Old-timers might call it the end of an era. Youngsters won't care.
But U.S. Savings Bonds, which have endured for more than 75 years and played a notable role in winning World War II, soon will no longer be available in paper form.
The Bureau of the Public Debt says it will stop making Savings Bonds available for purchase through banks or credit unions, ending the paper option. The only purchase method will be through the government's bond website, treasury direct.gov. Investors also can redeem bonds through the website.
It's all part of an effort to save the government $70 million over the first five years in reduced printing, mailing, storage and other costs, including fees paid to financial institutions for processing transactions.
"We're looking everywhere we can for financial savings in government," said Joyce Harris, director of public and legislative affairs at the Bureau of the Public Debt. "It's a lot less costly to go the electronic route."
It's not a headline-grabbing announcement, especially since there are more pressing topics out there involving government debts.
But the new policy does say something about changing public tastes and the gradual demise of these once-popular investments.
For starters, the shift to paperless Savings Bonds is just one more sign that electronics are taking over the financial world.
Stocks are bought and sold in electronic form, bank and credit-card accounts feature online statements and payments, and most income-tax returns now are filed through the Internet, so why not Savings Bonds?
In addition, the paperless option reflects slack demand. Savings Bonds, which once occupied a special place in the public's heart, have become just one more item in a crowded investment cupboard.
"There are a lot more things competing with Savings Bonds," said Harris. "Many are things that didn't exist years ago."
Since the first Savings Bond was sold in 1935, we've seen the advent of municipal bonds, money-market funds, 401(k) retirement plans, investment-based life insurance, no-load mutual funds, gold available for personal investment, inflation-protected Treasury bonds, section-529 college accounts, exchange-traded funds and a lot more.
Savings Bonds got a new lease on life with the introduction of inflation-protected Series I bonds, but sales have since fizzled.
Some 6.8 billion paper bonds have been sold since inception, but only 4 percent of that has come over the past decade despite rising wealth levels and a growing population.
One problem is that many of the rules for Savings Bonds are surprisingly tricky, such as those on early withdrawal penalties and Series-I rate calculations. The government hasn't done a good job explaining the intricacies, and most financial advisers can't earn anything from the bonds and thus don't have incentive to tout them.
Perhaps more than any other investment, Savings Bonds have a legacy of patriotism. This reached a peak during World War II.
In 1944, Uncle Sam sold $16 billion worth of bonds, with marketing campaigns led by celebrities such as actress Carole Lombard and songwriter Irving Berlin.
Bond sales didn't exceed $16 billion until 1992; on an inflation-adjusted basis, no year since has come close to matching 1944. In fact, one thing not commonly known about Savings Bonds was their role in sopping up excess cash and keeping a lid on inflation while the economy was in overdrive and consumer goods rationed during World War II.
"The danger of price inflation was growing as defense spending poured money into the economy and diverted consumer goods from the market," noted a government booklet written in 1991 to mark the 50th anniversary of Series-E bonds.
"This was a key factor in the successful financing of World War II and in keeping the pressures of inflation under control."
As noted, the new paperless policy doesn't end the Savings Bond program but takes it in a new, and perhaps diminished, direction. It could, for example, discourage the use of Savings Bonds as gifts because donors would need to set up accounts for both themselves and recipients and include a recipient's Social Security number.
Many people buy and forget about Savings Bonds. That's notable because they'll eventually stop earning interest, typically after 30 years.
I recently found a $25 Savings Bond that my grandfather purchased in June 1944, around the time of the Normandy invasion.
It's one of 45 million paper Savings Bonds worth $16.2 billion that matured and stopped paying interest but remain outstanding. Such bonds still can be redeemed at financial firms, and that will continue even after issuance goes paperless next year.
For whatever reason, my grandfather never cashed in that bond. Nor did my dad, who was listed as co-owner even though he was stationed in India at the time, helping to direct planes flying over the Himalayas in support of Chinese troops fighting the Japanese.
I don't intend to redeem the bond anytime soon. It's more valuable to me as a keepsake, and I'm probably not alone in that.
More on this topic
Sales of U.S. Savings Bonds have slumped since hitting a record in 2005.
