.
Chairman Barr. Can you take those actions administratively
on your own initiative without Congressional action?
Mr. Ryder. It has to be Congressional action. We have
submitted through our budget process legislative language that
will allow the Secretary to make that decision. I have briefed
the Secretary on both of these alternatives and I believe he is
supportive.
Chairman Barr. OK. Thank you very much.
Mr. Olijar, the Bureau of Engraving and Printing is on
record as seeing constant and improving demand for banknotes at
least the next decade, and your testimony talked about the
risks associated with electronic transactions.
But others, including the Chicago Fed, believe that
externalities including the improving economy and new
technologies may work against that particularly in out-years.
What is your projection for banknote demand in the near and
longer-term, 2-years, 10-years, 20-years, will people still be
using as much cash say in 2040?
Mr. Olijar. Our projection is that cash is going to
continue to remain a viable mechanism for payment and store
value.
The challenges that come with payment mechanisms are if
there are a significant amount of them, but it really hasn't
impacted currency demand to date.
People have a preference for using cash. As I mentioned
there is a large, under-banked population in this country, that
has a significant preference and has no access to alternative
payment mechanisms.
Chairman Barr. Let me move on to the proposal for a new
plant. I have looked at the GAO report and they do compliment
you in some regards for following good practices and then they
have some constructive suggestions for you all as you pursue
this idea.
When the plant in Fort Worth was opened, the land, the
infrastructure, and the building were donated with the
understanding that a large number of good jobs would arrive
with the new facility.
My question on this most recent proposal on a new facility
is whether or not the Bureau has pursued a similar model for
its plans to replace the D.C. facility, specifically whether or
not you are looking at States that may be willing to save the
Bureau money by donating the lands with the expectation that
jobs would be located there and what is the status of that and
if you are not pursuing that, a donation concept, why not?
Mr. Olijar. To date we have not pursued a donation concept.
We are open to pursuing that. The initial look we did with
respect to the facility location was existing Federal
facilities in the Washington, D.C. area, when we were going to
use GSA's (General Services Administration) Exchange Authority.
When GSA put a stop to using the Exchange Authority because
they didn't feel that they were receiving value, we decided to
pursue a different option.
We are open to looking at pursuing an option like we did
with Washington or Fort Worth facility and getting a donated
land and facility. Key requirements for us is that we do want
to remain on the East Coast. Primary shipments for us go to the
East Rutherford, Federal Reserve Center. We need to be near an
airport. But we can put our requirements out and work with GSA
to identify anybody that would be interested in donating land
and facility.
Chairman Barr. Thank you. I look forward to working with
you on ways in which we can make this work for everyone in a
cost-effective manner.
My time has expired and so I now yield 5 minutes to the
Ranking Member, the gentlelady from Wisconsin, Ms. Moore.
Ms. Moore. Thank you so much Mr. Chairman.
Thank you, and I appreciate your comments about just the
impracticality of going to a totally cashless society because
people are unbanked, under-banked, children, and certainly
merchants that maybe have pop-up vending products that really
would not be able to handle a cashless enterprise.
That being said, I want to just ask a little bit. I noticed
from your testimony that you have costed out the price of
pennies and nickels and it is one eighty-second of a cent to
produce the penny and 6.6 cents for the nickel.
I just want to know with what economists or marketing
people, do you consult, with regard to the practicality of
getting rid of either the penny and particularly the nickel?
It is one thing to round up or down with a penny but you
start rounding out nickels and it will add costs, so to whom do
you interface in order to evaluate whether or not it is
possible to get rid of a nickel in particular or a penny?
Mr. Ryder. Sure. My primary interface is the Federal
Reserve Bank so we have been meeting regularly on this issue,
the penny and the nickel. We have had quite a number of
meetings. It is my goal, I should say, our goal, to reach a
conclusion on what to do with the penny before the end of the
year.
It might take quite a bit longer than that to implement
whatever plan we do, but in regards to the penny I believe
there are quite a number of pennies out in circulation that are
not circulating.
One of our goals is to try to get the general public to
circulate more of those pennies. The banks that hold them along
with the armored carriers that hold them, need to start
circulating some of those pennies and not depend on brand new
pennies that are coming out of our facilities.
If we can really improve the circulation and get them back
into circulation, the cost to produce pennies is going to go
down because I would hope to see it go from 7 billion currently
to somewhere in a manageable number of the 2 to 3 billion
pennies a year to satisfy the Federal Reserve requirements.
Ms. Moore. The nickel?
Mr. Ryder. The nickel as you said, is correct. It costs
more than a nickel to make a nickel. I don't have the authority
to disregard the nickel. But again, we will work with the
Federal Reserve on measures to reduce cost. Circulation is not
as much of an issue with the nickel.
With our alternative metals, I believe we can introduce new
metals in the coming years that will reduce that cost
significantly and bring it down in line with the cost to
produce.
Ms. Moore. The topic of the need for a new facility,
obviously this has been costed out and the current or projected
use of coins is factored into that so we can afford a new
facility in your estimation?
Mr. Olijar. Yes. I believe that we can afford.
One of the criteria driving the need for a new facility is
the constraints that exist in the existing facility aren't
going to enable us to add the new security features that are
going to be coming with the redesigned currency and maintaining
the confidence of the currency is the essence of--
Ms. Moore. But this is with program revenue, not any
appropriation from Congress, you can build the facility?
Mr. Olijar. That is correct. There would be no
appropriation from Congress. We would include it in the billing
rates for the Federal Reserve for our currency.
Ms. Moore. OK. Thank you.
Mr. Chairman, I will yield back my time.
Chairman Barr. The gentlelady yields back.
The Chair now recognizes the Vice Chairman of the
subcommittee, the gentleman from Texas, Mr. Williams for 5
minutes.
Mr. Williams. Thank you, Mr. Chairman for holding this
important hearing on the Future of Money in the United States.
Our economy is booming and thankfully Americans are
consuming, spending, and saving more than ever before. While we
encourage and work to foster this historic growth we must also
scrutinize our current systems, keep what is working, reform
what is not.
This subcommittee has focused on issues that are important
to the American people and most importantly paid close
attention to how the Federal Government spends the taxpayer's
money. It is my hope that this morning we can have a discussion
on the U.S. Mint and Bureau of Engraving and Printing, how they
are doing, what are the good things they are doing, and how we
can improve upon what they are doing and how we can establish
and support best practices for the foreseeable future.
I look forward to this hearing and I appreciate our
witnesses being here and in full disclosure, I am from Fort
Worth, Texas.
First question, Director Olijar, I am sure many people
followed the proposal, removing Andrew Jackson or Alexander
Hamilton from Federal Reserve notes. Where does this issue
stand?
Mr. Olijar. The Secretary of the Treasury has final design
authority with respect to United States currency.
At this time, we are focused on the next denominations to
be redesigned, which are the 10 and the 50.
Mr. Williams. OK. It seems though any decision on this
subject would be controversial but a decision probably has to
be made as part of the banknote redesign schedule so what is
the decision or what is the timeline, that you think we will
have?
Mr. Olijar. Our estimate is that we need a decision with
respect to the $20 note in 2021 to enable us to be in
production and introduce a redesigned currency by 2026.
