Dems demand answers from Fed, Treasury amid penny shortage

• Key insight: Two prominent Democratic lawmakers have joined banks and retailers in asking that the Treasury Department and the Federal Reserve provide guidance or formulate a plan to manage penny circulation.
• What's at stake: After the U.S. Mint printed its last one-cent coin on Nov. 12, there has been widespread confusion about how retailers should handle situations where customers pay with cash and exact change is not available.
• Forward look: The Fed said Wednesday that it will respond to the letter sent by Sen. Elizabeth Warren and Rep. Maxine Waters.

As America's penny shortage has grown, banks and retailers have repeatedly asked for federal guidance. Now congressional Democrats are demanding it.

In a letter released on Wednesday, Sen. Elizabeth Warren, D-Mass., and Rep. Maxine Waters, D-Calif., grilled the leaders of the Treasury Department, Federal Reserve and U.S. Mint over their communication — or lack thereof — with consumers, businesses and lenders regarding the dwindling supply of one-cent coins.

"Despite the public's repeated calls for clarity, the Treasury Department and the Federal Reserve … have yet to provide any guidance or formulate a plan to manage penny circulation to meet current and future demand," Warren and Waters wrote.

The U.S. Mint printed its last new penny on Nov. 12, though businesses say it stopped making the coins in bulk even earlier. Meanwhile, most of the Fed's coin terminals, which are responsible for circulating the coins, have ceased supplying existing pennies to banks and credit unions.

The result has been a plummeting supply of both old and new pennies, causing headaches for customers paying in cash, the businesses giving them change and the banks supplying those businesses with coins.

Retailers, in particular, have become caught in a double bind that could expose them to lawsuits. If they round prices up to the nearest nickel, they could be accused of price discrimination against those paying in cash. Round down, and they risk being accused of charging more to Supplemental Nutrition Assistance Program recipients, who pay with electronic cards.

Neither the Treasury Department nor any other federal agency has provided instructions on how to handle these challenges, even as trade groups for both banks and retailers have pleaded for guidance.

In their letter, Warren and Waters echoed those requests. But they also went further, accusing the Trump administration of making its "abrupt and unilateral decision to stop minting pennies" without thinking it through.

"The Administration appears to have begun the process of removing the penny from circulation without establishing a formal phaseout plan, engaging in meaningful analysis on public impact, or integrating feedback from stakeholders," the Democrats wrote.

To test that theory, the two lawmakers asked Treasury Secretary Scott Bessent, Fed Chairman Jerome Powell and U.S. Mint acting Director Kristie McNally a series of pointed questions: Before discontinuing the penny, did any of their agencies study the impact this decision would have? Did they communicate at all with banks and businesses? Did they solicit any feedback from the public? Did they even consider embarking on an education campaign?

Almost every one of these questions — of which there were more than two dozen — came with a follow-up: If not, why not?

The two Democrats also asked whether the Fed conducted "any assessments on the impact of closing coin terminals" before implementing the policy change. The Fed has 165 of these terminals, spread widely across the country. As of Dec. 3, 119 of them were no longer distributing pennies, and 111 were no longer accepting deposits of the coins from lenders with excess supply.

When asked for comment, a Fed spokesperson replied, "We have received the letter and plan to respond."

By the time of this story's publication, the Treasury and U.S. Mint had not responded to American Banker's request for comment.