oversight

U.S. Coins: Alternative Scenarios Suggest Different Benefits and Losses from Replacing the $1 Note with a $1 Coin

Published by the Government Accountability Office on 2012-02-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States Government Accountability Office

GAO             Report to the Ranking Member, Subcommittee
                on Federal Financial Management,
                Government Information, Federal Services,
                and International Security, Committee on
                Homeland Security and Governmental Affairs,
                U.S. Senate
February 2012
                U.S. COINS

                Alternative Scenarios
                Suggest Different
                Benefits and Losses
                from Replacing the $1
                Note with a $1 Coin




GAO-12-307
                                                February 2012

                                                U.S. COINS
                                                Alternative Scenarios Suggest Different Benefits
                                                and Losses from Replacing the $1 Note with a $1
Highlights of GAO-12-307, a report to the       Coin
Ranking Member, Subcommittee on Federal
Financial Management, Government
Information, Federal Services, and
International Security, Committee on
Homeland Security and Governmental Affairs,
U.S. Senate


Why GAO Did This Study                          What GAO Found
In March 2011, GAO reported that                According to GAO’s updated analysis, replacing the $1 note with a $1 coin would
replacing the $1 note with a $1 coin            provide a net benefit to the government of approximately $4.4 billion over 30
would provide a net benefit to the              years, or an average of about $146 million per year. The overall net benefit was
government of about $5.5 billion over           due solely to increased seigniorage and not to reduced production costs. This
30 years, or an average of about $184           estimate differs from GAO’s 2011 estimate because it considers recent efficiency
million per year. This benefit, which           improvements in note processing that have extended the expected life of the $1
GAO estimated using an economic                 note and other updated information. GAO’s estimate covered 30 years to be
model based on a set of assumptions,            consistent with previous GAO analyses and because that period roughly
was entirely attributable to
                                                coincides with the life expectancy of the $1 coin.
“seigniorage,” a term defined as the
difference between the cost of                  Using the same model and assumptions used for its 30-year analysis, GAO
producing coins or notes and their face         found that replacing the $1 note with a $1 coin would provide a net loss to the
value. Seigniorage reduces                      government of about $531 million in the first 10 years, or an average of about
government borrowing and interest               $53 million per year. The cost of producing a large number of coins necessary for
costs, resulting in a financial benefit to      the transition would result in a net loss in 6 of the first 7 years. In the eighth year,
the government. As GAO noted, the               and for the remaining 2 years, this situation is reversed: the interest savings
estimated net benefit could increase or         outweigh the production costs and the net benefits would be positive. Overall, the
decrease with changes in the                    net loss over 10 years compared with the net benefit GAO estimated over 30
assumptions.
                                                years would occur because of large costs in the first few years to produce the
GAO was asked to provide additional             initial supply of $1 coins.
details on its 2011 analysis.
Accordingly, GAO (1) updated its                If the interest savings due to increased seigniorage are excluded from the
analysis to account for recent changes          analysis, the government would incur a total net loss of about $1.8 billion over 10
in note processing, among other                 years, or an average of $179 million per year. With no interest savings to offset
things, and based on this update                the costs of coin production, net losses would be incurred in 9 of the 10 years. As
determined (2) the specific benefit or          in the preceding scenario, these production costs are greatest in the first 4 years,
loss to the government for each of the          when a large number of coins need to be produced for the transition. Although
first 10 years of its 30-year analysis;         this scenario suggests there are no net benefits of switching to a $1 coin, GAO
(3) the net benefit or loss to the              believes that excluding the interest savings related to seigniorage omits a
government over 10 years if the                 monetary benefit to the government.
interest savings due to seigniorage are
excluded from the analysis; and (4) the         If it is assumed that each $1 note will be replaced by 1, rather than 1.5, $1 coins,
net benefit or loss to the government           the government would incur a total net loss of about $582 million over 10 years,
over 10 years if it is assumed that each        or an average of about $58 million per year. The costs of producing coins for the
note will be replaced by 1 coin, rather         transition dominate in the first 3 years, followed by benefits in the fourth year due
than 1.5 coins, as GAO assumed in its           to the overproduction of coins during the transition. In this scenario, net losses
30-year analysis.                               continue to accrue through year 10. Net losses in this scenario are smaller than
                                                in the preceding scenario because fewer coins are produced and coin production
GAO used the economic model it
                                                costs are lower, but the one-to-one replacement does not provide increased
developed for its 2011 report, updated
                                                seigniorage. Moreover, this lower replacement ratio is not consistent with the
certain factors, and varied the
                                                experiences of other countries that have switched from notes to coins and is
assumptions for seigniorage and the
replacement ratio of coins to notes as          likely to produce too few coins to meet demand, which could be disruptive to the
requested.                                      economy.
                                                In commenting on a draft of this report, the Federal Reserve and Treasury
                                                Department noted that GAO’s 30-year estimate does not consider the cost to the
View GAO-12-307. For more information,          private sector or environmental impacts. GAO agrees that such costs and
contact Lorelei St.James at (202) 512-2834 or
stjamesl@gao.gov.                               impacts are important considerations, but GAO identified no quantitative
                                                estimates that could be evaluated or modeled.
                                                                                           United States Government Accountability Office
Contents


