War bonds could take from here to eternity
By Holden Lewis • Bankrate.com

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 Senate.

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.

Ssshhh ...
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 II hero.

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