The US Savings Bond won a war: could it save us again?

Many people are looking to President-elect Obama to be able to perform some sort of miracle to get America out of its economic and financial crisis. Well, perhaps looking at what past Presidents have done upon taking office is giving the new President some great ideas.

Everyone in the press and on the TV and radio is asking where President-elect Obama will get the huge sums of money needed to finance all of the programs he is discussing. Well, if you look back to the start of World War II, where did President Roosevelt find the billions of dollars to build the munitions, tanks and airplanes to fight two wars on separate sides of the Earth? FDR's answer: US Savings Bonds.

With most people afraid to invest their money in banks or the stock market, there is a huge amount of cash sitting idly on the sidelines. Why not create the positive climate and motivate people to invest in their government? In the early 1940s, the country was still continuing the long slow climb out of depression and everyone was afraid to invest their money into anything at all. A feeling of skepticism about banks and the stock market was still the pervasive feeling all across the land. (Sound familiar?)

At the outset of WWII – in May of 1941 to be specific – the first of a new safe and secure place to invest one's money was introduced. It was called the series "E" US Savings Bond. It was purchased for 75% of its face value (you paid $17.50 for a $25.00 face value bond). In a certain period of time it would be worth the full $25.00. The investment was backed by the full faith, strength and credit of the United States government.

Americans pulled their money out of their mattresses and took it down to their bank and purchased almost $200 BILLION – in 1941 dollars - worth of savings bonds in a few short years. It was the patriotic thing to do! Our country was at war and needed the money to fight Hitler's Germany and Hirohito's Japan!

Even the children participated: One day each week, school children were able to purchase "Savings Bond stamps" that they would buy on "stamp day" and paste them into a stamp book. Once the book was filled with $17.50 worth of stamps, the child would give it to the "Stamp Lady" and she would return the following week with a $25.00 Savings Bond. So while Americans had banded together with Europe and Asia to fight the common enemies across the Atlantic and Pacific oceans, even school children were encouraged to join in via the stamp sales program.

In addition to helping the war effort, it also instilled a sense of learning about saving. Children would look at their stacks of "War Bonds" with a sense of pride and have a feeling of accomplishment. Something that is somewhat rare in today's fast-paced, charge-now-pay-later, society.

This morning, while getting ready to come to my office, I heard Mark Lapolla of Sixth Man Research discuss the idea of a resurgence of US Savings Bonds with the CNBC Squakbox panel. A focus on infrastructure rebuilding was the topic at hand, and what better way to fund President-elect Obama's proposed upgrades than with a new, specially dedicated Savings Bond. While the suggestion of an "I Bond" for infrastructure wouldn't work, (there's already an "I" for inflation-protected bonds), perhaps an "R" for rebuilding would fit the task. Either way, the panel made a good point, somewhere, somehow, there needs to be a way to fund the spending being planned.

Could this be President-elect Obama's secret weapon to rally the country? We already know that he is fond of reading about famous Presidents from the past – including Abraham Lincoln, Teddy Roosevelt and Franklin Roosevelt. Will President-elect Obama bring forth a page from FDR's playbook on how to rebuild a nation? Only time will tell.

Jack Quinn is a personal finance writer and editor for Jack has helped Savings Bond owners better understand their investments for more than 15 years, saving clients from mistakes which could cost them thousands of dollars.

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