Letter                                                                                                   1
              Our Updated Estimate Shows That Replacing the $1 Note with a $1
                Coin Could Provide a Net Benefit of $4.4 Billion to the
                Government over 30 Years                                                                3
              Replacing the $1 Note with a $1 Coin Would Result in a $531
                Million Net Loss over the First 10 Years                                                6
              Without Counting Seigniorage, Switching to a $1 Coin Would
                Result in a Net Loss                                                                     7
              Switching to a $1 Coin Would Result in a Net Loss if Coins
                Replaced Notes on a 1-to-1 Basis                                                         9
              Concluding Observations                                                                   10
              Agency Comments and Our Evaluation                                                        10

Appendix I    Comments from the Board of Governors of the Federal Reserve
              System                                                                                    13



Appendix II   Comments from the Department of the Treasury                                              15




Figures
              Figure 1: Discounted Net Benefit to the Government of Replacing
                       $1 Notes with $1 Coins over 30 Years, by Year                                    5
              Figure 2: Net Benefits and Net Losses to the Government over the
                       First 10 Years                                                                   7
              Figure 3: Net Benefits and Net Losses to the Government
                       Excluding Seigniorage                                                            8
              Figure 4: Net Benefits and Net Losses to the Government Assuming
                       a 1-to-1 Replacement Ratio                                                       9




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              Page i                                         GAO-12-307 $1 Note Replacement Scenarios
United States Government Accountability Office
Washington, DC 20548




                                   February 15, 2012

                                   The Honorable Scott P. Brown
                                   Ranking Member
                                   Subcommittee on Federal Financial Management,
                                   Government Information, Federal Services,
                                   and International Security
                                   Committee on Homeland Security and Governmental Affairs
                                   U.S. Senate

                                   Dear Senator Brown:

                                   Over the past 40 years, many countries have replaced lower-
                                   denomination notes with coins as a means to provide a financial benefit to
                                   their governments. We have reported five times over the past 22 years
                                   that replacing the $1 note with a $1 coin would provide a net benefit to the
                                   federal government of hundreds of millions of dollars annually. Most
                                   recently, in March 2011, we reported that such a replacement would
                                   result in a net benefit of about $5.5 billion over 30 years, or an average of
                                   about $184 million per year. 1 We found that this benefit was entirely
                                   attributable to an increase in seigniorage, which is the difference between
                                   the cost of producing coins or notes and their face value. To determine
                                   the estimated net benefit, we developed a model based on a set of
                                   assumptions and noted that changing these assumptions could increase
                                   or decrease the estimated net benefit. You asked us to provide additional
                                   details on our 2011 analysis and to conduct additional analyses changing
                                   two assumptions. To answer your request, we first updated our 2011
                                   estimate because of recent changes by the Federal Reserve and
                                   Department of Treasury in note processing and $1 coin production, the
                                   results of which are provided below. We then used this updated 30-year
                                   estimate to address your request that we provide

                                   •   the specific benefit or loss to the government for each of the first 10
                                       years for our 30-year analysis;

                                   •   the net benefit or loss to the government over 10 years if the interest
                                       savings due to seigniorage is excluded from the analysis; and


                                   1
                                    GAO, U.S. Coins: Replacing the $1 Note with a $1 Coin Would Provide a Financial
                                   Benefit to the Government, GAO-11-281 (Washington, D.C.: Mar. 4, 2011).




                                   Page 1                                       GAO-12-307 $1 Note Replacement Scenarios
•   the net benefit or loss to the government over 10 years if the
    replacement ratio is 1 coin to 1 note, rather than 1.5 coins for 1 note,
    as we assumed in our 30-year analysis.

