To the Chief Executive Officers of All Depository Institutions in the Second Federal Reserve District:
You may already be aware that the demand for U.S. coins - primarily pennies and other low-denomination coins - has been growing at a significant pace over the past several months. This sudden surge in demand for coins has resulted in low penny inventories at some commercial banks, financial institutions, and Federal Reserve offices. The Federal Reserve System and the United States Mint are taking corrective steps to meet this demand and have made plans to distribute coins where they are most needed until inventories can be returned to acceptable levels. We ask that you, as the public's depository institutions, assist in reducing the strain of low coin inventories by making it easy for your customers to deposit coins.
Demand for coins is not consistent across the country; certain regions are experiencing a larger need than other areas. To address these needs, the Federal Reserve will continue to monitor demand for coins, work with the Mint to adjust production levels where reasonable, and coordinate the distribution of inventory to the geographic locations exhibiting the greatest needs. In the long term, the combined efforts of the Federal Reserve System and the U.S. Mint to enhance inventory management and to augment coin inventories with additional safety stock reserves should help mitigate future problems.
Penny shortages have been reported in some areas despite the fact that the U.S. Mint has produced more than 312 billion pennies over the past 30 years for distribution to depository institutions by the Federal Reserve. More than 114 billion pennies are estimated to be in active circulation throughout the United States today, which equates to almost 426 pennies for every man, woman, and child in the country. In 1999, the Mint will produce 13 billion pennies to meet the additional needs of the public.
The U.S. Mint and the Federal Reserve are working closely together to address the unusually high demand for pennies that arose during the first half of 1999. The Philadelphia and Denver Mints are currently manufacturing pennies at least 6 days per week on a 24-hour schedule. The new Fifty States commemorative quarter program did not diminish the penny production. In fact, the Mint shipped 3.6 billion pennies to the Federal Reserve between January and April 1999, a 33% increase over the same period in 1998, which was itself a 29% increase over the 1997 level.
Discussions with representatives in the banking industry have not revealed any unique or unusual events that would drive demand for pennies to these extreme levels, so it appears that Americans are stockpiling pennies instead of circulating them through commercial transactions. Though some banks already have longstanding customer service policies in place to accept coins from the public, we are encouraging all depository institutions to reduce or eliminate any barriers that the public may encounter when attempting to deposit coins at those institutions. By making it easy for your customers to deposit coins (for example, by not requiring that coins be wrapped), you will promote circulation and discourage the hoarding tendency that results in strains on businesses that are in need of the low-denomination coins.
We hope that this circular will help answer your questions about the Nation's coin inventory levels. Please contact Anthony DiLullo at our Head Office, or Bob McDonnell at our Buffalo Branch, if you have any further questions.