QuoteDollar coins piling up at Baltimore reserve bank
Congressional mandate means Fed stores more than $1 billion in $1 coins
By John Fritze, The Baltimore Sun
12:27 AM EDT, September 7, 2011
In a dimly lit underground vault a block from Camden Yards, the Federal Reserve is holding millions of dollars in cash that nobody wants.
The money — stored in cloth and plastic sacks piled high on metal shelving units — is in the unloved form of dollar coins, some of them never used. But a 2005 law requires the reserve bank to keep ordering coins regardless of its stockpile, and so vaults in Baltimore and around the country are filling up.
"This is just a small portion of what there is nationwide," Dave Beck, senior vice president of the Federal Reserve Bank of Richmond and regional executive for the Baltimore branch, said as he stood inside a small warehouse filled with money bags, each containing 2,000 coins.
"At certain times, that vault will be full and we have to look for other Fed facilities ... that have more space," he said.
Congress created a program in 2005 to mint four new dollar coins a year, each featuring a different U.S. president, in an effort to encourage consumers to make the switch from dollar bills to coins.
But the new line, which began rolling out in 2007, failed to spark a significant increase in demand, Fed officials said, and some commercial banks are threatening to stop ordering the coins altogether.
Nonetheless, the law compels the Federal Reserve to keep buying the coins. Each time the Mint issues a new presidential coin — the latest, featuring Rutherford B. Hayes, came out earlier this month — the Fed must be able to supply commercial banks with that new $1 coin, and only that coin, for several weeks.
That requirement limits the Fed's ability to draw down its burgeoning supply of idle coins.
Beck, who has worked at the Baltimore branch for 27 years, would not say how many coins are stored in Baltimore, but the Fed's board of governors told Congress in June that the reserve system is holding more than $1.2 billion in dollar coins at 28 cash offices across the country.
Officials expect the number of dollar coins sitting in storage to grow to $2 billion by 2016.
Critics, including some members of Congress, call the law wasteful.
As the Fed board reported, "Because of vault storage constraints and insurance limitations at coin terminals, the Reserve Banks have been forced to spend resources to expand storage capacity to hold the excess $1 coins, with no perceptible benefit to the taxpayer."
The Fed cited a 2008 Harris poll that showed 76 percent of Americans prefer paper money.
Supporters of the coins counter that the real waste of taxpayer money is the public's reliance on greenbacks, which survive in circulation for only a few years before they must be replaced.
The nonpartisan Government Accountability Office reported in March that switching from paper to metal would save taxpayers $5.5 billion over 30 years.
"We want the Fed and Treasury to encourage people to use dollar coins. They've done nothing toward that end," said Shawn Smeallie, a lobbyist for the Dollar Coin Alliance and a former aide to PresidentGeorge H.W. Bush.
They're "complaining that no one uses the coin when it's their job to promote it."
The alliance is made up of vending machine operators, metal miners and at least one Washington-based fiscal watchdog group, Citizens Against Government Waste.
While the stockpile of coins might appear wasteful, advocates say their production does put money into government coffers.
It costs 30 cents to make a $1 coin, but the Fed purchases it for face value — and the U.S. Treasury pockets the difference. In 2010, the Mint put about 400 million $1 coins into circulation, which means the government made a profit of about $280 million.
The backlog, which was first reported by National Public Radio, has prompted some members of Congress to consider revising the 2005 law.
Rep. Jared Polis, a Colorado Democrat, introduced a bill in July that would allow the government to stop issuing new coins if stockpiles exceeded one year's worth of demand.
"We shouldn't continue to spend money minting coins until it's shown that the public actually has an interest in using them," Polis said. "When they were new, they were collector's items, but now billions of dollars of coins are sitting in storage space at taxpayer expense due to a lack of interest.
"We're not saying put an end to the program altogether," he said. "Just that we should put a hold on producing more until there is a demand for the coins."
The Baltimore branch of the Federal Reserve is a plain, brick building on South Sharp Street. The coins are stored in a basement warehouse partitioned with metal fences and monitored by dozens of security cameras.
