
Billions in bearer bonds could be lost due to Hurricane Sandy: sources - Cbasedlifeform
http://www.nypost.com/p/news/local/manhattan/sunken_treasure_R1WidDOAwSBvWbYgSIoflJ
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RockyMcNuts
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.

~~~
Datonomics
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...](http://www.panamalaw.org/issue_your_own_corporate_bearer_bonds.html)

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rogerbinns
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
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.

~~~
rogerbinns
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.

~~~
justincormack
I think thats why people collect old bonds, as they were very ornate to make
forging harder. Access to quality printing was less widely available, but I am
sure there was fraud. However as you had to present coupons for interest and
certificates for maturity, I suspect they would check them all together to
check for duplicates, manually. I know a few people who worked in that kind of
area who are old enough to remember will ask.

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ghshephard
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.

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

~~~
Spooky23
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!

~~~
patio11
If you think 150 years is a while, wait to you hear about perpetual bonds. The
United Kingdom still pays out interest, four times annually, on bonds which
predate the existence of the United States of America. (They could
theoretically call most of them, but owing to unilateral changes in the terms
over the years, the coupon is so low as to make calling them a losing
proposition as opposed to paying down more conventional debts of the nation.)

~~~
ghshephard
Citation: <http://en.wikipedia.org/wiki/Consols> (to save others the search)

First issued in 1751.

"Consols still exist today: in their current form as 2½% Consolidated Stock
(1923 or after), they remain a small part of the UK Government’s debt
portfolio. As the bond has a low coupon, there is little incentive for the
government to redeem it. Unlike most gilts, which pay coupons semi-annually,
Consols pay coupons four times a year because of their age. As a result of
their uncertain redemption dates, they are typically treated as a perpetual
bond.

...

Given their long history, references to Consols can be found in many places,
including literature such as Pride and Prejudice by Jane Austen, David
Copperfield by Charles Dickens, Howards End by E. M. Forster, Vanity Fair by
William Makepeace Thackeray, Of Human Bondage by William Somerset Maugham and
The Forsyte Saga by John Galsworthy and in economics."

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benblack86
Don't keep bearer bonds at a street called water. Clue is in the name.

~~~
ChuckMcM
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.

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

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

~~~
jamesmcn
Looks like we will need to do some dry cleaning.

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dfc
_"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>

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ericHosick
Ziploc bags.

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

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

