April 23, 2014

House Bill Calls for Suspension of Presidential $1 Coin Program

Following the two separate bills introduced last week, a third bill has been introduced in Congress which attempts to deal with the issue of the growing hoard of $1 coins held by Federal Reserve Banks.

Under current law, Reserve Banks are required to make each release of the Presidential $1 Coin Program available to financial institutions during an introductory period. This compels the Reserve Banks to order large quantities from the United States Mint despite little transactional demand. The situation has led to a hoard of 1.252 billion coins in storage that is projected to reach 2 billion by 2016.

H.R. 2635 ‘Cutting Out Inefficient and Needless Spending Act of 2011’ or the ‘COINS Act of 2011’ was introduced on July 25, 2011 by Rep. Jared Polis of Colorado. There are two cosponsors to the bill, which has been referred to the House Committee on Financial Services.

The bill would modify Section 5112(n)(8) of title 31, United States Code by adding "The Secretary shall suspend issuance of coins under this subsection during any period for which the Secretary determines that the surplus supply of $1 coins exceeds the reasonable circulation needs for one year." Additionally, the bill would remove the requirement for the Federal Reserve Banks to ensure that unmixed quantities of each design of the Presidential $1 Coin Program are available to depository institutions.

If the bill becomes law, collectors would likely be faced with an immediate and prolonged suspension in the Presidential $1 Coin series. During the last four quarters for which full information is available, the net number of $1 coins issued for circulation by Federal Reserve Banks was 88 million. This is calculated based on the difference between the Reserve Bank payments to circulation and the receipts from circulation. In actuality, the total demand from circulation during a suspension of the program may be even lower, as part of the demand is likely generated by the issuance of four different designs per year. Thus, it seems possible that a suspension could last as long as ten or twenty years while the surplus supply of $1 coins is used up.

The situation does have some recent precedent. During 1979 and 1980, the United States Mint struck around 847.5 million Susan B. Anthony Dollars for circulation. After it became apparent that the coins were not circulating to any wide extent, in 1981 the coins were minted in the minimal quantity necessary for the annual uncirculated coin sets produced for collectors. For the following 18 years, the coins were not produced in any format. In 1999 after the surplus of coins had finally been worked off, around 37 million 1999-dated Susan B. Anthony Dollars were produced for circulation. This represented the longest gap between two dates in the same series in the history of U.S. coinage.

A prolonged gap in the Presidential $1 Coin Program would be even more vexing, as the series was created to feature rotating designs. Rather than being released in approximately equal intervals, sequential Presidents could be released years or decades apart.

If the bill becomes law, it would also have an impact on the First Spouse Gold Coin Program. These one-half ounce 24 karat gold coins are required to be issued "on the same schedule as the $1 coin issued under subsection (n) with respect to each such President." Thus, any gap in the Presidential $1 Coin Program would be mirrored in the First Spouse series.

All three of the bills that have been introduced by Congress to deal with the growing $1 coin hoard have focused on eliminating or suspending the Presidential $1 Coin Program. None have directly sought to modify, suspend, or eliminate the Native American $1 Coin Program, and none have addressed the implications for the First Spouse Gold Coin Program. Most notably, none of the bills have sought to directly address what is generally perceived to be the primary reason for the non-circulation of the $1 coin and the resulting growing hoard of coins in storage-- the continued production of the $1 banknote.



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Comments

  1. Gar says:

    Wow this really stinks. If congress passes this they are truely stupid. As a collector that means even the FD coin covers will be stopped. What are they thinking?!

  2. CaptainOverkill says:

    This is slightly better than outright cancellation… I guess. I do not think we will have resolution until the debt ceiling drama is finished with in DC. After that, though, I expect some sort of fairly quick response on these different bills that are floating around out there. I expect we will probably make it to the Hayes $1 coins being minted, but probably not Garfield (beyond what is already available in uncirculated sets and proof sets).

    Most likely none of them have dealt with the First Spouse program because they either don’t know about it, don’t care about it, or else want it cancelled along with the $1 coin program.

  3. MJ says:

    Cancelling the First Spouse series simply because of the proliferation of Presidential dollars is beyond atrocious!
    The simple fix is to reduce the amount of dollar notes so we will HAVE TO use the coins.
    Our politicians are totaly cluless to the term “Common Sense”!

  4. Gar says:

    I agree MJ. The dollar bill needs to go, it has needed to go for decades, but the government is too scared to tell people, Hey sorry no more dollar bills, use a coin. Canada did it, very successful. I agree, the politicans have no idea what common sense means. How do these guys ever get elected?! But they are all the same… all morons!

