WASHINGTON, DC - Tom McMahon, senior vice-president and chief counsel for the National Automatic Merchandising Association, testified before the House Subcommittee on Domestic and International Monetary Policy early in May.
McMahon expressed concern over a policy proposed by the Federal Reserve that would tend to increase the number of worn and damaged banknotes in circulation. And he offered NAMA's endorsement of legislation directing the Mint to issue a series of dollar coins commemorating the nation's presidents.
That measure, H.R. 3916, has been introduced by Reps. Michael Castle (R-DE) and Carolyn B. Maloney (D-NY). If enacted, the first redesigned $1 coin would be issued in January 2006, bearing the image of George Washington.
"In our view, the Presidential $1 Coin Act is a thoughtful, legitimate attempt to generate interest in the dollar coin and, we hope, lead to wider use of the coin in commerce," the NAMA senior vice-president said. "We appreciate the sponsorship of this measure by Congressman Castle and Congresswoman Maloney."
Regarding the Federal Reserve proposal, McMahon noted that this is now under consideration, and has given rise to industry concern over the quality of the circulating U.S. currency. It was announced in the Federal Register in October 2003, and calls for levying a "recirculation fee" of $5 to $6 per 1,000-note bundle of banknotes returned by a bank, if that bundle contains fit currency in the same denomination as new notes ordered by the bank during the same week.
"In other words, under this policy, a bank will face a penalty if it returns fit currency to the Federal Reserve, but no penalty if it returns unfit currency to circulation," McMahon warned. "This will lead to a degrading of U.S. currency and more lost sales in our industry."
McMahon told the Subcommittee that NAMA has expressed serious concerns about the policy in written comments filed with the Federal Reserve Board in January, and requested that the Board determine the effect of the policy before adopting it. To date, he said, the association has received no response.
The NAMA senior vice-president also offered the Subcommittee several suggestions for increasing the circulation of the $1 coin. The first, he reiterated, is enactment of the Presidential Coin Act of 2004. Issue of a series of coins honoring U.S. presidents "would stand a good chance of stimulating interest in, and wider use of, the dollar coin," he noted.
"Second, get the Susan B. Anthony dollar coin out of circulation," McMahon urged. "Although vending machines 'like' Susan Bs as much as 'golden dollar' coins , they both work equally well in vending machines , people don't like Susan Bs. Some people don't know what they are," he explained. In fact, some retailers who have begun programs to offer dollar coins to their customers have discontinued those efforts as soon as they saw the Anthony dollars mixed in with the new Sacagawea coins.
"The Susan B is a major impediment to the success of the 'golden dollar' coin," the NAMA chief counsel reiterated. "Our industry might be able to help the Federal Reserve and the Mint get Susan Bs out of circulation.
"Third, make the 'golden dollar' coin available to the American people," McMahon recommended. "Start with federal buildings. Thousands of post offices, military installations, federal office buildings and the like do not offer the coin over the counter to the American people.'
And new "presidential" $1 coins would create a perfect opportunity to start this program, the NAMA senior vice-president added. "The United States government prints $1 bills and mints $1 coins; why are both government products not available to Americans on federal property?"
Fourth, he suggested, the government should engage the nation's retailers in the "presidential coin" program. "If Wendy's offers 'presidential coins' to its customers, you can bet McDonald's will follow suit," McMahon predicted. "If Target offers 'presidential coins' to their customers and those coins bring business in the door, you can bet Wal-Mart will follow.
"The American people will then have a convenient, useful, cost-efficient alternative to the dollar bill," McMahon summed up.