[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
DESIGN AND SECURITY OF CURRENCY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
DOMESTIC MONETARY POLICY, TECHNOLOGY,
AND ECONOMIC GROWTH
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JULY 24, 2001
__________
Printed for the use of the Committee on Financial Services
Serial No. 107-38
U.S. GOVERNMENT PRINTING OFFICE
74-334 WASHINGTON : 2001
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice BARNEY FRANK, Massachusetts
Chair PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska MAXINE WATERS, California
RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma KEN BENTSEN, Texas
ROBERT W. NEY, Ohio JAMES H. MALONEY, Connecticut
BOB BARR, Georgia DARLENE HOOLEY, Oregon
SUE W. KELLY, New York JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio MAX SANDLIN, Texas
CHRISTOPHER COX, California GREGORY W. MEEKS, New York
DAVE WELDON, Florida BARBARA LEE, California
JIM RYUN, Kansas FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina CHARLES A. GONZALEZ, Texas
DOUG OSE, California STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
GARY G. MILLER, California WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
Terry Haines, Chief Counsel and Staff Director
Subcommittee on Domestic Monetary Policy, Technology,
and Economic Growth
PETER T. KING, New York, Chairman
JAMES A. LEACH, Iowa, Vice Chairman CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California BARNEY FRANK, Massachusetts
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
RON PAUL, Texas BERNARD SANDERS, Vermont
STEPHEN C. LaTOURETTE, Ohio JAMES H. MALONEY, Connecticut
DOUG OSE, California DARLENE HOOLEY, Oregon
MARK GREEN, Wisconsin MAX SANDLIN, Texas
CHRISTOPHER SHAYS, Connecticut CHARLES A. GONZALEZ, Texas
JOHN B. SHADEGG, Arizona MICHAEL E. CAPUANO, Massachusetts
VITO FOSSELLA, New York RUBEN HINOJOSA, Texas
FELIX J. GRUCCI, Jr., New York WILLIAM LACY CLAY, Missouri
MELISSA A. HART, Pennsylvania MIKE ROSS, Arizona
SHELLEY MOORE CAPITO, West Virginia
C O N T E N T S
----------
Page
Hearing held on:
July 24, 2001................................................ 1
Appendix
July 24, 2001................................................ 27
WITNESSES
Tuesday, July 24, 2001
Allen, Hon. George, a U.S. Senator from the State of Virginia.... 4
Cantor, Hon. Eric, a Representative in Congress from the State of
Virginia....................................................... 3
Ferguson, Hon. Thomas A., Director, U.S. Bureau of Printing and
Engraving...................................................... 13
Snow, Daniel G., Special Agent in Charge, Counterfeit Division,
U.S. Secret Service, accompanied by Tony Chapa, Deputy Special
Agent in Charge, Counterfeit Division.......................... 15
Students of Liberty Middle School and Patrick Henry High School,
Ashland, VA.................................................... 6
APPENDIX
Prepared statements:
Oxley, Hon. Michael G........................................ 28
Cantor, Hon. Eric............................................ 30
Ferguson, Hon. Thomas A...................................... 38
Snow, Daniel G............................................... 43
Students joint statement..................................... 33
DESIGN AND SECURITY OF CURRENCY
----------
TUESDAY, JULY 24, 2001
U.S. House of Representatives,
Subcommittee on Domestic Monetary Policy,
Technology, and Economic Growth,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 2:10 p.m., in
room 2128, Rayburn House Office Building, Hon. Peter T. King,
[chairman of the subcommittee], presiding.
Present: Chairman King; Representatives Lucas, Ose, Green,
Hart, C. Maloney of New York, and J. Maloney of Connecticut.
Chairman King. The hearing will come to order. I want to
welcome Senator Allen, and of course our colleague, Congressman
Cantor. And I would just like to make a brief opening statement
before we begin. This deals with the second part of our hearing
today, but I doubt that many people consider the design of the
money in their pocket. The design of our currency serves a very
important purpose of security. All the precise lines and the
special currency paper that are instantly identifiable by touch
let us know that the bills in our pocket are genuine
obligations of our Government.
For more than 60 years, the changes to our bank notes were
so minor, the average person never would have noticed them. But
advances in photocopying technology and the computer scanners
and printers gave counterfeiters easy access to cheap, easy-to-
use tools.
While the fakes they produced weren't of great quality,
they sometimes were good enough to pass. About 5 years ago, the
Nation's security printer, the Treasury Department's Bureau of
Engraving and Printing, or BEP, gave us a new series of bank
notes which were harder to fake, and these help protect the
security of our Nation's currency.
But we are here today because the counterfeiters and their
equipment have gotten better, and it is time to consider a new
generation of bills, ones with more security features. And we
are going to receive testimony from Thomas Ferguson, the head
of the Bureau of Engraving and Printing; and Daniel G. Snow,
the top anti-counterfeiting agent of the United States Secret
Service, which, besides protecting the President and other top
officials, is the anti-counterfeiting police arm of the
Government.
Director Ferguson and Agent Snow are here to tell us the
state of our current anti-counterfeiting efforts and of our
plans to deter fakes through the new generation of currency
that we expect to be able to see within the next 2 years. They
will also tell us a little about what they expect will happen
with the introduction of the Euro currency next January. Euros
were introduced in electronic form 2\1/2\ years ago. They will
actually appear in physical form on January 1st. And the
Europeans plan to exchange all of their existing marks and
franks and lire and Irish pounds for Euros in a 2-month period.
I know that Secret Service is working directly and closely
with its counterparts in Europe and the rest of the world to
stem the tide of counterfeits. I am studying legislation that
could help that effort. Additionally, last week, I introduced a
bill at the request of the Administration that would allow the
BEP to print currency for other and smaller countries.
But now the real pleasant business of the hearing today.
And once we get counterfeiting out of the way, I just want to
say how privileged we are to have Congressman Cantor and
Senator Allen today, and some of their very special
constituents who have a novel idea for redesign of U.S. bank
notes. We have--I guess they are all sitting out here in the
audience--a group of pupils from Liberty Middle School and
Patrick Henry High School in Ashland, Virginia, to tell us
about a very patriotic idea they have to put the Constitution
on the backs of all our bank notes.
They have worked very hard on this effort and their
appearance today before this subcommittee is a tribute to their
dedication. Congressman Cantor, as one of his first pieces of
legislation, introduced it back in March of this year. I
certainly don't want to steal their thunder, so I will let the
students, and also Congressman Cantor and Senator Allen,
explain the proposal themselves in a few moments. And I also
want to thank Senator Allen for making a long trip over here to
the House of Representatives. I know he was here a few years
ago. It is great to have you back, and it is always great to
have Congressman Cantor.
Now I will yield to the gentlelady from New York, Mrs.
Maloney.
Mrs. Maloney. Thank you very much. It is my great honor to
welcome Congressman Cantor and Senator Allen from the great
State of Virginia, and I'd like to also welcome the young
patriotic team that came up with the idea for the Liberty Bill
Act of 2001. It is not surprising that you have come up with
this idea. After all, Virginia gave our country more Presidents
than any other State, and Virginia has often been called the
birthplace of democracy in the United States. So I welcome the
civic responsibility that the young authors have put forward
and the cooperation that their Congressman and Senator have
given them, and I look forward to hearing their testimony. And
all I can say is God Bless America.
But also, after this panel, we are going to be looking at
some very important things, maintaining integrity as it relates
to counterfeiting of the United States dollar, and that should
be a priority. Maybe the Constitution on the back would make it
harder for people to counterfeit. I guess we will find out in
the next panel. I am looking forward to hearing how the Secret
Service is working to maintain the integrity of the United
States dollar.
As the testimony will provide, we are seeing some increases
in counterfeiting with a surprising increase of 41 percent in
Colombian-manufactured counterfeiting. Also with the increased
availability of technology, the challenges which face law
enforcement will increase. That is why I feel this hearing is
so important, and we need to keep on top of these issues.
I am also pleased to announce the introduction of H.R. 2509
as an original co-sponsor with Mr. King. I believe the bill
provides an avenue for the Bureau of Engraving and Printing to
lend their expertise and knowledge to smaller countries. The
bill provides that the Bureau of Engraving and Printing be
allowed to print currency and security documents, passports,
stamps, for example, for other countries. As we value the
integrity of our currency, let us also assist others in
developing a high valued currency for their countries. I look
forward to the testimony, and, again, I welcome all the
participants.
Chairman King. Thank you, Mrs. Maloney.
I understand Congressman Lucas and Congressman Green do not
have opening statements.
