Ban the Benjamin

The federal government makes itself a virtual accomplice to international crime by continuing to meet the suspiciously high demand for $100 bills, which exceeds that for any other denomination.

Say hello to Lincoln’s Treasury secretary, Salmon P. Chase. His denomination was recalled in 1969; the Treasury stopped printing them long before that. You can’t buy anything with it anymore, but one of these babies recently sold for $480,000.

The United States government didn’t get around to criminalizing money laundering in any direct way until 1970, when President Richard Nixon signed into law the Bank Secrecy Act. One year earlier the Treasury and the Federal Reserve had recalled, at Nixon’s direction, all denominations in excess of $500. The reason cited was lack of use, but in fact Nixon had directed that these denominations be recalled to combat money laundering. I can’t seem to locate the mechanism by which Nixon did this. The executive action has been forgotten by everybody except numismatists and notaphilists (the latter being money hobbyists who collect paper currency rather than coins), who refer vaguely to a 1969 executive order that I can’t find and suspect doesn’t exist.

But I digress.

Connoisseurs of historical irony will note that the Watergate scandal entailed a great deal of money laundering by people on the payroll of the Committee to Re-Elect the President (which the Nixon White House and re-election campaign called CRP even as the press gleefully labelled it CREEP). Yet among the 69 Watergate indictments and 48 Watergate convictions, none was for money laundering, because the Treasury department hadn’t yet set up the enforcement mechanism required under the Bank Secrecy Act. Thus did the president most responsible for criminalizing money laundering become the president who committed the most money laundering.

That does not make it any less true that both the Bank Secrecy Act and the recall of all denominations above $500 were both sound policy. The only problem with the 1969 recall was that it shifted criminal activity away from currencies above $500 and toward the $100 bill. There weren’t enough $500 bills around to make that denomination a significant player in international crime; the $500 had ceased printing in 1945.

The obvious solution to this dilemma is to stop printing $100 bills and force international criminals to carry their paper currency in steamer trunks and other hard-to-hide containers. Today our government does the opposite: It prints more Benjamins than any other denomination. That’s nuts, and it’s the topic of my latest New Republic piece. You can read it here.