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Cash Back Guarantee: The U.S. Redeems Damaged Bills Because The Dollar Depends On It

Cash Back Guarantee: The U.S. Redeems Damaged Bills Because The Dollar Depends On It
Olivia Falcigno/NPR
Cash Back Guarantee: The U.S. Redeems Damaged Bills Because The Dollar Depends On It

Confettied scraps of shredded money blanket a table as a federal employee inspects each piece beneath a magnifying glass. A sliver containing Benjamin Franklin's face is examined before being placed in a pile with matching fragments.

Meticulously, workers piece together bills, as if solving a jigsaw puzzle. Noting the serial numbers, they deem that this pile of shreds contains value and move on to the next task, peeling apart waterlogged bills congealed into a sodden slab, probably recovered from a flood-hit home.

These bills are among about 24,000 claims annually that the U.S. Treasury Department reviews from people seeking reimbursement for their mutilated currency. It redeems an average of $30 million a year of that damaged money.


But the Treasury's Mutilated Currency Division has another important role: helping reinforce "the credibility and confidence the world places in the U.S. dollar," says Lydia Washington, a spokeswoman for the Bureau of Engraving and Printing, which oversees the division.

Each pile, each slab, each re-created dollar originates with someone taking advantage of this free service offered by the bureau. Employees of the Mutilated Currency Division attempt to salvage and identify damaged currency, and they issue Treasury checks for however much they can verify to the currency's owners.

"If you destroy your house, you can't just go to the bank and say, 'Give me a new house,' " says Eric Lonergan, author of Money. "But in a sense, the point is that the dollar bills are just representations of money. They aren't actually the money itself."

The U.S. dollar holds its value because people around the globe agree it holds value. Seventy-five years ago this summer, 44 nations joined together and gave the dollar its supremacy, its sturdiness and its universality.

So universal is the dollar that it can weather shredders, floods, fires and insatiable pets. (A manager at the Mutilated Currency Division encourages individuals who complain of dogs eating bills to follow the animal around for a few days and collect its droppings. The money will appear eventually.) The government will still guarantee the currency's worth, doggy-doo-doo-doused or otherwise.


Many economists agree that the dollar's supremacy began with the Bretton Woods conference in 1944. Besides the conference's more recognized landmarks — the creation of the International Monetary Fund and the World Bank — Bretton Woods established what French Finance Minister Valery Giscard d'Estaing would go on to call the dollar's "exorbitant privilege."

That privilege is being the international reserve currency, or the currency that the rest of the world's countries use to define their own currency's value. Back in the days of Bretton Woods, the U.S. dollar's value was pegged to gold, but ever since President Richard Nixon pulled the plug on the gold standard, the dollar has ruled solo.

Today, all international currencies define their worth in relation to the dollar.

"The Bretton Woods system ... cemented this. This is written into the articles, that the dollar is the basic currency, it's the reserve currency," says Michael Bordo, a Rutgers University economics professor and co-editor of the book A Retrospective on the Bretton Woods System.

If the U.S. didn't guarantee that its currency is valuable and durable, the rest of the world might lose faith in it. Hence the gloved hands picking apart sediment-caked bills, FedExed to Washington, D.C., by someone whose grandmother stashed her life savings, which have weathered mouse nests and termite bites, in the drywall of her decrepit family home.

But it's not those green pieces of paper adorned with pictures of George Washington and Abraham Lincoln that earn the world's trust and confidence. It's about what the dollar represents.

"The U.S. was the largest economy, did the most trade with the rest of the world, and we had very deep and very stable financial markets," Bordo says, describing the mid-1980s and onward after the Federal Reserve stabilized inflation rates. "We had rule of law. We had a lot of good things which are what's behind the dollar. ... And so the rest of the world has a lot of trust in us, in the dollar."

Money is about faith and relationships and has little to do with paper, Lonergan says. "One thing that's very clear about it is that the value of money is not a physical thing," he says. "Physical things can represent the money in a sense. But that isn't what it is."

According to Lonergan, money can't really be defined but has properties. It is a form of payment and relies on lots of people using it.

"I could invent a language that's a great language but, because nobody else speaks it, has no value," he says. "And to some extent, the usefulness of a language is directly proportional to or is linked to the number of people. For the more people that understand it and use it, the even more useful it is. And this is also true of currencies."

Money relies on the cooperation of society members to uphold its value — otherwise the system crumbles. And that's why the Mutilated Currency Division's role is so important. When the Treasury issues a note, the government guarantees its worth — whether it has been scorched, shredded or digested. As long as the workers can identify the serial number and ensure people aren't sending in counterfeits, the government will reimburse the value of the disfigured paper.

Employees sift through approximately 24,000 cases a year with a few tools at their disposal: scalpels, scissors, tape, glue, tweezers, microscopes, UV lights, drying ovens and cheesecloth.

Some submitters are nervous and want to drop off their claim in person to the Bureau of Engraving and Printing, but a majority of cases come in through the mail. Packages of damaged U.S. dollars arrive from people all over the world.

"It's the only global currency," says Washington, the bureau spokeswoman. "You can't take a euro everywhere. You can't take a rupee everywhere."

They've seen everything. Once, a woman walked into her home to witness her dementia-diagnosed father shredding $250,000 in life savings. The division was able to recover most of it. Another time, a farmer lost his wallet after a cow ate it, so he shipped in the cow's stomach.

"You never know what you're going to get until we actually open up and go through it," says Eric Walsh, assistant manager of the division.

After natural disasters, the division sees an uptick in cases. It was identifying money damaged in Hurricane Katrina for five years after the storm. "Some of the people are at the low points, and they reach out to us with these submissions and we're able to give them some relief," Walsh says.

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