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Image courtesy of National Museum of the American Indian.
MODEL OF THE National Museum of the American Indian is shown in a watercolor rendering by Elizabeth Day. Money from the sale of the Buffalo dollars, top, goes to the museum.
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To capitalize further on surcharges from the sale of American Buffalo silver dollars, the Smithsonian Institution has petitioned Treasury Secretary Paul O'Neill under a little-known legislative provision seeking the striking of 500,000 additional commemoratives to meet perceived demand.
If O'Neill acquiesces to the request, the increased production would double the overall mintage of the program, which sold out its initial legislated complement of 500,000 Proof and Uncirculated coins in a record two weeks. The move is the first sought under authority that went into effect Jan. 1, 1999.
Coin World has learned Smithsonian Institution officials were unaware of the provision permitting them to seek higher mintages until Mint representatives informed them. Among the reasons cited for seeking an increase in the production is the number of letters the Smithsonian has received from patrons who were shut out of the program and unable to get their orders processed before the maximum authorized mintage was exhausted.
Although Sen. Ben Nighthorse Campbell, R-Colo., embraces the thought of the Mint being able to produce and sell more coins to help benefit the Smithsonian's National Museum of the American Indian, Campbell is suggesting to limit the increase to 250,000, but marking the coins with the numeral 2 or other designation to indicate it was the result of a second striking.
Campbell sponsored the enabling commemorative coin legislation authorizing the production of silver dollars resurrecting sculptor James Earle Fraser's designs from the Indian Head 5-cent coin (1913-1938). Surcharges added to the price of each coin will go to the National Museum of the American Indian, for which a new facility is being constructed in Washington, D.C.
The Citizens Commemorative Coin Advisory Committee is opposed to the museum's proposal, according to CCCAC Chairman Elsie S. Howard. The reasons for the CCCAC's opposing an increase in mintages will be outlined in a letter to be sent directly to O'Neill, she said.
Should O'Neill opt for an increase in American Buffalo dollar production, there are still numerous questions that need to be answered:
Does the Mint have sufficient silver reserves for such an unexpected increase, since it's already wrestling with its stockpile silver nearing depletion and having to buy on the open market?
What kinds of production delays can be expected, since more Proof and Uncirculated planchets would have to be fabricated by an outside contractor?
Are there sufficient dies on hand or would more have to be made to satisfy the production increases?
Will additional production interrupt production schedules at the Denver and Philadelphia Mints, affecting other coinage programs?
If it would be decided to add some sort of marking to the additional coins to differentiate them from the first coins, would it be added after a coin is struck or as part of the striking process, i.e., as part of new dies?
And from a marketing standpoint, would the coins be offered at the pre-issue prices or regular issue levels and by which ordering means, i.e., telephone, fax, mail, Internet?
Will ordering limits be imposed from the start?
Similar increases in production of commemorative half dollars, extension of individual commemorative coin programs, minor changes in designs to create new varieties and other abuses in the 1920s and 1930s eventually led to the downfall of the early commemorative programs by 1954.
The modern era of commemoratives started in 1982, many with huge maximum mintages. Except for a handful of issues, most never sold anywhere near their authorized limits and Congress subsequently took steps in the late 1990s under considerable pressure from collectors to limit mintages to reasonable levels.
Surcharges
The National Museum of the American Indian already stands to receive up to $5 million in surcharges from the sale of the first 500,000 coins. Each coin carried a $10 surcharge.
Secondary market prices for the American Buffalo silver dollars, which reached multiples of the issue price even before coins were received by collectors and dealers who ordered them, have begun to soften. More of the individual coins, two-coin sets and the 50,000 limited-edition Coinage and Currency sets have been shipped and received in the marketplace.
The Smithsonian still has a major hurdle to overcome in its quest for addition coins. The authority under which they are seeking a boost in mintage requires the National Museum of the American Indian to demonstrate to the Treasury secretary that the mintage levels were inadequate to meet public demand "based on independent, market-based research conducted by a designated recipient organization of a commemorative coin program. ..."
If the Smithsonian can demonstrate increased public demand from an independent market study it commissions, the Treasury secretary can waive the requirement limiting the total mintage to just 500,000 silver dollars.