To identify the benefit or loss of replacing the $1 note with a $1 coin, we
updated the economic model developed for our 2011 report, and varied
the assumptions for seigniorage and the replacement ratio of coins to
notes as requested. Briefly, our model estimated net benefit or net loss to
the government by subtracting the benefit of a status quo scenario from a
replacement scenario. In the updated status quo scenario, notes remain
the dominant form of currency at the $1 denomination, the United States
Mint (the Mint) ceases production of $1 coins, the currently stored coins
are gradually released into circulation to meet transactional demand, and
production of $1 coins resumes after the stored coins are released. 2 In
the replacement scenario, we assumed, among other things, that the
production of $1 notes would stop immediately; no notes would be
withdrawn from circulation, but because of their shorter life span, they
would naturally fall out of circulation within a few years; the $1 coins in
storage would immediately be released into circulation; and the Mint
would produce a large number of $1 coins during the first 4 years of the
transition. Using the updated economic model, we then varied the
assumptions for seigniorage and the replacement ratio of coins to notes
to determine the net benefits or losses over the first 10 years, as
requested. We conducted this performance audit from November 2011
through February 2012 in accordance with generally accepted
government auditing standards. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.




2
 As of September 30, 2011, approximately 1.4 billion $1 coins were stored with the
Federal Reserve.




Page 2                                        GAO-12-307 $1 Note Replacement Scenarios
                        The federal government realizes a financial gain when it issues notes or
Our Updated Estimate    coins because both forms of currency usually cost less to produce than
Shows That Replacing    their face value. This gain, which is known as seigniorage, equals the
                        difference between the face value of currency and its costs of
the $1 Note with a $1   production. 3 Seigniorage reduces the government’s need to raise
Coin Could Provide a    revenues through borrowing, and with less borrowing, the government
Net Benefit of $4.4     pays less interest over time, resulting in a financial benefit.

Billion to the          Replacing the $1 note with a $1 coin would provide a net benefit to the
Government over 30      government of approximately $4.4 billion over 30 years, amounting to an
                        average yearly discounted net benefit 4 of about $146 million. 5 This benefit
Years                   would occur because, based on differences in how notes and coins are
                        used in the economy, more coins than notes would have to be circulated
                        to meet demand, and therefore more seigniorage would be created. This
                        estimate assumes a 4-year transition period beginning in 2012, during
                        which the production of $1 notes would stop immediately. On the basis of
                        information provided by the Mint, we assumed that during the first year
                        the Mint would convert existing equipment to increase its production
                        capability for $1 coins. We also assumed that it would take 4 years for the
                        Mint to produce enough coins to replace the currently outstanding $1
                        notes. Our assumptions cover a range of factors including a replacement
                        ratio of 1.5 coins to 1 note to take into consideration the fact that coins
                        circulate with less frequency than notes and therefore a larger number
                        are required in circulation, 6 the expected rate of growth in the demand for
                        currency over 30 years, the costs of producing and processing both coins


                        3
                          Traditionally, seigniorage is defined as the difference between the face value of coins and
                        their cost of production. As long as there is public demand, the government creates this
                        net value when it puts coins into circulation. Similarly, when the government issues notes,
                        it creates an analogous net value, equal to the face value of the notes less their
                        production costs. In this report, we use the term “seigniorage” to refer to the value created
                        from the issuance of both coins and notes.
                        4
                         A discounted net value uses a rate, known as the discount rate, to convert the value of
                        payment or receipts expected in future years to today’s value, taking into account that the
                        further into the future an amount is paid or received, the smaller its value is today.
                        Applying a discount rate establishes a consistent basis for comparing alternative
                        investments that will have differing patterns of costs and benefits over many years.
                        5
                         Our estimate of the discounted net benefit to the government of replacing the $1 note
                        with a $1 coin is not intended to replicate budget scoring that would be conducted by the
                        Congressional Budget Office.
                        6
                         As explained in more detail later, we used a 1.5-to-1 replacement ratio based on our
                        analysis of the experiences of Canada and the United Kingdom.




                        Page 3                                          GAO-12-307 $1 Note Replacement Scenarios
and notes, and the differential life spans of coins and notes. Our analyses
are projected over 30 years to be consistent with previous GAO analyses
and because that period roughly coincides with the life expectancy of the
$1 coin.

