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Thursday, April 7, 2011

House Subcommittee Hearing on US Mint Bullion Coin Programs


Today the House Financial Services Subcommittee on Domestic Monetary Policy and Technology held a hearing entitled, "Bullion Coin Programs of the United States Mint: Can They Be Improved?"

The Chairman was Rep. Ron Paul and witnesses included Beth Deisher, Editor of CoinWorld; Terence Hanlon, President of Dillon Gage Metals Division; Ross Hansen, Founder of Northwest Territorial Mint; and Raymond Nessim, CEO of Manfra, Tordella & Brookes, Inc.

The submitted written testimony of each of the witnesses can be found here. I believe an archived version of the webcast will be available on the same page at a later time.

In this post, I will list some interesting or relevant statements or points from the testimony and the question and answers portion. Some of this is done from memory, so these aren't exact quotes.

- Rep. Paul began the hearing by stating that the shortage of bullion coins is a reflection of what we're doing to our currency. He mentioned that the value of the dollar has fallen from the original 1/20 ounce of gold to 1/1,450 ounce of gold. More people are growing concerned and turning to bullion.

- Rep. Paul asked the witnesses to explain how the US Mint's distribution network for bullion coins works. He specifically asked why he can't go to the US Mint and buy bullion directly. Terence Hanlon responded and explained the distribution network and how the AP's also create a liquid two way market for the program. He discussed the challenges the US Mint would face if they wanted to sell directly to the public. Rep. Paul then asked, doesn't the US Mint sell proof sets directly?

- Beth Deisher discussed the "contrived rarities" created by the United States Mint either through the original distribution, ordering limits, or production limits. Examples cited included the 1995-W Proof Silver Eagle, 2007 First Spouse Gold Coins, and America the Beautiful Silver Bullion Coins. She recommended that the US Mint avoid purposely creating rarities, mint collector versions of bullion coins to demand for a certain number of days, and increase bandwidth for their website. During questioning she also stated that the artificial "one per household" ordering limits imposed by the US Mint don't work since people buy coins in the names of their dogs, cats, and cousins.

-Beth Deisher also discusssed questionable marketing practices in the secondary market for certain US Mint products. Without mentining any grading company by name, she cited the "First Strike" designation. She also mentioned that marketers may seek to identify Silver Eagles struck at the San Francisco Mint (production is expected to begin there in May) and claim that they are different or special. She recommended that the US Mint be more proactive and make consumers more aware of questionable marketing practices. She also recommended including the mint mark on bullion coins.

- Terence Hanlon mentioned that this year is the 25th anniversary of the American Eagle Bullion Coins. At one point, he recommended the creation of a special set including the Gold Eagle, Silver Eagle, Platinum Eagle, and Palladium Eagle. The latter coin he referred to as being introduced this year. (Statements previously provided by the Mint indicated that the Palladium Eagle would be released in 2012 after the completion of the required marketing study.)

- Terence Hanlon also took the opportunity to to recommend that Congress lower the tax rate on precious metals from the current maximum rate of 28% to 15%, to match the taxation of securities and mutual funds. Within the questioning session, he estimated that a more preferential tax treatment could increase bullion sales by 30 to 50%, and increase interest in the precious metals ETFs. The questioner then referred back to the bullion shortage and asked why would we want to make it worse?

- At one point, Terence Hanlon estimated that the US Mint loses about a third of potential bullion sales because they can't meet demand.

- Ross Hansen mentioned that he has offered to supply the US Mint with as many silver blanks as they want, but the former Director (Edmund Moy) declined his offer without explanation. He suggested that the US Mint work to develop a domestic pool of vendors for their raw materials and create an industry advisory group to help with coin production issues.

- Raymond Nessim discussed the distribution requirements imposed by the US Mint for the 2010 America the Beautiful Silver Bullion Coins. He expressed his opinion that the US Mint made the right decision and their terms and conditions were effective in counteracting the delayed production and limited mintage.

- No representatives of the United States Mint were present at the hearing.

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43 Comments:

At April 7, 2011 at 9:23 AM , Anonymous Anonymous said...

I am surprised at the Mint turning down the offer of blanks. I am not surprised that "First Strike" was identified as a sham. Collectors have known of this for a long time - hence the advice "buy the coin not the slab."

 
At April 7, 2011 at 9:24 AM , Anonymous Anonymous said...

Won't the Silver Eagles produced at San Francisco have "San Francisco" straps on the green monster boxes? The ones that come from West Point say "West Point" on the straps. In that way, as long as you have an unopened green monster box with "San Francisco" straps on it, you know that's where they were struck. Once the box is opened however, they would be indistinguishable from the West Point coins.