Congressman Cantor, if you would lead off first.
STATEMENT OF HON. ERIC CANTOR, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF VIRGINIA
Mr. Cantor. Thank you, Mr. Chairman. I thank you, and I
thank Mrs. Maloney for holding this hearing today, and I am
very pleased to be here to discuss H.R. 1021, the Liberty Bill
Act of 2001. Many studies have demonstrated that most Americans
have little knowledge about the Constitution of the United
States. While we all enjoy the benefits of our democracy, fewer
and fewer citizens of this great country can cite the basic
rights of freedom guaranteed in this timeless document.
To remedy this unfortunate trend, a remarkable group of
students at Liberty Middle School and Patrick Henry High School
in Ashland, Virginia, have proposed a way to give Americans a
daily civics lesson.
On their behalf, I introduced the Liberty Bill Act of 2001.
This legislation is intended to celebrate our Constitution as a
living American symbol, and integrate it into our lives on a
daily basis by simply placing an abbreviated version of the
Constitution on the reverse side of all U.S. paper currency.
This bill would honor our system of law and Government and
promote the teaching of democratic principles around the world.
We as a Nation must be ever mindful of the ideals upon
which the United States was founded, and this legislation would
provide a prominent reminder of our Founding Fathers' vision
for our Nation.
My distinguished predecessor, Congressman Tom Bliley,
recognized the value of this concept and garnered over 100 co-
sponsors of a similar bill during the 106th Congress, many who
sit on this subcommittee. This bipartisan bill was introduced
in the 107th Congress with the co-sponsorship of the entire
Virginia Delegation, and support for the concept is growing
here in the House.
I also welcome the distinguished Senator, my friend from
Virginia, Senator George Allen, who is the author of similar
legislation in the Senate.
I would also like to extend a welcome to members of the
Hanover County school board, the Chairman, Sue Watson, as well
as the Chairman-elect, John Axselle, who are both here from
Hanover County, as well as Dr. Stewart Robinson, the
Superintendent of Schools in Hanover.
I would like to applaud Mr. Randy Wright, whose vision and
leadership on this issue brought this concept to reality. Randy
has been an energetic proponent of the Liberty Bill, and his
hard work on this legislation has enabled his students to
present their idea here in the House of Representatives, as
well as at the White House.
Randy has a true understanding of our democracy, and I
commend him for his love of teaching. He is a model citizen, an
enthusiastic teacher, and an excellent example for his
profession. Randy is also joined by his colleague, Mr. Tony
Santos, who is also a teacher at Liberty, as well as Patrick
Henry. You will see from the presentation that follows that his
students have excelled in their studies and promise a bright
future for our country. They have travelled here today from
Ashland, Virginia, to participate in our democratic process and
present their idea to the subcommittee.
I am honored to represent such fine young men and women,
and am impressed by their patriotism and inspired by their
potential.
As a representative from the seat once held by James
Madison, I am particularly cognizant of the contributions of
our ancestors at the birth of this Nation. George Washington,
Thomas Jefferson, James Madison, and George Mason, are not just
names in a history book to these students from Liberty Middle
School; they are shining examples of our democracy, and their
memory embodies our heritage in Virginia and the United States.
Men and women in this country and around the world are indebted
to these patriotic Americans. We cherish their memory, and
through this legislation, we work to preserve their
accomplishments.
Thank you very much, Mr. Chairman.
[The prepared statement of Hon. Eric Cantor can be found on
page 30 in the appendix.]
Chairman King. Thank you, Congressman Cantor. I want to
thank you for bringing these students and teachers and
community leaders and parents here. It really does speak
volumes as to the outstanding people in your district, and it
is really an honor for you to have brought them here.
And now, the distinguished Senator from the State of
Virginia, Senator George Allen.
STATEMENT OF HON. GEORGE ALLEN, A U.S. SENATOR FROM THE STATE
OF VIRGINIA
Senator Allen. Thank you, Mr. Chairman, and Ranking Member
Congresswoman Maloney. Thank you all, and all Members of the
subcommittee for holding this hearing. And I agree with every
single thing that my good friend, Congressman Eric Cantor, has
said. He is an articulate strong leader, shares the values that
I think all of us understand are at the foundation of our
country and carrying forward into the future. Eric and I both
agree this is a very creative idea and a great way, an
innovative way to help spread, not just amongst the few that
study our Constitution and our system of Government--about how
our Government is organized; the separate branches; the
amendments and so forth in the Constitution. Not just folks who
pay attention to it all the time, but indeed, I think people
would pick up one of these bills, and they would look on there
and they would say that all right, the First Amendment protects
freedom of religion, freedom of speech, freedom of the press,
the right to assemble peaceably and the right to petition
Government. People may not know all of that. I guarantee you
most people probably forget the idea that the 8th Amendment
prohibits cruel and unusual punishment, and you can imagine
wisecracks about people--you know, they are saying--they are
hanging around with you and driving down the road is an 8th
Amendment violation. But nevertheless, it would be a way they
would learn about it.
You also learn through it the history of this country,
where you see the beginning amendments and certainly how the
Executive, Judicial and Legislative Branches work, and the
organization of the States. They will see how the full
blossoming of the promise of this country was not all in the
Bill of Rights, which unfortunately, many people don't even
know the first ten amendments in the Bill of Rights and how
they protect us.
But then you see how, over the years, that the rights were
finally given to those who were African-Americans, how even
later, those rights to vote and participate in Government were
given to women. And how the Constitution, yes, it is our
foundational document, but most importantly, it is not just our
history and heritage. It is a living document that still
applies, and when one thinks of how much and how often money
goes through our hands, this is a great way, Mr. Chairman, and
Members of the subcommittee, to help encourage and help educate
our citizenry today. And to the extent that the American
currency is put into circulation in various other countries,
Panama, for example, uses United States currency as their
currency.
So it is something that I think is a great idea. It came
from children, young adults, let us say, middle school students
at Liberty Middle School, carried on by students at Patrick
Henry High School. Most appropriately, I think, and it is
something that is just a great way to teach Americans about
their Government, their protected rights, spread our ideals
around the world, educate Americans about the importance of
this historic document and remind us daily of the rights and
prerogatives and protections we have, but also the
responsibilities that we all have as American citizens.
So I hope that you, Mr. Chairman, and Members of the
subcommittee will be--I am sure you will be as impressed and
inspired by the wholesome presentation. I saw this presentation
last February. I carried around a sample of the smaller version
of the bill--it is now worn out--in my speech folder. They have
improved it for 2001.
This is a much better version than what you gave me. Of
course, I wasn't elected yet. Once you get elected, you get
better versions, I reckon. But nevertheless, I strongly support
this legislation. Let me remind every American about our
treasured heritage, the protections, the reason this Government
was created, to protect our rights, our God-given rights and
returning the Constitution to where it belongs, figuratively
and literally, in the hands of American people.
Thank you, Mr. Chairman, and Members of the subcommittee.
Chairman King. Thank you very much, Senator Allen.
Now Congressman Cantor, are you going to introduce the
students or bring them up?
Mr. Cantor. Mr. Chairman and Members, I present to you the
students of Liberty Middle School and Patrick Henry High School
of Ashland, Virginia, and their presentation of the Liberty
Dollar Bill Act.
STATEMENT OF STUDENTS FROM LIBERTY MIDDLE SCHOOL AND PATRICK
HENRY HIGH SCHOOL, ASHLAND, VA
[The following students, including those who spoke
individually, participated in the recitation: Emily Ambler,
Rina Amin, Whitney Arnold, Jill Beard, Kaitlin Bourne, Kay
Breeze, Stacie Brown, Michael Bumbry, Lindsey Buraker, Sarah
Carter, Morgan Cougot, Anne Duncan, Carmen Franck, Chesney
Grizzard, Amy Harris, Karena Jackson, Tina Jackson, Lindsey
Keiter, Caitlin Kelliher, Rachel Lynch, Jessica Nesselhauf,
Matthew Nutter, Kari Roth, Stephen Sepe, Kate Taylor, Audra
Vanderland.]
Ms. Franck. Chairman King, Ranking Member Mrs. Maloney and
Members of the Domestic Monetary Policy, Technology and
Economic Growth Subcommittee, thank you for conducting this
important hearing today. It is truly an honor to be able to
speak to you on behalf of the Liberty Bill Act, a bill before
Congress to place an abbreviated version of the Constitution on
the back of $1 bills or possibly other currency.