Mr. Williams. OK. Another question, the United States
dollar is particularly strong right now and two-thirds of U.S.
$100 notes are thought to be circulating overseas, so what is
the state of counterfeiting of Federal Reserve notes these
days?
Mr. Olijar. As I mentioned, counterfeiting today is less
than one one-hundredth of a percent of the notes that are in
circulation. That said, the significant threat that we face in
counterfeiting is the casual counterfeiter has emerged as the
primary focus. Those are the folks that are using their
personal computer and inkjet printer to scan and print a note.
That is why we are redesigning the currency and coming up
with state-of-the-art security features to thwart that.
Mr. Williams. Will you say is that problem increasing,
decreasing, stable?
Mr. Olijar. Overall counterfeiting remains relatively
stable. But it used to be, that it was large printing shops, it
has now become the small individual and a lot more of them are
doing it.
Mr. Williams. You just touched on what I was going to ask
you, so is counterfeit produced in specific places or passed
more in specific places?
Mr. Olijar. Counterfeiters typically target the larger
retailers that don't have automated equipment; individual
cashiers; small businesses where people aren't as knowledgeable
about the currency and don't know the security features to look
for in what is there today.
Mr. Williams. OK. Finally, is the Secret Service still
emphasizing an anti-counterfeiting mission the way it once did?
Mr. Olijar. The Secret Service, BEP, the Department of
Treasury, all work very collaboratively to keep the Nation's
currency secure.
Yes, they are aggressively helping us fight counterfeiting,
especially in the international markets where you do see the
larger counterfeiters.
Mr. Williams. And also, I will just make a statement
because we have touched on the Fort Worth model, if that is
what you want to call it, for future expansion, is certainly
the way to go. It works does it not?
Mr. Olijar. Yes, it works very well. I would love to follow
that model and we could actually make some improvements on that
model. That was a facility opened--
Mr. Williams. Maybe bringing more business to Fort Worth?
Mr. Olijar. Yes.
Mr. Williams. Might be an improvement.
Mr. Olijar. We are doing a significant expansion in Fort
Worth already to accommodate the new equipment.
Mr. Williams. OK.
And just in closing, Director Ryder, I want to thank you
for the experience you bring with the Mint and your views and
so forth.
Tell me one more time, before my time is up, what does it
cost to make a penny?
Mr. Ryder. Right now, it is about two pennies.
Mr. Williams. But the nickel?
Mr. Ryder. About 6.3.
Mr. Williams. Yes. Sounds like you are in the car business.
I want to thank you all for being here, appreciate your
involvement.
I yield my time back, Mr. Chairman.
Chairman Barr. The gentleman yields back.
The Chair now recognizes the gentleman from California, Mr.
Sherman.
Mr. Sherman. Mr. Olijar, impressive results on the Virginia
CPA exam.
Mr. Olijar. Thank you.
Mr. Sherman. We have other countries in the same business,
countries like ours, like Japan, the E.U., Canada, Great
Britain, what is their smallest unit of paper money in those
countries?
Mr. Olijar. I am not sure but it is generally above a
dollar.
Mr. Sherman. I am used to $2 to $5 because they have
discovered that if you don't have a dollar bill, people will
use the dollar coin and they will save a lot of the money that
we are talking about here.
Mr. Ryder, I know you are going to be coming up with a
report on the penny by the end of the year, my guess is that
you won't do it but I am going to suggest that you simply
abolish the penny.
It is not currency, it is litter. Literally if a police
officer saw me throw pennies on the ground, I would get a
ticket for littering and if I tried to pay that ticket in
pennies, the judge would be very upset.
There will be the issue that somehow when transactions are
rounded, that that would be inflationary or somehow the
merchant would benefit.
If you buy something for $1.98 in a State with a 7 percent
sales tax, you are already rounding to the nearest penny, you
actually owe the merchant $2.1186 and it gets rounded to $2.12
so you are rounding up. If you buy four of those items instead
then with sales tax you round down.
The penny has been our lowest unit of currency since 1857,
since Lincoln, now he would not throw pennies on the ground and
call it litter because back then a penny was worth more than a
dollar is today, I believe, certainly well more than 50 cents.
Are you considering abolishing the penny?
Mr. Ryder. No. sir.
Mr. Sherman. Would you? Even after that impassioned
rhetoric from the gentleman from California?
Mr. Ryder. I actually just this morning off the Metro,
picked up a penny. I always seem to pick pennies up wherever I
go but it is not my decision to abolish the penny.
I will comply with regulations if and when, but right now
it doesn't seem that the American population wants to get rid
of the penny. If we had to round, the inclination will be to
round up.
Mr. Sherman. No. The rules--we round every transaction, in
every State with a sales tax, and the computers and before
that, little paper charts that the agency I used to run
distributed.
We round up or we round down based upon whether it is over
0.5 or under 0.5.
We can certainly mandate by law that if it was exactly half
a penny you round down.
Mr. Ryder. My personal opinion I think rounding affects the
people that least can afford it and--
Mr. Sherman. But every person who can least afford it has
their transactions rounded, every time they buy anything, in
any State with a sales tax.
Mr. Ryder. True.
Mr. Sherman. OK.
Let us see. I will ask your colleague there, what steps you
are taking in designing the currency particularly the $5 bill,
the $1 bill but all currency to make sure that the changes you
make are consistent with vending machines that read currency?
Mr. Olijar. We are prohibited by statute from redesigning
the $1 note so at this point in time we have no plans for a
redesign on that.
With respect to the $5 note, we have a very active
interaction with the BEM, the Banknote Equipment Manufacturing
community. We share proposed designs with them. We give them at
least 18 months to modify their equipment. We seek their
feedback on security features that we add specifically for the
Banknote Equipment Manufacturers to use because--
Mr. Sherman. This is the same equipment that is used in the
vending machines as well?
Mr. Olijar. Correct.
Mr. Sherman. OK. I would point out that in your testimony
you folks are talking about saving $4 million, saving $16
million and a million dollars is a lot of money, it sounds like
a lot of money but compared to the cost in this economy of
having people carry money and coins, of having machines count
money, of having vending machines either work or not work, just
the psychological cost of having to hire a psychiatrist to talk
to you about the incredible anger that you have when the
machines won't give you your potato chips. Those costs dwarf
the $4 million and the $16 million, I would hope.
Is it your mandate to come up with the best decisions for
society or just whatever cost your agency the least money?
Mr. Olijar. We focus on society. The cost of the electronic
transaction and electronic fraud is much more significant than
the cost of counterfeiting or the cost borne by businesses of
today.
Mr. Sherman. Well, yes.
Chairman Barr. The gentleman's time has expired.
The Chair now recognizes the Chairman of the Capital
Markets Subcommittee, Mr. Huizenga.
Mr. Huizenga. Thank you, Mr. Chairman. I appreciate the
opportunity to welcome you here.
Just while we are on this subject that Mr. Sherman was just
talking about, how much of a consideration is really given to
the equipment manufacturers, vendors, and the folks that
utilize these, whether it is coins or paper money, on a daily
basis? How much weight is given to their opinions on content as
they need to go in and maybe change how a machine would read a
coin or read a dollar?