  5. CaptainOverkill says:

    Gar:

    It’s not fear that’s motivating the government. There are two problems with getting rid of the dollar bill. The first is a total lack of public interest or knowledge about the issue. If it was just this problem, the numismatic community could probably get legislation pushed through to end the $1 bill anyway. However, the other problem is that Crane & Co., Inc., the paper supplier of paper for printing US dollars, is located in Massachusetts. The company is strongly backed by Barney Frank and the late Edward Kennedy.

    With the backing of powerful politicians, it is unlikely printing of US $1 bills will end any time soon. The $1 coin program, in contrast, does not have any powerful backers willing to take on the Massachusetts politicians. Thus the programs are often left to wither on the vine, and the uninformed say things like “Well, obviously the American people just don’t want dollar coins and really love the bill!”

  6. Goldbug509 says:

    I wish Congress worked on getting our budget in line instead of wrrying so much about some extra dollar coins. We need a revamp of our whole political system.

  7. Mitch says:

    If they want to save money they should stop producing the dollar bill and let the dollar coin replace it.

  8. Indentured_Servant says:

    Gar says:
    July 29, 2011 at 6:47 am
    I agree MJ. The dollar bill needs to go, it has needed to go for decades, but the government is too scared to tell people, Hey sorry no more dollar bills, use a coin.
    Mitch says:
    July 29, 2011 at 10:24 am
    If they want to save money they should stop producing the dollar bill and let the dollar coin replace it.

    Why do you guys think the dollar bill needs to go? The citizens of the United States have repeatedly demonstrated a very clear and specific preference for the dollar bill over a dollar coin. From Ike dollars to Susan B’s, Presidential and Native American it is crystal clear that the PEOPLE want the dollar bill.

    If you want to see the govt save money on this issue then tell them to LISTEN TO THE PEOPLE! Minting coins that the MAJORITY does not want or need is pure BS!

  9. Bob says:

    How will all of this affect seniorage obtained by the Mint? The Mint’s 2010 Annual report shows that the dollar coins accounted for 94% of all seniorage obtained by the Mint. The cost per coin including production, allocated administrative costs, and distribution to the FRB was 31.57¢. In other words, a “profit” of 68.43¢ per coin.

  10. CaptainOverkill says:

    The average citizen of the US has not demonstrated a “preference” for the dollar bill. The average US citizen has no idea these $1 coins even exist. Businesses do not carry them and the only place you can generally get them is directly from a bank. If businesses started using these coins as change, you would see the $1 coins start to circulate very quickly.

  11. joe says:

    Dave Harper has an article out there on coins going out of style, which is a good (and depressing) read for a collector.

    http://www.numismaticnews.net/article/is-it-already-too-late-for-u-s-coins

    The paper dollar is past its prime, but the dollar coins are ugly and cheap-looking in my opinion. I have already said this, but I think it bears saying again. The mint should consider adding some precious metal content to the coin planchets (silver being the most obvious choice). If they struck the new dollars with 5% silver, people would hoard them and there would be no more storage problems (except for the hoarders). I mean, jeez, look what’s happening with pre-1982 pennies due to their copper content! Imagine 5% silver with the balance being a copper/nickel alloy in a new silver dollar, quarters, and dimes. Heck, the Chinese would even start purchasing our currency again.

  12. CB says:

    The best outcome, from a numismatic point of view:

    Continue the Presidential Dollar series, but make only enough of each issue to satisfy collector demand, much like the 2002-2008 Sacagawea dollars and the 2002-2011 Kennedy halves.

    This would automatically authorize continuance of the First Spouse series.

    Problem solved!

  13. Gar says:

    I agree that most people don’t even know that the $1 coins exist. The people have not demonstrated a want or need for the $1 bill. The people will use whatever you give them, if you keep giving them more bills than coins then they will use the bills. How did Canada do it, does anyone know? I suspect that the government wanted to save money and they said we are going to change it and they did just that, probably in phases. The government should do whatever they need to do, this is a small issue, and it could save them billions.

  14. mj says:

    I believe Canada, just as the UK, put the coins into circulation and gave approximately 2 years for everyone to get used to them as they slowly removed the paper bills. At a certain date the paper bills were no longer currency and the only option was the coin. Yes, some people continued to gripe but within a few years everyone was used to the coin. The UK did this 30 years ago, Canada has also produced a $2 coin- this country needs to just do it.

  15. face1004 says:

    Was there anyone in Congress that said or thought of getting rid of the dollar bill instead?