We represent Liberty Middle School and Patrick Henry High
School, where the Liberty Bill originated nearly 3\1/2\ years
ago, yet we merely speak for the many students of our school,
other middle schools, high schools and now colleges that have
joined our efforts. America's history and culture are full of
examples of respect for our Constitution and our love of
liberty. Lincoln's Gettysburg Address ends with:
Mr. Bumbry. ``That this Nation, under God, shall have a new
birth of freedom and that Government of the people, by the
people, and for the people shall not perish from the Earth.''
Ms. Franck. In the movie, ``Mr. Smith Goes to Washington,''
Jefferson Smith says:
Ms. Duncan. ``Liberty is too precious a thing to be buried
in books. People should hold it up in front of them every
single day of their lives and say, `I am free to think and to
speak.' My ancestors couldn't. I can. And my children will.
People ought to grow up remembering that.''
Ms. Keiter. Ancient Greece and Rome had forms of democracy,
but these nations eventually fell apart, replaced by tyrannies
and monarchies. For over a thousand years, governments ruled
over the peoples of all nations. But in 1215, a candle for
freedom and liberty was lit when King John was forced to sign
the Magna Carta, and people began to challenge the relationship
between citizens and their governments.
From 1690 to 1789, many more candles were lit for freedom
and liberty as the enlightenment philosophers questioned
further the relationship between people and government,
eventually believing government should answer to the people.
Ms. Brown. The enlightenment philosophers produced mostly
talk and writings. But in America, the talk became action. The
Declaration of Independence stated that ``all men are created
equal.'' That people have a right to ``life, liberty and the
pursuit of happiness'' and that the Government should come
``from the consent of the governed.'' We fought a war to win
these rights and freedoms.
In 1787, we illuminated the world when our Founding Fathers
wrote what would become the model for all modern democracies,
the Constitution. Our Constitution is a beacon of light for the
world. The oppressed still stand up on occasion for freedom and
liberty as they did in China's Tiananmen Square. Shouldn't all
people be able to hold up our U.S. currency as a symbol of
freedom of modern democracy, like a candle in darkness?
Like a candle in darkness, shouldn't the Constitution be on
the back of the U.S. currency?
Mr. Bumbry. George Washington, President of the
Constitutional Convention; James Madison, father of the
Constitution; Ben Franklin, and many other great Americans met
for four hot months in 1787 to ignite history's greatest light
of Government. They argued, fought, compromised and gave their
all to create a lasting democracy of liberty and freedom found
in the Preamble, the Articles, and the Amendments of our
Constitution.
They protected this philosophy and these ideals by
separating the power of Government into three branches--
Legislative, Executive and Judicial. And creating checks and
balances among these branches of Government. They further
divided the Government with divisions of power between the
Federal and State governments.
While our currency celebrates some of the men who first
wrote the Constitution, it doesn't celebrate their most noble
achievement, the living document which they put their lives
into. Shouldn't the greatest of American achievements be in the
hands of all Americans to be preserved, protected and defended?
Shouldn't the Constitution be on the back of the U.S. currency?
Ms. Cougot. A survey by the National Constitution Center, a
body created by Congress in 1988, found that 75 percent of
Americans say that ``The Constitution is important to them,
makes them proud, and is relevant to their lives.''
However, the survey found that 94 percent of Americans
don't even know all of the rights and freedoms found in the
First Amendment, and 62 percent of Americans cannot name our
three branches of Government.
Six-hundred-thousand legal immigrants come to America each
year. Many of these immigrants become American citizens through
the naturalization process and must learn more about the
Constitution than many natural-born citizens know.
If America's most patriotic symbol, the Constitution, were
on the back of U.S. currency, wouldn't we all know more about
our Government? And shouldn't we?
Ms. Buracker. What is the cost of telling the world about
representative democracy, about freedom, about equality?
The National Automatic Merchandising Association, which
opposes the Liberty Bill if it places the Constitution on the
back of the $1 bill, says that it will cost $420 million to
update the 4.2 million vending machines to recognize new bills.
Sounds expensive. It isn't. The cost is only $100 per
machine for one year. That is less than 30 cents per machine
per day. That's right. 30 cents a day for one year.
If it is too expensive to update vending machines, then the
Constitution could go on other currency. As more people are
exposed to these essential rights, more nations will turn to
our form of Government. Then they will also turn to our free
market economy, opening additional markets for American
businesses, which, of course, expands opportunities for trade
and for income.
Ms. Arnold. What is the cost of telling the world about
representative democracy, about freedom, about equality?
The United States Information Agency, which promotes our
national interests abroad through educational programs and
radio broadcasts, has a budget of over $500,000,000. Yes, half-
a-billion dollars to tell other people the ideals found in our
Constitution. The Congressional Budget Office estimates the
one-time cost of the design of the Liberty Bill to be $500,000.
Could the half-a-billion dollar yearly expense of the
Information Agency be reduced if we let our half-a-million
dollar Liberty Bills carry our message around the world? Could
we cut back on programs and taxes if we let our money do the
talking?
Ms. Amin. What is the cost of telling the world about
representative democracy, about freedom, about equality?
The Treasury Department's Financial Management Service
reports that there are $558 billion of United States currency
in circulation. Of that, $7.4 billion are circulated in $1
bills. Two-thirds of our currency is in circulation outside of
the United States. Imagine the impact of 7.4 billion $1 bills
exchanging hands over and over each week with the 6 billion
people in the world, each exchange being the opportunity to
discuss and ignite a new or renewed passion for democracy.
Once printed, the cost of exchanging the ideas of freedom,
billions and billions of times each day, forever, is free.
Ms. Jackson. What is the cost of telling the world about
representative democracy, about freedom, about equality?
The Center for Strategic and Budgeting Assessments
estimates that the cost of the war in Kosovo for America was
over $2 billion, and that the ongoing peacekeeping will cost as
much as $3 billion a year.
If the world were more aware and accepting of the religious
freedoms we celebrate in our First Amendment, would there have
ever been a war? If the government of Kosovo were challenged by
a free press, would that government have been able to oppress
its own people? If the Constitution were written on the back of
U.S. currency, wouldn't it become the world's second
constitution, and wouldn't there be less war?
Ms. Brown. You ask, what is the cost of telling the world
about representative democracy, about freedom, about equality?
The Revolutionary War, the War of 1812, the Civil War, the
Spanish-American War, World War I and World War II, the Korean
War, the Vietnam War, Desert Storm, the War in Kosovo. These
are the costs of the ideals we cherish found in our
Constitution.
Stand in front of any monument to our fallen heroes. Run
your fingers across the names inscribed on the Vietnam War
Memorial, or stand at the hallowed ground at Arlington National
Cemetery. These are the real costs of the philosophy we love
found in the Constitution.
So, can anyone put a cost on mankind's highest
achievements? Or are they priceless?
Ms. Duncan. Perhaps with the exception of religious
writings, the Constitution is the most important document ever
written. The first three words say it all. ``We the people.''
It belongs to us.
The Founding Fathers also wrote in the Preamble of this
great document the words, ``our posterity.'' They wrote the
Constitution for the generations that would follow them. It
belongs to us!
With Article VII of the Constitution, the Founding Fathers
required that ratification for our Government come from the
consent of the people. ``We the people'' gave our consent. It
belongs to us.
The Founding Fathers wrote in Article V the amendment
process, knowing that future generations, ``their posterity,''
could alter the Constitution to meet the changing needs of the
people. Twenty-seven times the Constitution has been changed by
amendment. It belongs to us.
We the people, posterity, ratification, amendments, the
Constitution of the United States of America. Shouldn't it be
in the hands of all Americans--on the back of U.S. currency?
Because it belongs to us.
Ms. Keiter. The Constitution is all the more beautiful, all
the more important, when you see the history and growth of our
great Nation as we matured and improved through the amendment
process. The Constitution, unfinished, still being written, a
living document for all Americans.
Mr. Nutter. When the Constitution was first written, it was
not written for African-Americans. African-Americans were not
given equal rights in the Constitution, but the 13th, 14th, and
15th Amendments changed our Nation. These amendments abolished
slavery, defined citizenship, and guaranteed the right to vote
regardless of race. The amendments on the back of our currency
show a part of African-American history woven into the fabric
of the Constitution, a living document for all Americans.
Ms. Franck. When the Constitution was written, women too,
were treated as inferior. They were not allowed full
participation in our Republic, but the 19th Amendment changed
that. It said that women could vote. The 19th Amendment on the
back of United States currency celebrates a part of women's
history and the beauty of a Nation of change found in our
Constitution, a living document for all Americans.
