Statement by Theodore E. Allison, Assistant to the Board for Federal Reserve System Affairs, Board of Governors of the Federal Reserve System, before the Task Force on Economic Policy, Projections, and Revenues of the Committee on the Budget, U.S. House of Representatives, May 28, 1992

Statement by Theodore E. Allison, Assistant to the Board for Federal Reserve System Affairs, Board of Governors of the Federal Reserve System, before the Task Force on Economic Policy, Projections, and Revenues of the Committee on the Budget, U.S. House of Representatives, May 28, 1992

I am pleased to have this opportunity to present estimates of the impact on the Federal Reserve System of substituting a one-dollar coin for the one-dollar bank note now in circulation, as would be required by H.R. 1245, the United States One Dollar Coin Act of 1991. In brief, a dollar coin could produce sizable cost savings for the federal government as a whole, for three reasons: First, production costs for dollar coins, over time, would be lower than for dollar notes. Second, Federal Reserve processing costs for incoming coin deposits would be lower than for incoming note deposits. And, third, the Treasury's interest saving as a result of one-dollar coin seigniorage would be greater than the Federal Reserve's interest earnings derived from one-dollar notes (this is true because the number of dollar coins in circulation is likely to exceed significantly the number of dollar notes). These savings would aggregate to about $400 million a year on average, in present value terms, over the next thirty years.

The potential savings can be achieved, however, only if the one-dollar note is withdrawn from circulation. Moreover, the budgetary savings would be even larger--more than $500 million a year if the two-dollar note is not made available.

Before turning to the impact of a dollar coin on the Federal Reserve's financial position and to the specific questions raised in your invitation for this testimony, I would like to …

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Publication information: Article title: Statement by Theodore E. Allison, Assistant to the Board for Federal Reserve System Affairs, Board of Governors of the Federal Reserve System, before the Task Force on Economic Policy, Projections, and Revenues of the Committee on the Budget, U.S. House of Representatives, May 28, 1992. Contributors: Not available. Journal title: Federal Reserve Bulletin. Volume: 78. Issue: 7 Publication date: July 1992. Page number: 529+. © 1999 Board of Governors of the Federal Reserve System. COPYRIGHT 1992 Gale Group.

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