Year: Bond Sales
2005: $22.4 billion
2006: $6.3 billion
2007: $3.6 billion
2008: $3.4 billion
2009: $2.9 billion
2010: $2.6 billion
Source: Bureau of the Public Debt
by Russ Wiles The Arizona Republic Jul. 24, 2011 12:00 AM
Savings Bonds' shift to digital-only marks end of era
Reuters: Business News
National Commercial Real Estate News From CoStar Group
Latest stock market news from Wall Street - CNNMoney.com
- ► 2019 (55)
- ► 2018 (76)
- ► 2017 (81)
- ► 2016 (145)
- ► 2015 (146)
- ► 2014 (102)
- ► 2013 (395)
- ► 2012 (392)
- Almost half of mortgages in Arizona are 'underwate...
- Study: Arizona among worst states for consumer cre...
- Real-estate expert sees disconnect in lending
- Phoenix-area homebuilders adjust to market
- Gilbert new-home construction on rise, leading Val...
- Demolition site in Phoenix scheduled for trustee's...
- Scottsdale-based Meritage home sales, profits plun...
- Dissecting the rival debt plans' key differences
- Home-price index finally lines up with local reali...
- U.S. debt default would harm nation, individuals
- Fannie Mae Downgrades Housing Outlook. Again
- Can Brian Moynihan fix America's biggest bank? - T...
- Surprise! The big bad bailout is paying off
- Phoenix-area homebuilders adjust to market
- Savings Bonds' shift to digital-only marks end of ...
- Gilbert considers large apartment complex near San...
- A boom in corp. profits, a bust in jobs, wages
- Scams, manipulation, fraud targeting elderly on th...
- ASU launching 2 programs to offer help in resolvin...
- $86 million land purchase would expand Scottsdale ...
- Old Rawhide site in Scottsdale might become new ap...
- UPDATE: Freeport-McMoRan 2Q Net Income Doubles As ...
- Luxury-home broker Danley opens his own firm
- Storytellers: For 30 years, Walt Danley quietly cl...
- Realtors' confidence levels shoot up, survey repor...
- Chandler's office vacancy rate drops sharply
- Hispanic organization loan brings CityScape hotel
- FTC paying nearly $108M to Countrywide borrowers
- Bipartisan debt-reducing plan targets mortgage ded...
- Mortgage 'robo-signing' goes on
- 2 Phoenix medical-office buildings sell for $32.75...
- Analysis: Banks in Arizona need cash
- Lenders must give details on credit denials
- Home building jumps 14.6% in June
- Most of Tempe condo project is acquired
- Group proposes to build beach club in Entertainmen...
- Expert: Commercial loan modifications possible
- US builders' outlook rises after 2011 low
- 7 tips for rebalancing your fund portfolio
- Citigroup Q2 Profit Rises 24%, Tops View - Update
- Down on the farm, investors see big potential
- Apartment community is sold to fund for $40 millio...
- Prescott bank to open as a Foothills branch
- JPMorgan investment banking gains
- Foreclosure delays could hold off housing rebound
- Phoenix-area leasing of offices up in 1st half of ...
- Developer ready to channel energy into completing ...
- 26 acres in south Chandler sells for $2 million
- azcentral.com blogs - Scottsdale Republic Editoria...
- Settlements, lower trading to hurt 2Q bank earning...
- Feds ease foreclosure rules for unemployed FHA bor...
- Part of Scottsdale Promenade purchased
- Phoenix-area foreclosures are down again
- Bankruptcy filings in Phoenix area fall again
- Tenants, Glendale officials retain high hopes for ...
- 'Strategic defaulters' tend to be affluent, savvy ...
- Weidner fattens property portfolio
- Jobless homeowners to get more leniency
- Dimon-Bernanke Skirmish Shows Bankers Losing - Bus...
- JPMorgan pays $211M to settle bid-rigging charges
- Phoenix area housing market gaining ground, new da...
- New IMF chief vows to empower developing nations
- New regulation governs short sales
- Q&A on eligibility for homeowner aid
- Downtown Phoenix parcel set for housing
- Construction spending falls, manufacturing recover...
- Musical nameplates
- Office leasing may soon revive
- ASU realty professor Jay Butler retires
- Viad buys resort for $16 million
- Treasury secretary may exit after debt talks
- Scottsdale council increases maximum building heig...
- Fed limits debit fees retailers pay
- Bank of America pays $8.5 billion investor settlem...
- Phoenix shopping center sold for $30 million
- Scottsdale office buildings sold for $60 million
- Despite bad economy, homebuilder has Valley's top-...
- Fulton Homes to exit Chapter 11
- Former home of McCains up for foreclosure auction
- French finance minister appointed to lead IMF
- ▼ July (80)