Income-tax evasion has caged several celebrated American scoundrels, among them Mickey Cohen, Frank Costello, and Al Capone, whose armored car, confiscated by the Treasury, was used by the Secret Service to protect President Roosevelt during World War II. (“I hope Mr. Capone doesn’t mind,” Roosevelt murmured when told.) Auditors are often inadequate for these big evasion cases. Internal Revenue, like most Treasury bureaus, uses undercover men. Perhaps the most successful infiltrator was the mild-mannered agent who put Capone away; he lived his entire adult life under the name of Pat O’Rourke; his true name, Mike Malone, wasn’t revealed until his death in 1960.
More than half of the Secret Service works in real secrecy. Treasury men pose as bravos, smugglers and wholesalers of counterfeit currency. Narcotics agents haggle over the price of cocaine with raffish characters with names like Gee Gim Tick and Wong Gum Hoy, and Alcohol and Tobacco Tax Division men pursue “smoker cars”—doctored automobiles, favored by modern bootleggers, which cover escapes by releasing dense clouds of oily black smoke. The naïve may think of this as amusing melodrama. In reality it is dangerous; since Repeal moonshiners have killed more than one agent a year. It is also important. Without it the Treasury couldn’t hope to ring up about 293 billion dollars annually on the national cash register.
The Treasury gives as well as receives. To know how much it may give, it cannot wait until every taxpayer’s contribution has been tabulated. It must have some idea of where it stands from moment to moment. Monthly revenue estimates are prepared by the Office of Tax Analysis, which takes a keen interest in the nation’s economic health, since recession means shrinking incomes and shrinking income taxes. Simultaneously, at the wide end of the cornucopia, the Fiscal Assistant Secretary daily makes an educated guess as to how much the government is collecting and spending. The difference means surplus or deficit, and is greeted by cheers or groans from the rest of the government.
The Treasury collects vast amounts of money. Customs, Internal Revenue and employers deposit it in 11,000 private banks, and twice a week the Fiscal Assistant Secretary calculates how much is on hand. Bankers can lend this money without paying interest to the government, since they perform many services for the Treasury, such as selling Savings Bonds. Since abrupt withdrawals would bruise the economy, the Treasury calls for these funds on a percentage basis, depending on the size of the bank. When a “call” is made, funds are deposited in one of the twelve Federal Reserve Banks, where the Treasury keeps a deposit balance of between $450,000,000 and $550,000,000. It is credited to the account of the Treasurer of the United States, and checks can then be drawn upon the funds by any of the government’s 2000 disbursing officers. Squaring accounts among Federal Reserve banks is a mysterious affair involving gold certificates, the highest of which is a $100,000 bill bearing Woodrow Wilson’s portrait, and which are not allowed in general circulation.
The Federal Reserve System, known to friends as the Fed or the Fed’l, is not a part of the Treasury. Neither is another major fiscal agency, the Bureau of the Budget, which is part of the President’s official household. Officially the Treasury doesn’t see the budget until it has been approved by the President. Even so, the Department has a lot to do with preparing it, especially at the flag-officer level. (The Secretary, the two Under Secretaries and the five Assistant Secretaries are entitled to personal flags bearing the Treasury seal, crossed anchors and thirteen stars. The color varies with the rank. In Washington, having your own flag is like having a key to the executive washroom.) Negotiations with the Federal Reserve tend to be more delicate. The Fed is to the Treasury what the Bank of England is to the Exchequer: the nation’s great central bank. As the watchdog of credit, it influences interest rates. Since the Department must borrow continuously to keep up with the national debt, it has a big stake in these decisions, and flag-officer approaches to the Fed are diplomatic, like those to, say, West Germany.
Debt experts have their own bureau, because theirs is the Department’s greatest single chore. In Jackson’s day the government owed virtually no one. Once more the change must be chalked up to wars; each victory has left the Treasury holding a bigger bag. The Treasury’s arrears are massive, but only because the government is massive. Private indebtedness has been growing far more rapidly. Since 1945 corporate debt has more than tripled and consumer debt has increased over ten times, while Federal obligations have increased by almost twenty percent. The national debt needn’t terrify us, though managing it does take some doing.
