House Subcommittee Hearing On US Mint Bullion Coin Programs

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House Subcommittee Hearing on US Mint Bullion Coin Programs
Posted: 07 Apr 2011 02:32 PM PDT

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 I believe an archived version of the webcast will be available on the same page at a later time.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 menmentioning 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.