Bearer bonds, what are they?

Every now and then you come across it in films: bearer bonds. However, this is not only a theme in Hollywood but also in the real financial world. Bearer bonds can make you rich, but they also make you a target. Because whoever holds the bonds is the owner of them, but this also means that if they are taken from you, someone else can become filthy rich.

Bearer bonds

  • What are bearer bonds?
  • First use
  • Hollywood
  • The bearer bond mystery of 2009

What are bearer bonds?

A bearer bond is a so-called debt security that is issued by a business entity such as a company or government. However, it differs from ordinary bonds or investment securities in that it is not registered; There is no record of who the owner is or when which transaction took place. In fact, the person who holds the paper is the owner. This is particularly useful for investors who wish to remain anonymous. Restoring value in the event of loss, theft or destruction is virtually impossible. The only exception to this is the bearer fund for United States public debt .

First use

The bearer bond was first used during the American Civil War. The American Reconstruction (1865-1885) was even largely paid for with this. After the First World War, the popularity of Bearer Bonds increased because they were easy to trade and avoid taxes. The payment method became popular in Europe and South America for the same reason. In Central America, this is still a common method of government payment. In the United States, all bearer bonds issued by the US Treasury have now expired. Dividends are no longer paid to their owners. In the United States, the Tax Equity and Fiscal Responsibility Act of 1982 has strongly discouraged the use of bearer bonds. Their issuers are now heavily taxed, while registered bonds still enjoy a tax advantage.

Hollywood

Films like to make use of the phenomenon. Bearer bonds often have enormous values, ranging from several hundred thousand dollars to even a billion dollars. Transporting such an amount in notes would be very difficult, but a security is of course easy to transport in a suitcase, and therefore contributes to the credibility of various plots.

The bearer bond mystery of 2009

In early June 2009, a strange story appeared in the news. A pair of gentlemen with a Japanese appearance were arrested near Chiasso when they wanted to cross the border with Switzerland by train from Italy. They stood out among the ordinary commuters in their tailor-made suits. The tax police in Italy probably received a tip, after which the duo was taken away. A bag they had with them turned out to contain a false bottom. Among them, police found $134.5 billion worth of bearer bonds. This is American treasury paper. This was almost unbelievable. From that moment on, the story is shrouded in mystery. These appear to be so-called Kennedy Bonds ; bonds worth $1 billion each, supplemented by US Federal Reserve bonds worth $500 million. Although unconfirmed, it is rumored that some of the bonds date back to 1934; a time when securities were not yet issued in such high denominations. So would these be counterfeits? But the size of the amount also rings several bells. $134.5 billion was exactly the amount of the US government’s TARP (Troubled Asset Relief Program) economic package at that time. Did America want to smuggle this to Switzerland and is it now silent so as not to expose its own wrongdoings? In any case, the last word has not yet been spoken on this matter…. In 2020, this mystery has still not been cleared up and will probably remain that way.