Philly Deals: Geithner sees cash in coins' metal

Posted: March 29, 2012

Like an old man with a cart picking up junk on Ridge Avenue, Treasury Secretary Timothy Geithner is trying to turn scraps of metal into cash.

Geithner wants to strip copper and other valuable metals from the Philadelphia and Denver coining lines that mint America's small change. "Currently, the costs of making the penny and the nickel are more than twice the face value of each of those coins," he told a House Appropriations Committee panel Wednesday.

Treasury wants a law that would give it the freedom "to change the composition of coins to utilize more cost-effective materials" without having to ask Congress for permission every time it dilutes the content of the national coinage.

Geithner didn't specify in his testimony whether that means using plastic, aluminum, or other materials associated with carnival tokens. Or the old proverbial wooden nickel.

The U.S. Mint is researching alternative materials for all small change, said spokesman Mike White. "We're in the early stages, with a variety of metallic materials," he told me. Research on nonmetals would need congressional permission. "We have to deliver a report to Congress by the end of this year," White said.

The Mint says nickels are currently 75 percent copper, 25 percent nickel. Pennies are copper-covered zinc. Metals prices are volatile, but they have been generally rising in U.S.-dollar terms as China, India, and other fast-growing countries use more, drawing speculators who bid prices still higher.

Geithner hopes that Mint manufacturing and administrative changes "will save more than $75 million" a year, starting next year. That follows December's decision to stop making dollar coins after 1.4 billion of them piled up, unused, in Federal Reserve vaults.

The Mint employs 1,800 people, including 385 in Philadelphia, down from previous years. Philadelphia and Denver together produced about seven billion coins last year, down from a peak of 27 billion in 2000, due partly to lower demand for pocket change as more Americans use debit cards and other virtual money.

Bank again

Customers Bancorp Inc., the Wyomissing, Berks County, bank started by former Sovereign Bank boss Jay S. Sidhu, plans to raise $115 million in a public stock offering, Sidhu told the Securities and Exchange Commission.

Since 2009, Sidhu - backed by international investors and aided by veteran Pennsylvania lender Dick Ehst and other ex-Sovereign officials - has built Customers into a ?$2 billion-plus-asset bank, focusing on small-business owners, nonprofits, and consumers. Offices are in the Philadelphia, Reading, and Princeton areas and New York's northern suburbs, which Sidhu says are underserved by distracted national banks and cash-strapped local lenders.

Like Sovereign, Customers has been cobbled together from chunks of other banks. Sidhu started Customers with a 2009 investment in the former New Century Bank, a Phoenixville lender run by Kenneth Mumma, publisher Steve Forbes' brother-in-law. The bank has since absorbed the former Berkshire Bank in Reading, InterState Net Bank in New Jersey, and USA Bank in suburban New York. Sidhu wants to use the IPO proceeds to buy additional banks and bank assets, including discounted troubled loans from the Federal Deposit Insurance Corp.

Sidhu built Sovereign into the largest bank based in eastern Pennsylvania before he was forced out of the top jobs by Florida investor Ralph Whitworth and New Jersey banker Anthony P. Terracciano. When they failed to boost the share price (it fell, with Sidhu gone), Sovereign was acquired at a fraction of its former value by Spain-based Banco Santander. It is now run from offices in Boston.

Customers has asked the Federal Reserve to approve its largest individual investor, India-born, London-based Bhanu Choudhrie, as a director. Choudhrie has invested $8.7 million in the bank.

Other director-investors include Clipper magazine chairman Steven J. Zuckerman, $2.1 million; Alco Industries chairman T. Lawrence Way, $1.4 million; and Sidhu, $1.25 million, according to the SEC filing. The bank also has raised more than $18 million from three investment firms: Thomas Cherian's British-based Amberland Properties, New York-based Commerce Street Financial Partners L.P., and Sumant Kapur's Singapore-based Rodella Assets Inc.

Sidhu and Choudhrie are also directors of Atlantic Coast Financial Corp., a Florida bank that borrowed more than $36 million from Customers in 2009-10 and paid it all back, the bank says.

Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or follow on Twitter @PhillyJoeD.

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