New Money

n the colonial era, the U.S. government tried to deter the counterfeiting of American currency by printing "To Counterfeit Is Death" on their bills. The government meant it, too, although it was a penalty they rarely imposed.

This month, people will witness-and if they are fortunate enough, handle-the Treasury Department's latest attempt to deter counterfeiting. It's a redesigned $100 bill that contains a larger, slightly off-center portrait of Ben Franklin, repeated as a watermark; a security thread embedded in the paper; ink that changes from green to black when viewed at different angles; lettering that appears as a thin line to the naked eye and blurs when photocopied; and a host of other security features.

Counterfeiting in the United States has calmed down since colonial times, and since the "golden age of counterfeiting" which occurred in the mid-1880s. In those days, one-third of all U.S. paper currency was counterfeit. Today, only about nine out of every million bills that pass through the Federal Reserve Bank's scanners are judged to be fake.

Still, statistics from the Secret Service, the law enforcement agency charged with protecting the currency, show that the number of bogus bills circulating in the United States is increasing. The agency's research also shows that most of these counterfeits come from foreign manufacturers-in fiscal 1994, 75 percent of seizures of fake U.S. currency occurred overseas-often beyond the reach of the Secret Service, since its overseas presence is minimal. And about 10 years ago, Treasury officials and currency experts began to worry about imaging technology. "With the proliferation of high-quality color reprographic systems," say Robert Schafrik and Sara Church in the July 1995 issue of Scientific American, "the once technically demanding and esoteric pursuit of counterfeiting has been opened up to those with hardly any skills."

Hence, the arrival of the new, security feature-laden $100 bill.

The Treasury Department so rarely revamps the currency that it has a lot of explaining to do. And to a lot of people. More than $380 billion in U.S. currency is circulating, and two-thirds of it is overseas, where it serves a variety of functions. Some foreign citizens stick U.S. notes underneath their mattresses as insurance against inflation, others use it as a second, at times illegal, currency for commerce. Reaching out to the millions of U.S. currency holders who live in different societies and speak different languages is no simple task.

Treasury has several messages to send out to the public that it considers critical to the success of the currency redesign project. "The initial message is that we are not going to recall any currency," says Mary Ellen Withrow, the Treasurer of the United States. "If people have old $100 bills after the new ones come out those old $100s will be good forever." It is particularly important that this information is communicated to people outside the United States, she says, because it is common practice for other countries to devalue their old notes when releasing notes of a new design "so that's the first thing that their citizens think about."

A case in point is Russia, where two and a half years ago the Central Bank declared that all rubles issued before 1993 were about to become worthless, and gave people two weeks to exchange up to $35 in old Russian notes for new ones. In late January, The Washington Post reported that most Russians were planning to trade in their old $100 notes for new $100 notes "as soon as they can."

Treasury doesn't want to mess with the greenback's reputation. Every dollar in circulation acts as an interest-free loan to the United States, so the U.S. government stands to lose money if foreign citizens decide American dollars are no more secure than deutsche marks or yen, and trade them in for another country's currency.

Given these factors, Deputy Treasury Secretary Frank Newman, who has recently returned to the private sector, decided that Treasury needed to create a public education office to manage the introduction of the new-look $100 note to the world-and the redesigned notes of lower denominations which are scheduled to be released individually in decreasing order of value at 6 to 12 month intervals.

Last August, Treasury pulled together a five-person public education office. Some of the staff were recruited from Treasury offices-the team's director was previously special assistant to the deputy secretary, and the contracting officer is a main Treasury employee. Others are on detail from the Chicago Federal Reserve Bank and the U.S. Information Agency. There is one new hire, brought on board to act as the creative force behind the campaign. The Federal Reserve and Treasury offices such as Public Affairs, Management and Domestic Finance loan staff to the currency redesign education team "to make sure we get the work done," says a team member.

History of the Redesign

Authority to change the design of the currency and its security features rests with the Treasury secretary. In 1990, Treasury created a task force of representatives from the Treasury Department, the Federal Reserve System, the Secret Service and the Bureau of Engraving and Printing (BEP) to study measures that might improve the security of the currency and make recommendations to the Advanced Currency Deterrence Steering Committee (ACDSC), a permanent inter-agency body. At the same time, the BEP commissioned a study on counterfeit deterrence features from the National Academy of Sciences (NAS), which came out with a report in December 1993. The committee then recommended a new design to the Treasury secretary.

