The US government said it is still trying to identify the source of the production glitch that forced it to postpone introducing the new $100 bill and could force it to shred hundreds of millions of error-ridden bills. The issue stems from what officials called a "problem with sporadic creasing of the paper during printing" that resulted in blanks spots on some of the newly redesigned bills.
Officials at the Bureau of Engraving and Printing are working with Crane & Co., the Massachusetts company which has supplied the government with paper for currency for more than 130 years, to identify what caused the errors, but it's unclear if the problem was caused by Crane's paper or some other element of the printing process.
A person familiar with the situation said that at the height of the printing process, as many as 30 percent of the bills rolling off the printing press included the flaw, leading to the production shut down.
The government said it believes most of the 1.1 billion bills already printed can be salvaged, but any of the bills that were misprinted will have to be shredded.
According to a source familiar with the matter, the bills are the most costly ever produced, with a per-note cost of about 12 cents—twice the cost of a conventional bill. That means the government spent about $120 million to produce bills it can’t use. On top of that, it is not yet clear how much more it will cost to sort the existing horde of hundred dollar bills.
Sorting such a huge quantity of bills by hand, the officials estimate, could take between 20 and 30 years. Using a mechanized system, they think they could sort the massive pile of bills in about one year.
The new $100 bills feature an array of new security features aimed at thwarting counterfeiters, including a blue 3-D security ribbon with small images of bells that change into 100s as the bill is tilted. The strip is woven into the front of the bill. In addition, the new design features an image of a color-shifting bell inside a copper-colored inkwell on the lower front. Officials also retained some older security features, such as portrait watermarks and raised printing. The Geithner bills also cost more to produce than the Paulson version - nearly 12 cents per bill versus 8.5 cents for each Paulson bill.
According to the Bureau of Engraving and Printing Web site, more than "a decade of research and development" went into the new bill's security features. That increased complexity likely played a role in the recent production errors.
"This is the most complex note that the U.S. government has ever put into circulation," one Treasury official said. "As the notes become more sophisticated, the printing becomes more sophisticated."
Only a portion of the nation's money supply exists in the form of paper money or coins; a larger amount is held in bank accounts and other electronic forms. The Federal Reserve authorizes the creation of paper money based on how much banks request, and the currency is printed by the Bureau of Engraving and Printing, then distributed through the regional Federal Reserve system to banks around the country.
There was $978 billion in paper currency and coins outstanding as of last week, while the total money supply, using a measure that includes money in checking accounts, savings accounts, and money market mutual funds is about $8.8 trillion, according to the Federal Reserve.
The government rarely has encountered serious problems in the production of new currency. One other significant delay came in 1987 when the Treasury announced that technical problems had postponed the issuance of the first redesigned American currency in a half century. The new bills did not begin to circulate for several years.