Summary of July coin-related legislation

While doing my monthly review of the numismatic-related political news for the Gold & Silver Political Action Committee, I came across a bill that seems to have missed the numismatic press. One reason it was missed might be that the provisions are buried in a larger bill and has a name that might not be as noticeable. However, there are two issues buried in a larger bill. The bill is as follows:

H.R. 5196: Unified Savings and Accountability Act (or USA Act)
Sponsor: Rep. Mike Coffman (R-CO)
• To reduce waste and implement cost savings and revenue enhancement for the Federal Government.
• Introduced: July 24, 2014
• Referred to several committees based on jurisdiction of the provision.

Track this bill at https://www.govtrack.us/congress/bills/113/hr5196

Buried within the bill are two provision that may be of interest to collectors.

Sec. 203. Prohibition on non-cost-effective minting and printing of coins and currency.

If passed, Section 203 would require that the U.S. Mint stop striking any coin that costs more to manufacture than its face value four years following the passage of this bill. Using current standards, the U.S. Mint would be required to stop producing one- and five-cent coins by late 2018 because they cost more than their face value to produce. One of the problems with this bill is what would happen if the price of copper and zinc, the drivers in the price of both coins, were to fall and the costs were reduced to below face value? Would the coins be struck again?

Sec. 205. Replacing the $1 note with the $1 coin.

As the title suggests, Section 205 will replace the one-dollar Federal Reserve Note with the dollar coin. The section begins with requiring the Federal Reserve to “sequester” Susan B. Anthony dollars to remove them from circulation. There is a provision for their value as numismatic collectibles.

The plan to remove the $1 FRN is just to stop issuing the notes and replace them with coins as the notes come out of circulation after a one-year educational period. The Federal Reserve would continue to use the notes alongside the coins until 600 million coins are in circulation or for four years, whichever comes first. The bill allows the Bureau of Engraving and Printing to continue to print the $1 FRN for collectors.

Given the current state of congress, the likelihood of this bill passing is slim-to-none, and, as a friend liked to say, “Slim just left town.” Some of the other provisions of this bill might be introduced into an omnibus budget bill following the November elections, but it is doubtful that these sections will make it past this introduction.

Then again, who knows? Congress has surprised us in the past!

Counting Down the Top 10: #6 Ben finally gets his makeover

$100 Federal Reserve NoteWith the fanfare of a hard cough, the Federal Reserve released new new $100 Federal Reserve Notes on Tuesday, October 8, 2013 in the middle of the government shutdown. The launch is three years in the making following of folding problems during production at the Bureau of Engraving and Printing.

Earlier on 2013, a Freedom of Information request forced the government to release information as to the problems the BEP was experiencing. The BEP released images along with the report (OIG-12-038 [PDF]) from the Treasury Office of the Inspector General heavily criticizing the BEP for mismanaging the delay. The published response from the BEP was to apologize promising to do better.

As the U.S. Secret Service, Bureau of Engraving and Printing, and Federal Reserve scramble to deal with paper currency, some countries are abandoning cotton rag bond paper for polymer notes.

The polymer “paper” was developed by the Reserve Bank of Australia to enhance the durability of the notes and to incorporate security features not possible with paper or rag-based paper. RBA has been distributing polymer notes since 1992. While the polymer substrate costs little more and the production is only marginally more expensive, the benefit will come from the reduction in counterfeiting and the durability of the note. Polymer will last three-to-six times longer than rag-based paper.

Canada's $5 Polymer banknote was issued on Nov 7, 2013

Canada’s $5 Polymer banknote was issued on Nov 7, 2013

While the United States has been struggling to fix the problems with paper, Canada has been releasing notes printed on polymer “paper.” The Bank of Canada announced in 2010 that they will be converting their banknotes from paper to using the polymer substrate. The Bank of Canada began issuing new C$100 notes in November 2011 made using polymer. Polymer C$50 and C$20 notes were issued in 2012. This past year, the Bank of Canada issued C$10, and C$5 polymer notes. Although there have been problems with the higher circulation $5 and $10 notes, the Bank of Canada considers the rollout a success. It may be one reason why the Bank of Canada may be considering a move to a $5 coin to replace the note.