Treasury securities are divided into two groups: marketable and nonmarketable. The largest group of nonmarketable securities are Savings Bonds—formerly called Defense Bonds and War Bonds—and while all of these—over $50,000,000—could be cashed in at once, it’s not likely. The real problem lies in marketable debt.
During World War II the Fed pegged the market for government securities, buying Treasury bonds at low Depression rates. Late in the Truman administration there was a row. Cheap money was causing inflation, so the Fed decided to quit bailing out the Treasury. The government was forced to pay higher interest rates, and the cost of servicing the debt rose. Since the early 1960s the Treasury and the Fed have been working together on a new tack: high rates for short-term loans, to discourage the flow of hot money from the United States, and low rates for long-term loans. Negotiations between the giants are conducted in the ionosphere of economics. The smallest detail becomes incredibly technical.
Fiscal sophistication is the most awesome aspect of the Department. Primitive tribes barter or swap precious metals, but in the Treasury Building, the home of the big money, there are only ledgers and digits. Government securities worth billions are bought and sold in the bond market. The bigger the man, the more intangible is the wealth with which he deals. Former Treasury Secretary C. Douglas Dillon was born rich; in private life he was an investment banker. Yet he confessed that the first time he looked closely at a dollar bill was when his own signature, as Secretary of the Treasury, began to appear on currency. And a dollar, when you come right down to it, is only a symbol. Any bill—even a $100,000 note—has an intrinsic worth of less than a cent, its manufacturing cost. Money is faith, scraps of paper.
The scraps serve their purpose, though they cause certain practical problems. Paper can be lost, mislaid or damaged. It happens all the time, and the Treasury is sympathetic. There are some two and a half billion Savings Bonds records. A fifth of them represent outstanding securities. More than a million substitute bonds have been issued by the Bureau of Public Debt. If a widow believes her husband held some bonds, a letter will bring confirmation or denial. Similarly, the Treasurer of the United States handles a thousand lost-check claims a day. Even mutilated currency can be replaced, provided it is recognizable. Specialists in the office of the Treasurer of the United States, puzzling over charred fragments of currency, can spot redeemable paper where an untrained eye would see only ash. The rule is, face value for three-fifths of a note, half that for two-to-three-fifths. Many a man has cooled the embers of a blackened cash box and wound up with a roll of bills. One found a fortune moldering in his father’s grave. A refugee from Nazis hid $33,000 in greenbacks in a tree in Germany. It was soggy pulp after the war, but the Treasury paid off.
The Department’s valuable publications are turned out in the Bureau of Engraving and Printing. The bureau does all sorts of job printing for the government—bonds, checks, officers’ commissions, citations, White House invitations, liquor stamps and 23,000,000,000 United States postage stamps a year, to which it affixes a million pounds of stickum. Most of the presswork, of course, is paper money. The bureau makes $30,000,000 a day. Not many people have seen its ornate gold certificates, since you have to be a Federal Reserve Bank to spend one, but everyone knows its popular line of green goods. They come in three distinctive, eye-catching, easy-to-use models: silver certificates, United States notes and Federal Reserve notes. They are distinguished, respectively, by their blue, red and green seals and serial numb
ers. Some bills with yellow seals and serial numbers are still in circulation; every now and then one drifts back to the Treasury. They were designed for the invasion of North Africa in 1942. If the Germans had captured our paymasters, the special notes would have been declared illegal tender.
