How Much Your Coins Are Worth?

By Jim Tankersley

WASHINGTON - These days, your thoughts are worth 1.7 cents.

That's what it costs the government to forge a penny, thanks to the rising price of metal. A nickel costs 10 cents. Congress, in its infinite wisdom, has concluded that's a pretty bad deal.

A House subcommittee led by Rep. Luis Gutierrez (D-Ill.) convened a hearing Tuesday on a proposal to change the composition of both coins. Republicans and Democrats like the concept, particularly its promise to save taxpayers $100 million a year by using cheaper metals at the U.S. Mint. If the legislation clears the House and Senate and President Bush signs it, you could be plucking steel pennies off the street before year's end.

In Washington, of course, nothing is that simple.

There are bureaucracies to navigate and interest groups to appease. There are lobbyists and powerful home-state imperatives. There are questions of constitutionality and whether the penny should exist at all. There are biting words from Ron Paul, the Texas congressman whose long-shot presidential bid fell short.

And despite Gutierrez's plea that "we need to act immediately," it appears there will be months more of debate before Congress votes on fixing the penny problem.

The Mint has coined American money since 1792. Congress has given it the power to tweak coin composition several times. Rationing begat a steel penny and a no-nickel 5-cent piece during World War II. Rising prices pushed silver out of coins in the 1960s. Copper inflation gave us the current penny, which is copper-plated zinc, in the early '80s.

Until recently, Mint officials say, no American coin had ever cost more to produce than it was worth.

Global metal prices began rising in 2003, driven by increased demand for raw materials, particularly in India and China, according to Mint statistics. The price of copper quadrupled in the past five years. Nickel more than tripled, and zinc nearly did the same. The Mint lost $33 million on penny and nickel production in the 2006 fiscal year. In 2007, it lost $99 million.

"There is no indication," Mint Director Edmund Moy told the House Subcommittee on Domestic and International Monetary Policy, Trade and Technology in written testimony, "that copper, nickel and zinc prices will decrease over the short term."

Steel pennies in 180 days

Enter the Coin Modernization and Taxpayer Savings Act of 2008, the subject of Tuesday's hearing. It would give the Treasury authority to set the weight and composition of any coin whose production costs exceed its face value for five consecutive years. It also requires the Mint to start producing a primarily steel penny within 180 days of the bill becoming law, so taxpayers would save money almost right away.

The bill requires any new coin to work in existing vending machines. That's a concession to the National Automatic Merchandising Association, which opposed an earlier version for fear that it could force hundreds of dollars in upgrades to each of the nation's more than 6 million dispensers of soda, snacks and other items. An association lobbyist testified in favor of the revised bill on Tuesday.

Other concerns persist. Moy told the subcommittee that six months isn't nearly enough time to produce a steel penny and that the five-years-of-losses requirement would prevent the Treasury from stepping in early if the dime or quarter -- which currently run 7 and 10 cents to produce, respectively -- suddenly grow more expensive.

Several Republicans worried about Congress giving up coinage control to the executive branch. "It seems to me that the Mint has been the leader in slowing down changes to coin composition," said Rep. Peter Roskam (R-Ill.), who introduced a bill last year that would have mandated a cheaper penny.

Paul called the current proposal an unconstitutional delegation of power and a symbol of "how far we have fallen" in monetary policy. America, he said, has failed to maintain a gold standard or silver standard for its currency. "Now," he said, "we cannot even maintain a zinc standard."

Scrap all pennies?

Rep. Mike Castle (R-Del.) raised the long-simmering question of whether America should scrap the penny entirely. The pennies he collects go into "an old beer mug I have from college," Castle noted.

Gutierrez said he hopes to get the bill out of committee by summer, after some tweaks to address the Mint's objections. Other subcommittee members also seemed eager to get their hands on it. "This is going to be a good bill to work with," said Rep. Frank Lucas (R-Okla.). "I can see some good amendments coming for this."