The Bank of England announced that they were going to transition to polymer currency notes. The research performed by the Bank of England can be used as a basis for the Federal Reserve to begin its own study.

Although polymer notes may be a better idea, the BEP’s long time ties to Crane & Co. along with politics from Massachusetts will prevent the United States from considering polymer as a viable option. Ironically, there is an indication that the prices of the paper may not be as low as possible. After many yeas of Crand & Co. saying that they are heavy recyclers of cotton, specifically cotton from old denim jeans, we learned that Crane has been sourcing cotton from “beyond the waste stream.” In other words, no more blue jean recycling.

Crane claims the problem is skinny jeans—the pants that many of us should not be wearing! In order to make the clothes tight but comfortable, manufacturers are adding spandex to the fabric so they appear tighter. Spandex and other synthetic fibers cannot be used to make currency because it degrades the strength of the paper. The process to remove the spandex or other “contaminants” is too expensive to be viable.

The United States has tried to use non-paper for currency in the past. In the 1980s, the American Banknote Company worked to Dupont to use its Tyvek polyethylene fiber sheets for currency. Tyvek has had a lot of uses including liners used around insulation during construction and envelopes. It is a strong material that can last much longer than paper. After a number of problems, use of Tyvek was discontinued.

As with the dollar coin, the long memory of the Tyvek failure is a significant detractor to the possibility of just researching the possible move. To paraphrase Thomas Edison, we did not fail in producing currency with plastic, we learned ways of how not to do it! It appears to be unlikely that the United States will be producing polymer notes any time soon.

Last week I went to my local bank asking if they could order the new $100 note from the Federal Reserve. Following two currency deliveries I was told that the notes were not available in the supply chain that supplies my bank in the Maryland suburbs of Washington, DC. Another order was placed with the hopes that they will be available before the end of this year.

Information from the Bureau of Engraving and Printing as to how to use the new note’s security features to ensure it is not a counterfeit. (click on image to see it full-size and ready for printing)

Information from the Bureau of Engraving and Printing as to how to use the new note’s security features to ensure it is not a counterfeit.

Image of new $100 note and counterfeit detection info courtesy of the Bureau of Engraving and Printing.
Image of the Canadian $5 polymer note courtesy of the Bank of Canada.

Counting Down the Top 10: #7 Dollars and What Sense

Two discussions that transcended numismatics is what to do about the one dollar coin and common one-cent coin. Both coins cause different problems depending on who is doing the arguing. I find it amazing that the logic that is used to support the argument is not used consistently.

Dollar coins have been around since the beginning of the republic. In fact, the coin that currently holds the record for being the most expensive coin sold at auction is a 1794 Flowing Hair dollar. The coin is reported to be amongst the first dollar coins minted at the newly created Mint was bought by Legend Numismatics for more than $10 million. Laura Sperber, one of the principals of Legend Numismatics, was quoted as saying that she was prepared to bid higher for the coin.

If that is not enough to show how important the dollar coin has been in our history, there is always the 1804 Bust dollar, also known as “The King of Coins.” The U.S. Mint ceased to strike dollar coins in 1804 because of hoarding when the price of silver rose. The dollars that were struck in 1804 were struck using dies dated 1803 and are indistinguishable from the coins struck in 1803. The U.S. Mint continued to strike “minor coinage” to encourage circulation.

In 1834, eight dollar coins were struck with the 1804 date to include in a special set created as a gift for the King of Siam (the area known today as Thailand). One coin was included in the set, one was retained by the U.S. Mint for its collection that is now part of the National Numismatic Collection at the Smithsonian National Museum of American History, and the six others were kept as souvenirs by Mint officials and eventually landed in private collections. Between 1858 and 1860 seven more specimens were surreptitiously by U.S. Mint employee Theodore Eckfelt. It is alleged that Eckfelt created 15 coins. Six are in private collection, one is now part of the National Numismatic Collection and the others were reported to be destroyed when seized by the government.

