The 13 People Who Can Order a $1 Trillion Coin
NEW YORK ( TheStreet) -- It's not Timothy Geithner's choice to order a $1 trillion coin. In fact, it may not be an option.
Calls for the minting of a platinum (bullion platinum, to be precise) $1 trillion coin so as to avoid a debt ceiling clash have emerged from legitimate corners of the Web. Matt Yglesias at Slate, Joe Weisenthal at Business Insider and Nobel Prize-winning economist Paul Krugman at The New York Times are among many who have shed light on the possibility for Treasury Secretary Timothy Geithner to print a $1 trillion platinum coin, walk it over to the Federal Reserve and deposit it in the Treasury's account.
The bizarre action, first noted during the 2011 debt ceiling debate by a reader of Cullen Roche's Pragmatic Capitalism finance blog, has gone viral in the past week.
In interviews with two former U.S. Mint directors, TheStreet learned two differing interpretations on the U.S. code that has sparked a national conversation.
Why Does a Law Like This Exist?
"(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time."
This is the legal language driving the discussion as to whether Geithner may mint the $1 trillion coin. The U.S. Mint is part of the Treasury Department.
Former U.S. Mint Director Philip Diehl (1994 - 2000) said he helped author the law with the intent to allow the United States to print coinage for investment purposes. Essentially, Diehl said he, along with the aid of former Rep. Mike Castle (R., Del.), wanted to create platinum bullion coins for the expansion of the United States' investor market from silver and gold into platinum.
Diehl said his research found that the U.S. could mint platinum bullion to sell on the world market for investors to buy from an authorized purchaser. This coin came in the form of the American Platinum Eagle, which the Mint currently offers in 1 ounce, 0.5 ounce, 0.25 ounce and 0.1 ounce weights of platinum at a face value of $100, $50, $25 and $10, respectively.
The catch is that the printed face value of these platinum bullion coins doesn't represent the real value as the coin actually is worth the weight of the spot price of platinum (We'll return to this point later). For example: Tuesday's closing platinum spot price was about $1,586 an ounce, according to Kitco's index , which means an authorized purchaser would buy a 1-ounce American Platinum Eagle coin on Wednesday from the Treasury at about that price -- including a fee for the transaction -- and then sell that coin to a private purchaser at an agreed price.