By Charles Morgan for CoinWeek …..
Congressman Mike Castle served as governor of the state of Delaware from 1985 to 1992 and served almost 18 years (1993-2011) as a member of the United States House of Representatives from Delaware’s at-large district*. While in Congress, Castle was the head of the United States House Financial Services Subcommittee on Domestic Monetary Policy and Technology, a subcommittee of the House Committee on Financial Services. While serving in this capacity, Castle sponsored legislation that authorized production of the 50 State Quarters program–the largest circulating commemorative coin program in American history. He also had jurisdiction over issues concerning coins, medals, and currency.
At the Standish Foundation 4 Children’s Toast to Edmund Moy, I ran into Congressman Castle and approached him for an interview with CoinWeek.
In the following question and answer session, we discuss the 50 State Quarters® Program; the obsolescence of contemporary U.S. coinage**; whether the Mint should be allowed to develop its own commemorative coin programs; and whether states should charge sales tax for coin and bullion purchases.
Charles Morgan: Hi Congressman. Thanks for taking the time to talk to me. I’ve prepared 10 questions for you…
Mike Castle: Good, well, I’ll answer six of them.
CM: [Laughs] That’s a very political answer for you… and since I realize that you’re a career politician, I’m sure you won’t actually answer my questions anyway.
MC: [Laughs] We’ll see…
CM: So Congressman, in numismatic circles you’re known for your role in sponsoring and pushing through Congress legislation that authorized the creation of the 50 State Quarters® Program. How did that come about?
MC: Well first, I did not have a personal history of coin collecting and the reason that the coin collecting community approached me was because I was named head of the subcommittee of the Financial Services Committee that had oversight of the U.S. Mint. So, the collecting community approached my staff and me and made their pitch to change the quarter in order to celebrate the history of the 50 states.
CM: What did you think of their proposal?
MC: My initial reaction was one of strong uncertainty. I wasn’t really sympathetic to changing our currency. I didn’t want it to turn into Monopoly® money, so I needed to be sold on it and they preceded to do that.
CM: What convinced you?
MC: Well, the collectors came back to me and they indicated that the American public would have great interest in the program. They proposed the idea that the quarters would be released in the order the states were admitted into the Union. Of course, I liked that because I was from Delaware and Delaware was the first state.
They also brought up the concept of profit. It costs about five cents to make a quarter, but it’s distributed for 25 cents. The seignorage, that is the difference in its cost and its value, could go towards the operating costs of the Treasury. It would be revenue for the government that wouldn’t have to be brought in through taxing the American people. With that in mind, I warmed up and got my Chief of Staff John Lopez to help me work on the bill.
CM: Obviously, you had to convince a lot of people that this bill was a good idea…
MC: Yes. Well, I had to convince Treasury Secretary Robert Rubin and Deputy Secretary Larry Summers that it was a good idea. They were skeptical themselves and asked for a study, which Coopers & Lybrand did. In their report, Coopers & Lybrand said that everything represented in the coinage proposal was accurate. It was something that could make money and would have a broad appeal for the American people. For that reason, they basically recommended it.
CM: How did you get the bill through the House and Senate. People, I think, are interested in knowing how the sausage gets made, so to speak.
MC: My staff and I had to work other people on the subcommittee and the Financial Services Committee. We had to convince leadership that it was worthwhile, otherwise they wouldn’t have considered it. In time, we were able to do that. For me, the more difficult task was trying to convince the Senate. I didn’t have immediate connections over there, but eventually both houses of Congress thought it was a good idea.
CM: Seems like once there was momentum behind the legislation, it would have been an easy vote.
MC: Yes, it was an easy vote.
CM: Obviously, the Delaware State Quarter was the first one struck. Did you attend the launch ceremony?
MC: Yes, I did. And that’s when I realized the excitement of it. The launch ceremony was held at Caesar Rodney Square; Caesar Rodney, one of the great patriots of the Revolution, a signer of the Declaration of Independence. The Wilmington Trust Company distributed the quarters. There was a big turnout and lots of enthusiasm. After that, I started to hear from a lot of other people, other members of Congress, that it was good for them and that they were excited about it.
CM: It’s probably good politics to be seen in your district doing something good for everybody…
MC: It is good politics… and you know, kids liked it too, it was exciting for them.
CM: Well, there’s no doubt that the 50 State Quarters® Program was a success, even taking into account the fact that enthusiasm for the program declined in its later years. Today, as you probably know, the U.S. Mint continues to strike a number of circulating and non-circulating legal tender coin products with rotating designs. Have we taken the concept too far?
MC: I suppose that there’s always a danger. You know, I was involved with… even later… when we went from the State Quarters to the National Parks program. But the 50 State Quarters® Program brought in coin collectors and non-collectors into the hobby. It was an overwhelming success. These newer programs are successful too. The National Park coins are beautiful. The dollar coin programs… the Susan B. Anthony and Sacagawea dollars were not being distributed…
CM: Why do you think the dollar coin programs have failed?
