In a dimly lit underground vault a block from
is holding millions of dollars in cash that nobody wants.
The money — stored in cloth and plastic sacks piled high on metal shelving units — is in the unloved form of dollar coins, some of them never used. But a 2005 law requires the reserve bank to keep ordering coins regardless of its stockpile, and so vaults in Baltimore and around the country are filling up.
"This is just a small portion of what there is nationwide," Dave Beck, senior vice president of the Federal Reserve Bank of Richmond and regional executive for the Baltimore branch, said as he stood inside a small warehouse filled with money bags, each containing 2,000 coins.
"At certain times, that vault will be full and we have to look for other Fed facilities … that have more space," he said.
Congress created a program in 2005 to mint four new dollar coins a year, each featuring a different U.S. president, in an effort to encourage consumers to make the switch from dollar bills to coins.
But the new line, which began rolling out in 2007, failed to spark a significant increase in demand, Fed officials said, and some commercial banks are threatening to stop ordering the coins altogether.
Nonetheless, the law compels the Federal Reserve to keep buying the coins. Each time the Mint issues a new presidential coin — the latest, featuring Rutherford B. Hayes, came out earlier this month — the Fed must be able to supply commercial banks with that new $1 coin, and only that coin, for several weeks.
That requirement limits the Fed's ability to draw down its burgeoning supply of idle coins.
Beck, who has worked at the Baltimore branch for 27 years, would not say how many coins are stored in Baltimore, but the Fed's board of governors told Congress in June that the reserve system is holding more than $1.2 billion in dollar coins at 28 cash offices across the country.
Officials expect the number of dollar coins sitting in storage to grow to $2 billion by 2016.
Critics, including some members of Congress, call the law wasteful.
As the Fed board reported, "Because of vault storage constraints and insurance limitations at coin terminals, the Reserve Banks have been forced to spend resources to expand storage capacity to hold the excess $1 coins, with no perceptible benefit to the taxpayer."
The Fed cited a 2008 Harris poll that showed 76 percent of Americans prefer paper money.
Supporters of the coins counter that the real waste of taxpayer money is the public's reliance on greenbacks, which survive in circulation for only a few years before they must be replaced.
The nonpartisan Government Accountability Office reported in March that switching from paper to metal would save taxpayers $5.5 billion over 30 years.
"We want the Fed and Treasury to encourage people to use dollar coins. They've done nothing toward that end," said Shawn Smeallie, a lobbyist for the Dollar Coin Alliance and a former aide toPresidentGeorge H.W. Bush.
They're "complaining that no one uses the coin when it's their job to promote it."
The alliance is made up of vending machine operators, metal miners and at least one Washington-based fiscal watchdog group, Citizens Against Government Waste.
While the stockpile of coins might appear wasteful, advocates say their production does put money into government coffers.
It costs 30 cents to make a $1 coin, but the Fed purchases it for face value — and the U.S. Treasury pockets the difference. In 2010, the Mint put about 400 million $1 coins into circulation, which means the government made a profit of about $280 million.
The backlog, which was first reported by
, has prompted some members of Congress to consider revising the 2005 law.
, a Colorado Democrat, introduced a bill in July that would allow the government to stop issuing new coins if stockpiles exceeded one year's worth of demand.
"We shouldn't continue to spend money minting coins until it's shown that the public actually has an interest in using them," Polis said. "When they were new, they were collector's items, but now billions of dollars of coins are sitting in storage space at taxpayer expense due to a lack of interest.
"We're not saying put an end to the program altogether," he said. "Just that we should put a hold on producing more until there is a demand for the coins."
The Baltimore branch of the Federal Reserve is a plain, brick building on South Sharp Street. The coins are stored in a basement warehouse partitioned with metal fences and monitored by dozens of security cameras.
Visitors — as well as the bank's managers — must pass through a guarded airlock before they can get to the money. Inside the vault, they are accompanied by two minders.
The last line of defense: A pair of ordinary padlocks hanging on a metal gate just outside the vault.
Inside, coin bags are piled into row after row of shelves. In addition to the presidential coins, the bank also stores Susan B. Anthony dollar coins, which the Mint is no longer producing, and also the gold-colored coins that feature Sacagawea, the Shoshone Indian who guided Lewis and Clark on their 19th century expedition to the Pacific Northwest.
Beck, the Fed's regional executive, said the size of the stash can vary by season — ebbing a bit during summer months, possibly as increased travel drives an overall demand for cash. But it is collectors, according to the Fed, that are the biggest customers.
In an effort to put more of the coins into circulation, the Mint encourages people to purchase them directly on the Internet. But the program was limited after officials realized consumers were using credit cards to buy thousands of dollars of coins in order to accumulate frequent-flier miles, and then immediately returning the coins to the bank.
Now, consumers must use wire transfers, checks or money orders to buy coins online.
Smeallie, with the Dollar Coin Alliance, speculated that people probably wouldn't mind making the switch to coins as much as they might think.
Given the choice, he said, people will opt for what they're most comfortable with. And the $1 coin, he suggested, hasn't been given much of a chance.
He compared it to the 2009 transition from analog to digital television, which required people with older TVs to update their sets with digital converters.
"Everyone was so afraid that there was going to be this hue and cry," he said. "In the end, it wasn't that big a deal."