Ms. Jackson. Perhaps Barbara Jordan, while a Member of the
House of Representatives, said it best, `` `We the people. It
is a very eloquent beginning. But when that document was
completed on the 17th of September in 1787, I was not included
in that `We the people.' I felt somehow for many years that
George Washington and Alexander Hamilton just left me out by
mistake. But through the process of amendment, interpretation
and court decision, I have finally been included in `We the
people.' My faith in the Constitution is whole. It is complete.
It is total.''
Ms. Arnold. In 1998, the students of Liberty Middle School
and Patrick Henry High School in Ashland, Virginia, first
proposed that Congress adapt an abbreviated version of the
entire Constitution to be on the back of the United States
currency. Congressman Tom Bliley and Senator John Warner agreed
and introduced the Liberty Bill Act to the 105th and 106th
Congresses.
This year, Congressman Eric Cantor has presented, and
Senator George Allen will soon present, the ``Liberty Bill
Act'' to the 107th Congress. We just call it the ``Liberty
Bill.'' While the results of this change will be many, we would
like to tell you the six we think are most important.
Ms. Amin. First, the Liberty Bill ensures that Americans
have a deeper knowledge of the framework of their Government
and a better awareness of where their liberty and freedom
originate.
Second, the Liberty Bill teaches the progress of American
history as we amended the Constitution.
Ms. Duncan. Perhaps that is why the Fleet Reserve
Association said of the Liberty Bill, ``It should thrill all
Americans.''
Mr. Nutter. Third, the Liberty Bill spreads the philosophy
of representative democracy and the freedoms we cherish around
the world while saving millions and millions of dollars from
Federal programs.
Fourth, the Liberty Bill will expand the American economy
by encouraging nations to become republics and open their
markets to global trade and the global economy.
Ms. Buracker. Maybe that is why the Wall Street Journal,
who knows a little something about money, economics and
business, said that when Members of the 106th Congress met with
the students to listen to the Liberty Bill presentations, that
it might have been their most ``glorious moment.''
Ms. Franck. Cinco, los soldados alrededor del mundo podran
sostener la moneda corriente de los E.E.U.U. Y explicar porque
estan dispuestos a dar sus vidas para los mismos ideales que
llevan con ellos en sus bolsillos Y sus corazones.
And for those who don't speak Spanish: Fifth, American
soldiers around the world will be able to hold up United States
currency and explain why they are willing to give their lives
for the very ideals they carry with them in their pockets and
in their hearts.
When Lieutenant Shane Osborn and his crew gave the Chinese
some American money as souvenirs, imagine the power and message
of our currency if it had had our Constitution proudly and
boldly written on it.
Ms. Jackson. The Military Order of the Purple Heart simply
said, ``We cherish this idea.''
Ms. Cougot. Sixth, the Liberty Bill celebrates the
Constitution as an American symbol, and ensures that we
continue to preserve, as James Madison said, ``The hope of
liberty throughout the world.''
Ms. Buracker. Members of the Domestic Monetary Policy,
Technology and Economic Growth Subcommittee, that must be what
the Topeka Capital-Journal meant when it said, the Liberty Bill
``May be the greatest idea ever originated in any school
system.''
Ms. Keiter. Following the Constitutional Convention, Ben
Franklin was asked what kind of Government the Founding Fathers
had given to the United States. He replied, ``A Republic, if
you can keep it.'' The Constitution on the back of our currency
not only celebrates this great Republic, it deepens people's
knowledge and understanding of where our Republic comes from,
what it means, and it helps us ``keep it,'' as Dr. Franklin
challenged.
Mr. Nutter. And there are other reasons.
The Liberty Bill promotes human rights around the world as
people are exposed to Amendment 1, which protects freedom of
religion, freedom of speech, freedom of the press, the right to
assemble peaceably, and the right to petition Government.
Ms. Amin. The Liberty Bill promotes human rights around the
world as people are exposed to Amendments 4, 5, 6, 7, and 14
that ensure all people equal treatment and the same due process
under the law, including fair, speedy and public trials, trials
by jury, and the right to a lawyer.
Ms. Cougot. The Liberty Bill promotes human rights around
the world as people are exposed to Amendment 8 that forbids
cruel and unusual punishments.
Mr. Bumbry. The Liberty Bill promotes human rights around
the world as people are exposed to Amendment 13 that forbids
slavery.
Ms. Duncan. Thus, the Liberty Bill increases the acceptance
of diversity and equality around the world as the Liberty Bill
becomes the tangible symbol of human rights.
Ms. Brown. In the 106th Congress, over 100 Representatives
co-sponsored the Liberty Dollar Bill Act, including the
Majority leader, the Majority Whip, eight committee Chairmen
and three Ranking Members. It was one of only five bills in the
House co-sponsored by both the House Speaker and the House
Minority leader.
Now, in the 107th Congress, the Liberty Bill has been
introduced by Congressman Eric Cantor. It currently has more
than two dozen co-sponsors. Congressman Cantor, thank you for
sponsoring the Liberty Bill.
Ms. Keiter. Our deep American philosophy is sometimes taken
for granted in the everyday business of making laws. Yet, no
country can survive that forgets its philosophical bearings.
The Constitution on the back of the $10, the $5, the $2, or
hopefully the $1 bill, where it will be seen by the most
people, will remind all the world of the freedoms and liberties
of our American culture, based in the Constitution. The
ideological light that gives substance, value, and meaning to
the laws by which we live.
Ms. Arnold. Chairman King, Ranking Member Mrs. Maloney, and
Members of the Domestic Monetary Policy, Technology and
Economic Growth Subcommittee, we hope you will vote in favor of
the Liberty Bill Act and send it to the House. Of course, we
hope the vote is unanimous. Send a clear, strong message to the
world that we are proud of our Constitution, and what it stands
for.
The peace and good will of the Constitution will cast a far
greater light if all Americans and citizens of the world have
it in hand, so that it can be read and the philosophy of
American freedom and democracy shared.
We know there will be opposition. People will tell you
reasons why the Liberty Bill should not pass and cannot be
done, but we believe that those reasons are weak when compared
to the reasons for why it should pass.
Many times, we have been told to stop dreaming the
impossible dream. Standing here today is proof that Congress
does listen to the people. People not yet old enough to vote,
people who have little influence and little money. Yet, you
have listened. We carry the impossible dream, and we are proud
to stand here today with you, the most democratic body of
Government in the world, and say that, yes, in America, the
impossible dream is possible.
Thank you for listening to us today, and now we present to
you the Constitution.
[All students recite the Bill of Rights.]
All Students. Amendment 1: Freedom of religion, freedom of
speech, freedom of the press, right to assemble peaceably,
right to petition.
Amendment 2: The right to bear arms.
Amendment 3: Do not have to quarter soldiers during
peacetime.
Amendment 4: No unreasonable searches and seizures.
Amendment 5: Rights of the accused.
Amendment 6: Right to a fair trial.
Amendment 7: Right to a trial by jury in civil cases.
Amendment 8: No cruel and unusual punishments.
Amendment 9: Unenumerated rights go to the people.
Amendment 10: Reserves all powers not given to the national
Government to the States.
Written in 1787, ratified in 1788, the Constitution, a
living document, took effect in 1789.
Chairman King. Well, thank you very much. As the Chairman,
I will take the prerogative to ask everyone to give a round of
applause to these students. I also must say I feel a bit sorry
for our two witnesses who are going to follow them. It is a
very tough act to follow. But I can certainly now see why
Congressman Cantor is so proud of this middle school and high
school and teachers and community leaders, because this was a
tremendous presentation you made today, very moving, very
informative, and Congressman Cantor, do you have any questions
you think should be asked?
Mr. Cantor. Mr. Chairman, Mrs. Maloney, I just want to
thank you again. I think you have seen some of Virginia's best
and brightest engaging in what I see as the world's greatest
civics lesson with the proposal to spread that throughout our
land and to continue to help preserve the establishments of our
Founding Fathers.
So I have no further comments, Mr. Chairman. Just thank you
again, and thanks to the students for their terrific
performance.
Chairman King. Thank you, Congressman Cantor. Thank you,
Senator Allen, very much and thank all of you. It was very
educational experience for all of us, and again I want to
commend you for the great job you have done. Thank you very
much.
Also out of my own curiosity, will Randy Wright please
point himself out, Randy Wright? OK. This is the gentleman that
apparently deserves all the credit for this. So congratulations
to you for a job truly well done.
[The prepared statement of the students can be found on
page 33 in the appendix.]
