'Patriot Bonds' come marching in
By Holden Lewis • Bankrate.com

War bonds are on sale.

The Series EE savings bonds bear the inscription "Patriot Bond." In all other respects they are regular Series EE bonds. The money raised by the bonds will go to the general fund and won't be earmarked for any purpose. The bonds carry the same yield as any other Series EE bond. The current yield, in effect through November, is 3.96 percent.

The bonds sell at half face value and are available in eight denominations from $50 to $10,000. Patriot Bonds can be bought through financial institutions and through the Savings Bonds Direct Web site.

After the Sept. 11 attacks, Congress passed at least three measures calling for the Treasury to issue war bonds. The Treasury was cool to the idea because war bonds don't make economic sense right now. After the House passed a "Freedom Bonds Act" and similar legislation started to make headway in the Senate, the Treasury announced that Patriot Bonds would be available.

Sen. Mitch McConnell (R-Ky.), one of the most ardent backers of war bonds, said the Treasury's decision came after he and other co-sponsors of war bond legislation wrote a letter to Treasury Secretary Paul O'Neill.

"I am excited that the Treasury Department is acting on my call to establish war bonds," McConnell says, adding that the public "is unified in its desire to take decisive action and now will have the opportunity to contribute directly to help rebuild the broken and retaliate against terrorism."

It's not true that Patriot Bonds will enable people to "contribute directly," because money from the bonds will simply flow into the general fund and won't be set aside specifically for rebuilding or counterterrorism.

Economists have said that war bonds are a bad idea now because they encourage people to save. Congress, the White House and the Federal Reserve are encouraging Americans to spend as a way to stimulate the faltering economy. President Bush, Federal Reserve chairman Alan Greenspan, New York Mayor Rudolph Giuliani and many others have urged people to give to charities, buy holiday gifts and travel. They haven't been asking people to save money.

The last time the United States issued war bonds was during World War II, when full employment collided with rationing, and war bonds were seen as a way to remove money from circulation and reduce inflation.

-- Updated: Dec. 12, 2001