The Coinage Act of 1873, known as “The Crime of ’73,” ended the free coining of silver and put the United States strictly on the gold standard until the western states where silver was being mined became upset. Two weeks later, congress passed the Bland-Allison Act to required the Department of the Treasury to buy the excess silver and use it to strike the Morgan Dollar. Morgan dollars, especially those struck at the branch mint in Carson City, Nevada are popular with collectors because of their ties to the days of the old west. Collectors can find quite a few nice examples of Morgan and the Peace dollars that were struck from 1921 through 1938 because many did not circulate. These coins were held as backing to silver certificates in circulation and did not get released to the general public until the GSA Hoard sales that begin in the 1960s.

Such a colorful history also has a downside that is used as fodder against the dollar. After ending the production of the Peace dollar in 1938, no dollars were struck until 1964 when the U.S. Mint struck 316,076 1964-D Peace dollars in May 1965. The coins were never put into circulation and the entire population of 1964-D Peace dollar were allegedly destroyed. There have been reports that some Peace dollars were struck using base metals (copper-nickel clad) as experimental pieces in 1970 in anticipation of the approval of the Eisenhower dollar. The same reports also presume these coins have been destroyed.

The Eisenhower dollar was not well received because of its size. The 38mm coin was seen as too big for modern commerce and with the exception of dollars struck with the special bicentennial reverse in 1975 and 1976, most coins did not circulate.

The Susan B. Anthony dollar coin was introduced in 1979 with much fanfare for being the first coin to honor a woman. The coin was a failure because it was confused with a quarter

The Susan B. Anthony dollar coin was introduced in 1979 with much fanfare for being the first coin to honor a woman. The coin was a failure because it was confused with a quarter

To try to improve circulation someone came up with the idea of the small dollar as part of an attempt to honor suffragette Susan B. Anthony. The copper-nickel coin was very close in size to the Washington quarter, had reeded edges like the Washington quarter, and on a simple glance was consistently confused with the Washington quarter. I even have heard coin collectors use the fiasco of the Susie B.’s as a reason not to pursue the dollar coin.

Since the introduction of the Sacagawea dollar in 2000, the dollar coin’s size has remained the same but with the addition of manganese has a golden color to be visually different from other coins. For the visually impaired, the reeding was removed from the edges. Today, the Presidential $1 coins and the Native American $1 Coins have edge lettering that keeps it tactically different from the quarter dollar. However, people continue to bring up the Susan B. Anthony dollar as a reason not to use dollar coins.

Historically, dollar coins has been more popular in the western regions of the United States where the east prefers paper. Financial centers and big city government prefers paper for its alleged ease of handling. When circulated side-by-side, the public tends to choose paper over coin.

When we look around the world for examples of how to handle this situation, we find that the United States is the only country where the unit currency is available in both paper and coin. Other countries did not give people a choice. Rather, their governments made a decision based on overall economic benefits of using a coin with a predicted 30-year lifespan over paper currency that can last 18-24 months in circulation. Instead of the argument being of practical economics where every other country and the European Union have put on their proverbial long pants and made a decision that is in their best economic interest, factions in the United States comes up with mind boggling arguments of alleging that taking the paper dollar away is akin to taking away our freedom.

Obverse of the 2013-S Lincoln proof cent. Lincoln's portrait, designed by Victor D. Brenner in 1909,  is the longest running design of any United States coin.

Obverse of the 2013-S Lincoln proof cent. Lincoln’s portrait, designed by Victor D. Brenner in 1909, is the longest running design of any United States coin.

Then why is that not an argument that can be used to figure out what the do about the one cent coin? Are we not giving up the same freedoms by forcing those who pay for good and services using cash to sacrifice their ability to pay what is due and not over pay?