 
At April 7, 2011 at 9:33 AM , Anonymous Anonymous said...

Why would Ms Deisher of coin world not want the mint to make 'contrived rarities'. That what makes it all interesting. (Many times the finalal mintage numbers are related to alot of other factors as well). I would Not want to see every coin produced to it max mintage. That would kinda make 'em Common,and I would just lose interest.
I kinda like how the Mint keeps us guessing. It adds intrigue and suspense to the hobby.
Keeps it interesting.

 
At April 7, 2011 at 9:37 AM , Anonymous Anonymous said...

Fantastic read! Thanks for posting.

Just checked Fedex, my coins from Jack Hunt were delivered!

 
At April 7, 2011 at 9:37 AM , Blogger Scott said...

Interestingly, it is a hearing about the US Mint without the US Mint being present. Also, there is really no "expert" on bullion mining or planchette production. In short, it's a show of Ron Paul's ignorance over the subject he is supposed to be responsible for oversight.

 
At April 7, 2011 at 9:46 AM , Blogger Mint News Blog said...

"Won't the Silver Eagles produced at San Francisco have "San Francisco" straps on the green monster boxes?"

Yes, I think so. The AP's also may be able to pick up the coins directly at the facility.

What I think she is worried about are the individual coins placed into third party grading holders that say "San Francisco Mint" and then selling at a premium.

 
At April 7, 2011 at 10:01 AM , Anonymous Anonymous said...

I'm not very trusting when it comes to stuff like that. It would be too easy to fake. Even if it wasn't done intentionally, the chances of getting the coins mixed up and putting a West Point coin in a holder that claims the coin is from San Francisco would be too probable.

Besides, aside from the novelty factor the San Francisco coins shouldn't be "worth" any more than a West Point Eagle.

I do like the idea of putting the Mint mark on the bullion coins. That would serve to increase bullion sales, if collectors had multiple Mints to pursue.

I wonder if the AP's will be willing to let buyers of green monster boxes pick which Mint is on the straps? I'd like to buy a full box of San Francisco Eagles and leave it sealed, so I would know they really were struck there. Just a novelty I know, but it's my choice how I build my physical silver stockpile! :)

 
At April 7, 2011 at 10:32 AM , Anonymous Anonymous said...

Ron Paul is 100% correct with respect to his commentary on the devaluation of the dollar.

 
At April 7, 2011 at 11:58 AM , Anonymous Anonymous said...

@ Scott
You're off your rockers. Ron Paul is an expert on sound money and free markets. He's now chairs the committee to investigate the Federal Reserve Bank. As a coin collector, I hate the APs. I'd rather buy my bullion strait from the US Mint. We don't need the APs to make markets because we have a marketplace like ebay. All APs do is create profits for themselves. It like the FED, we don't want or need them.

 
At April 7, 2011 at 11:59 AM , Anonymous Anonymous said...

I also like the idea of putting the mint mark on coins. Even if a coin is produced at only one mint facility I still think it should have the mark. It doesn't cost the US Mint anything extra to put the "W" on there.

 
At April 7, 2011 at 12:13 PM , Anonymous Jeff72 said...

I totally agree with the person who referenced the comment by Ms. Deisher of coin world.

If the Mint stops making rarities -I lose interest and stop buying.

Mint -don't listen to those who profit from having "lots of inventory" to sell.....there's no salient value in collecting common high mintage coins.

So I miss out on a few releases every now and then ...that just makes those releases more collectible and EXCITING for me to obtain.

 
At April 7, 2011 at 12:38 PM , Anonymous Anonymous said...

I just received my ATB 5 ouncers in the mail, and my dog is expecting his any day now. Woo hoo....

;-)

 
At April 7, 2011 at 12:55 PM , Anonymous Anonymous said...

Hee hee! I loved that bit about people ordering in their dog's and cat's names!

At least when I order extras on 1 per household items, I use real family/friends that use their own credit cards and have the items shipped to their own physical addresses. I just have to write them all checks for reimbursement. It does cost me an extra $4.95 s/h charge for each extra person I "contract" for help, but for rare, valuable items I guess it's worth that small extra price.

 
At April 7, 2011 at 1:03 PM , Anonymous Anonymous said...

Where does one go to buy "previous" metals? If they lower the tax rate, I'll have to stock up. :)

"Terence Hanlon also took the opportunity to to recommend that Congress lower the tax rate on previous metals from the current maximum rate of 28% to 15%"

 
At April 7, 2011 at 1:15 PM , Anonymous Anonymous said...