The ACDSC chose security features for the new $100s based on four criteria, says Tom Ferguson, assistant director for research and development at BEP and a committee member: Effectiveness at deterring counterfeiting, ability to be manufactured in consistently large volumes, durability and cost.

More than 120 security features ranging from holograms to color patterns were examined and tested, including those submitted in response to a BEP ad in The Commerce Business Daily, those used in other world currencies and those suggested by the National Academy of Sciences.

Development of the new $100 bill had its snags. In early 1994, for example, a BEP engineer with security clearance stole $1.6 million worth of test bills stashed in a vault to which he had access.

Still, the redesign of the $100 bill, says Ferguson, was "actually a fairly smooth process. Perhaps our biggest problem was getting to a point where we said, 'We're done. No more additions,' and moved on. There was always one more person with a feature they wanted to try."

It cost $765,000 to develop the new C-note: $265,376 for the NAS report and $500,000 to purchase test quantities of security features for evaluation. Taking advantage of the unique way the BEP funds its operations-it raises revenue by selling packages of paper money to Federal Reserve Banks-the costs of developing the new bills are being rolled into the cost of the currency. To cover the development costs, plus the budget of the public education campaign and the higher production costs associated with inserting the new features into the bills, the BEP has increased the price of each bill that the Federal Reserve buys from it to four cents, a hike of 0.3 cents.

The redesigned $100 bill is being put into circulation by the Federal Reserve as part of the Series 1996 currency. As banks deposit old-design $100 bills in Federal Reserve Banks during the regular course of business, the Reserve Banks will take the old bills out of circulation and replace them with the new bills. The Treasury has been printing and stockpiling the new notes since last September to meet both the regular demands of commerce and the curiosity factor, the department says.

Educating the World

During the golden age of counterfeiting in the United States, independent publishers ran the only public education campaign around, churning out currency identification manuals like the 1839 edition of Peyton's Counterfeit Detector: The Principal Points Which Constitute a Genuine Banknote, a particular volume which, say Schafrik and Church, contained illustrations identifying 1,395 circulating counterfeits, 20 fictitious banks, 43 banks with worthless notes, 54 bankrupt banks and 254 banks with counterfeit notes.

Today, Treasury's public education office has a budget of $11 million for year one of its campaign. It plans to spend approximately $2 million on printing posters and brochures for the public and producing training manuals for banks and other currency handlers; $4 million to $5 million on advertising the currency change abroad; and $3 million to $4 million on travel, administrative and operational costs incurred in training cash handlers, law enforcement personnel and others. Treasury has awarded a $30 million, five-year contract to Young & Rubicam subsidiary Burson-Marsteller to place public service announcements and paid ads in the media.

The public education office is conducting different campaigns to introduce the new $100 bill to the public here and abroad. In the United States, a Treasury official says, the general public tends to use credit cards and checks rather than $100 bills to take care of large purchases. Therefore, the office is directing their domestic education effort towards Americans who encounter $100s as part of their work-bankers, Federal Reserve employees, postal workers who accept cash for money orders and merchants. The Federal Reserve is generating its own training videos to show its employees how to recognize the new bills.

Treasury's international education effort is more broad-based and intense.

Treasury has tapped employees at U.S. embassies abroad to do the legwork for the international component of the campaign. Since use and counterfeiting of American currency varies from country to country, location will dictate how much currency redesign education each U.S. embassy does. "The embassies themselves will determine how much outreach is appropriate," says a Treasury spokesperson. "They can do that better than we can."

The public education office, however, lit a fire beneath U.S. embassies last summer by asking them to assess the interest in and importance of the new currency in their countries. "We asked, 'Who in your country uses American money?'" she says. "'Local consumers? Only those involved in the tourist industry?'" Treasury also asked embassies to identify the best media outlets through which to reach the American-dollar using public in their countries. "In some countries," says the spokesperson, "the radio is the most popular source of information. In others, it's the newspaper which gets passed around. Perhaps the only people who use American currency in the country watch CNN-then getting the message out on CNN is sufficient.

"This information, along with the expertise of the Secret Service, other State Department officials and Treasury international affairs staff, has helped us develop a coherent plan for public education abroad," she says.

