IT'S A BRAND-NEW CENTURY

By ROD USHER

THE C-NOTE, AS IT USED TO BE CALLED in Raymond Chandler novels, will never be the same. To frustrate counterfeiters, the Treasury Department has given the $100 bill a complete overhaul, and will begin releasing the new currency in a matter of weeks. Treasury spent nearly 10 years on the redesign and has added any number of state-of-the-art features: microprinting, color-shifting ink, a polymer security thread. The most striking alteration, however, is the enlargement of Benjamin Franklin's portrait: he now dominates the bill like a movie star in a newspaper advertisement.

The money we carry around is so familiar that whenever a new bill or coin is introduced, it creates a ripple in our workaday lives. But not much more than a ripple, and since few people use $100 bills regularly, most Americans will greet the arrival of the new note with no stronger emotion than curiosity. Some foreigners, by contrast, have become decidedly worried by the news of its impending arrival. Around the world, U.S. currency--and the $100 bill in particular--is often treated as the ultimate repository of value. The Federal Reserve estimates that two-thirds of all U.S. cash circulates outside America. In nations where inflation is high and where there are few credible banking institutions--from Latin America to Africa--people save and conduct business in $100 bills. And with the U.S. issuing new $100 bills, many abroad are worrying that the ones they already have are about to become worthless.

The fear is most widespread in Russia. The Russian Central Bank estimates that somewhere between $15 billion and $20 billion of U.S. currency is in Russia, about 80% of it in the form of $100 bills. Everyone from small savers to businessmen to members of the Mafia relies on hundreds, so the changes in the bill are causing high anxiety. Last week Maria Meshkova, a single mother, was in line outside the Novogorodsky currency exchange in Moscow's Old Arbat Street. There was fear in her voice as she explained she had already changed her meager supply of $100 bills into smaller U.S. notes. Now she was back trying to split her last remaining $50 bill "just in case, you never know." She feared that the new hundred might somehow make her fifty less valuable.

For Meshkova and other Russians the news of a reissued $100 note revives bad memories. In the winter of 1991, when then Prime Minister Valentin Pavlov suddenly announced that citizens had three days to exchange their rubles for a newly printed currency, they could turn in only the equivalent of one month's salary. The old rubles were declared worthless, and millions of Russians lost their life savings. Then in 1993 the government made another sudden decree, which meant that Russians again had to exchange a limited amount of old money for new, with the transaction stamped in passports to prevent repeat visits.

The U.S. is going to extraordinary lengths to reassure Russians that they have nothing to fear from the redesign. The Treasury Department has posted explanatory flyers in Russian in Moscow and set up an information hot line, which is receiving up to 150 calls a day. The department has even run focus groups to assess Russian reactions to the new bill. The U.S. wants to head off any event that might destabilize Russia. In 1990, when a slightly modified $100 bill was issued, the General Accounting Office severely criticized Treasury for failing to educate the Russian public properly. Officials also fear any perception that U.S. currency somehow lacks integrity.

In addition, there is an economic consideration. The U.S. government comes out $20 billion to $25 billion ahead each year from the worldwide market in dollars, officials say. When the Federal Reserve sells currency to a bank, it uses the credit to buy Treasury bills, which earn interest that fund government programs. The overseas market allows the Fed to sell more currency than it otherwise would be able to.

Vladimir Orlov, a deputy director of treasury at Tokobank, the largest cash dealer in Russia, says, "Russians tend to react automatically; they say, 'My neighbor has already exchanged, so I should.' I am sure Russians will literally rush to exchange their 'inferior' old bills as soon as the new bill is introduced to the market." They also worry about counterfeit bills, and that is another reason for racing to acquire the new notes. The fears may be exaggerated, however. While the press reports that one-sixth of the U.S. currency that circulates in Russia is fake, a recent study by the U.S. Secret Service indicates that for every $1 million in U.S. cash that Russians hold, only $30 has been forged.

This is only the beginning: over the next few years Treasury plans to redesign every note except the $1 bill. If blown-up portraits of Lincoln and Hamilton stare out at us the way Franklin's does, the changes will require a significant psychological adjustment even on the part of Americans.

--Reported by Masha Pavlenko/Moscow and Elaine Shannon/Washington

With reporting by MASHA PAVLENKO/MOSCOW AND ELAINE SHANNON/WASHINGTON