  16. Gar says:

    MJ, yep, agree totally, and that is how it should be done, people need to move to the new coins by force. A $2 coin would also be useful in the US. But, gosh, if a $1 coin won’t get circulated a $2 coin certainly won’t be either.

  17. Gary J says:

    When you take away choices from people this stops being the United States. That is what separates us from all the other countries you all mention.

  18. Sean says:

    The paper bill really needs to go. All sources say the coin is cheaper and lasts longer. I was in Europe for about a month where they have the 1 euro and 2 euro coins. It was so easy to use that I didn’t even know the difference. It is a cost effective choice and they just need to do it. And they don’t need a grace period to produce enough to meet the markets demand because word on the street says there is enough to last the US 10 years. And Gary J you are right, if we can’t choose this isn’t the US, but unfortunately we have NEVER had the choice to dictate to the government about the currency. That is one of the few things the Fed has total control over. They can change whatever they want about it and we can’t do anything about it. Besides, it is just dollar coins, not our civil rights. They can get rid of the paper dollar bill and any complaining they hear is just that, complaining. It doesn’t effect anyone’s life in a terrible way. The weight of the coins in anyone’s pocket isn’t even a good enough excuse. I have had 10 Presidential dollars in my pocket and I didn’t even feel. No one is that weak, that a few coins could bother them that much. This seems to be about money. Many Congressmen and women won’t get paid by that paper company if the paper dollar goes.

  19. joe says:

    Playing the devil’s advocate here:

    The USA is a financial powerhouse around the world, and the the US dollar bill is symbolic of our financial strength (if we still have it after this administration is through with it). You might say it’s iconic and it is certainly almost as recognizable as the US Flag. As with any good company, you don’t throw out a brand name that you’ve worked so hard to establish. It’s an easy thing to say you want to do, but I doubt a presidential dollar (or Sacajawea dollar) will ever replace the “greenback” as a recognizable symbol of our financial strength.

    Put some precious metal into our coinage (even a small percentage) and then it might actually be worth holding like it once was before we went off the gold standard. If the choice is a piece of paper or a cheap, ugly magnesium coin, I don’t think it matters (six of one; half dozen of the other).

  20. face1004 says:

    It’s not about choice. It’s about wasting money on money.

  21. joe says:

    And the choice is (based on a vote by congress and the signing into law by the executive branch)…we waste money on money by producing coins that will never be used.

  22. face1004 says:

    We are wasting money that is being used but outdated (cent,Nickel). Farewell to the cent, change 5 cent into steel w/nickel plate. I do like the idea of a 5% silver plate on a dollar coin with a new look. I still can’t figure why a dollar bill is so important. Yes the Presidential dollars are ugly but if the Government was going to do these in the first place they should have slowly got rid of dollar bills. Or instead, make limited mintage’s on them like the Kennedy half dollar. It will be interesting how this all plays out, but realistically none of these opinions will matter because the powers that be will come with another idea which will be another waste of our taxpaying money.

  23. joe says:

    No arguments here…

  24. Gar says:

    Ok I found one reason why the bill should be kept, but it’s a weak reason… In my travels to many countries, I have found that some of them utilize the USD like their own local currency and the reason is that their local currencies are not very stable. These are low income countries, so if you want to buy something the $1 bill comes in handy sometimes. These countries only utilize the paper money, they do not bother with US coins and for good reason. Even if the $1 bill were to be eliminated, they would not use the coins. If the product you want to buy cost $1, they would return to you US$4 equivilent of their own currency. Good or bad, this is the way it would be. As I said, it is a weak reason to keep the $1 bill. Indeed the US goverment needs to come up with a better quality design for the coins, I feel they are stuck in the 1950′s with their designs, they need something fresh to make people really want to use it. It does not really need to carry a picture of one fo the presidents, but if it did the front would be fine, but what to put on the back of it? It has to be flashy and fresh and modern.

  25. Douglas Meredith says:

    Eliminating the dollar bill isn’t the only reform needed.

    Eliminate the dollar bill and use only a dollar coin
    Eliminate the penny as a medium of exchange (keep it for a unit of account and store of value). This means tht prices and check and credit card transactions will still be to the penny, but chnage for transactions would be rounded to the nearest nickle.
    Use the metals from penny production to mint dollar coins. That should pacify the penny mining lobby.
    Print and use the two-dollar bill more. Crane Paper will still have demand for low denomination notes
    These reforms will satisfy all of the lobbies trying to promote their self-interest.

  26. GoThruChange says:

    When I go for a run, I like to buy a water in the vending machine. Dollars get all wet and the machine does not accept them. Also it takes 5 or 6, too many quarters to buy a water.
    I think making all vending machines to take $1 coins is a great idea.

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