The United States has a history of using its currency to boost the economic status of its citizens, aside from the various silver laws and the laws that eventually took the United States off the gold and silver standards, the creation of the half-cent was made because of the economic status of its citizens. Following Alexander Hamilton’s Treasury Secretrary’s report to congress “On the Establishment of a Mint,” Secretary of State Thomas Jefferson had another idea. Jefferson thought it would be better to tie subsidiary coins tied to the actual usage of the 8 reales coin. At the time, rather than worry about subsidiary coinage, people would cut the coin into pieces. A milled dollar cut in half was a half-dollar. That half-dollar cut in half was a quarter-dollar and the quarter-dollar cut in half was called a bit.

The bit was the basic unit of commerce since prices were based on the bit. Of course this was not a perfect solution. It was difficult to cut the quarter-dollars in half with great consistency which created problems when the bit was too small, called a short bit. Sometimes, short bits were supplemented with English pennies that were allowed to circulate in the colonies.

As an aside, this is where the nickname “two bits” for a quarter came from.

Jefferson felt that in order to convert the people from bit economy to a decimal economy, the half-cent was necessary to have 12½ cents be used instead of a bit without causing problems during conversion from allowing foreign currency to circulate as legal tender until the new Mint can produce enough coinage for commerce.

The half-cent would come into focus in the 1850s when the cost to produce the United State’s copper coins was nearly double their face value. In 1856, the Mint produced the first of the small cents, the Flying Eagle small cent, and produced 700 samples to convince congress to change to the small cent. As part of the discussion was the elimination of foreign currency from circulation making the U.S. Mint the sole supplier of coins.

There is no record of outcry from the public on the elimination of the half-cent. Its elimination came four years after the Coinage Act of 1853 that created the one-dollar and double eagle gold coins in response to the discovery of gold in North Carolina, Georgia, and California. The gold rush caused a prosperity and inflation that not only made the half-cent irrelevant but not something on the public’s mint. In that light, the Mint and congress felt that it just outlived its usefulness and would not be necessary with the elimination of foreign currency from circulation.

More controversy was generated in 1857 over the demonetizing foreign coins in the United States than the elimination of the half-cent. While the half-cent continued to circulate, it was estimated that one-third of the coins being circulated were foreign, primarily reales from Mexico. Redemption programs did not go smoothly, but in the end foreign coins were taken out of the market and the American people adapted and it could be said we prospered as a nation.

Like the 1850s, the last seven years have found that the cost of the copper used to make the one-cent coin has increased to more than the coin’s value. Combined with the labor and manufacturing costs, it costs the U.S. Mint between 1.6 and 1.8 cents for each copper-coated zinc cent struck. Although people argue that the cent is not needed and is barely useful, the U.S. Mint reports that 65-percent of its production are for one-cent coins that are ordered by the Federal Reserve to be circulated in commerce.

Eliminating the cent has caused controversy from those concerned with the economic welfare of the less fortunate. Many are using the same arguments that Jefferson made in 1791 to create the half-cent in order to keep the one-cent coin in circulation while others point to what other countries are doing. Canada is currently the country with the largest economy to eliminate its lowest denomination coin. Proponents of eliminating the cent point to Canada’s rocky success (withdrawal of the cent had been delayed twice) as an example of how the United States can handle the situation.

Canadian 1-dollar and 2-dollar coins. The 1-dollar coin is called a Loonie because its reverse depicts a common loon. “Toonie” is a play on the Loonie nickname.

Canadian 1-dollar and 2-dollar coins. The 1-dollar coin is called a Loonie because its reverse depicts a common loon. “Toonie” is a play on the Loonie nickname.

Canada also does not circulate paper currency smaller than their 5-dollar banknote. Rather than paper (or polymer as they are converting away from rag-bond paper), Canada circulates a one-dollar (Loonie) and two-dollar (Toonie) that is regularly used in commerce. The Bank of Canada is also considering eliminating their 5-dollar note in favor of a 5-dollar coin that would be produced by the Royal Canadian Mint for circulation.