Chairman King. And now I will ask the witnesses of our
second panel to come forward.
Good luck to you two guys.
Mr. Ferguson. Yeah. Thank you, Mr. Chairman.
Chairman King. I want to welcome Thomas Ferguson, who was
already introduced, and also Daniel Snow. I appreciate you
being here today. It is obviously a very important matter you
are going to be testifying on, a matter that is very critical
to our Nation's security, and I would ask if Mr. Ferguson would
begin with his statement, and I would ask Congressman Lucas
just to preside briefly while I leave the room.
STATEMENT OF HON. THOMAS A. FERGUSON, DIRECTOR, U.S. BUREAU OF
PRINTING AND ENGRAVING
Mr. Ferguson. Thank you, Mr. Chairman, Congresswoman
Maloney and Members of the subcommittee for inviting us here
today and for holding this hearing on this very important
topic.
I appreciate the opportunity to report on the initiatives
of the Bureau of Engraving and Printing, (BEP), particularly on
our anticounterfeiting program.
The Bureau is the security printer for the United States.
It produces a number of products that require special printing
processes and techniques to protect against counterfeiting and
fraudulent alteration. The Bureau uses capital systems, state-
of-the-art high-speed presses, electronic inspection systems
and other sophisticated equipment, in combination with the
exceptional technical competence of our workforce, who
efficiently produce billions of Federal Reserve notes, postage
stamps and other U.S. security printing.
The Bureau's operations are financed through an industrial
revolving fund. So we do not receive annual appropriations from
Congress. Instead, we are reimbursed directly by our customers
for the products that we produce. Our two largest clients are
the Federal Reserve System and the United States Postal
Service.
The Bureau works cooperatively with the Federal Reserve
System, the Department of the Treasury and the United States
Secret Service to improve the security of Federal Reserve
notes. Our goal is to incorporate cost-effective security
features to deter counterfeiting, as well as to help the public
easily authenticate their money as genuine U.S. currency. It is
vital that we keep pace with the evolving methods of
counterfeiting in order to maintain the integrity of, and the
public's confidence in, our monetary system.
In the mid-1990s, the Bureau introduced the first major
redesigned currency in over 65 years. The design changes were
needed to combat the emergence of a new breed of counterfeiters
who increasingly used computers, scanners, color copiers and
other emerging technologies to replicate notes.
All notes, with the exceptions of the $1 and $2 bills, were
redesigned and introduced into circulation by the year 2000.
The new design incorporated a number of security features,
including a large off-center portrait, an embedded security
thread that glowed under ultraviolet light, color shifting ink,
watermarks, expanded use of micro-printing and moire patterns
that do not copy accurately.
The redesigned currency has been effective in combatting
counterfeiting by making it more difficult to produce a high
quality counterfeit note. Today, most of the counterfeit notes
produced in the United States are made by using computer and
inkjet technology and are below average quality, which means
that they can be detected with proper visual scrutiny.
The percentage of counterfeit currency appearing worldwide
remains extremely small, approximately 5/100-of-1-percent of
the approximatly $550 billion of genuine currency in
circulation. In fiscal year 2000, the United States Secret
Service reported that approximately $40 million in counterfeit
U.S. currency was passed on the American public. The odds that
an American citizen will ever encounter a counterfeit note in
the course of his or her lifetime are extremely low, and it is
our goal to keep it that way.
While the redesigned currency has been successful in
staying one step ahead of the counterfeiters, rapid computer
and other technological advances will not afford us the luxury
of waiting another 65 years before augmenting the design of our
Nation's currency. In fact, we anticipate the need to change
the design of our currency every 7 to 10 years.
To prepare for the production of the next generation of
currency, the Bureau is testing an array of anti-counterfeiting
features that involve various types of papers, inks, embedded
security features, as well as offset and other printing
technologies. Additionally, we have initiated a Bureau-wide
training program to enhance the skills of our employees who
will be required to utilize these new techniques.
Recently, we began an expansion of the Bureau's Western
Currency Facility in Fort Worth, Texas, and the modernization
of the DC facility to accommodate the additional production
steps that are anticipated for future currency designs.
Treasury has submitted a legislative proposal to Congress
that would authorize the Bureau to produce security products on
behalf of foreign governments and States of the United States
on a reimbursable basis. Presently, the Bureau's authority to
print security document applies to Federal Government agencies
only.
Periodically, foreign governments request assistance from
the Bureau to design and/or produce currency, stamps or other
security printing products. The bill's limited authority could
allow the Bureau to develop new and innovative security
features outside the current traditions of U.S. currency
design, for possible application to future generations of U.S.
currency.
The authority in the legislation is limited to times when
the demand for U.S. currency, postage stamps or other products
is below the Bureau's production capacity. The measure
precludes the Bureau from producing products on behalf of a
foreign government, unless the Secretary of State determines
that such production is consistent with U.S. foreign policy.
And our use of this authority will be consistent with the
Administration's competitive sourcing initiative and its
commitment to public-private competition.
This concludes my opening remarks, Mr. Chairman, and I will
be happy to respond to questions by you or other Members of the
subcommittee. Thank you.
[The prepared statement of Hon. Thomas A. Ferguson can be
found on page 38 in the appendix.]
Chairman King. Thank you, Mr. Ferguson.
Mr. Snow.
STATEMENT OF DANIEL G. SNOW, SPECIAL AGENT IN CHARGE,
COUNTERFEIT DIVISION, U.S. SECRET SERVICE, ACCOMPANIED BY TONY
CHAPA, DEPUTY SPECIAL AGENT IN CHARGE OF THE COUNTERFEIT
DIVISION
Mr. Snow. Thank you. Mr. Chairman and Members of the
subcommittee, it is my pleasure to speak with you today and
discuss the counterfeiting of U.S. currency and its impact on
the integrity of the financial system of the United States.
With me today is Tony Chapa, Deputy Special Agent in Charge of
the Counterfeit Division, and until very recently, Resident
Agent in charge of our Bogota, Colombia office.
Although best known among the public as the protectors of
our Nation's leaders and visiting world dignitaries, the Secret
Service continues its historic mission to suppress counterfeit
activity, a mission that began in the 19th Century and
continues into the 21st Century. Technological improvements
with computers and reprographic equipment, coupled with the
increasing expansion of international, organized criminal
syndicates, has challenged the Secret Service to develop
innovative and investigative techniques.
Numerous worldwide and domestic counterfeit investigations
conducted by the Secret Service indicate that counterfeiting
U.S. currency has become a crime that has no territorial
borders. Counterfeiting is a crime that is as likely to be
committed by an organized criminal enterprise in Colombia,
South America, as it is to be committed by a local street-level
criminal in America. And counterfeiting is on the rise.
Counterfeit U.S. currency passed in the United States during
the first 8 months of this fiscal year increased 18 percent
over fiscal year 2000.
Today's counterfeiters are often criminals who, because of
the relative ease of the crime, choose counterfeiting over
other nonviolent crimes. But today's counterfeiters are also
represented by ruthless offenders, involved in violent crimes
such as narcotics trafficking and homicide.
Staying ahead of the technologically-advanced counterfeiter
of the 21st Century continues to be a challenge and a priority
for the Secret Service. With reprographic equipment, computers
and computer software continuing to become more sophisticated
and affordable, counterfeiters have been able to increase both
the volume and the quality of their product. Domestically-
passed counterfeit U.S. currency that has been manufactured
utilizing digital technology rose from $174,000 in fiscal year
1995 to over $18 million in fiscal year 2000. Currently, 94
percent of the domestic counterfeit printing operations
suppressed by the Secret Service in this fiscal year has been
digitally-based. These significant increases are due largely to
a growing number of criminals attracted to the seeming
simplicity of the crime, made possible by today's technology.
In response to this growth in digital counterfeiting, the
Secret Service is pursuing legislative changes to
counterfeiting statutes that clearly define the fraudulent use
of digital images as a violation of law.
The Secret Service is also staying ahead of modern
counterfeiting operations through its involvement in the
currency design process. The Secret Service enjoys a close
working relationship with the Bureau of Engraving and Printing,
as well as the Federal Reserve Board during the design phase of
U.S. currency.
Over one-third of the $40 million in counterfeit U.S.
currency passed to the American public this past year was
transported or ``muled'' into the United States from foreign
countries, most often Colombia. But Colombian-manufactured
counterfeit also poses a threat to the stability of the dollar
in countries outside the United States as well as those
countries that seek economic assistance by ``dollarizing''
their economies. For example, Ecuador officially ``dollarized''
its economy in April of 2000 in an attempt to slow inflation
and the devaluation of its local currency.