Experience has taught the Treasury to be suspicious, and this prudence is most conspicuous in the bureau’s pressrooms. Visitors are blinded by the sight of so much cash. Greenbacks stand imperiously in million-dollar stacks, and though nothing larger than a $100 bill has been printed since 1945, there are plenty of serviceable old $1000, $5000 and $10,000 notes around. Tidy girls patrol the halls carrying natty purses which, upon being opened, are discovered to contain .38 caliber pistols. Despite these precautions there are slip-ups now and then. A few years ago a $58-a-week bureau handyman outwitted security and made off with two wrapped “bricks” of twenties worth $160,000. He was collared quickly. “It’s stupid to steal new money. The serial numbers can be traced so quickly. But I won’t say it couldn’t happen again,” an official said recently, resting his elbow on a bale of 232,000 silver certificates.
Each year 600,000 tourists parade through the shop. In the spring the tide becomes a flood—9000 visitors a day, mostly schoolchildren, all of whom are escorted in groups of twenty-five by guides. Employees report that nine out of ten children ask slyly where they can get samples. The joke has become an occupational bore. To the bureau, making money is just a job, like making doorknobs. It does have its trade secrets, however, and some of them are top secret. One is the formula for that chrome-green dye, of which 4,000,000 pounds are manufactured annually. Another is the identity of the animals whose hides are used to size the paper. The threaded paper itself is such a sensitive topic that you can be jailed for making any paper—even blank paper—with red and blue cotton fibers in it. The Treasury’s supply comes from a heavily guarded mill in Massachusetts. Each sheet is impregnated with resin and can take over two thousand double foldings in the same crease without tearing. Eventually money does become soiled and worn, of course. Filthy lucre is destroyed—Federal Reserve notes are cut in half, shipped to Washington on separate days and burned—and crisp new tender, after undergoing twelve countings, is issued through the Fed’s banks. At any moment about thirty billion dollars is in circulation, five billion of it ready for the incinerator.
If men like former Secretary Dillon don’t ogle greenbacks, plenty of others do. The Treasury maintains a steady correspondence with people who are fascinated by folding money. Certain questions recur. Isn’t the flag on the back of the ten-dollar bill upside down? (No.) What’s happened to the White House on the back of the twenty? (The Truman balcony has been added.) Is the automobile on the ten a Ford? (It’s a composite.) The superstitious think they see the figures “172” in the Lincoln Memorial shrubbery on the five, and, in the scrollwork, the Pope.
A more sensible criticism of our currency came from the late W. A. Dwiggins, the type designer, who complained that the intricate vignettes, tracery and ornamentation in the engravings were bad art. Bureau engravers weren’t offended. They don’t try for art. The purpose of their fancy doodles is to thwart counterfeiters, and they passed their greatest test in World War II, when Germany decided to ruin Allied economies by flooding them with bad bills. The Nazis raised hob in England—pound notes had to be completely redesigned—but they quit trying to duplicate American money. “It was too good for us,” Hermann Göring said.
Carpers never mention the vulnerable Treasury seal, which is reproduced on the face of every bill. The Latin legend is an abbreviation of Thesauri Americae Septentrionalis Sigillum, “The Seal of the Treasury of North America”—an obvious error. The dots on the shield are the heraldic way of depicting gold, although United States currency hasn’t been convertible for over forty years. Nevertheless, all Federal Reserve notes must be backed by twenty-five percent gold (the other seventy-five percent is commercial paper).
Watching the bullion in the granite sepulcher of Fort Knox, and the mints and assay offices of Denver, San Francisco, Philadelphia, and New York, is the responsibility of the Bureau of the Mint. As long as gold is taken seriously, the Mint lavishes care upon it. Each vault door bears a double seal; two men, each with a different dial combination, are necessary to open it. Every mote of gold dust is cherished. Tender instruments move ingots, to prevent abrasion; when the San Francisco mint was abandoned, the building was torn apart and $175,000 in gold sweepings was recovered.
Silver, which is no longer sold by the Treasury and which is being withdrawn as backing for part of our paper money, has its own mausoleum at West Point. Because silver circulates, some vanishes each year. Reno and Las Vegas tourists keep silver dollars as souvenirs, and even the normal wear and tear on a half dollar, quarter or dime may diminish its size by as much as six percent.