Talk a little bit about that process if you would?
Mr. Olijar. With respect to currency, there are a
significant number of conferences where we have an opportunity
to sit down with the equipment vendors. One of the things that
they share with us is the particular version of counterfeit
notes that they see and how their machines are being reverse-
engineered so that we can work collaboratively with them to
enhance the security of our designs.
We have a very significant outreach to them. They are one
of the front line of defenses in fighting counterfeit so we
want to work collaboratively.
Mr. Huizenga. Mr. Ryder?
Mr. Ryder. With regard to the Mint, we rely heavily on our
vendors and machine manufacturers. Behind me there are two
gentlemen from Coinstar that have about 17,000 machines in the
industry today that count coins and whatnot, in supermarkets.
We also work with many of our other vendors when we are
doing metal evaluation of our different products to ensure that
the machines work well with our products, they cohabitate well.
We depend heavily on those vendors.
Mr. Huizenga. That is a pretty dynamic relationship?
Mr. Ryder. Yes.
Mr. Huizenga. I know that has been cited, however, in the
past, reluctance to move from a paper dollar or $5 banknote to
those coins, changing those systems, but it sounds like those
systems are continually reviewed and in demand from the
manufacturing side.
I am going to move on to a letter, this is a theme, it is
not particularly new, but this is a letter that I had sent in
September 2016 to a Comptroller generally, a U.S. GAO and when
I had the privilege of chairing this particular subcommittee,
talking about the building and the desire at the time to move
the Mint.
One of the things I was really quite curious about though
was the BEP had foregone at least $200 million in maintenance
on its current D.C. facility and it seems quite a big number
and I believe it begs the question of how well all BEP
facilities or any new one would be cared for. If you could
address that issue?
Then I am curious how did it occur? How did we get $200
million behind? Was BEP underpricing their services, their
printing fee, charges to the Federal Reserve or was the Federal
Reserve refusing some of those charges? How did we get $200
million behind in maintenance?
Mr. Olijar. A significant amount of that maintenance
actually goes back to being deferred into the late 1990's when
I was the CFO of the Bureau of Engraving and Printing.
As I have mentioned we have done three facility studies and
prior to making, I will say, significant infrastructure
investments we had the hope that we would be able to move
forward on a replacement facility rather than continuing to put
money into a facility that would not provide us with the
operational efficiencies that a new one would give us so we
deferred maintenance.
We have done three facility studies in the past 25 years.
Our hope is that we can get a smaller more efficient
manufacturing facility. The deferred maintenance that we are
talking about exists primarily in Washington, D.C. We have not
deferred maintenance in the Fort Worth modern facility that we
have today.
Mr. Huizenga. Yes. Real quickly, my time is running out.
Are we really going to need two factories for banknotes in
25 years?
Mr. Olijar. I believe it is in the Nation's interest, as
does the Federal Reserve and the Department of Treasury to have
two manufacturing facilities for what is the world's currency
today. Putting all of our eggs in one basket, presents a
significant security risk.
Mr. Huizenga. Do you have some third-party studies or
anything that could demonstrate that?
Mr. Olijar. With respect to security?
Mr. Huizenga. Has anybody looked at what that means outside
of just internally, both the need for the sheets, the security
situation, the entire package of why a second facility would be
necessary?
Mr. Olijar. GAO did a comprehensive review of our most
recent study that was done and they support the need for a more
efficient manufacturing facility, in lieu of--
Mr. Huizenga. With real indulgence are people going to be
able to go tour it?
That is one of the things that we hear from constituents
all the times. They want to go and see their money being made
and I am curious if that is part of that plan?
Mr. Olijar. We haven't gotten that far. There is a great
interest in our citizens to see the printing of the Nation's
currency and I would hope to entertain them there as well.
Chairman Barr. The gentleman's time has expired.
The Chairman now recognizes the gentleman from Texas, Mr.
Green.
Mr. Green. Thank you, Mr. Chairman. I thank the Ranking
Member and the witnesses for appearing.
I am curious about digital currency and I am curious about
it not in the sense of Bitcoin but in the sense of dollars as
we know them and coins as we know them. It seems to me that
there is a future wherein hard currency and coins won't find as
much prevalence as we see today.
Russia is currently looking at a bit currency of a sort,
they are calling it the CryptoRuble, I believe. China is doing
a similar thing. There seems to be some advantages in digital
currency. You have better efficiency. You have immutability.
You have transparency. You have portability.
Where are we in terms of looking at the future of currency
in the sense of whether there will be a need for the type of
tangible currency that we currently have a lot of need for it
seems?
Mr. Olijar. People have a preference to a tangible
currency.
I do not believe that there is going to be a world in which
we won't have something that we can hold, touch, and transact.
The challenge that faces a digital currency as I mentioned
is that there is a lot of electronic-related fraud going on and
that the loss that accumulates related to that type of fraud is
much more significant than that encountered from
counterfeiting.
Mr. Ryder. My opinion is there is probably a place for it
but there is a larger place in society for actual currency that
you hold and transact with.
Crypto-type currencies are much more speculative and risky
but you are talking to somebody whose parents raised a pretty
conservative investor so I am going to stick with currency.
Mr. Green. You do understand that I am not talking about
Bitcoin. I am talking about a crypto dollar. I am talking about
persons who are going to metamorphose from going to the vending
machine and utilizing a credit card to make a purchase as
opposed to a coin. I am talking about people who want to
traverse the country and they want to take $10,000 with them
but they don't want to take it in dollars for fear of many
things that can happen along the way.
Why would we not see a world where these people are going
to at some point, not everybody will have $10,000 but everybody
will have the opportunity to go to a vending machine and there
are other types of machines now that have been converted such
that they can use credit cards.
I know that there will be fraud, in anything that we do we
have fraud. It is just a fact of life, let us try to minimize
it.
Are you saying that there will be more fraud with the
electronic currency than we have with tangible currency?
Mr. Olijar. I believe that there already is more fraud with
the electronic payment mechanisms than there is with currency
today, so I would think that would be likely to continue in
digital currency.
In addition, there is a very large part of the population
that likes the anonymity that comes from using currency in
their transactions. There is a government fear. When you take
Russia issuing a currency, do you really want to hold that as a
stored value?
Mr. Green. No. I don't.
As a matter of fact, nor do I want to hold China but what I
do want to do is look to the future and sometimes others can
get to the future ahead of us. We ought not to conclude that
because we have other things that we find that we don't like
about Russia, that they may not be ahead of us on some other
things. I can think of a few things that they have done ahead
of us that we try to catch up with.
But let me just leave you with this. I am just concerned
about our not staking out at least a vision, at least start to
look at where this may be going without us. I don't care to
have people know what I have in my bank account. There probably
would be an easier way to find out but I do want to make sure
that we don't find ourselves at the tail end of a future that
is going to envelop currency.
Thank you. I yield back.
Chairman Barr. The gentleman yields back.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger.
Mr. Pittenger. Thank you, Mr. Chairman. Thank each of you
for being with us today.