Smithsonian spokesman Thomas Sweeney said museum officials had not commissioned any such study and as of Aug. 2, did not have plans to do so.
In a July 30 letter to O'Neill, the Smithsonian Institution's secretary, Lawrence M. Small, indicated there is still a strong demand for the coins, the proceeds from the sale of which "will be used to fund opening events and supplement endowment and educational outreach funds for the Museum [of the American Indian]."
"As you may know, the American Buffalo coins sold out in a record two-and-a-half weeks - the fastest sell-out in the history of modern commemorative coins," according to Small in his letter. "Indeed, the entire supply sold out before magazine advertisements and direct mail solicitations even appeared in print. Considerable demand still exists for the American Buffalo coins, as reflected by the hundreds of inquiries from members of the public that have been received by the National Museum of the American Indian.
"Moreover, we understand that there is already a brisk resale market for the American Buffalo coins on eBay and other auction sites, with coins selling for three to four times the original issue price. In addition, independent organizations - not authorized by the Mint - are already producing and marketing 'knock-off' copies of the coin with no benefit to the museum.
"To meet this incredible demand, we are requesting that you issue a waiver of the mintage levels with respect to the American Buffalo coins under authority conferred upon you by Title 31 of the United States Code, Section 5112(m)(2)(B) and authorize an additional minting of 500,000 American Buffalo commemorative silver dollar coins.
"The sale of these additional American Buffalo coins will serve two purposes by satisfying the American public's obvious fascination with these coins and simultaneously raising urgently need funds for the National Museum of the American Indian."
The legislative authority permitting the Treasury secretary discretion in raising mintages was included by then Sen. Alfonse D'Amato, R-N.Y., in a commemorative coinage reform amendment added to the 1997 Treasury, Postal Service, and General Government Appropriations Act as it neared final approval in the Senate.
While limiting the number of annual commemorative coin programs to two and restricting mintages to no more than 750,000 clad half dollars, 500,000 silver dollars and 100,000 $5 gold or $10 gold coins, the amendment also includes the exemption allowing the mintages to be raised if backed by a supportive independent market study commissioned by the organization benefiting from the commemorative coin surcharges.
The Smithsonian's Sweeney said the American Buffalo dollars were such an "extraordinarily fast seller" that many of the museum's 50,000 members were disappointed at not being able to purchase a specimen.
"The museum itself did not get its order processed in time so even we don't have one," Sweeney said. The additional coins are what the public is demanding, he said.
"We have the opportunity to make the request and were made aware of it by Mint officials," Sweeney said. "We're exercising our prerogative."
Mint Director Jay W. Johnson told Coin World that when he attended the dedication of the National Museum of the American Indian on June 26, one of the fundraisers with whom he was talking was lamenting the fact the Mint could not strike coins after hearing from Small's speech the program was a sell-out and that $5 million was coming to the museum from surcharges. Johnson said he informed the fundraiser that there was a way to increase the number of coins produced by demonstrating to the Treasury secretary that there was significant marketing potential. Johnson said the Smithsonian may have pursued the additional coin production based on his discussion.
Asked what he thinks about the possibility of the Mint being directed to produce additional coins, Johnson said: "Yes, it can be done. Is it likely? I don't think so." He said he anticipates there would be significant opposition to the measure, especially from the coin collecting community and those who already received coins. Those who were shut out would probably favor the proposal, he said.
"It's still up to the Treasury secretary," Johnson said. "They would have to show him everything and let him decide. I'm sure he'll take a lot more things into consideration than just a marketing study, such as prior history.
Campbell said he agrees with the assessment by Small and the National Museum of the American Indian's director, Rick West, that more coins be struck and sold which could generate additional funds for the museum.
However, in an Aug. 1 letter to O'Neill, he recommends the maximum additional production be limited to just 250,000 coins, and be marked to differentiate them from the first 500,000 coins.
"Although the law allows for additional coins to be minted after the initial striking, this has never been done before," Campbell said in a separate statement. "This is new territory. In order to avoid a surplus of Buffalo coins, I erred on the side of caution in my request for 250,000 additional Buffalo coins to be minted. I know that others have called for many more Buffalo coins to be minted than that.
"For the good of the National Museum of the American Indian, I hope that there will be cause for me to make a request for that magnitude in the future."
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