Seems pretty disingenuous to hold a meeting on the Mint's bullion coin program without actually inviting the Mint!

 
At April 7, 2011 at 1:34 PM , Anonymous Anonymous said...

Maybe the Mint was invited, but for whatever reason chose not to attend.

 
At April 7, 2011 at 1:50 PM , Anonymous vaughnster said...

'In short, it's a show of Ron Paul's ignorance over the subject he is supposed to be responsible for oversight."

Hey Scott-- If Ron Paul is ignorant, who was it before him who was so smart and did such a great job of oversight, especially with no 2009 proof silver eagles minted???

 
At April 7, 2011 at 2:27 PM , Anonymous Anonymous said...

"Hey Scott-- If Ron Paul is ignorant, who was it before him who was so smart and did such a great job of oversight, especially with no 2009 proof silver eagles minted???"

Vaughnster - Don't let your common sense get in the way of politics...

 
At April 7, 2011 at 2:34 PM , Anonymous Anonymous said...

If Ron Paul is so clever, why would he say "Why doesn't the mint sell proof sets directly?" as he did at the hearings. Hello, sell proof sets directly? Yes, since 1936!!

 
At April 7, 2011 at 2:48 PM , Blogger Mint News Blog said...

He didn't say "why doesn't" he said "doesn't the mint sell..." like a leading question where the implied answer is yes.

 
At April 7, 2011 at 3:27 PM , Anonymous Anonymous said...

Snagged a Mary Todd Lincoln proof and UNC.
Nervous about the future of the program and price increase next week. Hope its a good investment.

 
At April 7, 2011 at 3:33 PM , Anonymous Anonymous said...

No need to defend Ron Paul, everyone here knows Scott is way off base.

 
At April 7, 2011 at 6:12 PM , Anonymous Anonymous said...

tHE mINT WAS AFRAID TO SHOW UP AND FACE THE MUSIC FOR ALL THEIR FLUBUPS.

 
At April 7, 2011 at 6:56 PM , Anonymous Anonymous said...

Gee I read where the targeted focus was about the Mint Bullion Coin programs, so I guess little or nothing was said about the Mint's pricing policy of constantly raising collector costs for non precious content offerings. Or the general reasons that have contributed to a yearly eroding customer base. The little guys and girls need some representation and a voice too! Not everyone is fortunate enough to be able to devote limited resources chasing after some of the narrowed down desirable products being minted these days.

 
At April 7, 2011 at 8:08 PM , Anonymous Anonymous said...

low quality leadership

 
At April 7, 2011 at 8:36 PM , Anonymous Anonymous said...

I think it is fantastic that Michael has actually covered a story like this! Where else could we read about this kind of news?? I think certain criticisms about public deception (and First Strike is not the worst, what about these "Tribute" medals that people are tricked into buying?) while may be valid, are not on-point testimony for hearings like this. That is more of a consumer protection issue.

Isn't a better question, esp. for Paul ("Rep. Small Government"), WHY is the US Mint involved in selling silver bullion at all? The Mint is constitutionally mandated to create coinage for commerce, but for the rest of this, Can't we get our silver bullion on the private market?

I happen to think Ron Paul is either a fool or a fraud, or some combination of both. I believe our government should have a strong role in creating things of beauty, and shaping our culture, and the Mint is one of many great outlets for that. But if one is SERIOUS about shrinking government, we should be buying silver rounds from private producers, and not being involved in the buying and selling silver and gold business.

I would like to hear how the small government conservatives could actually justify the present state of affairs, that is, running a side business in precious metals selling.

A prime example, if you will, is this palladium subsidy. The MT delegation pushes through this legislation to create a market for the palladium producers in Montana. In a real free market, the mining companies would have to spend the capital to create demand. But now, the government is going to step in, and being a guaranteed buyer of palladium, relying on its base of collectors to soak up the production. Who thinks they would have better luck selling palladium rounds than they will in selling palladium to the Mint to make into beautiful legal tender giant Mercury dimes? OF COURSE, it is a huge boon to the palladium producers. I think that this is a perfectly fine role for government, but it is not the kind of small government that Rs claim to want.

 
At April 7, 2011 at 8:55 PM , Anonymous Anonymous said...