As shown in figure 1, the annual benefit would vary over the 30 years—
the government would incur a net loss in 6 of the first 7 years and then
realize a net benefit in the remaining years. The early net loss would be
due in part to the up-front costs to the Mint of increasing its coin
production during the transition, together with the limited interest expense
the government would avoid in the first few years after replacement
began. The large net benefit in 2016 would occur because we assume
that the Mint’s production at maximum capacity during the 4-year
transition period would lead to some overproduction and thus production
would drop dramatically in 2016. Because of the far lower coin production
costs, the net benefit to the government would temporarily spike in that
year. We also found our net benefit estimate was due solely to increased
seigniorage and not to reduced production costs. Like all estimates, this
one is uncertain, particularly in the later years, and thus the benefit could
be greater or smaller than estimated. Furthermore, inputs to our analysis,
such as the costs to produce $1 notes and $1 coins, will change over
time. Changes to the inputs and the assumptions used in the estimate
could increase or decrease the estimated net benefit.




Page 4                                  GAO-12-307 $1 Note Replacement Scenarios
Figure 1: Discounted Net Benefit to the Government of Replacing $1 Notes with $1 Coins over 30 Years, by Year




                                        This estimate differs from our 2011 estimate, which found that
                                        replacement would result in a net benefit of about $5.5 billion over 30
                                        years, or an average of about $184 million per year, because it takes into
                                        account two key actions that occurred since our 2011 report.

                                        •    In April 2011, the Federal Reserve began using new equipment to
                                             process notes, which has increased the expected life of the $1 note to
                                             an average of 56 months, according to the Federal Reserve,
                                             compared with the 40 months we used in our 2011 analysis. The
                                             longer note life reduces the costs of the status quo scenario and thus
                                             reduces the expected net benefits of replacing the $1 note with a $1
                                             coin.

                                        •    In December 2011, the Treasury Department announced that it would
                                             take steps to eliminate the overproduction of dollar coins by relying on
                                             the approximately 1.4 billion $1 coins stored with the Federal Reserve
                                             as of September 30, 2011, to meet the relatively small transactional
                                             demand for dollar coins. This new policy will reduce the cost of
                                             producing $1 coins that we estimated in the status quo scenario and
                                             thus reduces the expected net benefits of replacing the $1 note with a
                                             $1 coin.



                                        Page 5                                     GAO-12-307 $1 Note Replacement Scenarios
                        In addition, our updated analysis used a start date of 2012 rather than
                        2011 and used the Congressional Budget Office’s most recent estimates
                        for future government borrowing costs, which are lower than the figures
                        used in our 2011 analysis. The reduced borrowing costs reduced the net
                        benefits of switching to a $1 coin. 7

                        Finally, as in our 2011 report, we considered only the fiscal effect of this
                        change on the government. We did not consider other factors, such as
                        the relative environmental and societal costs and benefits of the status
                        quo and a replacement. Further analysis would be needed to determine,
                        for example, whether the net effects of a replacement would be positive
                        or negative for the environment, 8 or how the costs to industry would
                        compare with the net benefit to the government. As we noted in our 2011
                        report, the costs to industry of a replacement are difficult to quantify and,
                        according to stakeholders we spoke to, would include both near-term
                        transition costs, such as the costs of retooling cash drawers, and longer-
                        term costs from structural changes to ways of doing business, such as
                        higher transportation costs incurred by armored carriers since coins are
                        heavier than notes.


                        Across the first 10 years of our 30-year analysis, replacing the $1 note
Replacing the $1 Note   with a $1 coin would result in $531 million in net loss, or approximately
with a $1 Coin Would    $53 million per year in net loss to the government. For this analysis, we
                        maintained all the key assumptions of our 30-year analysis—notably that
Result in a $531        1.5 coins would be produced to replace each $1 note and that the
Million Net Loss over   demand for $1-denominated currency continues to grow each year. As
the First 10 Years      shown in figure 2, the cost of producing coins would result in a net loss in
                        6 of the first 7 years when the Mint produced $1 coins at high levels to
                        enable the transition. Net benefits would occur in each of the remaining
                        years. Overall, the net loss over the first 10 years compared with the
                        benefits we estimated over 30 years would occur because of large costs
                        during the first 4 years to produce the initial supply of $1 coins, while the


                        7
                         In addition to the changes listed above, we revised the level of transactional demand for
                        coins that is assumed to exist in the status quo scenario. On the basis of updated
                        information from the Federal Reserve, we assumed a smaller transactional demand for
                        coins. This change had only a minimal impact on the findings.
                        8
                         For example, officials from the Bureau of Printing and Engraving pointed out that
                        replacing the $1 note with a $1 coin would also have environmental impacts relating to
                        obtaining raw materials and carbon dioxide emissions, among others.




