On June 17, 2020, Federal Reserve Chairman Jerome Powell informed Congress that the partial lockdown of the American economy has “kind of stopped” the circulation of coins.
At some banks across the nation, pennies, nickels, dimes, and quarters are beginning to experience shortages.
Tennessee Congressman John Rose brought up the issue during a hearing in front of the House Financial Services Committee, informing Powell:
I received a call from a bank here in Tennessee’s sixth congressional district yesterday alerting me to the fact that they had been notified at the beginning of this week by the Fed that they would only be receiving a small portion of their weekly order of coinage.
According to this banker, his institution will likely run out of coins by Friday of this week or this weekend, and after some preliminary research, I found that many other banks across my district are having the same operational challenge.
My fear is that customers who use these banks will react very poorly, and I know that we all don’t want to wake up to headlines in the near future that such as banks out of money. Chairman Powell, I wonder, are you aware of this issue, and what is being done to mitigate it?
“Yes, I am aware of it. I’m very much aware of it,” Powell responded:
Let me say, what’s happened is that with the partial closure of the economy the flow of coins through the economy has gotten all–it’s kind of stopped. In places where you go to give your coins and get…cash, you know, folding money, those have not been working. Stores have been closed.
So the whole system of flow has kind of come to a stop. We’re well aware of this. We’re working with the mint, and we’re working with the reserve banks. And as the economy reopens we’re, you know, we’re seeing coins begin to move around again.
So if your bank hasn’t already done so, they should certainly be in touch with their Reserve bank to report the situation, and we’re doing–we’ve been working on this problem and, you know, very much appreciate your bringing it to our attention. We feel like we’re making progress, but it’s been something that we’ve been working on.
Powell described the coin shortage a “temporary situation,” and he claimed that the Fed is “working with the Mint to increase supply, and we’re working with the Reserve bans to get that supply where it needs to be.”
Rose asked if bank customers are going to have to round up or round down, if coins are not readily available.
“And in a time when pennies are the difference between profitability and loss, it seems–it seems like it might be a bigger concern than the announcement from the Fed would indicate that it is,” Rose declared.
He called on Powell to “put out some more robust guidance” to the banks, so they know how to update their customers.
“I want to thank you for–for bringing that up, and I’ll certainly do that,” Powell commented.
The U.S. is in the middle of a massive economic downturn which is beginning to disrupt some of the most mundane aspects of our lives.
Now more than ever, policymakers need to get things straightened out, lest they want the lives of everyday people continue to be disrupted.