Suggesting that if the United States follows Canada’s lead in the elimination of the cent, should the United States follow Canada’s lead and eliminate the one- and two-dollar Federal Reserve Notes in favor of one- and two-dollar coins?

This debate will continue until someone decides to act like an adult and make a definitive policy decision—especially when the Fed publishes a “working paper” that cherry picks facts to support a specific viewpoint.

Image of the Susan B. Anthony dollar and Lincoln cent courtesy of the U.S. Mint.
Image of the Canadian Loonie and Toonie courtesy of Noticias Montreal.

Counting Down the Top 10: #9 The Trillion Dollar Nonsense

If there was a countdown of the idiocy of the punditocracy of this country, the discussion over the $1 Trillion platinum coin would be the number 1 story. As I previously explained, which it is feasible for the U.S. Mint to strike a $1 Trillion coin, the question remains, “Who will buy the coin?” In order for the U.S. Mint to gain from the seigniorage that would come from minting and selling this coin.

If the coin is has to be paid for by a depositor before it can become legal tender, who will buy a $1 Trillion coin?

How could the coin be used to reduce the debt? If the coin is just deposited with the Federal Reserve, there will be a $1 Trillion liability on the government’s balance sheet. In order to make the books balance, the Department of Treasury would have to sell debt bonds to make up the difference and that would add $1 Trillion to the national debt.

If the coin is bought by the Federal Reserve, then the Fed will have to pay $1 Trillion to the U.S. Mint for the coin reducing its overall working capital by $1 Trillion. Paying for a $1 Trillion that could not be used will just transfer the debt from the general treasury to the Federal Reserve. Since the Federal Reserve is in charge of managing the country’s money supply, the net effect will be to reduce the money supply by $1 Trillion that will cause the economy to shrink—any time you artificially remove money from the economy it will shrink which will also weaken the buying power of the U.S. dollar.

Transferring the debt away from the general fund might look good on paper but the effect will shrink the economy and cause more problems than even considering the constitutionality of doing this.

The bottom line is that regardless of what the U.S. Mint sells, there has to be a buyer. If there is no buyer then all the government would do is transfer balances from one balance sheet to another without any net gain.

Heritage Auctions asked the public to proposed design for the coin trillion dollar coin.

Dallas-based Heritage Auctions, held a mock contest on Facebook for the public to design a potential $1 trillion coin. The concept of a coin was even a joke to the folks at Heritage whose mockup included famed Mad Magazine “pitchman” Alfred E. Newman.

Counting Down the Top 10 of 2013

It is that time of then when the pundit class of this country puts together their list of the best, worst, or most impactful stories of the year being concluded. There was even an advertisement on satellite radio about an upcoming show that will list the Top 10 moments in music for 2013. After a meeting of the Board of Directors for the Coin Collectors Blog (all three of us: me, myself, and I), the last ten days of the year will count down what we feel are the Top 10 Numismatic-Related Stories of 2013.

Number 10: Lew’s Lewpts

75th Secretary of the Treasury Jacob "Jack" Lew

75th Secretary of the Treasury Jacob “Jack” Lew

In one of the more fun stories of 2013 started following the nomination of Jacob “Jack” Lew to succeed Timothy Geithner as Secretary of the Treasury. One of the “issues” surrounding Lew’s nomination was that his autograph was far from conventional. As one of the co-signers of U.S. currency, collectors became interested in what the new autograph would look like. On one hand there were the series of loops that Lew has passed off as his autograph even while a member of the White House staff. On the other was the alleged promise Lew gave the president to provide a clearer signature for U.S. currency.

Lew, whose autograph has been called “lewpty” and been compared to the decorative icing on a Hostess cupcake, made a promise to the president that he would do better with his penmanship. During his confirmation hearing, Lew told Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee, that he promised the president he would do better. This did not satisfy those with an ironic sense for the different when a petition appeared on the White House website to “Save the Lewpty-Lew.”

MSNBC on-air comparison of Jack Lew's autographs: the original Lewpts on the left and what will appear on U.S. currency to the right.

