A trillion-dollar-coin idea takes off, and a former head of the U.S. Mint doesn't see why it shouldn't
Rep. Jerry Nadler proposed issuing a trillion-dollar coin to circumvent an impending fight over the federal debt ceiling, and the idea has taken off.
The idea, which Nadler assured me was "absolutely serious," was endorsed by Josh Barro of Bloomberg View and a Twitter campaign by Joseph Weisenthal of Business Insider using the hashtag #mintthecoin, and it's now one of those White House petitions.
The idea, which Nadler didn't make explicit, is that the coin is a bargaining chip, meant to counter the equally ill-founded idea that Congress' discretion over the debt ceiling was intended to be used regularly as a negotiating tool. (Congressional Republicans are explicitly promising, once again, to use the threat of national default to compel the president to cut spending in the next round of budgetary negotiations.)
At one point this morning, #mintthecoin was fifth on Yahoo's front page of top searches, and shortly thereafter, Weisenthal was on Bloomberg TV, which had already begun asking other guests about the prospects for the instant, trillion-dollar solution.
"It does address another bad law, and that's why it's worth promoting," said Weisenthal.
Matt Yglesias gave the idea a straigtforward look on Slate; the Daily News wrote a humorless editorial about how funny it is; and Kevin Drum of Mother Jones said he didn't think courts would allow it, though he was admittedly unsure.
Certainly, it's not a realistic policy path for Barack Obama, who wasn't willing to invoke the far less ridiculous-looking workaround of invoking the 14th Amendment guarantee of the validity of national debt as a way of invalidating Congress' debt-ceiling threat.
But for what it's worth, the guy who was in charge of the U.S. Mint when the original law providing for the minting of such a coin was passed told me he thinks Nadler's proposal is perfectly legal.
"My understanding of how this all works suggests that this is a viable alternative," said Philip Diehl, a former chief of staff to the late Texas congressman Lloyd Bentsen, who was head of the U.S. Mint from 1994-2000.
Diehl tried to make the Mint function more like a business, and saw an opportunity in the worldwide market for platinum bullion coins. (The gold bullion coins fashioned by the Mint are not produced at the preferred purity for the worldwide gold trade, Diehl said, making them a tough sell on the international market.)
Diehl planned to conduct extensive market research, focusing in particular on the hot market for platinum in Japan, and wanted legislation that would allow him to react quickly to those results. The Treasury Department, wary of its bureaus making their own friends on the Hill, was "decidedly unenthusiastic" about the legislation, Diehl said, but he worked closely with Republican Rep. Mike Castle, who was chairman of the House Financial Services Subcommittee at the time, and eventually got the bill through the Republican-controlled House with what Diehl called a "blank check."
"One of the ironies in this story is that a G.O.P. Congress passed the legislation over the objections of a Democratic Treasury, and now, today, Treasury may well be in a position to use the law as leverage to neutralize the G.O.P.'s threat to hold the debt limit hostage," he said.
The legislation served its purpose; the Mint rushed out a platinum bullion eagle coin—in denominations up to $100—and overtook the market.
"We brought that coin to market faster than any coin the U.S. Mint had ever brought to market, and within about six months of launching it, we owned about 80 percent of the worldwide market for platinum bullion coins," he said. "The Canadians had dominated the Japanese and U.S. market up to that time, and we basically took them out of his both markets."
"Of course, no one ever imagined that a scenario like this would develop," said Diehl, who is now C.E.O. of a gold seller in Austin, Texas.
Diehl said he thought it could be used "as a backstop," and that it appeared to be on more firm legal ground than the 14th Amendment.
"From everything I know about this, it is possible," he said. "Now, is it likely? I think it's highly unlikely to happen. It just looks so ridiculous for the major economic power in the world to produce a trillion-dollar coin in order to balance its books. But is that any more ridiculous than the country being held hostage over default? I think not."
"This coin thing could be done quickly—over and done with it, and I just don't think there's any legal basis for a challenge for it," he added.
At one point yesterday, with a prod from Buzzfeed's Zeke Miller, Twitter users began suggesting names of people who might be pictured on the trillion-dollar coin.
Diehl said that would in fact be up to the Secretary of the Treasury—"In every previous case I know of it was written into the law"—but he suggested Teddy Roosevelt.
Through a spokesman, in an email, Nadler offered a couple of other ideas.
"Albert Gallatin -- for his role in setting up the modern treasury system
John Boehner -- for his role in screwing it up"