Visitors — as well as the bank's managers — must pass through a guarded airlock before they can get to the money. Inside the vault, they are accompanied by two minders.
The last line of defense: A pair of ordinary padlocks hanging on a metal gate just outside the vault.
Inside, coin bags are piled into row after row of shelves. In addition to the presidential coins, the bank also stores Susan B. Anthony dollar coins, which the Mint is no longer producing, and also the gold-colored coins that feature Sacagawea, the Shoshone Indian who guided Lewis and Clark on their 19th century expedition to the Pacific Northwest.
Beck, the Fed's regional executive, said the size of the stash can vary by season — ebbing a bit during summer months, possibly as increased travel drives an overall demand for cash. But it is collectors, according to the Fed, that are the biggest customers.
In an effort to put more of the coins into circulation, the Mint encourages people to purchase them directly on the Internet. But the program was limited after officials realized consumers were using credit cards to buy thousands of dollars of coins in order to accumulate frequent-flier miles, and then immediately returning the coins to the bank.
Now, consumers must use wire transfers, checks or money orders to buy coins online. :lol:
Smeallie, with the Dollar Coin Alliance, speculated that people probably wouldn't mind making the switch to coins as much as they might think.
Given the choice, he said, people will opt for what they're most comfortable with. And the $1 coin, he suggested, hasn't been given much of a chance.
He compared it to the 2009 transition from analog to digital television, which required people with older TVs to update their sets with digital converters.
"Everyone was so afraid that there was going to be this hue and cry," he said. "In the end, it wasn't that big a deal."
Personally, I like using $1 coins, particularly as a foil to counterfeit bills--but carry any more than 8 or 9, and your pants start dragging. Not as heavy as the GBP, but definitely heavier than a quarter.
More than USD 1 billion? I'm too tired to do the math right now but that's a huge number of coins.
:lmfao: wow. i guess now i know what i'll be asking for next time i visit the bank
Why not just eliminate the dollar bill? That'll get them into circulation.
I'd use dollar coins; just don't see many/any in circulation. I wouldn't likely carry more than a half dozen, same as dollar bills in my wallet, so the weight shouldn't be a problem.
Quote from: The Brain on September 07, 2011, 06:56:08 AM
More than USD 1 billion? I'm too tired to do the math right now but that's a huge number of coins.
:lol:
Quote from: The Brain on September 07, 2011, 06:56:08 AM
More than USD 1 billion? I'm too tired to do the math right now but that's a huge number of coins.
I'll gladly take a hundred thousand coins off their hands; I'm sure I'll find a place to store them. ;)
Quote from: Neil on September 07, 2011, 07:36:37 AM
Why not just eliminate the dollar bill? That'll get them into circulation.
:x
I'd rather never use coins.
Quote from: garbon on September 07, 2011, 11:27:45 AM
Quote from: Neil on September 07, 2011, 07:36:37 AM
Why not just eliminate the dollar bill? That'll get them into circulation.
:x
I'd rather never use coins.
Of course. Why use cash at all?
The only place I ever got dollar coins was with the ticket machines of the Long Island railway. Dollar coins and 2 dollar bills sometimes have people hesitate for a second when you pay with them too.
I'd use them if I ever got them in change, but I don't.
All I get from banks is $20 bills from the ATM.
Quote from: Neil on September 07, 2011, 11:46:28 AM
Of course. Why use cash at all?
Some places will only accept cash. -_-
The fuckers at Pizza Hut wouldn't take my hundred dollar bill. :mad:
The Mint will mail you the coins for free, if you order them by credit card.
Many people take advantage of this program and charge the coins to their credit card, depositing the coins in a local bank to repay the card debt, and collect the rewards program benefits for "free." Costs taxpayers a bundle, but is perfectly legal.
Quote from: grumbler on September 07, 2011, 02:36:12 PM
The Mint will mail you the coins for free, if you order them by credit card.
