Savings Bonds and the Web

Kristi Von Tickner, VP/Financial Services Manager, Scott Valley Bank

Financial Institution involvement in the over-the-counter sales of United States savings bonds is coming full circle beginning January 1, 2012. That date marks the end of Financial Institution involvement in assisting the public with purchasing savings bonds. It does not mark the end of savings bond sales, but rather a new approach as to how they can be purchased.

In 1935, the United States Treasury Department began issuing non-marketable Treasury securities, called savings bonds. The program began with what were popularly referred to as "baby bonds", which were issued in four successive series, A, B, C, and D, from 1935 to 1941. In 1941, the United States Treasury Department introduced new series of savings bond, the E Series.

The tumultuous times leading up to 1941 left the U.S. Treasury facing heavy defense expenditures, rapidly expanding debt, a growing threat of inflation and the realization that the Bond program needed to be greatly expanded to reach more Americans. Up to that point, the ďbaby bondĒ series had been sold only through post offices and promoted chiefly through direct mail and limited magazine advertising. To successfully expand the Series E savings bond program, the Treasury introduced a national volunteer program. It was at that time that financial institutions got involved and became agents of the U. S. Treasury providing manpower and support in the issuance and redemption of savings bonds. Currently, the savings bond program remains a popular saving mechanism with two types of bonds available: the EE bond which replaced the E bond in 1980 and the I bond which was introduced in 1998. It is estimated that there are currently more than 680 million paper bonds worth $183 billion dollars in the hands of the public.

With the evolution of the electronic age, the U.S. Treasury began offering the EE and I Series bonds in electronic (book entry) format in the early 2000ís. The U.S. Treasury developed a secure site in which investors could register for an online account and purchase or redeem electronic savings bonds. For the past decade, individuals wishing to purchase savings bonds have had the choice of purchasing them via the Web and receiving an electronic version of the savings bond or by submitting an over-the-counter order form through their local financial institution and receiving a paper bond through the U.S. mail. This is where the change as to how a savings bond can be purchased comes into play. In a press release dated July 13, 2011, the Bureau of Public Debt announced that as of January 1, 2012, paper savings bonds will no longer be sold at financial institutions. It was reported that this action, in support of the U.S. Treasuryís goal to increase the number of electronic transactions with citizens and businesses, will save American taxpayerís approximately $70 million over the first five years.

What does this mean to individuals interested in purchasing savings bonds? It means that as of January 1, 2012, in order to purchase a savings bond, be it for yourself or as a gift, you will need to register an online account with the U.S. Treasury on their secure Web-based system. The account is free of charge and can be established by visiting TreasuryDirect.gov and choosing to open a TreasuryDirect account. The site is very informative in regard to the various types of Treasury investments and offers a guided tour of the  TreasuryDirect account process. I opened an account for myself and found the process to be relatively easy with only a few steps needed to complete the account set up. The TreasuryDirect system also utilizes multiple layers of security for account access. Once established, the account can be accessed 24/7 and an individual can customize how and when they would like their bond orders to be placed.

With 680 million paper savings bonds in circulation, I would imagine that most banks would continue their seventy-plus years of volunteer services with regard to redemption of those bonds. Scott Valley Bank will. I encourage you to visit  TreasuryDirect.gov to learn more.

Kristi Von Tickner, VP/Financial Services Manager
[email protected]
Scott Valley Bank

View Scott Valley Bank - The Vault - October 2011