According to a report by the Federal Reserve of San
Francisco, cash purchases amount to only 14 percent of the
total value of consumer transactions with the average
transaction being only $21. With this in mind I just want to
ask you, is it necessary to continue to produce cash at the
rates we have seen over the past decade or so?
Mr. Olijar. We have seen no decrease in demand for cash. As
I mentioned, it has two uses--
Mr. Pittenger. Let us say and excuse me but maybe 50, 60
years ago it was close to 100 percent and then we began
utilizing more credit cards. Now it is only down to 14 percent.
Mr. Olijar. At the same time the overall number of
transactions has increased significantly and overall cash
demand as I have mentioned, over the past 10 years, has
remained relatively stable at 7 billion notes. We don't
perceive that other payment mechanisms are going to drive that
down at this point in time.
The Apple Pay, the Bitcoin have taken share from checks.
Checks have been the primary payment mechanisms that as has
suffered a significant decrease in volume.
Mr. Pittenger. OK.
Some scholars propose eliminating higher value notes
because they are heavy-use in tax evasion, corruption, and even
terror financing. With this in mind the Europeans had a $500
note they call the ``bin Laden note'' because of it's ease of
use by terror groups.
I would say that no other transaction provides the same
level of anonymity. Understanding this, will it be worth
studying a gradual phase-out of our large denominations?
Mr. Olijar. The largest denomination that we produce today
is the $100 bill.
Mr. Pittenger. I understand that.
Mr. Olijar. We do have the authority to print 500-, 1,000-
or 10,000-notes. I don't think that we could look at doing
that. It would have a very adverse impact on Commerce, the $100
note is increasingly used in transactions.
The higher denomination notes when we stopped printing them
in 1969, the $100 note today is worth $17 compared to the
hundred it was in 1969.
As the level of prices have gone up, the demand and usage
of the $100 note has increased significantly in Commerce and it
serves as a stored value internationally.
Mr. Pittenger. Mr. Ryder, you wish to comment on that?
Mr. Ryder. The Mint, in 2016, produced a little over 16
billion coins. It reduced in 2017 to about 14 billion and we
are on track to produce over 13 billion coins this year so it
is hovering in that area. The Federal Reserve has been ordering
that for the last 10 years.
Mr. Pittenger. Does the Secret Service and Customs have the
tools necessary to identify counterfeit coins and then
prosecute those counter-felons?
Mr. Ryder. Yes. The U.S. Mint is taking that issue very
seriously.
When I joined the Mint, I created a taskforce of some of
the brightest men and women in our facility where we are
addressing that issue on a weekly basis.
The Gold bullion coming out of China that is counterfeit is
a unique problem from a technology point of view as they are
replacing the gold with tungsten. Tungsten has about the same
weight as gold, the density and trying to detect that can be
difficult but we are looking at technologies to address that
issue both from a coining point of view within the metal itself
or on the metal as well as packaging.
Recently we have undertaken a new effort with consumer
awareness on educating our consumers about what to look for.
Mr. Pittenger. Thank you. Let me ask you one other
question, if I could.
I am told that some countries including China may have
truckloads of perhaps counterfeit coins that they maybe would
engage us with a mint buyback program.
Are we prepared to ensure that this buyback program that we
have is secure?
Mr. Ryder. Yes, sir. We are working diligently with the
Office of Inspector General and the Secret Service, to address
those issues. I believe we are on top of it and can take care
of that issue when it comes up.
Mr. Pittenger. Thank you very much. My time has expired.
Chairman Barr. The gentleman's time has expired.
The Chair now recognizes the gentleman from Illinois, Mr.
Foster.
Mr. Foster. Thank you, Mr. Chairman.
I guess I should start out by saying that, as I guess the
most senior representative from Illinois, if we are looking at
a future where you are thinking about issuing digital
currencies, I think I can speak for the entire delegation from
Illinois, that that currency must be named for Abraham Lincoln.
Just wanted to get on the record on that.
Second, as I guess the only PhD physicists in Congress, if
you are looking at methods for distinguishing tungsten from
gold, you could look at low-frequency or medium-range gammas
and x-rays which have a very, very strong dependence on atomic
number and then well, probably with a pretty simple method,
generate even a hand-held way of telling the difference there.
Now back to digital currencies. I was wondering what you
can learn, or maybe you already studied this, if you look at
countries where they have made the transition to having most of
the consumer payments be it cashless, payment by cellphone.
That I presume is accompanied by a drop in low denomination
bills and coins and perhaps a persistence of the higher
denominations as they are used for other purposes.
Have you looked at the adoption curves in those countries
that have made this rapid transition and factored that into
your planning?
Mr. Olijar. We have. We are in constant contact with other
countries and the mechanisms that they are using to drive
efficiencies in the economy. They have not seen a significant
increase in demand for the higher denomination notes as a
result of that.
The countries that have done the dollarization are very
small, homogeneous countries, mostly Scandinavian countries
going toward cashless but as I mentioned they are actually
moving backward now and trying to make sure that they are
serving the population.
Mr. Foster. The total demand, particularly low
denominations, is not affected when the consumer economy goes
cashless, is that what they observe?
Mr. Olijar. The demand for--it is the demand for all notes.
Mr. Foster. I was talking about the shift. You may actually
see a shift, my guess is that the low denominations would
become just stored on your cellphone and it is the higher
denominations where you want something you can hold in your
hand and stuff under the mattress or whatever, do you see
anything, have you looked at the difference in the distribution
of value that consumers are asking for?
Mr. Olijar. It is fairly much across the board when you are
going cashless.
Mr. Foster. That is interesting. OK.
Is there a general report? If you could, as a response for
the record, if there is some review article of what the
response is in different countries I would be very interested?
Don't do a big internal study on this but if you can pretty
quickly come up with some report of what the experiences in
countries that are ahead of the curve of the U.S. on cashless
economies, it would do everyone some good to see what is coming
and look around the corner here a little bit.
Mr. Olijar. Absolutely. We can get you that.
Mr. Foster. Thank you. I appreciate it. I will yield back.
Chairman Barr. The gentleman yield's back. The Chair now
recognizes the gentleman from Minnesota, Mr. Emmer.
Mr. Emmer. I thank the Chair and the gentlemen for being
here today.
The United States dollar is particularly strong right now
and two-thirds of U.S. $100 notes are thought to be circulating
overseas. What is the state of counterfeiting of Federal
Reserve notes these days?
Mr. Olijar. The level of counterfeiting remains relatively
stable. It is less than one one-hundredth of 1 percent.
In 2011, we unveiled a redesigned $100 note with a Blue 3-D
Security Ribbon. It has been extremely successful in the
marketplace. To date, it has not been successfully replicated
by the counterfeiters. They are continuing to counterfeit older
designs.
Mr. Emmer. I am sorry, they are, I missed it?
Mr. Olijar. The counterfeiting is focused on older design
notes and we are gradually taking those out of circulation as
quickly as we can.
Mr. Emmer. In general, has the counterfeiting been stable
since 2011 or just stable on $100 notes?
Mr. Olijar. Overall counterfeiting has been stable. $100
notes have gone down. Counterfeiters have shifted towards the
50, which is why it is now the second note to be redesigned.
