US impounds billion new $100 notes

They took ten years to design and were heralded as the most counterfeit-proof and costly notes ever minted in the United States.

But now more than a billion new $100 bills have been impounded in a government vault after their anti-crime features foiled even the printing press.

The $110bn stash, which represents more than 10 per cent of the world's supply of US paper currency, has been placed in secure quarantine while officials consider what to do with it, after manufacturers noticed "a problem with sporadic creasing of the paper during printing".

The accidental fold meant some bills - the Bureau of Engraving and Printing (BEP) has yet to determine how many - were left with blank spots on the front. The hitch had not shown up during pre-production testing and could ultimately result in billions of dollars in banknotes being sent to the shredder.

"There is something drastically wrong here. The frustration level is off the charts," an unnamed official told the CNBC television network, which revealed the foul-up yesterday.

The notes are the first to bear the signature of Timothy Geithner, the US treasury secretary since January 2009, and had been due to go into circulation in February.

Darlene Anderson, a spokesman for the BEP, said: "We are confident that a very high proportion of the notes will be fit for circulation."

But a source claimed that, at the height of the problem, 30 per cent of the notes coming off the presses were flawed, and checking each one by hand to weed out the defective ones would take between 20 and 30 years.

Bureau staff are now working with Crane and Company, the business that has supplied the paper for US currency since 1879, to come up with a way of reviewing each note mechanically, a process that could still take up to a year.

The redesigned $100 bill was unveiled in April by Mr Geithner and the chairman of the US Federal Reserve, Ben Bernanke, amid much fanfare.

Like its predecessor, it bears an image of Benjamin Franklin but there are sophisticated security features in an attempt to thwart counterfeiters; as the highest denomination note in circulation, the old $100 bill is the one that is most frequently copied.

Woven into the paper is a 3D security strip comprising thousands of minute lenses that cause a picture of a bell underneath them to change to the number 100 when the note is tilted. There is also an image of a bell inside an inkwell, which changes colour from copper to green when it is moved.

Each one cost 12 cents to make, double the price tag of the old $100 bill.More than 6.6bn $100 notes are currently in circulation, two-thirds of them outside the US, forming part of the total $930bn in US banknotes in use worldwide - and that means sophisticated international forgery gangs frequently try to copy the American currency.

Worried about a global cash crunch caused by their inability to replace worn-out notes with new ones, officials at the Federal Reserve have now ordered more print-runs of the old $100 bills while they troubleshoot the issue.