Yesterday, I called for reform in the coinage laws to remove congress from the operations of the US Mint. Before talking about coinage, the first act of reformation is a reorganization of the system. When a business is failing, the first thing they do is to reorganize. This is the purpose behind Chapter 11 of the Bankruptcy laws.
The first step to reorganization is that congress must change the coinage laws (31 U.S.C. §5112) to divide the coinage types into the four relevant types: circulating coinage, bullion, commemorative coins, and medals. Making this distinction between coinage types will clean up the laws, reduce the confusion, and make it easier for the US Mint to understand the policies it is required to implement. A byproduct of making the laws easier to understand would help the public with understanding the responsibilities of the US Mint.
Next would be to change the organizational of the US Mint. It is unfortunate that the previous administration chose to appoint a political hack as the director. Rather than being a good manager to lead the US Mint through a slow period, the current director has shown that it needs more than a political appointee to run the US Mint. Thus, the US Mint needs a Board of Directors.
The Board of Directors would be responsible for ensuring that the US Mint would maintain policies, properly managed production issues, and assisted with the design of the coinage. The Board would be the first line of defense to ensure that the US Mint is living up to its responsibilities to both its commercial client, the Federal Reserve, and the collecting community. This Board would be responsible for contacting the Treasury Inspector General or the Government Accountability Office to investigate issues with the US Mint.
To create a Board of Directors, congress would have to look no further than the current Citizens Coinage Advisory Committee. Since its inception in 2003, the CCAC was supposed to be on the front-end of the design process. Instead, the lawyers at the US Mint defined the CCAC’s role as being virtually in competition with the US Commission of Fine Arts when it comes to coin design. It is time for that to end and give the CCAC a more significant role in the process.
Under this proposal, the CCAC would be the ultimate arbitrator of everything that goes into the coin design. While I will discuss this role in the context of coin types, this means that congress will cease deciding what is to be depicted on the coins. The CCAC will be the arbitrator of this process. While this concept is new in the United States, this is the role played by similar organizations that work with the Canadian Royal Mint, Great Britian’s Royal Mint, and other worldwide mint. It is time for the United States to catch up with the rest of the world in this regard.
With the expanded role of the CCAC, the role of the CFA to be the arbitrator of the final design will not end. However, rather than be in competition, the CCAC and CFA will work together on the final design.
As part of the CCAC’s role as the US Mint’s Board of Directors, the US Mint Director and the directors of each branch mint would have an ex-officio seat on the Board and be required to provide monthly production reports and quarterly operating reports (similar to SEC Form 10-Q) for review by the CCAC. All reports would then be published by the US Mint and made available electronically via the US Mint’s website. Similarly, notes from the CCAC, including design considerations, would be made available through the CCAC’s currently useless website.
If the CCAC is to take on a more significant role in operating the US Mint, it is reasonable that they should receive a stipend. The stipend would be paid out of the Public Enterprise Fund and counted as an operating expense of the US Mint.
Speaking of accounting, as part of this reorganization, the US Mint would be required to produce their quarterly and annual reports that is in full compliance with the Federal Accounting Standards Advisory Board. Annual reports must be audited by an accredited accounting firm while it would be optional for quarterly reports to be audited.
Funding for the US Mint and its operations will be proposed by the Director and approved by the CCAC. The approved budget will be provided to the Secretary of the Treasury and submitted to congress for their final approval. The budget for the US Mint must be withdrawn exclusively from the United States Mint Public Enterprise Fund (31 U.S.C. §5136). If the Public Enterprise Fund does not have enough money sufficient to fund US Mint operations, the Secretary of the Treasury must approve the transfer of money from the general fund to the Public Enterprise Fund.
The only substantive change to the operations of the US Mint Public Enterprise Fund is how the excess money is handled. Although the wording is not clear, it appears that a reserve of “6.2415 percent of the nominal value of the coins minted” is required and that all excess is transferred to the general fund. For the reorganized US Mint, the reserve in the public enterprise fund would be 10-percent of the bureau’s total budget rounded up to the next million dollars. Also, to hedge against the problems congress creates with their annual budget battles, the budget approved by the Secretary will go into effect on October 1. During the budget process, the excess from the Public Enterprise Fund will remain in the fund until congress passes the budget.
While we are cleaning up the laws, congress needs to remove the Numismatic Public Enterprise Fund (31 U.S.C. §5134). The law that created the US Mint Public Enterprise Fund supersedes this law and is unnecessary to remain on the books.
The final aspect of the reorganization is to alter the laws that requires all metals to be purchased from United States mines and other sources. Through a labyrinth of laws, the copper, nickel, zinc, and manganese used for US circulating coinage and silver, gold, and platinum for bullion coins must be bought from US sources at the prevailing price. In other words, the US Mint cannot negotiate for discounts on the purpose of these metals as any large manufacturer would do. By doing this, congress is providing a subsidy (welfare) to the mining industries who have stemmed losses by selling to the US government. While politics will protect those mining interests, congress can authorize the US Mint to purchase coining metals from non-US sources when US sources cannot maintain sufficient supplies.
Now that the US Mint has been reorganized, the next installment will discuss improving circulating coinage.