MSNBC on-air comparison of Jack Lew’s autographs: the original Lewpts on the left and what will appear on U.S. currency to the right.

The other signature on U.S. currency is that of Rosa “Rosie” Gumataotao Rios, Treasurer of the United States. Rios was sworn in as Treasurer on August 20, 2009 and has served in that office ever since. Rios’s signature appears with former Secretary of the Treasury Timothy F. Geithner on Series 2009 notes. Ironically, Geithner also changed his signature when he became secretary.

Rosie Rios signature on the older (Series 2009) $100 Federal Reserve Note

Rosie Rios signature on the older (Series 2009) $100 Federal Reserve Note

Notes that will include Jack Lew’s signature will appear on all Series 2009-A notes.

Glad we were able to resolve this pressing issue!

New $100 bills released

New $100 Federal Reserve NoteWith the fanfare of a hard cough, the Federal Reserve released the new $100 Federal Reserve Note on Tuesday, October 8, 2013 to financial institutions. Various factors will effect how quickly these notes are seen in circulation including the demand and ordering policy of the financial institutions. In fact, the launch was introduced with a video by Sonja Danburg, Program Manager of the U.S. Currency Education Program at the Federal Reserve.

This launch is three years in the making as Bureau of Engraving and Printing reported problems with folding during the printing of the new notes. The announcement on April 21, 2010 said that the new notes would be released on February 10, 2011. On October 1, 2010, the Federal Reserve announced that the new note would be delayed. Later, the folding problems were revealed following a report released by the Treasury Office of the Inspector General.

The reason for the new notes are for the addition of security features. Aside from the ecurity thread, portrait watermark, color-shifting ink, microprinting, and the strategic use of color, the new note has a 3-D security ribbon and the use of color-shifting ink used to reveal a bell in the inkwell. If you look at the blue ribbon on the front of the note, tilt the note and watch the bells on the ribbon change to “100s” as the reflection of light changes. The 3-D ribbon is embedded in the paper and not printed. Looking at the copper-colored inkwell on the front of the note, tilting the note will reveal a bell that was embedded using color-shifting ink. Using these light sensitive features, the Federal Reserve hopes to significantly reduce the number of counterfeit notes, especially overseas where half of the $100 notes are known to circulate.

The Federal Reserve released a video about the new anti-counterfeiting features:

As an aside, the Bank of England recently announced that they will be transitioning to polymer banknotes by 2015.

The shutdown and U.S. money manufacturing

Government ShutdownIn the ongoing drama that is United States Federal government, a shutdown is looming over the shear idiocy of idiot-loges on both sides of the aisle attempting the rule and not govern. All 537 politicians elected to federal office are in need of a good spanking.

First, here are some impacts:

  • According to the Office of Management and Budget, a government shutdown will cost taxpayers an extra $40-60 million per day.
  • The District of Columbia is reporting that a shutdown will cost the city about $2 million per day in lost revenues.
  • Maryland and Virginia has not reported their potential economic impact of a shutdown.
  • UPDATE (4:40pm): Local news reports say that over 835,000 workers will be effected by a shutdown with at least 80-percent being in the Washington, D.C. metropolitan area. Some estimates are saying that it could cost the region up to $20 million per day.

What does this mean for the money manufacturing bureaus of the country?

  • The U.S. Mint is not answering inquiries about pending shutdown. Media is directed to contact OMB for more information.
    UPDATE (1:40pm): The U.S. Mint will not allow tours of the Philadelphia and Denver mints during a government shutdown.
  • Office of Management and Budget is not answering the telephone. Rather, they requested that an email be sent with detailed questions. Email inquiries have yet to be answered.
  • When calling the Bureau of Engraving and Printing, their phone is either busy or when trying to get past the voice response system for the Office of External Relations, the system says “the person you attempted to reach is unavailable.” An email was sent to the BEP’s general inquiry account and OMB asking about the operations at the BEP.
    UPDATE (3:30pm): An email note was received from the BEP saying to contact a spokesperson at the Department of the Treasury. Telephone and email messages have not been returned.
    UPDATE (4:10pm): Both the Washington and Fort Worth plants will not hold tours if there is a government shutdown at midnight tonight.
  • Since the Federal Reserve is an independent organization and not subject to congressional appropriations, they will remain open during a shutdown. The shutdown will not affect the launch of the new $100 Federal Reserve Note planned for October 8.

