February 1, 2012 / 7:21 PM / 6 years ago

Petition to restore old-fashioned paper U.S. bonds

Vice President Al Gore unveils a new inflation-protected Savings Bond, which will honor eight Americans including Albert Einstein, Martin Luther King and others, during a ceremony at the Treasury Department July 8.

(Reuters) - It's a curious irony that the petition to bring back paper bonds, which the federal government phased out in January after 76 years, is an online movement. The government decided to drop the certificates, traditionally given as gifts to children, to keep up with modern times and sell a product that didn't rely on redeeming something as flimsy as processed wood pulp sheets. To reach a modern consumer base, you've got to go digital, which is why Mark Prosser, the founder and CEO of LearnBonds.com, is taking his gripe to the digiterati.

Prosser is upset that the U.S. Department of the Treasury stopped selling paper bonds as of January 1, and his manifesto, posted on his website (link.reuters.com/nyz36s), reads in part: "Over 50 million Americans hold paper saving bonds. For many of these people (including myself), a savings bond served as introduction to the idea of saving money and earning interest."

In other words, eliminating paper savings bonds takes away a great tool for parents and grandparents to teach an otherwise abstract financial concept: compound interest.

"It's hard to grasp, but what is very easy -- and tactile -- is having the physical certificate that the interest represents," says Prosser. "It's not just a string of digital numbers. This is something practical, and it teaches people how to save money. It's a great teaching prop: an oversized piece of paper that doesn't look like anything else."

What's more, he adds, the digital bonds you can buy at TreasuryDirect.gov make lousy gifts presentation-wise. "They don't have the same impact as a physical bond," Prosser says. "You're taking away some of the specialness of giving it to your grandson or niece when you the paper bond."

So far, it's been slow going. Just 118 people have signed Prosser's petition, but he says he's just getting started -- his effort launched just as paper bond sales halted. To date, his story has appeared in a few media outlets, including the San Francisco Chronicle (link.reuters.com/hyz36s). "The more outlets that cover the story, the more signatures we'll get," he says. "And I'd like to partner with a non-profit that does financial education and have them help promote it."

Eventually, Prosser wants to take his effort to members of Congress. He thinks they may see the light if bond sales drop sharply. More than 87 percent of bonds were purchased in a paper format in 2011, he says (see graph at link.reuters.com/myz36s).

"On the one hand I'm sympathetic with Mark's position," says Tom Adams, who runs the Savings Bond Advisor website (www.savings-bond-advisor.com/).

"Bonds are a unique investment vehicle and deserve a lot more respect from the Treasury and investing public than they get. The folks who buy savings bonds as gifts or who have an emotional, often patriotic, attachment to them are quite upset."

However, the government's been planning on this for years, Adams says, adding, "I tend to agree with the Treasury that the paper savings bond is an anachronism. There's no other investment available in the U.S. that requires you to return a specific piece of paper for redemption."

Try telling that to Prosser, who has emotional attachments of his own. If not for bonds, he says, he might not have entered the financial field.

"When I was 10, I remember going to Apple Savings Bank," he recalls. "My eyes were just above the counter and I'd go with these $25 and $50 savings bonds, to see how much interest I'd made. That was a great experience."

Meanwhile, there is one last chance to grab paper bonds this year, if you qualify. Mckayla Braden, a spokeswoman for the Treasury Department's Bureau of the Public Debt, says that while there isn't any money allocated to print more paper bonds in 2012, you can still get what Uncle Sam has left over come tax time.

If you fill out IRS Form 8888 in conjunction with filing for your 2011 tax refund, you can purchase paper savings bonds for yourself or others, Braden says, But it's only for this year: The government has no plans to repeat this for 2012 tax year refunds - which, if you ask Prosser, is downright unpatriotic.

"Would the government stop doing maintenance on the Washington Monument? This is the same sort of thing; bonds are a historical monument, but much more accessible to most people," he says. "This is taking away a piece of Americana."

(The author is a Reuters contributor. The opinions expressed are his own.)

Editing by Beth Pinsker Gladstone and Andrea Evans

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