Mr. Emmer. Is counterfeit currency produced in specific
places or passed more in certain locations?
Mr. Olijar. In the United States, 85 percent of the
counterfeits are done with a PC or an inkjet printer and a
scanner so there are literally thousands of them and
unfortunately across the country where people are generating
very small volumes of counterfeit.
Outside the country there are some locations that are hot-
beds of counterfeiting.
Mr. Emmer. For instance?
Mr. Olijar. For instance, Peru. The Secret Service has
opened an office there and they are working very closely with
the Peruvian government to combat that.
Mr. Emmer. Are there others or is Peru the outright winner?
Mr. Olijar. There are some others that I could share with
you. I would prefer not to do it publicly.
Mr. Emmer. OK.
Is the Secret Service still emphasizing the anti-
counterfeiting mission the way it once did?
Mr. Olijar. As I mentioned, yes. We are working very
collaboratively with the Secret Service and the Federal Reserve
to keep the Nation's currency secure.
Mr. Emmer. All right.
Mr. Ryder, following a similar line of questioning, in an
August 14 interview you are quoted as saying that you have,
``set up an internal steering committee at the Mint,'' which is
what you referred to a little bit earlier, that is addressing
counterfeiting issues.
Can you give us some more information about the specific
mission of this steering committee, who sits on the committee,
who runs it and what do you expect the committee to accomplish
within the next year? Earlier you were referencing gold bullion
and other things but just counterfeiting in general?
Mr. Ryder. Yes, sir. As I said we take counterfeiting
pretty seriously.
I spent 25 years in that industry both in the currency as
well as the coinage side of the business. Our team at the Mint
is mostly operational-type individuals who have knowledge of
the makeup of our products.
We meet twice a week or twice a month usually in
Philadelphia but we have a pretty good handle on the problem.
We are addressing those problems properly with the Secret
Service, the Office of Inspector General, on the bullion side
as well as the circulating side.
Mr. Emmer. Who sits on it?
Mr. Ryder. I am sorry?
Mr. Emmer. Who sits, so how many people do you have on this
committee?
Mr. Ryder. About 12 members on our steering committee,
mostly members of the Mint.
We are getting ready to have a Vendor Day at the Mint where
any vendor who has an anti-counterfeiting technology can come
to the Mint, present to us and it is our hope to select the
best of the best that particularly pertain to both our
packaging and our certificates of authenticity, as well as
entertaining some pretty smart people with regard to the
physics of what we might be able to do within the metal itself.
Mr. Emmer. Do you run this committee personally or you have
somebody else running it?
Mr. Ryder. I run it.
Mr. Emmer. In the last few seconds I have left for both of
you, are there additional authorities that Congress should
provide to aid your efforts to combat counterfeiting?
Mr. Ryder. You are doing a great job as it--
Mr. Emmer. We don't hear that every day.
Mr. Ryder. No. But as I have had several letters in this
regard, it keeps us on our toes. If you find a problem out
there in your districts, any of you, it is good that you let us
know either verbally or in writing and we will address it.
Mr. Olijar. Currency is a counterfeiting game and we
greatly appreciate your support in the anti-counterfeiting
mission we have.
Mr. Emmer. Thank you both.
I see my time has expired.
Chairman Barr. The gentleman's time has expired.
The Chair now recognizes the gentleman from West Virginia,
Mr. Mooney.
Mr. Mooney. Thank you, Mr. Chairman.
It is good follow up to my colleague's comments about
counterfeiting.
Your predecessors have not incorporated anti-counterfeiting
technologies into U.S. coins, minted of precious metals. My
efforts to press your agency on this inaction has been met with
responses suggesting, you have not had that many complaints or
see a large problem.
But in my meetings with law enforcement, I know the Secret
Service and U.S. Customs and Border Enforcement have been
dealing with many cases and would certainly like more
assistance from the U.S. Mint.
Other than providing ongoing cooperation with
investigations, one thing the Mint can do is adopt the types of
anti-counterfeiting technologies that other sovereign mints
have adopted long ago.
I have had a demonstration of one of these in my office.
This technology is called a ``PAMP VeriScan'' and it seems to
work great, so when will the U.S. begin to address these
problems and implement these types of security standards?
Mr. Ryder. I believe we are adjusting to them now, I am
very active in this area.
Finding a solution for the bullion problem is an
interesting problem. I have talked recently to a very bright
physicist who has some very interesting ideas about how to
resolve that at a relatively inexpensive cost but from a
technology point of view, it is very robust.
Our team at the Mint is addressing many of the issues that
you are speaking about and we will continue to do so.
Mr. Mooney. OK. I look forward to working with you. I
appreciate your comments earlier that if we hear problems we
pass it on to you and so that is what I am doing.
It is important we do that. It is in the Constitution that
we have the right to do that, the duty to do that.
Mr. Ryder. Yes.
Mr. Mooney. Unlike a lot of things government does, that is
actually in the Constitution and I would just comment as an
aside to my colleagues on the other side of the aisle, who are
complaining about the value of the penny, it is the
inflationary practices of the Fed that we should stand up to
because those inflation costs have devalued the penny greatly
over the years.
The Fed's goal is 2 percent. It is been higher than that
many years so, yes, the penny is worth a lot less and my
constituents, many of whom save and are the ones that you
mentioned, Director Olijar, about folks that are not highly
banked and I are just saving their pennies and their dollars,
they are the ones who were hurt by those inflationary prices so
maybe we should keep that in mind as we complain about the
value of the penny, to my colleagues on their side of the
aisle.
Another question however is, the IRS currently classifies
these precious metals and coins as collectibles like Beanie
Babies and baseball cards and then requires taxpayers to report
capital gains, which are taxed at a discriminatory high
collectibles rate of 28 percent.
My view, which is backed up by language in the U.S.
Constitution, is that gold and silver coins are money and
indeed these American Eagle coins are legal tender.
If they are indeed U.S. money, it seems there should be no
taxes on them at all so why are we taxing these coins as
collectibles?
Mr. Ryder. That is a very good question. It would help our
investor community, collector community if it weren't taxed.
Obviously, it is not my decision, but it is something that
we deal with, but again there is not much I can do about it.
Mr. Mooney. OK. I see my colleague Frank Lucas is here so
we have been working on this issue and appreciate seeing you
and I am glad you are here to ask some questions.
I will ask you one more before I finish here. I understand
from my meetings with law enforcement that one hurdle in
getting counterfeit prosecutions pursued is the statutory
threshold of the $10,000 in value.
Gold Eagles have a face value of $50; however, as a direct
result of the Federal Reserve's inflationary policies over many
decades, the market value of the gold contained in a single
one-ounce Gold Eagle is now worth about $1,200 so $10,000 in
face value of these coins is worth about $240,000 at current
gold prices.
Shouldn't the statutory threshold be modified so that
prosecutors can look at actual values involved in these frauds
and therefore pursue more cases and leads?
Mr. Ryder. It is something probably they should take a look
at.
Mr. Mooney. OK. Thank you.
Mr. Chairman I will go ahead and yield back the balance of
my time.
