There were a fundamental error and an omission in "Prepaid Cards Could Dry Up Source of Treasury Income" (April 18, page 7).

The error was the view that stored-value cards remove funds from a bank. The card merely contains information. When a payment is made, the recipient demands the funds from the card's issuer.

Therefore, the greater the amount of funds used in stored-value cards, the larger the bank balances will be. The odds are that payments out of stored-value funds are destined for a merchant's account in another bank.

The omission was that the Federal Reserve or Treasury makes a substantial profit from issuing coins and currency. The profit is the difference between the cost to produce the cash and the value of that cash. Use of stored-value cards will reduce this artificial income as it reduces the need for new currency. Only a bureaucrat could lament this loss. Jerome Svigals Jerome Svigals Inc. Redwood City, Calif.

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