Jane Bryant Quinn: Savings Bonds Face Ill Wind From Treasury
Thursday, September 11th, 2008
Categorized as: Savings Bond news
In her column yesterday on Bloomberg, Jane Bryant Quinn blasted the Treasury’s handling of Savings Bonds.
The article begins:
Sept. 10 (Bloomberg) — If the government didn’t deny it, I’d swear they were trying to get rid of U.S. savings bonds.
In January, the Treasury Department made the bonds all but useless to financial planners and other savvy investors who bought them to capture high short-term interest rates. In May, the fixed-rate portion of the interest on Series I bonds, whose interest payments are linked to inflation, was set at zero.
Many of the issues Quinn talks about are ones we’ve covered here in the past. Like Quinn, we can’t figure out what the folks in charge of this program are trying to accomplish, other than perhaps destroy it.
(Average rating: 5.00 stars)
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Tom Adams
J.B.Quinn, is to be commended for drawing attention to the damage done to the savings bond program by the gov’t discouraging small investors. After throwing Trillons to fre and fnm and several (leh,ml,aig wamu)banks which are on their way to washington at this moment to pick up billions, as well as GM and Ford with their begging bowls for 50 billion. It just seems like paying modest income buyers of savings bonds a few cents would not be such a burden!!!!!!!!!!!!!!!
Thanks
Eugene
This is in line with Treasury’s current behavior and who they cater to.
I have believed that the folks at Treasury are trying to dismantle the Savings Bonds program for several years. It began with the attempted demise of paper bonds. Then they fooled with the mandatory holding period. Then they did away with $10,000 bonds. Then they lowered the maxumum amount one can invest in bonds. No GOOD news seems to come from them. The current Washington regime manages to cut taxes on dividends for the wealthy, but there doesn’t seem to be much interest in helping Joe Sixpack save. As both Presidential candidates say…”It is time for change in Washington.”
I purchased a few Series EE bonds in January of 2006. I knew at the time that these bonds were only going to pay a paltry fixed rate of 3.20% but I felt that the playing field was a bit more favorable towards the little guy with U.S. Savings Bonds as opposed to just leaving the money in the bank. In the current financial crisis that we are in, I think that I’ll keep these bonds a while longer. It’s not like I have to hold on to these bonds forever! On a positive note, at least the interest rate that these particular bonds are paying, as bad as they looked back then, are more attractive than what the banks are paying now.
Could it be that the Treasury has some tremendous exposure on the inflation-type bonds and thus is shutting it down to try to limit that exposure? Do we know how much exposure Treasury has? Back in the beginning, there was a 3.0% fixed rate and the lucky holders of those are gonna get over 9% soon. That’s way way over what anyone else can get these days for no risk, not to mention the tax benefits. Did the same people that the Treasury seems to be prejudiced towards now load up big time back when the fixed rate was 3.0%? Will we ever know the answers to any of these questions?
Ethan - the current value of all the Savings Bonds outstanding is about $200 billion. That is tiny compared to the Treasury’s total debt - like the difference between a pea and a watermelon.
The Treasury has been throwing around lumps of $200 billion the last couple of weeks on various bailouts. So I can assure you no one at the Treasury is worried about its Savings Bond exposure.
The irony is that these “free-market” bozos want to close the tiny Savings Bond program but they’re in the process of nationalizing the heart of the U.S. financial system. The dysfunction one administration can bring to government is beyond what anyone thought possible.
Tom Adams
What can we do about this? Do we have a voice in any of this?
Why does the U.S.A.keep making it so difficult for the small investor. When I-Bonds were first introduced it was great for the small investor. The Washington lobby for the Banks and Brokers must have put pressure on the Treasury to kill this program which they are doing. Why else would they limit your yearly investment from $30k to $5k There isn’t any limit as to how much China can invest in the U.S.A.Treasury. Why isn’t our Government encouraging U.S.A. citizens to invest in their Country? Why didn’t the fact that for the first time in the history of I-Bonds the rate in May of 2008 dropped to ZERO and no one will say why.