Billions in bearer bonds could be lost due to Hurricane Sandy: sources

http://www.nypost.com/p/news/local/manhattan/sunken_treasure_R1WidDOAwSBvWbYgSIoflJ

by Cbasedlifeform • 14 years ago

27 28 14 years ago

ghshephard3• 14 years ago

After reading this article, I'm almost in tears when I realize what the mitigation step would have been for protecting those bearer bonds from moisture: Tupperware containers.

unabridged• 14 years ago

Yeah you would think these things would be in plastic folders like something used for a $20 baseball card.

But there can't be that many left to cash, all of them have to be over 30 years old now which is one of the longest coupon lengths.

Maxious• 14 years ago

Self sealing comic book bags. $127.50 per 1000.

SilasX2• 14 years ago

Or, you know, not storing large amounts of money in a long-obsolete financial instrument that you can't back up.

Spooky232• 14 years ago

Bonds are never obsolete. My dad knew a guy whose family owned some sort of bond with a 150 year maturity. It was used to build a long-defunct racetrack in the Bronx, and is now a NYC obligation.

Is cutting out coupons a little silly? Sure. But the money is quite real!

ericHosick• 14 years ago

Ziploc bags.

Also great for travel if you have anything in your luggage that might break or leak.

RockyMcNuts2• 14 years ago

It's kind of similar to people who had uninsured art in safe deposit boxes in the World Trade Center on 9/11.

In the old days you took $10,000 to your bank or broker and got a bunch of certificates. Then, as coupons become due, you detached them from the bond (they were actual, paper coupons) took them to your bank and deposited them like checks. Then, when the bonds came due, you presented them to the bank for redemption. If you sold the bonds, workers in the bank's vault a/k/a the cage handled shipping certificates from the seller's bank to the buyer's.

But bearer bonds stopped being issued in the early 80s. Now, the issuer's transfer agent keeps an electronic registry of who owns what and who is due interest payments. When you sell bonds, the transfer is made electronically on the books. There should be very few bearer bonds still outstanding.

Also, they got wet, it's not like they went up in smoke. Bottom line, I wouldn't expect losses from destroyed certificates to be a big number like tens of billions. If they can't salvage them, sounds like it could impact some people, and could be a legal scramble to see who ends up on the hook between DTCC, the banks, the customers, and their insurance companies.

politician• 14 years ago

The article describes the bonds as being soaked in diesel and sewage-tinged water.

Datonomics• 14 years ago

There are still a few places where a person, so inclined, could create or purchase this wonderfully nefarious financial instrument. http://www.panamalaw.org/issue_your_own_corporate_bearer_bon...

benblack86• 14 years ago

Don't keep bearer bonds at a street called water. Clue is in the name.

ChuckMcM• 14 years ago

I realize you're just being funny, the thing I don't get is why the 'vault' isn't air tight. I looked at renting a space that had been a bank, the old vault was literally welded open because it was air tight and if the door closed and locked it would take longer to re-open then a person could survive on the air inside.

ablerman• 14 years ago

This would make a great plot element in a movie about money laundering.

jamesmcn2• 14 years ago

Looks like we will need to do some dry cleaning.

rogerbinns2• 14 years ago

How did they prevent fraud with bearer bonds? (The wikipedia page is remarkably silent.) Since no records of ownership are kept, the only evidence of ownership is the bond itself. And given their value there is a large incentive to make fraudulent ones.

refurb• 14 years ago

Issuers don't have ownership records, but they do know the identity of every bond issued through the bond's serial number.

So the only way to create a fraudulent copy, would be to copy an existing bond and it's serial number. Of couse, since the original bonds were as good as cash, they were/are kept under pretty tight security.

Not impossible of course, but it did make it difficult to make counterfeit bonds. Also, many bonds had unique security features associated with the bond itself, similar to currency.

rogerbinns2• 14 years ago

If it wasn't a sequential serial number, but rather a long random string then that would make a lot more sense. If your serial had been cashed in fraudulently then you would only find out when you tried to cash in the legitimate bond. There is still provides a massive incentive to steal numbers either from the bonds or the issuing company.

I'm somewhat sceptical of the security features. Obviously some would exist, but the huge value of the bonds makes forging them attractive. It mentions the bonds being held for many years (possibly decades) so the security features would have to last that long. In the UK they regularly change the bank notes withdrawing old ones from circulation and they are no longer accepted except at the Bank of England. The US doesn't seem to do this.

ghshephard3• 14 years ago

Re: large incentive to make fraudulent ones.

Indeed, there is. :-)

http://www.reuters.com/article/2012/02/17/us-usa-bonds-forge...

" Italian police said on Friday they had seized about $6 trillion worth of fake U.S. Treasury bonds and other securities in Switzerland, and arrested eight Italians accused of international fraud and other financial crimes."

(I know, not exactly what you were getting at, but it's actually one step better - not just creating forgeries of authentic bonds, but creating absolutely new entities)

RockyMcNuts2• 14 years ago

Same way they prevent fraud with cash - paper certificates with features that are hard to copy. Also, the company has a record of what was issued and isn't going to pay off the same bond twice, or one that doesn't match what it issued. Doesn't stop people from trying -

http://www.reuters.com/article/2012/02/17/usa-bonds-forgery-...

dfc• 14 years ago

"In 2010, DTCC settled nearly US$1.66 quadrillion in securities transactions."

If you are interested in how financial markets operate and have not heard of DTCC I highly recommend you take a look at their "about us" page.[1]

[1] http://www.dtcc.com/about/business/index.php

Hominem• 14 years ago

55 water was hit amazingly hard by flooding, offices in 55 water will be closed another 3-4 weeks.

jamesmcn2• 14 years ago

This is precisely why I didn't locate my cloud storage company on Fatal Disk Error St.

Billions in bearer bonds could be lost due to Hurricane Sandy: sources

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