Coinage, like the printing of greenbacks, is a tidy, businesslike operation. Some tricks of the trade are ancient: rims of silver coins are receded to discourage trimming, a fraud that goes back to Roman days. Other practices are triumphs of automation, thus permitting the mints in Philadelphia and Denver to churn out twelve million coins a day with one fourth of the old work force. Most of the Mint’s shimmering cascade goes to thirty-seven steady clients—the twelve banks of the Fed, their twenty-four branches and the Treasurer of the United States. The bureau also strikes military medals and a medallion for each President (copies of all thirty-four are available at $3.00 apiece), and since 1937 it has produced coins for over thirty foreign countries.
Minters watch the American economy carefully, for money itself is as responsive to the law of supply and demand as the things money buys. If times are hard, there is less coinage. In addition, the small-change market varies seasonally, reaching a peak just before Christmas. It is different in different places. The Mint keeps tabs on how many people are attending movies in Chicago, whether new vending machines are being installed in Texas, which towns on the West Coast are adopting sales taxes or installing parking meters, where cash-and-carry chains are expanding. A single nationwide boxtop-and-a-coin campaign may bring sixty million pennies into a Midwestern town. One month recently a cigarette tax rise required the dispatch of thirty Mint trucks to New Jersey, each truck carrying fifteen tons—$43,000—in pennies.
Despite its vigilance, the bureau is occasionally surprised by sudden demands for coins, and certain regional quirks have never been explained. New York accumulates half dollars. Boston spends them. Tellers in Baltimore never seem to have enough five-cent pieces. The explanation dawned on a high official of the Mint over one weekend. He was standing in front of a Maryland one-armed bandit at the time, and had just finished feeding it his fiftieth nickel.
The Mint has, at one time or another, made half-cent, two-cent, three-cent and twenty-cent pieces. In 1943, when copper was scarce, it produced a zinc-coated steel penny, and in recent years it has reduced the silver content of dimes, quarters, half-dollars, and cartwheels. Designs aren’t altered often, though. Congress, to whom the Constitution gave the coining power, prohibits changes in a new coin for twenty-five years. Sometimes congressmen become interested in details; they were responsible for the Washington quarter. As a rule, however, the Mint does the designing. Once the Secretary has approved its decision, production is routine. Silver, alloy, bronze, and cupro-nickel bars are rolled flat. Blanking machines stamp out disks. Presses imprint letters and images, automatic scales reject defective pieces, machines tally the final result and the bright merchandise is poured into buckets and packaged in canvas bags.
After a decade or two the coins return, dull and defaced, in other bags. These beat-up pieces are counted and the sums charged to the Federal Reserve. Then the bags are held over fires. Flames eat away the canvas bottoms and the tired shekels tumble down to be melted and molded into fresh ingots. A cashier in the Philadelphia mint once decided to extract a profit from this final step. Wearing a coat with a hidden pocket in the tail, he would stand over counted bags of
half dollars and scoop up a few each day. The fires couldn’t inform on him, but Mint men are paid in new money, and fellow employees, observing his old change, became suspicious. Arraigned and confronted with his hoard of battered fifty-cent pieces, he betrayed an imperfect understanding of numismatic theory. “I wouldn’t steal from the Mint,” he said. “That’s Fed money.”
The cashier wasn’t stupid. After his hitch in the pen he went into legitimate business and cleaned up. It is one of the marvels of the annals of Treasury crime that sane men, intelligent men, even shrewd men talk themselves into elaborate con games and wind up by conning themselves. “One great error,” said the first Secretary of the Treasury, “is that we suppose mankind more honest than they are.” Another is to suppose that dishonest men are cleverer than we are. The present Treasury Building owes its existence to two brothers who became enmeshed in a scheme to defraud the Department. Reflecting that they might be caught, they decided to destroy the Treasury’s records on March 31, 1833. Owing to an oversight they burned not only the incriminating papers but the entire structure as well. The blaze attracted the eye of Andy Jackson next door in the White House, and he started an investigation which brought them to the dock.
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