Chairman Barr. The gentleman yields back.
The Chair now recognizes the gentleman from Arkansas, Mr.
Hill.
Mr. Hill. I thank the Chairman. Thank you for conducting
this hearing. It is good to have our leaders from the Mint, the
Bureau of Engraving with us today.
First of all, I know you have addressed this but I was not
in the room, I would like to talk a little bit about the
proposed facility you are considering in the Bureau of
Engraving here in the Beltway.
Is there no way to expand the facility in Fort Worth to
increase capacity and thereby not build another facility here?
That is question one.
Question two is, are you using the same approach which is
donated land and treating it in the same manner you did when
you built the facility in Fort Worth back in 1986?
Then, third I would say, what cost-benefit analysis it
requires?
I understand the part about expensive property here in
Washington, D.C., higher and better use, old facility but I am
real interested in this issue of could you just do it by
expanding in Fort Worth or are you required from a safety point
of view to have two production facilities?
Thank you very much.
Mr. Olijar. That is the primary driver for two facilities,
it is in the Nation's and the world's interest that we have two
manufacturing facilities. Putting all of our eggs in one basket
presents a significantly high risk. That is one of the reasons
that the Fort Worth facility was constructed so that we had two
manufacturing facilities.
When the facility in Washington, D.C. faced a threat from
the airliner that went down on the 14th Street Bridge, we had
to look at that as a very significant economic threat to the
country. I want to make sure that we can meet the Nation's and
the world's demand for our currency.
Mr. Hill. Who supervises construction on a Treasury project
like that?
Mr. Olijar. We don't have the expertise internally to do
that type of a construction. We would work with either GSA or
the Army Corps of Engineers to supervise the production. It is
well beyond our capabilities.
Mr. Hill. Thank you.
For the facility location here, are you going to use the
same approach you did in Texas on considering an economic
advantage to Maryland or Virginia and ask for donated land and
State support for that construction?
Mr. Olijar. We are considering going out and asking to see
what type of land and facility would be provided to us.
Mr. Hill. Thank you. I appreciate that.
I noted in the preparation for the hearing, there was some
interest that the Bureau might propose conducting your high-
quality engraving, printing for non-Federal customers. Can you
tell me about that?
Mr. Olijar. Yes, yes. A coalition of the States has
approached us to get secure documents, I think birth
certificates done. There is no capacity and capability to do
that in the United States today. The States have reached out to
Canada to get their secure documents printed. We have the
capability. We could do it without having any impact on our
core mission and would incorporate the necessary security
features that they are looking for.
Mr. Hill. I presume that is because as the bond and stock
market has gone electronic, we have no private engraver,
printers left in the United States?
Mr. Olijar. That is correct. No large scale.
Mr. Hill. Thank you very much.
Mr. Chairman I appreciate the time and I yield back the
balance.
Chairman Barr. The Chair now recognizes the gentleman from
Ohio, Mr. Davidson.
Mr. Davidson. Thank you, Chairman. Thank you both for your
time here today and the work you do on behalf of our country.
I am curious if we look at the problem Director Ryder, with
the counterfeit bullion coins coming into the country, do
Secret Service and Customs have adequate tools to detect the
counterfeits? Do they have adequate legal authorities? Are
there changes that need to be made and if so what might we do
to address that?
Mr. Ryder. I don't think that Customs, based on the problem
that we have, has the right tools because I don't think the
tools exist to easily authenticate the difference between an
authentic bullion coin or one that has been incorporated with
tungsten particularly.
If it is simply a counterfeit coin that is made of gold,
they have the capabilities of addressing that issue but the
tungsten issue is an interesting problem and it is difficult to
manufacture an inexpensive detector, when I say inexpensive,
something less than say $5,000 that can do the job.
We currently have quite a number of those types of devices
in our facilities and they do not detect the tungsten without
destructive testing.
Mr. Davidson. Have you put out an RFI? DARPA, for example,
funds defense projects when, gee, I wish there was a technology
solution to this and they solicit proposals. Have you solicited
proposals from the commercial sector for innovators whether
they are PhD candidates or existing companies to try to solve
this problem?
Mr. Ryder. We have. I have sat down with a number of
companies to talk to them. As I said earlier, we are going to
have a Vendor Day to allow anybody who might have something,
come and talk to us.
I have talked to NASA particularly with some of their
scientists about some of the things they might be doing but it
is something that is ongoing, is something that we have to
address.
Mr. Davidson. Thank you. And, one of the other challenges
of course, when you have cash or coins, is they do store value,
they are the legal tender of the United States of America but
sometimes people lose them. When you lose them they are gone or
cash and coins, are they used for illicit finance?
Mr. Ryder. In a number of cases, yes, they are.
Mr. Davidson. Do people launder money--
Mr. Ryder. Absolutely.
Mr. Davidson. With cash? OK.
Many of these same objections are raised about
cryptocurrencies or crypto assets of various types and as we
speak about those, how much cash could you store inside this
phone case?
Mr. Ryder. Quite a bit.
Mr. Davidson. If it were digitized, you could store quite a
lot but in a similar package, you really would not be able to
carry much value. If you had gold coins or melted this and
turned it into a piece of gold but that is not what we print in
the Mint, we print currency and coins, paper currency.
There is a demand in the future for crypto out there and
the question is, will there be intermediaries like currently,
Visa and MasterCard, or cryptocurrencies, whether it is Bitcoin
or one of the numerous other coins that are out there, seeking
to become currencies?
Recent reports have cited that demand for investor-grade
bullion coins has decreased and perhaps some of that decrease
is accounted for due to demand for Bitcoin or Ether or XRP
because they are an emerging asset class and present
opportunities for investor to store values.
Do you see a correlation between the rise in demand for
these cryptocurrencies and decline for bullion?
Mr. Ryder. There are two different customer bases, two
different people who have two different agendas.
The bullion products have been selling quite a bit in
reduced numbers in the last couple of years mostly because
investors have taken on different types of investments.
We have seen a rise in the last 2 or 3 months where we have
seen a slight increase from an investment point of view.
But as I said, I believe the crypto-type investments are
built for specific investors who have specific investment
goals.
Mr. Davidson. OK. My time has expired.
I look forward to following up with you on additional
items.
I yield Chairman.
Chairman Barr. Thank you.
The gentleman yields back.
The Chair recognizes the gentlelady from New York, Ms.
Tenney.
Ms. Tenney. Thank you, Chairman Barr.
I really appreciate the panel for being here today.
Obviously the jurisdiction of this committee is to give
oversight over the institutions that produce our currency and
aid in facilitating our everyday commerce.
I have a question, just jump right to it, is, according to
the bipartisan study from the Dollar Coin Alliance in Canada,
approximately 10 percent of our population saved $450 million
over the first 5 years of moving to a coin-base as opposed to
the dollar bill.
Can you tell me what your opinion is on that happening, Mr.
Olijar, first and then Mr. Ryder either way? I would like to
hear from both you, what is your opinion on that, particularly
referring to the Currency Optimization, Innovation, and
National Savings Act. Let me just clarify, a study on the penny
and then moving to the coin similar to Europe and Canada, if
you could tell me what is your opinion, it says there is going
to be a cost savings, is that true? Can you give me a little
quick pro and con just for a few seconds there?