Sorry to digress, but ALL of the first spouse coins have been winners. The Martha Washington is an example of pre-market winner, aftermarket loser now an aftermarket winner due to the rise in precious metal prices.
I too think the 2010 dated Mary Todd Lincoln is at minimum a "good investment" and if say only 5k Unc and less than 10k proof are sold before they are removed from the Mint website (they don't legally have to be there anymore) they could have dramatic increases.
Better chance you may have a true winner in a first spouse than any current Buffalo or gold Eagle.
Great article of the House Subcommittee Hearing. Thanks!

 
At April 8, 2011 at 4:24 AM , Anonymous Anonymous said...

Silver over $40/oz!

 
At April 8, 2011 at 5:57 AM , Anonymous Anonymous said...

WOW! Gold hit another all-time high today (April 8. 2011) $1472.+ We may see $1500. gold by the end of April. And Silver hit $40.+ this morning - prices are looking "up" for the 5 oz ATB...

TMM

 
At April 8, 2011 at 6:09 AM , Anonymous Anonymous said...

"Isn't a better question, esp. for Paul ("Rep. Small Government"), WHY is the US Mint involved in selling silver bullion at all? "

Here Here!!! That is one of the best statements on this whole mess I have yet to see! Sometimes the solution is too simple.

 
At April 8, 2011 at 6:23 AM , Anonymous Anonymous said...

Man, I wish the profit-taking would begin on the gold! We need a pullback to below $1,450 next Wed PM!

 
At April 8, 2011 at 7:52 AM , Anonymous Anonymous said...

Any word about the First Spouse program Michael?

I'm not in favor of 1/4 oz gold coins, too tiny like the MOH.

I'd like a 1oz silver First Spouse set. The lack of release of any 2011 coins is very strange. I couldn't resist buying the Lincoln set today before a price increase next week. I don't see much down side and I wonder what the mintages will show next week. I would be funny if the much anticipated Lincoln ended up with a low mintage after all.

-JBL

 
At April 8, 2011 at 8:21 AM , Anonymous Anonymous said...

Pop(NOT) Pop(NOT) Pop(NOT)!!!!!!!

 
At April 8, 2011 at 8:32 AM , Anonymous Anonymous said...

Is this the same Ron Paul who proposed a silver comm. for George Lincoln Rockwell and whose doctoral thesis advisor was Joseph Mengele?

 
At April 8, 2011 at 8:34 AM , Anonymous Anonymous said...

APMEX is still sitting on there ATB'S

 
At April 8, 2011 at 8:42 AM , Anonymous Anonymous said...

I'm wondering if APMEX even still HAS their ATB's.

In my best R. Lee Ermey voice:

"You ARE dumb, APMEX, but do you honestly expect me to believe that you don't understand the Mint's rules on how to sell these??!!"

 
At April 8, 2011 at 10:28 AM , Anonymous Anonymous said...

APMEX is cherry-picking

 
At April 9, 2011 at 8:35 AM , Anonymous Anonymous said...

They're also over-charging for 2011 Grizzlies, which ticks me off.

Nick

 
At April 9, 2011 at 8:36 AM , Anonymous Anonymous said...

Also, Michael, thanks for the coverage of the hearing, very interesting.
Nick

 
At April 11, 2011 at 6:18 AM , Anonymous Anonymous said...

Why wait for the Mint. Make your own coins, excuse me, medallions, or import them from China, Australia, South Africa, Brazil or anywhere else.

I am certain that there is a Chinese supplier who will gladly mint the coins, excuse me, medallions for you.

The US Mint is clearly trying to stop people from owning gold and silver so bypass it.

 
At April 11, 2011 at 8:02 AM , Anonymous Anonymous said...

Complete with Chinese imported PCGS holders!

 
At April 11, 2011 at 8:40 AM , Anonymous Anonymous said...

Congress could register a significant improvement in bullion management by selling all manner of Silver Eagles through the Mint online sales. Particularly the AE bullion coins - rather than just through select dealers. Why should small collectors be forced to pay excessive markups on bullion coins. Comeon congress do the right thing!!

 
At April 14, 2011 at 6:39 AM , Anonymous Anonymous said...

"He discussed the challenges the US Mint would face if they wanted to sell directly to the public."

What a joke, mints in other countries sell numismatic and bullion coins directly to the public so it can't be that difficult. The APs are just protecting their monopoly.

"Ross Hansen mentioned that he has offered to supply the US Mint with as many silver blanks as they want, but the former Director (Edmund Moy) declined his offer without explanation."

Why is he interested in supplying blanks to US Mint on which he would not make much money when he could make bullion coins instead and sell them directly at full retail prices, making up for the US Mint's shortages? Doesn't make any sense.

 

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