As the U.S. dollar became the ``coin of the realm'' in
Ecuador, Colombian counterfeiting operations began targeting
the country by flooding the region with counterfeit currency.
The Secret Service response to the threats posed by Colombian-
based counterfeiting and ``dollarization'' follows our
traditional methodology. The Secret Service pursued and
received funding from ``Plan Colombia'' to increase our
presence in Colombia and to fund Colombian law enforcement
units that will, under the direction of the Secret Service,
solely target counterfeit U.S. dollar operations. The Secret
Service is also studying a plan that includes the creation of
additional field offices in Central and South America to
address the increasing challenges created by ``dollarization.''
In closing, counterfeiting will continue, to some extent,
as long as genuine currency is a medium of exchange. However,
the Secret Service continues to pursue ever-changing tactics of
the modern counterfeiter and to educate law enforcement, the
financial community, and the public about the security features
of genuine currency.
Since our inception, the Secret Service has protected the
security and stability of the dollar by stemming the flow of
counterfeit. Without constant attention to this task, the
modern counterfeiter could jeopardize the foundation of our
financial system and our Nation's currency. The Secret Service
will continue to aggressively pursue this goal, as it has for
more than 135 years.
Mr. Chairman, this concludes my prepared remarks. I would
be pleased to answer any questions that you or Members of the
subcommittee may have.
[The prepared statement of Daniel G. Snow can be found on
page 43 in the appendix.]
Chairman King. Thank you very much, Mr. Snow. I have
actually several questions.
The first question is to Mr. Ferguson. Can you testify what
is the raw cost of redesigning currency exclusive of the
special security features and also as a follow-on to that, my
understanding is that U.S. bank notes cost about 4 cents to
make. Would new security features raise the cost and how much?
Mr. Ferguson. OK. Thank you, Mr. Chairman.
The cost of redesigning currency, exclusive of the security
features, is very minimal. It would require just the
reengraving of plates. We amortized those costs over a huge
amount of product. So the incremental cost is in the hundreds-
of-a-cent per note.
The major cost of redesigning, though, are the additional
security features. As you add new and very exotic materials,
new methods of printing, organize new production steps, you add
to the manufacturing cost.
When we changed in 1996, the incremental cost was
approximately $1 per thousand or one cent per note. So we would
expect around the 25 percent increase to change the cost of
currency. The higher value notes now cost approximately 6 cents
a note, adding approximately a penny-and-a-half to 2-cents a
note.
Chairman King. I realize that some of the design features
in the new series of currency are yet to be developed and will
remain secret in any case. What are some of the types of
features that we might see?
Mr. Ferguson. As both myself and Agent Snow testified, the
largest threat to our currency at the moment appears to be
coming from the digital explosion that is happening. The
systems that we are looking at now for inclusion in currency
tend to be things that would counter those kinds of systems,
anti-digital things, things that would be able to encode notes
so that computer systems would not copy those. Similar to
things that are in the notes now that would prevent copiers
from reproducing notes. We are also looking at the addition of
authentication features that can be used by high-speed
equipment and vending equipment, things that would allow the
general public to be able to easily recognize and authenticate
their currency. So a wide range of features that would attack a
wide range of types of counterfeiting.
Chairman King. I don't know if you mentioned H.R. 2509 or
not. Actually, it is legislation that I have introduced to
allow the Bureau to print foreign currency under certain
conditions.
Mr. Ferguson. Yes. And we thank both the Chairman and the
Congresswoman for co-sponsoring that.
Chairman King. How would passage of this legislation allow
you to print currency, how would this benefit the American
taxpayer?
Mr. Ferguson. American currency has, for a number of years,
been extremely traditional. We have produced it using virtually
the same technologies and techniques for all of my career, and
for all of the last 50 or 60 years. By being able to produce
for other countries, we would be able to test and evaluate and
develop the skills that are necessary to produce currency with
new and innovative techniques, new materials, new technologies.
It would allow us to generate these skills, test the equipment,
determine how effective they are, especially within our
operation. So that when we turn those on in production for the
public on their currency, we would have already had the
experience.
Next to that, it would be, I believe, helpful to countries
outside of our United States to be able to take advantage of
some of the expertise that we have and giving them some advice
and assistance that otherwise they may not be able to get.
Chairman King. Agent Snow, is it necessary to redesign our
currency as often as every 7 to 10 years?
Mr. Snow. Mr. Chairman, yes, I agree with Mr. Ferguson. We
have found that in order to stay on the cutting edge in the
combatting of counterfeiting, it is now necessary, with the
rapid changes in reprographic technology, to have that ongoing
process of looking at potential security features, having the
time to sufficiently evaluate those features and then deciding
as to whether or not they will keep us one step ahead of the
counterfeiter.
Chairman King. One more question before I yield to Mrs.
Maloney.
The media often portrays digital counterfeiting as a
nuisance crime, primarily committed by juveniles. Can you
comment on the accuracy of that and how serious it really is?
Mr. Snow. Yes. Thank you for that question.
You are correct; the media often does portray digital
counterfeiting as a kiddie crime. Sometimes in that process it
is minimized. Whereas we do see a significant percentage of
juveniles experimenting with this new reprographic equipment in
the area of counterfeiting, it is important to know that the
bulk of that $19 million that we expect to see in losses to the
American public this year do not come from that group.
A very small percentage of the juveniles who are actually
participating in counterfeiting are manufacturing large amounts
of counterfeit. It is the organized criminal groups that I
mentioned in my testimony, many that have ties to organized
crime, gang activity, drug activity, that are actually
spreading the large volumes of counterfeit to the American
public.
We do believe that through our education campaign--and we
do target juveniles in our education campaign, although we
always take the counterfeiting extremely seriously regardless
of who perpetuates it--we do believe that through a positive
outreach to the juveniles, we can bring home the message that
it isn't something that they should become involved in.
Chairman King. Thank you, Agent Snow.
Mrs. Maloney.
Mrs. Maloney. Thank you very much.
Mr. Ferguson, Mr. Snow mentioned that we need to redesign
the currency periodically to protect our currency. Is there
another way that we can accomplish this without the expense of
a complete redesign?
Mr. Ferguson. I believe that any good currency system
relies on three things. A very good solid currency design with
good security features, an educated public and strict law
enforcement. Without any one of those, you don't have a very
good system.
Certainly, we can help the American public greatly by
putting out the word, by hearings like this, getting
information into their hands about how they can authenticate
their own currency, what to look at, how to recognize the feel,
the look, the security features in a bank note that make it
genuine.
But with advances in reprographics out there, we are going
to have to keep changing it from time to time in order to
minimize the cost on society. The costs on the Government
aren't that high; they tend to be higher on people having to
change their systems.
We are looking at trying to concentrate those changes on
the higher value notes which tend to be counterfeited more, for
example, not changing the $1 and $2 notes this last time
around. But, unfortunately, in order to maintain a very secure
currency system, we believe that it needs to be changed
periodically.
Mrs. Maloney. Is there a system in place, Mr. Ferguson,
where the Secret Service keeps you apprised of new
counterfeiting issues as they relate to law enforcement?
Mr. Ferguson. Yes, there is, Congresswoman. We both, along
with the Federal Reserve System, participate in the Advanced
Counterfeit Deterrent Steering Committee that is chaired by the
Department of the Treasury. And we meet periodically and go
over the statistics, review the type of counterfeit notes that
are being passed, where they are being passed, how they are
being manufactured, how they are being detected at the public
level or at the commercial level, so that we can take advantage
of the good things in notes and correct those things that we
need to.
So we work along with the Federal Reserve, hand-in-hand on
those operations, and share information regularly.
Mrs. Maloney. Do you feel we are adequately addressing the
availability of new technology as it relates to the counterfeit
production of currency?
Mr. Ferguson. By that, do you mean are we addressing what
is available to the public to use?
Mrs. Maloney. Yes. Are you on top of the changes daily?
Mr. Ferguson. Well, the computer world out there is
booming. The technology seems to be doubling in speed. And the
price is getting cut in half every 6 months or so. We try and
stay ahead of that. We feel very confident that the changes
that we made in 1996 were very effective. The changes that we
are studying now will be effective in the future.
But it is, in fact, a very challenging battle for us to
stay ahead of that kind of booming technology.
Mrs. Maloney. Mr. Snow, you mentioned earlier that there is
a surprising increase of 41 percent in Colombian-manufactured
counterfeiting. Is that related to the drug trafficking and the
drug cartels; is that what is happening there?
