( Originally Published Early 1900's )
A DESCRIPTION of the means of protection and the pathway of a particular bond will substantiate the assertion that if a spurious bond were presented for redemption the fact that it was not a valid instrument could not escape detection. Let us inquire into the reasons that warrant that statement and begin by describing the delivery of the first invoice of the $100 denomination of the Third Liberty Loan coupon bonds and select bond No. 1 as an example.
Bonds Nos. 1 to 6,000 were, in fact, delivered to the Loans and Currency Division by the Director of the Bureau of Engraving and Printing on August 13, 1919, and the Register of the Treasury was simultaneously notified of that fact. He thereupon opened a book register with a blank space opposite each of those 6,000 numbers. That book thus disclosed that, until each of those particular 6,000 bonds was accounted for by de-livery to the Register's Office, the Loans and Currency Chief (or the individuals to whom that official delivered those bonds) would stand charged with them.
The Loans and Currency Division records disclose that those 6,000 bonds (which, of course, included No. 1 bond) were shipped on January 13, 1920, to the Federal Reserve Bank of Chicago. That bank acknowledged delivery of the bonds and soon after deposited the funds to the Treasurer's credit in payment for the bond it is our present purpose to discuss.
Our records do not disclose who it was that procured that bond from the Chicago bank, but whatever individual or individuals owned it during the eight years it was outstanding cut the coupons from it, presumably as they fell due, and at maturity date of the bond (September 15, 1928) presented it at the same bank from which it was procured in 1920. The bank paid the $100 to the holder and charged the Treasurer's account with that amount.
After canceling the bond, the bank transmitted it to the Treasurer in support of the charge. The Treasurer allowed the charge after comparing the bond with the bank's invoice and then, in turn, claimed credit in his own September account that he rendered to the Auditor. The bond was then sent to the Register of the Treasury with the bank's invoice accompanying it.
The Register verified the bond with the invoice and fully audited the account to prove its accuracy. He then posted the above-described bond register with a notation to show that bond No. 1 had been redeemed and had been invoiced to the Treasurer on September 15, 1928, by the Federal Reserve Bank of Chicago. The posting discloses also that the bond would be found scheduled on that bank's invoice of that date, and that the canceled bond would be found with the particular bundle of bonds on file in the Register's Office corresponding to that invoice. The space opposite the particular number reserved for noting that particular bond was found to be open when the bond was cleared by the Register. If a subsequent bond of that loan, denomination, and number were presented, the posting clerk would find the space filled that related to that particular number.
Such a circumstance would cause the two bonds immediately to be located, brought together, and examined. As there should be no two bonds of the same loan and denomination bearing the same number, if one were spurious the fact would surely become known at once, for critical examination would follow and the facts would be discovered.
The posting of the numerical records thus seems to be an adequate protection against successful presentation of spurious bonds, for each must bear a particular number, and if there should be two of the same number, the register posting would certainly disclose the fact and show that there was either an error or that one of the bonds was a counterfeit.
The Register is always notified regarding the last progressive number of the bonds issued and opens his bond registers accordingly. No false bond ever got past the record, and it is difficult to see how one could do so. Moreover, the total number of bonds honored is balanced against the total number recorded and outstanding according to the registry records. The latter proof is accomplished by auditing authority not subordinate either to the Treasurer or to the Register. The Government is punctilious in proving that all bond receipts and disbursements are exactly in balance and each instrument fully accounted for.
It should be understood also that every bond sent to the Federal reserve banks or otherwise issued stands charged by number until that bank or individual either deposits the money for the bond or until the bond is returned unissued. It should also be understood that if coupons not yet matured have been detached from a bond presented for redemption, the face value of the missing coupon is deducted from the sum paid to re-deem the bond. Every bond purchased and taken off the market or called before the last maturity date is fully reviewed to determine that no unmatured coupon is missing and that each one attached is canceled by perforation to render it valueless before the bond is audited and filed.
Treasury officials consider the bond issue and redemption procedure well designed fully to protect the public debt.