UPDATE (5:30pm): According to the Treasury Department:

Operations of the following bureaus are funded from sources other than annual Congressional appropriations, and would operate normally if a government shutdown were to occur: the Office of the Comptroller of the Currency (OCC), the United States Mint, and the Bureau of Engraving and Printing (BEP).

This post will be updated as new information is provided.

Representatives of these agencies may contact me via email to provide additional information. Please note that I do respect the confidentiality of sources!

NOTE: I am not a member of any political party. I am a proponent of government employees who do not deserve the way they are being treated by the elected officials.
Image courtesy of Adam Bitely at NetRightDaily.

Lew gives us some Lewpts

Lew Signing CeremonyIn one of those news items from while I was away, Secretary of the Treasury Jacob J. “Jack” Lew put pen to official paper and provided an autograph that will appear on United States Federal Reserve Note. Treasury reports that Lew’s signature will first appear on Series 2013 five-dollar notes that will be issued this fall. No plans were announced for other denominations.

Lew, whose autograph has been called “lewpty” and been compared to the decorative icing on a Hostess cupcake, made a promise to the president that he would do better with his penmanship. During his confirmation hearing, Lew told Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee, that he promised the president he would do better. This did not satisfy those with an ironic sense for the different when a petition appeared on the White House website to “Save the Lewpty-Lew.”

Mock-up of how Treasury Secretary Jack Lew’s autograph will appear on the Series 2013 $5 Federal Reserve Note in the Fall.

Mock-up of how Treasury Secretary Jack Lew’s autograph will appear on the Series 2013 $5 Federal Reserve Note in the Fall.

Remember as you were growing up spending time with a piece of paper practicing your signature? I wonder if Lew was doing this in his spare time?

While Lew’s autograph lost many of his infamous lewpts at least he did not go to the extreme that of predecessor, Tim Geithner. Geithner’s autograph was very readable and lacked character. At least Lew kept some of his lewpts. It will make for interesting conversations for currency collectors in the future as they examine the autographs on their collectibles.

Images courtesy of the U.S. Department of the Treasury.

Lew Looses Lewpts

MSNBC on-air comparison of Jack Lew's autographAlthough new currency with the autograph of Secretary of the Treasury Jacob “Jack” Lew have yet to be issued, Treasury documents signed by Lew have been seen with a new autograph.

During his confirmation hearings, it was reported that Lew told Sen. Max Baucus (D-Montana) that he made to the president “to make at least one letter legible.” It looks like he has made more than one letter legible based on the image broadcast by MSNBC.

Lew is not the only Treasury Secretary to change his autograph. Timothy Geithner did the same on his appointment. When asked about his autograph, Geithner said, “Well, I think on the dollar bill I had to write something where people could read my name. That’s the rationale.”

Not every autograph on U.S. currency could be considered legible. You can see all of the autographs on small size currency (since 1928) on this page at uspapermoney.info.

I wish Lew kept his lewpts!

A mock-up of what Jack Lew's original signature would look like on a one-dollar note

A mock-up of what Jack Lew’s original signature would look like on a one-dollar note

Jack Lew autograph examples courtesy of MSNBC.
Tim Geithner autograph examples courtesy of American Public Media

I’ll take “Don’t Get Too Excited” for $100

$100 Federal Reserve NoteEarlier today, the Federal Reserve issued a press release announcing that the redesigned $100 Federal Reserve Note will be issued on October 8, 2013.