                        Page 6                                          GAO-12-307 $1 Note Replacement Scenarios
                         benefits of reduced interest expense due to increased seigniorage would
                         occur more heavily in later years.

                         Figure 2: Net Benefits and Net Losses to the Government over the First 10 Years




                         Note: The large net benefit in 2016 occurs because we assume that the Mint’s production at
                         maximum capacity during the 4-year transition period will lead to some overproduction and production
                         drops dramatically in 2016. Because of the far lower coin production costs, the net benefit to the
                         government will temporarily spike in that year.




                         Under a scenario that does not consider interest savings due to
Without Counting         seigniorage, a net loss of approximately $1.8 billion would accrue during
Seigniorage,             the 10-year period for an average cost of $179 million per year. As shown
                         in figure 3, net losses would be incurred in 9 of the 10 years. In particular,
Switching to a $1 Coin   large costs would be incurred in each of the first 4 years because of the
Would Result in a Net    large number of coins that would need to be produced for the transition,
Loss                     as was the case in the scenario discussed above. As in the previous
                         analysis, in year 5, there would be a temporary net benefit because coins
                         would be overproduced during the previous 4 years and coin production
                         would fall to zero in that year—and the cost is therefore less than the cost
                         of producing $1 notes that would have been incurred had the transition
                         not taken place. After year 5, net losses would continue to be incurred
                         because, although the life of a $1 coin is longer than the life of a $1 note,



                         Page 7                                              GAO-12-307 $1 Note Replacement Scenarios
coins cost more than notes to produce. All of the scenarios assume that
additional currency would need to be produced not only to replace worn
out or lost currency, but also to support a growing economy. Thus, in this
scenario, we found that even with the longer life of the $1 coin, the cost of
producing coins for the growing economy after the transition would
exceed the cost of producing $1 notes in each of those years that would
have been incurred without the replacement. While this scenario suggests
that there would be no net benefits from switching to a $1 coin, we
believe that not including the interest savings related to seigniorage omits
a monetary benefit to the government.

Figure 3: Net Benefits and Net Losses to the Government Excluding Seigniorage




Note: The net benefit in 2016 occurs because we assume that the Mint’s production at maximum
capacity during the 4-year transition period will lead to some overproduction and production drops
dramatically in 2016. Because of the far lower coin production costs, the net benefit to the
government will temporarily spike in that year.




Page 8                                               GAO-12-307 $1 Note Replacement Scenarios
                         Under this scenario, we include the net benefits of interest savings related
Switching to a $1 Coin   to seigniorage, but assume that a single $1 coin would be produced to
Would Result in a Net    replace each $1 note. In total, across the 10 years the total net loss of
                         switching to $1 coins would be $582 million, or just over $58 million per
Loss if Coins            year. As shown in figure 4, net losses would be incurred in 9 of 10 years
Replaced Notes on a      of this scenario. The costs of producing coins for the transition are highest
1-to-1 Basis             in the first 3 years, followed by benefits in the fourth year because of the
                         overproduction of coins during the transition. In this scenario, net losses
                         would continue through year 10.

                         Figure 4: Net Benefits and Net Losses to the Government Assuming a 1-to-1
                         Replacement Ratio




                         Note: The large net benefit in 2015 occurs because we assume that the Mint’s production at
                         maximum capacity during the transition period will lead to some overproduction and production drops
                         dramatically in 2015. Because of the far lower number of coins produced in a one coin to one note
                         replacement scenario and the corresponding lower production costs, the net benefit to the
                         government will temporarily spike 1 year earlier than in the other scenarios.


                         In this scenario, far fewer coins would be produced because of the low
                         replacement ratio, and thus the costs associated with their production
                         would be much less than in the previous scenarios. However, this
                         scenario also involves no gains to the government because of
                         seigniorage because only one coin would be produced to replace each
                         note that will fall out of circulation. In fact, the replacement case in this



                         Page 9                                              GAO-12-307 $1 Note Replacement Scenarios
                     scenario results in reduced seigniorage relative to the status quo because
                     the cost of producing a note is less than the cost of producing a coin, so
                     each $1 coin has less seigniorage associated with its issuance than the
                     $1 note it is replacing.

