Q: Why is the U.S. Treasury converting traditional savings bonds into paperless, electronic accounts?

A: Times have changed since President Franklin D. Roosevelt placed the first order for a $500 Series E Savings Bond in a radio broadcast on April 30, 1941. With the advances in electronic banking and widespread Internet use by consumers in the 21st century, the federal government is looking to save money and offer more conveniences to bondholders. The Bureau of Public Debt, which administers the U.S. Savings Bond program, has more than 1,000 full-time employees. Nearly three-fourths of this staff are needed primarily for the savings bond program. With an overall administrative cost of $200 million, all but $50 million is dedicated to managing the savings bond program. Any farmer and small business owner in Iowa can see that’s stiff overhead. A lot of time and resources go towards printing, distributing and redeeming paper bonds, as well as tracking those that are lost or stolen. A popular tool to help the federal government pay its bills, approximately 55 million Americans own savings bonds. U.S. Savings Bonds account for approximately $200 billion, or about five percent of the government’s outstanding debt. Treasury’s long-term goal is to stop issuing paper bonds, but no final date has been set. In the meantime, bond buyers may continue to buy traditional paper bonds through their local banks and credit unions. One advantage to investors of buying savings bonds electronically is that it will allow them to purchase and redeem them at any time. Plus, consumers can buy electronic savings bonds in any amount above $25, up to the annual limit. And unlike paper bonds, the electronic bonds will automatically be redeemed upon maturity and be deposited in the investor’s bank account. This would help alleviate the 'forgotten' bonds collecting dust in desk drawers and stem the confusion many bondholders have regarding when their savings bonds mature. Consumers may open a Treasury Direct account on-line by filling out an application at www.treasurydirect.gov. Bondholders will not be required to switch their paper certificates for electronic bonds, but they may choose to do so starting next year.

Q: Are some consumers concerned about the new paperless system?

A: Yes. As a grandfather of nine, I understand the popularity of gifting U.S. savings bonds to young people. Millions of Americans buy them as wedding, graduation and birthday gifts. That’s why some have raised concerns about the ability to continue gifting paper bonds to children. To buy electronic savings bonds and transfer ownership as a gift, the bond owner must have a Treasury Direct account. Current Treasury rules require an account holder to be at least 18. Obviously, this complicates the gifting option. However, the Treasury Department is working to address this issue. The Treasury Department also is working to assist folks without access to the Internet on home computers. It is developing opportunities to access Treasury Direct via computers accessible to the public and to partner with financial institutions to integrate Treasury Direct as a customer service benefit. As chairman of the Senate Finance Committee, which holds primary jurisdiction over the U.S. Treasury Department, I will keep tabs on the implementation of the electronic U.S. Savings Bond program to make sure it remains accessible and secure to Iowans of all ages. I invite Iowans to contact me with concerns they may have about the new program.