US Coins

Fed Presidential $1 inventory tops 1.2 billion

Surplus Presidential dollars are piling up in Federal Reserve Bank vaults, pushing the total to more than 1.25 billion coins. The report briefly addresses Native American dollars, although the numbers of those coins are not included with the total of Presidential dollars in Fed storage.

Images courtesy of U.S. Mint.

The Federal Reserve’s surplus inventory of Presidential dollars has ballooned to a whopping 1.252 billion coins in three and a half years, with collectors remaining the primary consumers for the coins.

Storage has become such a problem that a new storage facility is being built at a cost of approximately $650,000 at the Federal Reserve Bank of Dallas to handle the surplus inventory, according to the 2011 Annual Report to the Congress on the Presidential $1 Coin Program submitted in June by the Board of Governors of the Federal Reserve System.

“The Federal Reserve estimates that it could hold more than $2 billion in $1 coins by the time the program is expected to end,” according to the report. “Because of vault storage constraints and insurance limitations at [contracted] 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.”

Eliminate requirement

The Federal Reserve supports a U.S. Mint legislative proposal to eliminate the provision under the Native American $1 Coin Act of 2008 that a minimum 20 percent of all dollar coins struck be Native American dollars.

The proposal is contained in Section 119 of the Administrative Provisions for the Department of the Treasury in the President’s Budget for Fiscal Year 2012.

The Fed report indicates a recent survey found that 60 percent of all Native American coins issued have been redeposited with the Federal Reserve Banks by depository institutions. Unlike the Presidential dollars, the Native American dollars are not distributed into circulation through the Federal Reserve, but directly from the Mint to the public and banks through its Direct Ship program.

The Fed’s 2011 report to Congress indicates it is anticipated that the Federal Reserve Banks will incur shipping costs of more than $3 million to transport excess Presidential dollars from their respective locations to the new storage facility.

The new facility is expected to be able to handle storage of forecasted inventory growth through the end of the Presidential $1 Coin Program, according to the report.

The Presidential dollar coin program does not have a specific termination date.

According to the Presidential $1 Coin Act of 2005 (Public Law 109-145), “No coin issued ... may bear the image of a living former or current President, or of any deceased former President during the 2-year period following the date of the death of that President. ...” The issuance of the Presidential coins is to end when each president has been so honored, subject to the restrictions against depicting a living former or current president, or one who has died recently.

Approximately 40 percent of all Presidential dollars issued into circulation have been redeposited with the Federal Reserve Banks by participating depository institutions, according to the Fed’s 2011 report to Congress.

Fed officials indicate that with demand dropping for the dollar coins, some of the Fed’s largest cash customers are evaluating whether to continue to provide the Presidential dollars to their customers. If the depository institutions decrease or eliminate their orders with the Fed altogether, corresponding Fed orders to the U.S. Mint would drop significantly, according to the report.

According to U.S. Mint production reports, the Mint has struck 2,227,570,000 Presidential dollars for circulation through the Ulysses S. Grant dollar coin. The Rutherford B. Hayes Presidential dollar was still in production when the Fed’s report to Congress was filed in June.

Additional dollar coins

Participating depository institutions may currently order Presidential dollars by specific coin from three weeks before until two weeks after each coin’s official release into circulation through the Federal Reserve. That ordering procedure went into effect with the Feb. 18, 2010, Millard Fillmore Presidential dollar coin release.

From the Feb. 15, 2007, release of the George Washington Presidential dollar through the Nov. 19, 2009, release of the Zachary Taylor Presidential dollar, the ordering period was two weeks before the circulation release date until four weeks after.

While the Presidential dollars have a specific ordering period, no similar program exists for ordering Native American dollars. The Federal Reserve Banks are not ordering any Native American dollars for circulation distribution.

The public and banks may order rolled Native American dollars and some Presidential dollars at face value in $250 boxes through the U.S. Mint’s Direct Ship Program.

According to the Fed’s 2011 report to Congress, the United States Mint has indicated that it distributed 121 million Native American dollars through its Direct Ship Program in 2009, another 47 million coins in 2010 and 16 million through June 1, 2011.

The United States Mint also indicated that it has placed into circulation 60 million Presidential dollars via direct shipments since the start of the Presidential $1 Coin Program through June 1, 2011.

These totals are not included in the Reserve Bank statistics reflected in the accompanying table.

Dropping demand

The Fed has been meeting annually since 2008 with coin users, including depository institutions, community bankers and armored carrier representatives to gather feedback about demand and potential obstacles to the circulation of dollar coins.

Armored carriers are contracted by the Fed as coin terminals to store and distribute the coins.

From the most recent meetings, according to the 2011 Fed report to Congress, “Participants again indicated that transactional demand for $1 coins has not increased since the start of the program and that overall demand continues to come primarily from collectors. Most meeting participants did not believe that demand would increase significantly for future coin releases, with the possible exception of the coins commemorating the most popular former Presidents.”

According to the Fed report, “Some depository institutions stated that because of operational challenges associated with distributing the $1 coin to all of its branches and decreasing demand, as well as increased levels of $1 coin inventories at the branch level, they may not continue ordering $1 coin for all branches or may stop participating in the program altogether.”

Some of these depository institutions provide coin and paper money services to many small depository institutions that do not obtain cash services directly from the Federal Reserve, according to the report.

Depository institution demand has continued to decline, albeit at a slower pace than earlier in the program.

The 1.252 billion coins in Fed inventory is 1.1 billion more than the Fed held at the beginning of the Presidential dollar coin program in 2007, according to the Fed report. ¦

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