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Kyle Bass's Nickel Collection

Wednesday, 5 Oct 2011 | 1:22 PM ET
Burke/Triolo Productions | Getty Images

Kyle Bass has a lot of spare change.

The founder of Hayman Capital, the Dallas-based hedge fund that profited from the collapse of the housing market, bought 20 million nickels, according to a new book from Michael Lewis.

In "Boomerang," Lewis writes that Bass spent $1 million on 20 million five-cent coins.

Why?

Bass apparently believes that the metal in each nickel is worth 6.8 cents. So the face value is below the underlying value of the coins.

That seems like such an obvious way to make money that its almost surprising everyone isn't hoarding nickels.

The catch is that melting U.S. coins is illegal. In 2006, the U.S. Mint reacted to rising metal prices by passing an interim rule that banned melting coins. In 2007, that rule became permanent.

"The rising commodity prices of copper, nickel, and zinc have increased the value of the metal in both pennies and nickels so that the content of these coins now exceeds their face value," the Mint explained. "There is concern that speculators could remove pennies and nickels from circulation, and sell them as scrap for profit."

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