The redesign of the $100 note was announced with a press release that was to be held on April 21, 2010 at the Department of the Treasury Cash Room with all of the usual suspects: then Secretary of the Treasury Timothy Geithner, Chairman of the Board of Governors of the Federal Reserve System Ben Bernanke, Treasurer of the United States Rosie Rios, and the since retired Director of the United States Secret Service Mark Sullivan.

The date of the announcement, the Bureau of Engraving and Printing and Federal Reserve announced that Chairman of the Federal Reserve Board Ben S. Bernanke said, “When the new design $100 note is issued on February 10, 2011, the approximately 6.5 billion older design $100s already in circulation will remain legal tender.”

Throughout the summer of 2010, the BEP and Federal Reserve released a lot of training and education materials in anticipation of the release of the new notes.

Everything seemed to be going well until October 1, 2010 when the Federal Reserve “announced a delay in the issue date of the redesigned $100 note.” The Federal Reserve and BEP said that there was a problem with creasing of the paper during the printing process. That was the last we heard from the Federal Reserve until today’s announcement.

Magnified images of the creasing showing up on the new $100 notes.

Magnified images of the creasing showing up on the new $100 notes.

In the mean time, the Treasury Office of the Inspector General issued a report (OIG-12-038 [PDF]) that said the BEP did not handle this process properly. The report said:

We consider the delayed introduction of the NexGen $100 note to be a production failure that potentially could have been avoided and has already resulted in increased costs. We found that BEP did not (1) perform necessary and required testing to resolve technical problems before starting full production of the NexGen $100 note, (2) implement comprehensive project management for the NexGen $100 note program, and (3) adequately complete a comprehensive cost-benefit analysis for the disposition of the approximately 1.4 billion finished NexGen $100 notes already printed but not accepted by FRB. [Federal Reserve Board]

After the report noted that the BEP basic responded by saying that they were sorry and are looking into it, the OIG caved and said that even though the BEP was bad, the corrective actions “are responsive to our recommendations.”

Then nothing. No follow up by the OIG or the Government Accountability Office. In fact, we have not heard from the GAO since their 2005 report suggesting whether a second supplier of currency paper is needed (see GAO-05-368).

Of course it is easy for the BEP to say that Crane & Co., the Dalton, Massachusetts company that has been the exclusive currency paper supplier since 1879, because it would be easy to justify. Some of the arguments against finding a second supplier includes the cost of entering the market and the established relationship with Crane who the BEP allows to “own” the innovations paid with taxpayer money. There was also the case of having two of the most powerful senators, Ted Kennedy and John Kerry, there to protect Crane. Neither are the senators from Massachusetts today.

While the BEP has been struggling with rag-bond paper, countries have been moving to using polymer “paper.”. The polymer “paper” was developed by the Reserve Bank of Australia to enhance the durability of the notes and to incorporate security features not possible with paper or rag-based paper. RBA has been distributing polymer notes since 1992. While the polymer substrate costs little more and the production is only marginally more expensive, the benefit will come from the reduction in counterfeiting and the durability of the note. Polymer will last three-to-six times longer than rag-based paper.

The Bank of Canada has reissued its C$100, C$50, and C$20 notes using the polymer paper and will issue the new C$5 and C$10 notes later this year.

Switching to polymer notes, especially for higher denominations, would be a better decision. It will reduce counterfeiting and reduce the costs over the lifetime of the note. And there is no law that would prevent the Federal Reserve from using the polymer paper.

Considering the Bureau of Engraving and Printing’s previous performance with the $100 notes, this should not be consider the time to celebrate. Especially since a pre-solicitation notice asking for information about purchasing a Single Note Inspection System is still open at FedBizOpps.gov and the BEP has not issued a request for proposal (RFP) to purchase such a system. Let’s wait for the BEP to deliver the notes to the Federal Reserve for distribution before considering this a success.

While waiting, enjoy this video announcement narrated by Federal Reserve Deputy Associate Director Michael Lambert about the new release date.

Images courtesy of the Bureau of Engraving and Printing.
Video courtesy of the Federal Reserve.

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