Many people take advantage of this program and charge the coins to their credit card, depositing the coins in a local bank to repay the card debt, and collect the rewards program benefits for "free." Costs taxpayers a bundle, but is perfectly legal.
I take it you missed the bolded bit in the article. ;)
Another interesting fact about the dollar coins is that the Fed is storing more than a billion of them because of Congressional mandate.
This is so stupid.
If you want people to start using dollar coins, then stop printing dollar bills.
Unless you do that, they won't ever start using the coins.
It is that simple.
Quote from: DGuller on September 07, 2011, 02:47:29 PM
Another interesting fact about the dollar coins is that the Fed is storing more than a billion of them because of Congressional mandate.
They make 4 new ones every year, something to do with Presidents I think.
Quote from: Berkut on September 07, 2011, 02:48:31 PM
This is so stupid.
If you want people to start using dollar coins, then stop printing dollar bills.
Unless you do that, they won't ever start using the coins.
It is that simple.
It's what they did here. Seems to have worked okay - most people are pretty happy with 1 and $2 coins, rather than bills.
And they should really get rid of a penny while they're at it.
Quote from: Berkut on September 07, 2011, 02:48:31 PM
This is so stupid.
If you want people to start using dollar coins, then stop printing dollar bills.
Unless you do that, they won't ever start using the coins.
It is that simple.
It's interesting just how conservative Americans are over certain things. Alternatively one might see it as if it ain't broken don't fix it.
From a government finance standpoint it doesn't make much sense to continue using expensive low value banknotes.
Though I do admit the equivalent UK pound coin is rather on the heavy side to have too many on ones person.
Quote from: DGuller on September 07, 2011, 02:54:07 PM
And they should really get rid of a penny while they're at it.
better yet, make the penny the new dollar coin. instant stimulus package :P
Quote from: DGuller on September 07, 2011, 02:54:07 PM
And they should really get rid of a penny while they're at it.
I can imagine in a few more years the US penny is again worth more in its base metal scrap value than its face value.
Apart from that, the basic problem is that it's more of garbage now than an actual legal tender, and that imposes costs of their own. Who actually carries pennies with them anymore? Everyone I know filters them out and puts them in a bottle or something of that nature.
Quote from: DGuller on September 07, 2011, 03:20:59 PM
Apart from that, the basic problem is that it's more of garbage now than an actual legal tender, and that imposes costs of their own. Who actually carries pennies with them anymore? Everyone I know filters them out and puts them in a bottle or something of that nature.
I'm guessing you've now reached the point in the US where you can't actually buy anything for just one cent ?
IIRC that was the major reason for withdrawing our 1/2 penny a good few years ago, once you could buy haf'penny sweets so the coin had a use until those went up to 1p each. Incidentally I'd guess those sort of traditional sweets/'penny chews' probably cost 2 or 4 pence each. :hmm:
Quote from: mongers on September 07, 2011, 03:27:58 PM
IIRC that was the major reason for withdrawing our 1/2 penny a good few years ago, once you could buy haf'penny sweets so the coin had a use until those went up to 1p each. Incidentally I'd guess those sort of traditional sweets/'penny chews' probably cost 2 or 4 pence each. :hmm:
Yeah, those types of candies are usually a nickel these days.
In Sweden the lowest coin is 1 SEK. Which is roughly 15 cents. We got rid of the 10 öre coin (a bit more than 1 cent) 20 years ago. The 50 öre last year IIRC.
Quote from: mongers on September 07, 2011, 03:27:58 PM
Quote from: DGuller on September 07, 2011, 03:20:59 PM
Apart from that, the basic problem is that it's more of garbage now than an actual legal tender, and that imposes costs of their own. Who actually carries pennies with them anymore? Everyone I know filters them out and puts them in a bottle or something of that nature.
I'm guessing you've now reached the point in the US where you can't actually buy anything for just one cent ?