Mr. Olijar. The American public obviously loves the dollar
bill and prefers to use that in commerce. Treasury's policy is
that the note and the bill co-circulate and given a choice,
people significantly prefer the paper note.
The analysis that GAO did of the conversion shows that
after 10 years it would be a net cost to the U.S. Government of
over $500 million of making that conversion.
Ms. Tenney. How about giving, Mr. Ryder, do have an
opinion?
Mr. Ryder. Yes. As the chairman mentioned in his opening
statement, one of the issues that has constantly plagued the
dollar coin is reluctance to remove the dollar bill.
Ms. Tenney. Yes.
Mr. Ryder. The two just haven't co-circulated. Currently
there are 1.1 billion-dollar coins in the Federal Reserve
storage vault and in our storage vaults, and that equates to
about a 14-year supply, if we use 80 million coins a year.
The program as designed hasn't worked.
Ms. Tenney. Yes. It is interesting because the GAO says
that savings would be about $4.5 billion over 30 years. That is
pretty significant when you realize the paper version lasts
about 5.8 years and the coin lasts longer.
I know when I was in Europe and you get the coin, as an
American citizen we are so used to having the dollar bill but
actually you find the coin is pretty convenient.
Maybe your point is right, maybe if the Americans didn't
have the choice maybe they would actually decide they liked the
dollar coin better. That is up for debate at this point.
But I am thinking as you are advocating for, and I am
looking at the GAO on renovating the new site, that you are
proposing, would be $2 billion but then a new site, which would
be higher technology, as you advocate, would be $1.4 billion so
there would be a savings.
If we did move to the dollar coin, wouldn't that actually
take care of some of the savings on building the building that
you want to build? Technically we could save money that way if
we are looking at a fiscally conservative message.
Mr. Olijar. I don't think it would have a significant
impact overall, if you eliminated the dollar bill, the demand
for the $2 note would most certainly go up and as it exists
today the $1 note is only about 14 percent of our volume.
Ms. Tenney. OK. I know you have answered this before but I
missed it, could you just tell me again what your opinion is on
eliminating the penny, is that something you would advocate for
or not Mr. Olijar first?
Mr. Olijar. I am agnostic.
Ms. Tenney. OK.
Mr. Olijar. I am a coin collector so--
Ms. Tenney. Oh, there you go.
How do you feel about challenge coins, they are out there--
Mr. Olijar. Love them.
Ms. Tenney. We could be making those.
Mr. Ryder, what do you think?
Mr. Ryder. No. It is not the intention of the Treasury
Department to eliminate the penny, our intention is to try to
create programs to increase circulation of pennies that are
currently out there.
Ms. Tenney. Yes.
Mr. Ryder. If we can do that effectively with the Federal
Reserve's assistance, I believe we can reduce the penny
production by approximately 2 to 3 billion per year.
Ms. Tenney. The savings?
Mr. Ryder. 2 to 3 billion demand for--
Ms. Tenney. Demand? OK.
How much in savings would that be to the taxpayer?
Mr. Ryder. Probably in the neighborhood of $20 million, $25
million.
Ms. Tenney. Twenty-five million annually?
Mr. Ryder. Potentially.
Ms. Tenney. OK. That is better than nothing.
Mr. Ryder. Yes ma'am.
Ms. Tenney. Thank you. I appreciate your comments.
Thank you. I yield back.
Chairman Barr. The gentlelady yields back.
The Chairman recognizes the gentleman from Oklahoma, Mr.
Lucas.
Mr. Lucas. Thank you, Mr. Chairman. I apologize for being
late. This is also Farm Bill Conference morning, so kicking off
with the esteemed other body to start the process to address
that.
To both directors, I apologize for being late and have
arrived way into the discussion so just for the sake of
conversation, you mentioned that 14 percent of the paper
currency printing is the $1 bill.
Of the volume of Mint production what percentage in dollar
value or tonnage, however you want to describe it, Mr. Ryder,
what percentage is the one-cent piece?
Mr. Ryder. Currently the one-cent is about 8.4 billion
compared to the five-cent which is 1.3; the dime is 2.4
billion; the quarter-dollar is at 1.9, for a total of about 14
billion coins produced.
Mr. Lucas. More than slightly half of the production of the
Mint at current levels would be one-cent pieces?
Mr. Ryder. Correct.
Mr. Lucas. OK. Fair enough.
As my colleagues discuss these issues of course, I think
back to the historic beginning of both your institutions. Mint,
1790's, Bureau of Engraving and Printing, 1860's so to speak,
and the goal of both institutions reflected the time. And for
the benefit of some of my colleagues here, the original Mint
Act of 1792, the goal was to make sure that the coins produced
at the Mint, the material in that coin reflected the value of
the coin at the time.
A one-cent piece was a big old chunk of copper. From 1793
to 1857 we made half cents, we did all sorts of stuff like that
and with time and commerce and the focus, things change. We
went from big old giant one-cent piece to the present coin that
we all think of, of course. Just as on the paper side, we went
from those rather large banknotes prior to 1929, to the size we
use now. Nothing has ever set in stone and the goal is to
reflect the needs of commerce and of the industry.
It would seem to me that, even though as some of my cohorts
discussed, Bitcoin and the other electronic types of currency
or even the more traditional use of debit and credit cards and
that sort of stuff, obviously from the production levels that
both of your institutions are engaged in, there is still a need
for the physical commodity, the consumer still wants the
physical commodity so it is important that we maintain that.
I would suggest that at some point, I believe we need to
assess in both currency and in coins what we have. We don't
make half-cent pieces anymore. We don't make half-dimes
anymore. We went off the Gold Standard. We don't stamp out gold
coins anymore.
We released into general circulation the last standard
silver dollars in 1960, to 1963, somewhere along that period of
time so, at some point, we need to have a piece of legislation,
I believe, that addresses the denominations, the makeup, and
the size, a comprehensive review and our neighbors around the
world have done that. But that is a different day.
A number of my colleagues have stressed the importance of
the bullion coin programs and counterfeiting and that is an
issue not just with the bullion coin programs but as the value
of the historic coin issues for say the Mint have gone up, the
tendency and the focus on counterfeiting those two are there
also.
Can you explain, each of you from your own perspective,
what you believe is the greatest challenge you face, is it
production volumes, is it your old facilities, is it
maintaining the integrity of the products you produce, that is
an open-ended question?
Mr. Olijar. For me at the Bureau of Engraving and Printing,
the greatest challenge that we face is keeping the Nation's
currency secure.
As I have said, there are counterfeiting threats that we
face around the world today and our paper currency is really a
confidence-game and we need to maintain people's confidence in
our currency in order to continue its usage as a store value
and in commerce.
Mr. Lucas. This is not an appropriate question for you but
my understanding is more a Federal Reserve question, don't we
have more $100 bills outside of the United States physically
than we have inside the United States?
Mr. Olijar. Yes. It is estimated two-thirds of them
circulate outside this country, yes.