                     A caution concerning a 1-to-1 replacement of coins to notes is that under
                     this scenario, there would likely not be enough coins to meet demand. A
                     shortage of currency could have significant negative consequences for
                     the economy, such as hampering cash transactions. As we noted in our
                     2011 report, other countries that have switched from notes to coins have
                     found that, because people use notes and coins differently, the number of
                     coins needed for a replacement is greater than the number of notes to be
                     replaced. While the actual replacement ratio needed is not known ahead
                     of any transition, our 2011 analysis of the transition to a $1 coin in
                     Canada and the £1 coin in the United Kingdom led us to decide that a
                     1.5-to-1 ratio was a reasonable level.


                     Estimating whether the government would derive benefits from replacing
Concluding           the $1 note with a $1 coin requires an analysis with many assumptions.
Observations         As is clear from the findings in this report, not accounting for the benefits
                     related to increased seigniorage can substantially affect the estimate.
                     While we identified and updated a few factors used in these analyses that
                     changed since our 2011 report, other factors could also change over time,
                     such as the cost of inputs for notes and coins or changes in the use of
                     cash by the public, among other things. As such, these analyses are
                     highly affected by changing conditions as well as by conceptual views on
                     certain key issues, such as seigniorage and replacement ratios.


                     We provided a draft of this report to the Federal Reserve and the
Agency Comments      Department of the Treasury for review and comment. Their written
and Our Evaluation   comments are reprinted in appendixes I and II, respectively. The Federal
                     Reserve noted that it believes our 30-year estimate may overstate the net
                     financial benefit to the government because it (1) does not adequately
                     address the costs to the private sector, state and local government, and
                     the Federal Reserve and (2) does not consider potential increases in the
                     cost of raw material for coins or possible future changes in discount rates.
                     Similarly, the Treasury Department noted that our analysis should
                     consider the cost to the private sector and the impact on the environment.
                     We agree that the benefits and costs to the private sector and the impact
                     on the environment are important considerations. However, we found no
                     quantitative estimates of the costs to the private sector or environmental


                     Page 10                                 GAO-12-307 $1 Note Replacement Scenarios
impacts that could be evaluated or modeled. We did not assess potential
environmental impacts because these concerns were beyond the scope
of our analysis and we did not identify quantitative estimates of such
impacts. We included all relevant costs to the Federal Reserve that the
agency provided to us and found no data on the cost to state and local
governments. We used the best data available on coin production costs,
which accounts for the cost of raw materials, and we used the most
current discount rate. Furthermore, we recognize that our analyses are
highly affected by changing conditions, such as changes in the cost of
coins and notes, which may alter the total cost savings associated with
replacing the $1 note with a $1 coin.

In addition, the Federal Reserve noted an increased risk of counterfeiting
associated with replacing the $1 note with a $1 coin. We reported in 2011
that counterfeiting of U.S. coins is currently minimal, according to the U.S.
Secret Service. 9 The Federal Reserve also noted that we did not provide
a sensitivity analysis that varies key assumptions such as possible
increases in the public’s use of electronic payments. In 2011, we reported
the results of our sensitivity analyses, including one in which replacement
leads to a decrease in the demand for currency as people switch to
electronic payments. The Treasury also provided technical comments,
which we addressed as appropriate.


We are sending copies of this report to the appropriate congressional
committees, the Secretary of the Treasury, and the Chairman of the
Federal Reserve. The report will also be available at no charge on the
GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-2834 or by e-mail at stjamesl@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff that made key




9
GAO-11-281.




Page 11                                 GAO-12-307 $1 Note Replacement Scenarios
contributions to this report include Teresa Spisak (Assistant Director),
Amy Abramowitz, Lindsay Bach, Patrick Dudley, Bess Eisenstadt, and
David Hooper.




Sincerely yours,
Lorelei St. James
Director, Physical Infrastructure Issues




Page 12                                    GAO-12-307 $1 Note Replacement Scenarios
Appendix I: Comments from the Board of
              Appendix I: Comments from the Board of
              Governors of the Federal Reserve System



Governors of the Federal Reserve System




              Page 13                                   GAO-12-307 $1 Note Replacement Scenarios
Appendix I: Comments from the Board of
Governors of the Federal Reserve System




Page 14                                   GAO-12-307 $1 Note Replacement Scenarios
Appendix II: Comments from the Department
             Appendix II: Comments from the Department
             of the Treasury



of the Treasury




             Page 15                                     GAO-12-307 $1 Note Replacement Scenarios
           Appendix II: Comments from the Department
           of the Treasury




(544174)
           Page 16                                     GAO-12-307 $1 Note Replacement Scenarios
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