War bonds could take from here to eternity
War bonds have received a boost in Congress. Just don't expect to
be able to buy them anytime soon.
After Sept. 11, at least seven bills were introduced
into Congress that asked the Treasury to introduce some type of
war bond. Two bills have passed: one in the House and one in the
Congress has passed the bills even though the Treasury
Department made clear that it has higher priorities, such as tracking
international money launderers and protecting the borders. (The
Treasury runs the Customs Service.)
Like savings bonds, only warlike
War bonds are a type of U.S. savings bond. They were last sold during
World War II, when they helped pay for the war effort, focused civilians'
patriotism, and kept inflation down by removing money from circulation.
Several members of Congress decided in the week after
Sept. 11 that it would be a good thing to bring back war bonds to
raise money for rebuilding and to mobilize support for the fight.
The Senate passed an appropriations bill containing
an amendment that would allow the Treasury to issue "unity
bonds." House members introduced bills to allow "war bonds,"
"victory bonds," "freedom bonds" and "defense
of freedom bonds."
On Oct. 23, the House passed a bill authorizing the
Treasury to issue "freedom bonds." That doesn't mean that
an entirely new design would be issued. The legislation appears
to give the Treasury wiggle room to simply designate a series of
existing savings bonds as freedom bonds.
The notion of war bonds has struck a nerve. Applied
Card Systems, a credit card servicing company, pledged to buy $10
million worth. Members of Congress said they were getting calls
from constituents who wanted war bonds.
They'll have to wait.
As members of Congress leaped at the chance
to look patriotic by issuing a new kind of debt, the Treasury was
requesting more substantive help. Treasury Secretary Paul O'Neill
told the House Financial Services Committee that "money can
be as lethal as a bullet." He asked for unspecified "legislative
tools" to track and seize terrorists' money, and to strengthen
customs. He talked up an international agreement to nail money launderers.
He didn't say anything about war bonds.
Silence is Treasury's method of choice for cooling war-bond fever.
The department has adopted a top-down policy of not talking about
war bonds. Treasury spokesman Pete Hollenbach says it just isn't
something that the public servants at Treasury wish to discuss.
He doesn't even want to talk about how long it would take and what
the procedure would be.
Another Treasury employee said it would take a surprisingly
long time to design and issue a war bond. The fastest route would
be to modify the design of Series EE savings bonds, the employee
said -- to add the words "War Bond" or something similar
in black ink, or to change the background colors.
That sounds simple and quick, but few things involving
the federal government are simple and quick. The Treasury employee
said it would take a year to get modified Series EE bonds into buyers'
hands, and that would be "super pushing it." Designing
the look, making or altering the printing plates, getting materials,
printing and distributing are tasks that have to be done sequentially
and can't be done all at once.
Producing a brand-new bill would take even longer.
Take the example of the Series
I bond, an inflation-indexed U.S. savings bond. In May 1996,
the Treasury secretary announced that the department would issue
the new bonds. The bonds were issued in September 1998, more than
two years later.
Alternatives to war bonds
There is a way to sell war bonds more quickly. The Treasury could
sell them electronically and promise to get paper versions into
buyers' hands as soon as possible, probably in a year or two. But
who wants to do that? For most buyers, the whole point of having
a cool-looking war bond would be to show it off.
The easiest, cheapest, fastest option would be just
to market the existing bonds differently. The Treasury could sell
EE bonds or inflation-indexed I-bonds as an investment on the war
against terror. This wouldn't require a change in design, but just
a change in advertising.
I-bonds have the built-in advantage of featuring
the likenesses of different Americans on each of the eight denominations
-- and some of the people honored on I-bonds are military heroes.
The $75 I-bond features Hector Garcia, founder of
the American GI Forum. The $500 I-bond bears the likeness of Gen.
George C. Marshall, the U.S. Army Chief of Staff during World War
II, author of the Marshall Plan and recipient of the Nobel Peace
Prize. The $10,000 I-bond features Spark Matsunaga, a World War
Stamping out terrorism
Something much cheaper -- the postage stamp -- could steal some
of the war-bond thunder.
The Postal Service appropriations bill would require
the post office to issue "semipostals" honoring emergency
relief personnel who died Sept. 11.
A semipostal is a postage stamp that has the same
value as a regular postage stamp, but costs more. The difference
is given to charity.
For example, a regular first-class stamp costs 34
cents. The Postal Service could sell a 40-cent stamp honoring New
York City's slain firefighters, paramedics and police officers.
For each stamp sold, the 6-cent difference would be given to the
Federal Emergency Management Agency.
That bill is in a joint House-Senate committee.
-- Updated: Oct. 26, 2001