Treasury will not provide embassies with any additional funds to conduct currency redesign education-the effort is considered to be part of the ongoing duties of embassy personnel. However, the Treasury spokesperson points out, beyond the employee hours spent on the project, there should be no extra costs involved in promoting the currency change. Treasury will supply embassies with all the brochures, stickers and kiosk displays in any 1 of 13 languages they request. Embassies are instructed to place paid advertisements on radio and TV through Burson-Marsteller. If an embassy official travels for the public education campaign, then Treasury will evaluate the situation and may provide reimbursement.

The public education office is attempting to lessen the burden on embassy employees by also providing them with public education resource kits the office developed with Burson-Marsteller. The kits contain sample press releases, articles on the design change that can be sent to the Op-Ed page of the local English-language newspaper or translated for use in the non-English press and prototypes of speeches for ambassadors to deliver. Treasury is encouraging embassy personnel to consult with Burson-Marsteller in the cities overseas where the worldwide company has representatives.

While embassies are tailoring the foreign public education campaign to particular countries, some general strategies apply. Treasury is signing up senior department officials to spread the word. Treasurer Withrow, for example, met with bankers in Seoul, Shanghai and Tokyo to talk about the redesign while on a tour to promote another U.S. product, commemorative coins, in 1995. Treasury officials are relying on people they call "local influentials"-foreign citizens who are comfortable with the change and can speak on it with authority-to relay information on the currency design to their compatriots. Translations of pamphlets and training videos into other languages are being contracted out and then checked for accuracy by USIA employees.

The focus and intensity of the public education campaign will change with each of the lesser denominations. Treasury officials anticipate they will mount a less intense campaign than the current outreach effort for the introduction of new $50 bill because it will be the second redesign released, and it has a relatively low volume of use. The public education campaign for the new $20 bill will be focused on the general American public because they use the majority of the world's $20s.

Satisfying Skeptics

However comprehensive Treasury's public education campaign is, some charge that it's failing to satisfactorily answer a central question: Why redesign?

"We are making our currency secure against the threat of advancing counterfeiting technology," said Treasury Secretary Robert Rubin at the ceremony announcing the currency redesign last September. "This is an example of government doing what it should, staying ahead of the curve."

However, last October, two reporters charged in The New Yorker that "while the threat of widespread amateur counterfeiting on color reprographic equipment is indeed serious, it is far-fetched to think that that threat alone prompted the currency redesign." Rather, they said, the Treasury is reacting to the proliferation of an excellent-quality counterfeit $100, dubbed the Supernote, that is being produced by a large-scale printing operation in the Middle East. Why might federal agencies deny the existence of such a counterfeit? "The Federal Reserve and the Treasury don't fear the Supernote itself as much as they fear a confidence problem that might result if they publicly acknowledge it and countenance a large-scale investigation," the reporters argued.

Wire services and the foreign media were quick to pick up on The New Yorker's skepticism: "As if on a whim, the U.S. Treasury announced a redesign of the $100 note," The Times of London reported; "An almost flawless counterfeit $100 . . . has forced the U.S. Treasury to introduce the first new version of the note since 1929," The Calgary Herald said.

Treasury Department spokespeople have responded to these allegations by merely continuing to insist that the redesign is a preventative measure. One Treasury employee told Government Executive that, precisely because "it's an example of government trying to address the potential for massive counterfeiting rather than trying to react to a problem, this is one of the more rewarding projects I have worked on."

Treasury officials argue that widespread disbelief in Treasury's stated motives for redesigning the currency stems from the inability of the public to see the federal government as a proactive organization. "We know enough," a Treasury spokesperson says, "that it is fairly reasonable to assume that counterfeiting will become a crisis. Taking action in anticipation of a problem makes more sense, but government spends so much time being reactive that the public finds it difficult to accept an agency embracing a new role."

Having the currency redesign campaign cast in a dubious light is the last thing Treasury desires. It's the department's misfortune to be promoting a solution to a problem that many Americans are not aware of in an era of publicly-sanctioned shrinking government. Treasury officials are sensitive to the possibility that the public might perceive the money the department is investing in the currency redesign public education campaign as unnecessary spending or expansion of government. "We don't want to overstate the structure of the currency redesign public education office," a Treasury spokesperson says. "It's a hodge-podge of people. It might not be there forever. On the other hand, we don't want to understate the importance of the office either."

At least Treasury officials are able to make a good case that the currency redesign public education campaign is more than pretty packaging. "If we don't pay to print and distribute a cash register sticker," the spokesperson explains, "the cashier won't be able to tell what the new bills look like and all the work that we've done to redesign the currency will have been a waste of time."