Mr. Lucas. That says something about the store value that
our paper currency represents and am I fair to say too that we
are one of the few countries, if maybe not the only country, in
the world where if I go to a bank with a product that you
printed and the Treasury issued in 1863, it cashes just the
same as if I pull out a brand-new $1 bill that came from D.C.
or from Fort Worth, unlike most of the world that recalls
currency and cancels currency?
Mr. Olijar. That is correct. We have never devalued and or
dis-denominated our currency. I would say good today, good
tomorrow, good forever, that is what the United States say.
Mr. Lucas. Everybody on the planet wants it under their
pillow, if they want a nest egg.
From the Mint perspective, again the products that you have
issued, your institutions issued since 1793, 1792, all still
legal tender, all still spendable, tell me about the challenges
you face?
Mr. Ryder. I agree with Len, counterfeiting is an issue
that we have to address. That is something we take very
seriously.
On the numismatic side of our business, our customer base
has dwindled. When I was Mint Director in 1992, we had a
customer base of around 2.7 million, today it is around
500,000.
Working with Congress to create some new innovative
projects from both the bullion and the numismatic side would be
of great interest to me.
Mr. Lucas. Would the Chairman indulge me for 1 more minute?
One of the comments that I get direct from the general
public, on the occasions that these topics come in, they point
out how from basically the mid-1960's until the early 1980's
there were very few products available to the consumer out
there from the Mint, other than just the standard-issue
products, the proof sets, the Mint sets, and the things that
went through commerce.
Since the 1980's the number of products, the number of
metals, the number of different pieces, I occasionally get
comments about how deep one's pocket would have to be if you
wanted a complete set.
Do you think that is a fair observation from the public?
Mr. Ryder. Yes. I believe that over the years, there have
been quite a number of products legislated that we have had to
manufacture, that haven't been that successful.
Mr. Lucas. It is a fair observation, you only make what we
authorized or insist you make?
Mr. Ryder. Correct.
Mr. Lucas. That issue is shared by this side of the table?
Mr. Ryder. With the exception of some of our bullion
products that sell quite nicely, a new 9999 bullion product,
the Buffalo program, a Palladium program that was authorized by
Congress. The Secretary of Treasury has certain authorities to
be able to do certain things. The majority of the products are
legislated but I would really look forward to working with the
Congress when we are drafting that type of legislation to work
together to create legislation that makes a bit more sense from
the consumers' point of view creating more of a rarity,
creating different programs.
I would love to see the next Quarter programs to be more of
a sports-related type of product to follow the America the
Beautiful program which generated almost 72 million.
Changing that in 2021 with the help of Congress would be a
very interesting challenge but very rewarding for our customer
base.
Mr. Lucas. Mr. Chairman, there is not enough time left in
this session of Congress to address these issues, but this is
perhaps something we need to, as an institution, look at in the
coming year or 2, the overall process completely.
Chairman Barr. I thank the gentleman for his suggestion.
Mr. Lucas. I yield back.
Chairman Barr. Thank you. The gentleman yields back.
I appreciate the gentleman's suggestion and I will be happy
to work with him to pursue that.
If the witnesses would indulge me for one final round of
questions, I just wanted to follow up on a few points and since
we were on the subject of the declining numismatic customer
base, I did want to ask why that is the case to Mr. Ryder.
Why do you think that is the case especially given the
success of the America the Beautiful Quarters program and do
you count the Commemorative Coin programs or the America the
Beautiful Quarters program as part of that new numismatic
customer issue?
Mr. Ryder. It is the primary reason in my opinion. In the
last 10 years, the Mint was not given authority to spend any
money on marketing our products globally.
I am trying to change that around to get more allocation of
funds from the Treasury Department to spend on important
advertising of these programs which is another one of my
priorities.
Chairman Barr. You may have already answered this question,
but from the start to the projected finish of the America the
Beautiful Quarters program, what is the total seigniorage that
will be produced as a result of that program as a result of
coin collectors pulling those quarters out of circulation for
keep-sake?
Mr. Ryder. That is a good question and I don't know the
specific answer.
The total revenue that we generated on that program after
cost and whatnot was about $72 million.
A new program that is coming up now, the American
Innovators program which is a Dollar-Coin program, we are
hoping to generate total revenue in this neighborhood of $350
million.
But that is going to be a brand-new program but I would
stress that the America the Beautiful Quarters program expires
in 2021, and I would really like to work with the Congress to
create a new program going forward after 2021 that would
inspire young collectors and whatnot with the right theme to
get back into the coin collecting community and raise our
revenues that much more.
Chairman Barr. Some numismatists in my district came to me
with an idea that ultimately manifested itself in legislation I
introduced a couple of Congress' ago, we called it the
``American Liberty Coinage and Deficit Reduction Act,'' and
that bill proposed to direct the Mint to, on every other year,
instead of having the head-side of the coin reflect Statesmen
from the past, not pulling those off of the coins, but keeping
them in every other year, but in every other year going forward
putting a symbol of liberty on the coin.
The idea was that this could create additional collectors.
It could attract more seigniorage.
Is that an idea that would appeal to you or that you would
consider going forward?
Mr. Ryder. Absolutely.
We are going to introduce another Liberty product in 2020
or 2019 I believe it is, but I like the theme that you have on
that piece of legislation, Liberty.
In my opinion, Liberty comes in a lot of different forms,
that encompasses the United States of America and it could be
anything from the Statue of Liberty to a starburst of
fireworks, there are a lot of things that, from a design point
of view, we could put in that program that would generate
interest going forward for the collector community.
Chairman Barr. Yes. The legislation specifically referenced
celebrations of American Liberty; the Union; American values;
attributes of freedom; independence; civil governance;
enlightenment; peace; strength; equality; democracy; justice;
those concepts could be used to generate additional interest
and maybe help increase the numismatic customer base to address
that issue that you mentioned.
Mr. Ryder. Absolutely.
Chairman Barr. I would love to work with you Mr. Ryder on
that issue.
Our time has expired today but, would the gentleman like to
ask another question, in my remaining time?
Mr. Lucas. No Mr. Chairman. Just to offer and an
observation there.
Chairman Barr. Sure.
Mr. Lucas. One of the important things about our coinage,
which sometimes we forget in the day-to-day commerce, this is
something that as societies, as countries that we took up on
this planet 2,500 years ago, and in many ways there are images
of leaders, images of concepts from the ancient times, that
only exist because they were incorporated as a coinage theme,
so we should always be artistically mindful about the legacy
that we leave when we produce things.
We are not just stamping out pieces of metal, we are
leaving a statement for all time, about who we were and what we
are, so the artistic element always must be factored into our
coinage and engraving programs.
Thank you, Mr. Chairman.
Chairman Barr. Well said. I couldn't agree with you more. I
appreciate your passion and interest in the issue. It is very
important.
We appreciate the service of Mr. Olijar and Mr. Ryder and
for the work of the thousands of public servants who work for
your Bureaus, we appreciate every single one of them for their
work and for their service to our country.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
Once again, I want to thank our witnesses for their
testimony today.
This hearing is now adjourned.
[Whereupon, at 11:48 a.m., the subcommittee was adjourned.]
A P P E N D I X
September 5, 2018
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]