Mr. Snow. We do see some correlations between drug
distribution and counterfeit distribution. The increase that we
are seeing this year in Colombian-based counterfeiting coming
into this country is a reflection of some very organized
criminal enterprises that we have identified and are working
very closely with the Colombian law enforcement officials to
address.
One very positive note on that is that just yesterday a law
went into effect in Colombia that raised the maximum penalty
for counterfeiting of U.S. dollars from 6 years to 10 years.
That, in essence, takes the crime out of what was a finable
offense and raises it to the equivalent of our felony. From
that we will see longer jail terms for Colombian
counterfeiters. It will open up the possibility for extradition
to the United States.
We hope that that will help us to address this growing
problem.
Mrs. Maloney. Well, you more or less said that you are
working with foreign law enforcement to address this issue and
that they have literally changed, legislatively, the law to
cooperate with this growing problem.
Are there other areas for improvement legislatively,
besides the one you just mentioned, of raising the fine?
Mr. Snow. Well, the Secret Service believes that working as
closely as we can with our foreign law enforcement partners
throughout the world is our best approach. And we are going to
be talking with the Administration about the possibility of
increasing our presence in the areas in and around Colombia,
the ``dollarizing'' regions of Central and South America.
Mrs. Maloney. Finally, is there any area for improvement
legislatively to address the counterfeiting here in the United
States that we could put forward that would help you do your
job?
Mr. Snow. Again, I think we are exploring now the
possibility of being very specific in the language that
addresses the manufacturing implements of counterfeit currency,
to identify the digital image of a dollar bill with intent to
defraud, to use it to defraud, as a violation of law.
Whereas in the past we had hard plates that were used to
counterfeit, it was very clear, if you held a counterfeit
plate, that it could only be used for counterfeiting. Digital
images now can be captured off the internet, they can be
improved digitally. That itself can become a product that is of
value to potential counterfeiters.
We are discussing at this point the possibility of that
kind of legislation. And, again, we will be discussing that
with the Administration.
Mrs. Maloney. And, finally, what are your opinions of the
Liberty Bill Act? Would that be possible to do? You know, they
said it would cost $500,000 to do it, the technology. Could
that be counterfeited easily? What is the practicality of
implementing the very patriotic idea that was put forward by
the young people on the first panel?
I am sure you were here to hear them, weren't you? Is it
possible to do what they are proposing, or would it be very
simple to counterfeit it? What is the response to their
proposal from a technology point of view?
Mr. Ferguson. From the standpoint of the potential being
able to produce it originally, instead of counterfeiting it, as
with all text, could be engraved in the plate and printed onto
the back of the notes.
On the higher value notes, the current layout that they
have would have to be changed in order to allow room for the
watermark. But on the lower denomination notes, it would fit
and could be produced on the note. It would have absolutely no
counterfeit deterrent value. It can be reproduced by digital
systems or other types of counterfeiting the same as other
types of text on the note.
It would not be, I would say, either better or worse as far
as the counterfeit deterrent than other types of printing.
Mrs. Maloney. Is it better to have images and pictures than
the words to counter counterfeiting?
Mr. Ferguson. Well, on the face of the note, certainly we
believe very strongly that the portrait is the very best
security feature that we have that is printed on the note.
People are used to looking at people's faces. There is a lot of
detail and a lot of texture in a human face. We are used to
looking at those. So people tend to focus on that; they notice
differences.
We use a very elaborate hand-engraved process that gives a
very lifelike image to the engraving. So a lot of counterfeit
notes look flat and lifeless. On the back of the note, the text
versus a building, I wouldn't know if one had any more
counterfeit deterrent value.
I would turn that over to Agent Snow.
Mr. Snow. Thank you. I commend the students for an
excellent presentation. It was very moving. And I agree with
Mr. Ferguson that technically it provides no deterrence to
counterfeiting. However, the Secret Service is constantly
looking for anything that may dissuade the potential
counterfeiter. If this, in fact, appeals to the integrity or
the patriotism of a potential counterfeiter, we would salute
it.
Mrs. Maloney. My time is up.
Chairman King. Congressman Lucas.
Mr. Lucas. Thank you, Mr. Chairman.
Mr. Snow, here in really only a matter of months the
Europeans will be conducting an amazing exercise in converting
in something like a dozen countries, their currencies that they
have used for years, decades, centuries, over to the Euro.
Have you been, or has the United States Government, been
working with the European Central Bank in regard to how they
address the potential for counterfeiters out there? And I say
that in regard to, as these sums of money come out from under,
in some cases, mattresses, there will be a deluge. Some of it
will be U.S. currency that will be appearing in those banks to
be converted for Euros.
Have you been in touch, been working with those people as
to how they address that challenge?
Mr. Snow. Yes. Our understanding is that as the Euro is
introduced, there may be an increased demand for U.S. dollars
in Europe, that whenever that occurs there may be an increased
opportunity for counterfeiters.
But we are working with the European Central Bank and with
Europol so that we can continue our close working relationship
that we really have enjoyed bilaterally, with most of the
European Union nations.
But we are anticipating, for example, joint training
exercises, something that will give us a basis for working
together in what we anticipate to be the most likely attacks
against the Euro and the dollar from the same operation.
Mr. Lucas. Because clearly, the local banking authorities
will recognize marks and they will know a counterfeit from a
noncounterfeit franc, but as these sums come in, ultimately the
dollars that they do exchange out for Euros may potentially
wind up coming back to us. I can see where that is a good
question.
To follow up on Mrs. Maloney's questions, the comment about
the challenges that we face in Colombia, I have been on this
subcommittee now for my fourth term. And there have been
different hearings conducted by you and your predecessors--
perhaps Colombia now, but at different times there have been
hot spots, shall I say, around the world, where very organized
counterfeit efforts have been massed against us using state-of-
the-art technology.
Are there presently other places besides Colombia where we
face those challenges?
Mr. Snow. There are other places in the world that
counterfeit the U.S. dollar, a variety of places around the
world that counterfeit the U.S. dollar. But, as you mentioned,
over the long haul, the Colombian situation really is at the
top of that particular group.
Certain areas, certain criminal organizations, will come
and go. We have had some recent successes in Bulgaria, for
example, where we have, through our Rome field office,
successfully dismantled some printing operations of what were a
fairly damaging operation.
But I think it is safe to say that the Colombian issue,
which has been with us for probably over 20 years, my entire
career anyway, is probably the single most identifiable
location where counterfeit U.S. dollars are produced.
Mr. Lucas. And under present Federal statutes, do you have
all of the necessary authority that you need to work with your
law enforcement counterparts around the world on those kind of
issues?
Mr. Snow. Yes. We have currently the 18 USC 470, which gave
us extraterritorial jurisdiction in violation of our
counterfeiting statutes here domestically, anywhere in the
world, and is just now coming in use. And it is a very
effective tool.
Recently, in the Miami district, a Colombian-based
counterfeiter was indicted on counterfeiting charges. He was
picked up in Ecuador, is now in a Miami jail, somebody who has
been counterfeiting the U.S. dollar for over 15 years.
Mr. Lucas. And to touch for one more moment on the concept
that the Chairman and the Ranking Member have discussed, this
potential for the redesigning of our currency on a regular
basis, the 7-to-10-year figure being thrown out, looking at how
technology has advanced and will continue to advance, is it
fair to say this is something our fellow citizens are just
going to have to get used to if we are going to maintain the
integrity of our medium of exchange?
Mr. Ferguson. It would certainly appear that way, Mr.
Congressman. The changes are so rapid that our goal is to get
ahead and stay ahead. And we don't know at this point anything
that would get us 20 years ahead, because we don't know what is
coming up.
When we changed, we spent a lot of time in the 1980s
worrying about copying machines and not so much worrying about
individual ink-jet printers, which at that time were crude and
big dots and blots. They now do photographic quality. You can
buy a digital camera and make your own photographs at home. So
the technology continues to advance at such a degree that I
believe it will, in fact, require continuous change of our
currency.
Mr. Lucas. Thank you, gentlemen.
Thank you, Mr. Chairman.
Chairman King. Thank you, Mr. Lucas.
Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman. I want to make sure I
understand a couple of things here.
Mr. Ferguson, I think your testimony said there is $550
billion worth of American currency in circulation around the
world?
Mr. Ferguson. Yes, sir.
Mr. Ose. Roughly. And that each year, the Bureau delivers
about 7.5 billion different notes and 15 billion stamps to the
Federal Reserve and the Postal Service, respectively?
Mr. Ferguson. Yes.
