Everyone should be aware of this lawsuit. It takes a lot for me to side against states in favor of the federal government, but looting a generation’s legacy is sufficient. Some states are suing the Federal government over unclaimed war bonds (and other old savings bonds). The states want the money, but the Federal government has the obligation to pay out if and when the bonds are redeemed. The bonds themselves never go bad. The bonds themselves represent a loan (and corresponding claim) to the federal government. These last three facts are nicely printed on the bonds themselves.
From the LA Times, States suing federal government for unclaimed war bonds (emphasis mine):
Nearly 70 years ago, the federal government began issuing hundreds of billions of dollars in savings bonds to finance the greatest war effort in the nation’s history, with President Franklin D. Roosevelt buying the very first one.
But the bonds came with a catch: They wouldn’t be paid off for 40 years. As the decades passed after World War II, $16.7 billion worth of bond certificates were either forgotten in dusty attics or thrown out in the trash.
That treasure has remained unclaimed, but a lawsuit could change that.
Six states have sued the federal government to get that money, contending that the Treasury Department has done nothing to find the original bondholders or their descendants — not even send out a letter when it came time for the government to repay the bonds. Moreover, the states say, they have laws that empower them to take unclaimed property for themselves, which would be a welcome infusion of cash at a time of economic distress.
The problem is that the vast majority of these bonds were not “thrown out in the trash,” though they may actually be sitting in dusty attics. We are talking about a generation that was born in the Great Depression. They didn’t just save your stupid hand drawn cards from Christmas when you were in second grade. They save the twist ties off of bread bags. They save the rubber bands off their morning paper. They were taught by their parents to never throw away anything that had value. Yet these governors want to invoke an abandoned property clause. But the bonds themselves haven’t been abandoned (unless they were in stored in abandoned safety deposit boxes, in which case the states have already cashed them in).
My old boss just went through the emotional ordeal of getting his mother’s affairs in order. He found that she had tens of thousands of bonds in a personal safe. Most were past the date of maturity (no new interest would be earned). She was saving them for her children—my old boss is getting near retirement age himself. It was her legacy.
My own grandparents are a little more careful about renewing their bonds. Some have been rolled into munis. But, they have a few original printed war bonds. Yes, the lack of new interest earnings is an opportunity cost, but there seems to be a sentimental attachment to them. As a consequence, a few remain, constantly losing financial value as the dollar is debased by the government they funded.
I have no doubt that as the oldest generation passes on, children and grandchildren will find that they were left with the vast majority of this $16.7 billion. Until then, the money was loaned to the federal government until claimed, not the states.