IIRC that was the major reason for withdrawing our 1/2 penny a good few years ago, once you could buy haf'penny sweets so the coin had a use until those went up to 1p each. Incidentally I'd guess those sort of traditional sweets/'penny chews' probably cost 2 or 4 pence each. :hmm:
Pennies are still needed to make change in commerce, stores, etc.
So...it seems to me that people are willing to use dollar coins but the system in place for distributing them is utterly retarded and requires people to go out of their way and order them over the internet.
Is there not a way to get them into regular circulation? Making post offices give change in dollar coins or the like?
The idea of a dollar note always struck me as a bit mad. Hell, the Swedish 20 sek note was daft enough. Even the UK 5 pound isn`t worth what it used to be even 10 years ago and we should be looking towards (properly) turning it into a coin.
QuotePennies are still needed to make change in commerce, stores, etc.
In several European countries IIRC they don`t have euro coins up to....5 cents? or was it 10 even? They just round to the nearest one they do have coins for.
Hell, even in Sweden I remember seeing things that cost 49.90 even though the only ore coin was the 50.
Quote from: KRonn on September 07, 2011, 06:43:43 PM
Quote from: mongers on September 07, 2011, 03:27:58 PM
Quote from: DGuller on September 07, 2011, 03:20:59 PM
Apart from that, the basic problem is that it's more of garbage now than an actual legal tender, and that imposes costs of their own. Who actually carries pennies with them anymore? Everyone I know filters them out and puts them in a bottle or something of that nature.
I'm guessing you've now reached the point in the US where you can't actually buy anything for just one cent ?
IIRC that was the major reason for withdrawing our 1/2 penny a good few years ago, once you could buy haf'penny sweets so the coin had a use until those went up to 1p each. Incidentally I'd guess those sort of traditional sweets/'penny chews' probably cost 2 or 4 pence each. :hmm:
Pennies are still needed to make change in commerce, stores, etc.
Why? We don't use mils anymore.
Quote from: Tyr on September 07, 2011, 07:12:40 PM
So...it seems to me that people are willing to use dollar coins but the system in place for distributing them is utterly retarded and requires people to go out of their way and order them over the internet.
Is there not a way to get them into regular circulation? Making post offices give change in dollar coins or the like?
The idea of a dollar note always struck me as a bit mad. Hell, the Swedish 20 sek note was daft enough. Even the UK 5 pound isn`t worth what it used to be even 10 years ago and we should be looking towards (properly) turning it into a coin. :nelson:
QuotePennies are still needed to make change in commerce, stores, etc.
In several European countries IIRC they don`t have euro coins up to....5 cents? or was it 10 even? They just round to the nearest one they do have coins for.
Hell, even in Sweden I remember seeing things that cost 49.90 even though the only ore coin was the 50.
There's already 5 pound coins but there still only commemorative issues, so it would be daft to use them for their denomination.
Strippers get pissed when you stuff dollar coins in their g-strings. Especially when you put them in the freezer first...
:ccr
Quote from: C.C.R. on September 07, 2011, 08:58:03 PM
Strippers get pissed when you stuff dollar coins in their g-strings. Especially when you put them in the freezer first...
:ccr
:D
Quote from: Razgovory on September 07, 2011, 07:21:31 PM
Quote from: KRonn on September 07, 2011, 06:43:43 PM
Quote from: mongers on September 07, 2011, 03:27:58 PM
Quote from: DGuller on September 07, 2011, 03:20:59 PM
Apart from that, the basic problem is that it's more of garbage now than an actual legal tender, and that imposes costs of their own. Who actually carries pennies with them anymore? Everyone I know filters them out and puts them in a bottle or something of that nature.
I'm guessing you've now reached the point in the US where you can't actually buy anything for just one cent ?
IIRC that was the major reason for withdrawing our 1/2 penny a good few years ago, once you could buy haf'penny sweets so the coin had a use until those went up to 1p each. Incidentally I'd guess those sort of traditional sweets/'penny chews' probably cost 2 or 4 pence each. :hmm:
Pennies are still needed to make change in commerce, stores, etc.
Why? We don't use mils anymore.
What were mils ?