Mr. Ose. The currency that is delivered, like the $1 bills,
the $2 bills, the $5 bills, what is their life span? Like, a $1
bill lasts 6 months? A year?
Mr. Ferguson. The current estimate for a $1 note is 18
months, although some recent statistics would suggest it is
probably closer to 20 months.
And the higher denominations last longer. $5s and $10s last
2- to 2\1/2\ years. The $20s last about 3 years; $50s and $100
bills, the estimate is 8 to 10 years, and, in fact, most likely
longer than that. It really depends of the velocity of
exchange. It is really the number of transactions that a note
goes through during its life.
Obviously the $1s have the highest usage rate.
Mr. Ose. OK. On the Federal Reserve notes that are
delivered to the Federal Reserve system now, we are producing
those in our own production facilities?
Mr. Ferguson. Yes. In Washington and Fort Worth, Texas.
Mr. Ose. How much of the current currency production
capacity that we presently have is sitting idle?
Mr. Ferguson. Well, the maximum capacity, and it is machine
capacity not employee capacity, is about 12 billion a year.
Mr. Ose. $12 billion or 12 billion notes?
Mr. Ferguson. Notes.
Mr. Ose. So we are at 7.5 billion notes versus 12 billion
in capacity?
Mr. Ferguson. Yes.
That number is lower than normal. Our normal production is
somewhere around 9 billion to 9.5 billion. We, in 1999, in
order to get ready for Y2K, produced 11.3 billion notes to have
currency available if people wanted to withdraw it. That
inventory of currency is being slowly eroded so that our
production rates for this year and next year are lower in order
to allow that inventory to be utilized.
Mr. Ose. There was a comment about the new materials and
equipment that is available for the production of different
currencies. As it relates to American currency, I presume that
staff at the Bureau is staying current in all of the different
types of security measures that are available at present?
Mr. Ferguson. Yes, sir. We spend a great deal of time
analyzing the different features that come out in currency
meetings with our colleagues around the world, meeting with our
security printers, meeting with people from universities and
other organizations that are developing, researching different
types of security features.
We are also testing and evaluating all of these features.
For the 1996 design we looked at over 125 security features. We
actually bought and tested 25 different features.
Mr. Ose. Would it be fair to say for the benefit of
America's taxpayers that the Bureau is probably doing
everything that it can to explore those different security
features and the like to protect the value of our currency?
Mr. Ferguson. I certainly would like to. That is absolutely
true, sir.
Mr. Ose. I think your testimony earlier was that the
ability to print currency for foreign governments would allow
the Bureau to test and evaluate skills with new materials and
equipment, primarily focusing on the efficacy of such security
efforts and educating our staff as to how best to use these
skills to further protect American taxpayers; which begs the
question, if you are doing everything that you can now, how is
adding production going to improve what you are doing in
everything you can now do?
Mr. Ferguson. Good. We are keeping up with everything as
far as the knowledge base. The great difference is that with
United States currency, our volume is very, very high, 7
billion minimum. In order to add a new manufacturing step, to
bring in new equipment and to put it on the floor and to turn
it on for that entire program, requires, in the case of adding
one manufacturing step, perhaps five different pieces of
equipment, three shifts a day. So you are talking 15 crews
trained, ready to go.
It would be beneficial to be able to get some real-life
experience producing real products under production
requirements as opposed to just testing. Testing is beneficial,
it keeps us knowledgeably up, but it doesn't keep all of our
work force ready and prepared to go, those 15 crews set to go.
It would be very advantageous to us to have practical
experience using those new techniques on a product that we have
to meet quality requirements, cost requirements, delivery
requirements and have that experience.
Mr. Ose. Thank you, Mr. Chairman. I see my time has
expired.
Chairman King. I have no further questions.
Mrs. Maloney advises me that she has none.
Frank Lucas, do you have any?
Mr. Ose.
Mr. Ose. I have two, Mr. Chairman. May I?
Chairman King. Mr. Ose is recognized.
Mr. Ose. Thank you.
Further questioning on the use of this technology. As I
read the Chairman's legislation, H.R. 2509, I don't see any
change in the methodology by which the Bureau goes about
protecting the value of American currency.
I see an expansion in terms of the products that the Bureau
might be involved in.
I am just trying to make sure that the American taxpayers
aren't losing something with a diffusion of focus, if we add
foreign government instruments to their charge.
Could you respond to the question of, would any of the
steps that you currently take now to protect the American
dollar from counterfeiting, or security measures involved
therein, would any of those change under H.R. 2509?
Mr. Ferguson. Well, the potential would certainly be there
to change. For example, if we were to be able to produce a
product that had foil features like holograms, or kinograms
which are being now utilized on the Euro, we would be able to
produce that. It requires a different manufacturing step that
we don't have, we don't utilize now at all. It would give us
the opportunity to evaluate how our work force did that to get
experience and training.
If you look at the Euro that will be coming out, or a lot
of foreign currencies, they have different types of security
features that we currently don't use. It would be an
opportunity for us to gain a great deal of actual production
experience doing that.
So I believe that, in the end, it would aid greatly to the
value for the American public. We recover all of our costs, so
there is not a cost implication for the American public. And I
believe that any additional knowledge that we can gain, any
additional experience that we can gain, can only serve the
Americans in the future.
Mr. Ose. I presume under these new security features that
you just referenced, the foil features and the like, that if
they were practical for use in American currency that we would
use them; am I correct?
Mr. Ferguson. If they were cost-effective and they were
security-effective and met with all of the other requirements
that we have, yes.
Mr. Ose. And there is nothing in the current statutes that
precludes you from investigating their efficacy in meeting our
standards for use in American currency today?
Mr. Ferguson. Correct. And we do investigate the efficacy.
It is the practical experience and the manufacturing that we
would gain, not the intellectual knowledge. It is the day-to-
day ability to crank out 8 or 9 billion of those pieces.
Mr. Ose. We had this question come up in the predecessor to
this committee last session, Mr. Chairman, where the question
was actually somewhat a little bit different in the sense that
the Treasury was being asked to engage in seigniorage for other
countries. And I don't believe this is the concept here.
This is merely production of foreign currency that would
then be sold at cost to foreign governments. I think Mr. Snow's
testimony talks about ``dollarization'' as opposed to printing
dollars and selling them to foreign countries for use in their
currency base. And I want to be very clear about the difference
between what we are talking about here today as opposed to what
we considered last go-around.
So I thank the Chairman.
Chairman King. Thank you, Mr. Ose.
I want to thank Mr. Ferguson and Agent Snow for their
testimony today. I would ask that you be available in case any
Members have written questions to submit to you, and we
certainly appreciate your answers. I want to thank you for your
cooperation, for your assistance, the job you do, and also wish
you the very best, because this is a very, very serious matter
affecting our national security, and certainly we will work
with you in any way we can.
I know, on behalf of Mrs. Maloney and myself, we thank you
for your efforts.
I will just say that the hearing record will remain open
for 30 days to allow Members to submit statements, questions or
extraneous materials. And I would also ask that the individual
names of all of the students from Liberty Middle School and
Patrick Henry High School be entered in the record. The hearing
is adjourned.
[Whereupon, at 3:35 p.m., the hearing was adjourned.]
A P P E N D I X
July 24, 2001
[GRAPHIC] [TIFF OMITTED] T4334.001
[GRAPHIC] [TIFF OMITTED] T4334.002
[GRAPHIC] [TIFF OMITTED] T4334.003
[GRAPHIC] [TIFF OMITTED] T4334.004
[GRAPHIC] [TIFF OMITTED] T4334.005
[GRAPHIC] [TIFF OMITTED] T4334.006
[GRAPHIC] [TIFF OMITTED] T4334.007
[GRAPHIC] [TIFF OMITTED] T4334.008
[GRAPHIC] [TIFF OMITTED] T4334.009
[GRAPHIC] [TIFF OMITTED] T4334.010
[GRAPHIC] [TIFF OMITTED] T4334.011
[GRAPHIC] [TIFF OMITTED] T4334.012
[GRAPHIC] [TIFF OMITTED] T4334.013
[GRAPHIC] [TIFF OMITTED] T4334.014
[GRAPHIC] [TIFF OMITTED] T4334.015
[GRAPHIC] [TIFF OMITTED] T4334.016
[GRAPHIC] [TIFF OMITTED] T4334.017
[GRAPHIC] [TIFF OMITTED] T4334.018
[GRAPHIC] [TIFF OMITTED] T4334.019
[GRAPHIC] [TIFF OMITTED] T4334.020