MC: Well, there’s a couple of reasons. The big one is that businesses don’t want them. Banks don’t want them. And so, they are not being used despite the overwhelming evidence that supports the conclusion that its cheaper to use a dollar coin in commerce than the paper $1 Federal Reserve Note.
CM: I’ve spoken several times with Mint Directors Edmund Moy and Philip Diehl about the dollar coin programs. One of the points I bring up to them is that the dollar coin does not have enough spending power to stand on its own. In other words yes, we need a $1 coin… but we also need higher value coins as well, such as a $2.50 coin or a $5. A dollar is what you get back in change these days, it’s not a spending denomination.
MC: I see your point. A dollar is worth less now than it used to be. But you also have to take into account another factor. We may be facing the gradual elimination of currency–physical currency–altogether. Electronic devices are revolutionizing commerce.
CM: I agree, but that is also very dangerous. Electronically-stored money, as it’s been demonstrated time and time again, cannot be kept safe from sophisticated hackers and foreign and domestic criminal syndicates.
Getting back to my conversations with Moy and Diehl. I also asked both of them what, if anything, was the Mint doing in terms of “future proofing” its product line. We essentially have two circulating coins that cost less to make than their face values. Neither coin has all that much purchasing power. In the 19th Century the Mint and Congress seemed to be more willing to test out new denominations and coining compositions. Today, we seem to be stuck in a coinage system [made for] the early 20th century. Are we letting American coinage die on the vine?
MC: You have a point. For starters, yes… the cost of the penny is higher than its face value. Same is true, or essentially true, for nickels. So, the government is making these coins at a loss. Now, a lot of people worry that if we eliminate the cent that consumers will pay more for goods because they will be expected to round every purchase up to the nickel. So Congress has been reluctant to deal with the issue.
CM: Also, I imagine that some in Congress don’t want to deal with the repercussions of eliminating high value government contracts with certain industries…
MC: You’re right. With the dollar coins, Crane & Company out of Massachusetts didn’t want to see its business hurt by eliminating orders for the one dollar Federal Reserve Note. For the cent and nickel, there are mining interests that would be hurt by a change in our coinage.
CM: So, basically Industry is the tail that’s wagging the dog? That’s not how it’s supposed to work.
MC: It’s politics. Whether it’s an effort to eliminate pennies or paper money or anything else, it’s often just a few members of Congress who are protecting the status quo.
CM: Another issue dealing with Congress and our coinage is the existing system for the creation of commemorative coins. The U.S. Mint operates differently than the other world mints, in that it takes an Act of Congress for the Mint to produce a new coin, commemorative or otherwise.
Do you think it would be a good idea to change this law and allow the Mint to produce non-circulating legal tender coins – such as commemorative silver dollars and gold coins – based on its own research and analysis and sidestep Congressional authorization? In other words, voting on a silver dollar to honor Mother’s Day in order to appease the West Virginia delegation can’t be high on the list of Congressional priorities right now, can it?
MC: My recollection is that we actually limited the number of commemorative coins that get put out. Having Congress approve the coins means that ideas–such as a Frank Sinatra coin or something else, which would be a stretch–won’t get put out. It would be nice to simplify the process by which these types of coins can be done. I’m not sure if you want to give the Mint sole discretion to develop the programs.
CM: What if the process allowed the Mint to propose to a House and Senate Committee, five or 10 annual programs that it has researched and designed and the Committees have the role of rejecting the programs they don’t like?
MC: I’m for a simplified method. Going through committees is better than having to get all of the votes required to pass something through Congress. If the committees you mention review the designs and give an up or down vote, then you would have some review methodology.
CM: Switching gears here, early last year when House Republicans pushed to shut down the federal government, there was talk of the Mint striking a trillion dollar platinum coin. In a column published on January 3, 2013, Dylan Mathews of the Washington Post called you the “unsuspecting godfather of the trillion dollar coin”. Do you take that as a compliment or an insult? Also, if the Mint were to strike a trillion dollar coin and you could design it, who would you put on it and what would it be called?
MC: The article was complete nonsense. I think it was a stretch of interpretation. As for the coin, I have no idea. I haven’t put a bit of thought into it. First of all, how big would it be? I don’t know.
CM: Ok, last question. You were once governor of your state. A question that faces many states is whether to allow tax exempt status for bullion purchases. It seems that each state treats the issue differently. In your opinion, should buyers of precious metals for investment purposes enjoy tax exempt status for these investments?
MC: If you are talking about collector coins, that’s one thing. For bullion, though, it’s an interesting question. You know, we don’t have sales tax in Delaware. So, you can buy a coin or whatever with no tax. Now, when you sell the coins you should pay capital gains. But I can’t tell you the answer for what other states should do. I don’t feel strongly either way.
CM: Congressman Castle, thanks so much for your time.
MC: You’re welcome.
*Delaware is one of seven states with only one representative in the House.
** For more on the obsolescence of U.S. coinage, read the piece Hubert Walker and I wrote for CoinWeek, titled “Congressional Inaction, Not Inflation, is to Blame for the Diminishing Role of U.S. Coinage” and check out this recent video interview I conducted with former U.S. Mint Director Philip Diehl.
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