We have been in for a wild time here in the Washington, DC area. Severe thunderstorms and high winds swept through the area on Wednesday and Saturday providing the electric companies with quite a bit of work to do. During that time, I am reminded once again that computers cannot function without electricity.
While the rest of us were sweating and fixing our homes, the US Mint and Treasury policy implementers were downtown trying to figure out how to throttle the sale of silver on the open market. In fact, the Mint has been slowing the sale of American Silver Eagle bullion coins since April.
According to a letter sent to authorized bullion purchasers, the Mint has experienced “unprecedented demand” for silver bullion coins. While the demand for silver has risen, the Mint’s supply has not been able to keep up with the demand. So the Mint will be increasing production at the expense of collector American Eagles and while limiting the sales to bullion dealers.
Although sale of silver bullion has surpassed expectations, expectations by the US Mint should have been higher. With the economy waning, it should not surprise the Department of the Treasury that people would hedge their money against inflation through the purchase of precious metals. This is one of the oldest strategies in investing. Yet, the Mint all but admits to being caught short by this. Why?
Since the seating of the 110th Congress, there has been a subtle show of acrimony between the Mint and the new congressional majority. US Mint Director Edmund Moy has made it clear that he thinks the Mint should have the power to determine the content and design of US coins. The House of Representatives responded by introducing H.R. 3956 that would give this power to the US Mint.
After H.R. 3956 was introduced, fellow members and watchdog groups question whether the bill would be constitutional since it will pass off to the executive branch the power “To coin Money, regulate the Value thereof…” (Article I, Section 8). To fix these issues, H.R. 5512. In H.R. 5512, congress would continue to determine the composition and design of coins while the Mint would become advisors.
When the bill passed the House, Moy was quick to disagree with H.R. 5512 by suggesting that the Mint should have more control over the composition and design of the coins. He also requested that the bill be changed to provide more time to implement the requirement for copper-colored steel cents. The current bill requires the change to occur in 90 days. Moy said that the conversion would require 18-24 months.
There may be more to this than just one bill. Following the passage of the Native American $1 Coin Act, the Mint thought they had a loophole that would prevent them from minting Sacagawea Dollars in 2008. Letters were exchanged between Congress and the Department of the Treasury explained the law that was passed and said that the Mint should strike Sacagawea Dollars immediately. Sources report that contentious discussions suggested that the Director would be in violation of the law if the Mint did not strike Sacagawea Dollars. Allegedly, this conversation occurred two weeks before the availability of 2008 Sacagawea Dollars.
Moy again by proposing the Mint strike 2009 Double Eagle Gold $20 ultra-high relief coin based on 1907-1908 design by Augustus Saint-Gaudens. When introduced to the Citizens Coinage Advisory Committee, Moy stated that 31 U.S.C. § 5112(i)(4)(C), the authorization of the American Eagle program, gave the Mint the authorization to strike these coins. Congress disagrees because everything about the coin, from composition to design, is not codified in the law. Rather than argue with the Director, both the House and Senate introduced appropriate legislation to authorize this coin.
Now, when the Mint was questioned on the distribution problems with silver, the Mint responded with a brief statement that said in part, “By law, the United States Mint’s American Eagle silver bullion coins must meet exacting specifications and must be composed of newly mined silver acquired from domestic sources.” (emphasis added) The problem is 31 U.S.C. § 5112(e) and 31 U.S.C. § 5112(f), the laws that authorizes the bullion program does not say that the coins must be made of newly mined silver. In fact, the law does not require that the silver be purchased from US-based mines. All it requires is that the silver used be purchased at market value and the bullion sold at a value based on the silver market.
It appears that Director Moy is using a pedantic reading of the law to make his point. Rather than working with congress to resolve these issue, Moy would rather use politics to make his point hoping citizens would complain to congress. Sources say that Rep. Luis Gutierrez (D-IL) has emphatically told both Moy and Treasury Secretary Henry Paulson to resolve the situation. Rep. Gutierrez is Chairman of the Domestic and International Monetary Policy, Trade and Technology Subcommittee which has oversight responsibility over the Mint.
Individually, these policy moves by Director Edmund Moy do not seem significant. Together, they represent a pattern that shows the Director is looking to increase his power over the Mint. Moy needs to remember that he is the boss of the manufacturing operation charged with the responsibility to strike coins as prescribed by the 535 member Board of Directors (congress) and approved by the Chief Executive Officer (president). Moy’s actions are insolent and should be the subject of disciplinary actions by the Board of Directors.