Lucky penny

For one year, 1943, the penny was made of zinc-coated steel because of critical war needs for copper. But 40 copper-alloy cents are known to have been struck that year, possibly by accident. Top amount paid for a 1943 copper cent: $82,500 in 1996.

Link here

Sharper Image's Gift Card with Zero Value

By Marty Orgel

As you are reading this, you might need to check your wallet as well. Because if you own one of many gift cards issued by Sharper Image company I am afraid to rock your boat that it is now has zero value.

See the following report below.

SAN FRANCISCO (MarketWatch) -- The Sharper Image's Chapter 11 bankruptcy filing reveals the downside of popular and convenient store gift cards. Tens of millions of dollars in gift cards and certificates became worthless overnight in the wake of the Sharper Image's financial plight -- and customers holding those cards have little recourse. Federal law allows a company to stop honoring store gift cards when it files Chapter 11 bankruptcy, and that's exactly what's happening at San Francisco-based Sharper Image. Sales clerks are telling customers they can no longer accept the plastic cards as payment, and the cards are no longer accepted when customers try to use them online.

Sharper Image could be sitting on as much as $25 million dollars in gift card money, according to an estimate by Brian Riley, a senior analyst with the Needham, Mass.-based TowerGroup, a research and advisory services firm. Riley follows Sharper Image. That figure comes from the retailer's Form 10-K filing in January 2007, in which the company reported it had $31 million in deferred revenue on its books. Riley estimates 80% of that is from gift cards. "My swag estimate and it's not more than a swag guess," Riley said, "is that Sharper Image has between $20 and $25 million in ... open gift cards." That's millions of dollars in cash shelled out by consumers who bought or received Sharper Image gift cards before the company filed for bankruptcy.
The gift card market is a $50 billion dollar a year industry, but it's an industry with few controls in place. Many states have ruled that gift cards cannot expire except under specific, limited instances. But in situations where a company goes bankrupt, consumers' standing is much less clear.

Federal law does say the holder of the certificate or card may have a claim against the bankruptcy estate. But Riley believes all of those cards and store credit receipts are probably worthless. "There's a good chance the dollars will be lost," Riley said. "A lot will have to do with how the courts interpret it and how the consumer should be protected." Rays of hope

A customer service representative answering Sharper Image's toll-free telephone number said customers should check back with store workers in mid-March, because company officials are still trying to determine whether they will eventually honor those cards. Riley said there is a slim chance that could happen, especially if Sharper Image intends to try to stay in business. In that case, company officials may decide to honor gift cards as a good faith effort for customers.

Riley said he doesn't expect that to happen. But there is enough action being generated online that consumers should hold on to their Sharper Image gift cards and check back with the company from time to time in case it decides to accept them again, if just for the positive public relations that action would generate. The Sharper Image bankruptcy is already generating offers from other retailers hoping to capitalize on the ailing company's woes. For a limited time, rival gadget retailer Brookstone Inc. is offering a 25% discount for anyone who turns in a Sharper Image gift card when making an in-store purchase. Brookstone is not offering customers 25% of what their Sharper Image gift card is worth - it's offering to take 25% off the Brookstone purchase price for anyone who turns over a Sharper Image card. Other rules apply, so shoppers should check with the retailer for complete details. See details on the Brookstone site.

A relatively new company that offers insurance on gift cards is Leverage. The Web site, now operating in beta, will exchange Sharper Image gift cards for any other cards it carries, for equal value. The caveat, though, is that you had to have bought your original Sharper Image gift card through the site. See full story. Riley said the Sharper Image situation illustrates an often overlooked drawback in gift cards, even as they grow more popular every year. "You're really just putting money into an unsecured institution," he said. "That is something people don't usually realize when they buy gift cards." Consumers can petition the courts in an effort to recoup some of the value on the cards, but it likely will be a frustrating experience, Riley said. "Who's going to go through all of that effort," he said, "for a $25 or $50 gift card?"