The Fed has piles and piles of dollar-coins that no one wants. How did they get there?
The government has been complaining it's broke, but NPR reports that more than a billion dollar-coins are sitting unused in government vaults. It cost more than $300 million of your tax dollars to produce these coins and now, apparently, no one wants them.
The surplus is the result of a program started in 2007 to put the images of every deceased U.S. president on the coins, in addition to the Sacagawea dollar-coins that the government still mints. The Fed is even running out of room to store them. Their solution: Build a new storage facility at the Federal Reserve Bank of Dallas, at a cost of approximately $650,000. The situation has gotten so bad that three Democratic Senators sent a letter on Monday to the Federal Reserve urging them to explain themselves.
But how did these coins pile up, and what does it mean that no one "wants" them? Normally when money is minted by the Treasury, it's sent to the Federal Reserve Banks. When your local bank branches need cash, they go to one of 12 regional Federal Reserve Banks and pick it up in big trucks. When people deposit money in the bank, that bank either keeps it for transactions or gives it back for the Fed to hold. Most middle-sized and large banks have these reserves with the Fed's regional warehouse; the local banks make a small amount of interest off this cash.
In this case, the Mint thought it would be a fabulous idea to market presidential coins directly to individuals, hoping that people would go to stores, use the dollar-coins to buy things, and put them in circulation. The Mint created an online order form, allowing people to pick their preferred design and method of shipment. The Mint's pitch:
We appreciate your support of the Presidential $1 Coin program. You play an important role in the coin's success, so please spend them. The more $1 coins that you can help circulate the better, because they last for decades, save our Nation money and are 100% recyclable.\n
Don't remember this ad campaign? Me neither, but apparently some people did order them—and put them right back into their bank accounts. The banks weren't interested in dollar-coins because merchants didn't request them, for a bunch of logical reasons: their cashier drawers don't accommodate them, people mix them up with quarters, vending machine companies and laundromats would have to remodel. So what did the banks do? Gave the currency back to the Federal Reserve—at least they could make a little interest that way.
This isn't the first time the Mint has tried to coax the dollar-coin into circulation. In 1979, it promoted the Susan B. Anthony dollar-coin (the slogan was "Carry thee for Susan B"). Needless to say, the coin failed to catch on. But if coins are more long-lasting, better for the environment, and (as we noted earlier this year) ultimately money-saving, why doesn't the Mint grow a pair and just abolish the dollar bill? If the Treasury bit the bullet and declared a permanent change rather than relying on coin collectors, we wouldn't have piles of useless money sitting in the Federal Reserve.