Huge sums of Treasury bonds seized on italian-swiss border

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Huge sums of Treasury bonds seized on italian-swiss border

A short summary in english, i found the news in italian only.

On june, 4th the Italian police officials of the "Guardia di Finanza" and swiss authorities stopped two japanese businessmen arriving in Switzerland from the italian border at Chiasso; at the customs check the two declared nothing and were discovered having hidden in their luggage 249 FED Bonds ($500 millions each) and 10 "Kennedy" bonds ($1 billion each) for a total of $134 billion in value.

Investigations are underway, officials say.

I found the news here (italian only):

Mercato Libero Blog (italian financial blog):

http://mercatoliberonews.blogspot.com/2009/06/la-stangata-del-millennio....

Ticino Online (swiss newspaper): 

http://www.tio.ch/aa_pagine_comuni/articolo_interna.asp?idarticolo=46455...

Guardia di finanza (official site):

http://www.gdf.it/GdF__Informa/Notizie_Stampa/AdnKronos/Adnkronos_2009/A...

Other references can be found on adnkronos.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

But they had nothing of value to declare......

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Re: Huge sums of Treasury bonds seized on italian-swiss ...
gyrogearloose wrote:

But they had nothing of value to declare......

Well, just that 134 billion or so in treasuries in case the car broke down or something. :-)

If this is true, is this not a huge story? What are the Japanese doing smuggling this massive amount of treasuries into Switzerland?

I sent this post to Matt Drudge and asked him to break the story in the U.S. We'll see.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

I keep coming back to this post hoping to see some additional news on this.  Seems very fishy to me and I coudn't find any other news items about it anywhere.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

http://www.asianews.it/index.php?l=en&art=15456&size=A

Quote:

» 06/08/2009 15:18
ASIA – ITALY
US government securities seized from Japanese nationals, not clear whether real or fake
Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.

Milan (AsiaNews) –  Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.

The question now is who could or would counterfeit or smuggle these non-negotiable bonds.

In order to stop money laundering Italian law sets a ceiling of 10,000 euros per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.

If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.

If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.

As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police.

Some important international financial newspapers had already reported on the existence of ‘funny money’ circulating on parallel, i.e. unofficial, financial markets.

For AsiaNews a few points need considering:

1.      When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.

2.      The fear of counterfeit bonds and securities has spread across Asia with the result that real securities are also considered with suspicion.

3.      During the Second World War several countries at war printed and put in circulation perfectly counterfeit enemy money. It is also historically established that some central banks, like the Bank of Italy 65 years ago, issued the same securities twice (identical registered number and code). This way they could print more money with legal tender than they officially declared. The main difference though is that 65 years ago the world was involved in a bloody war, which is not the case today.

 

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

For AsiaNews a few points need considering:

1.      When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.

 

Actually, what AsiaNews is saying about the Italian press is false.

I'm Italian and nothing whatsoever surfaced on national newspapers regarding this story, let alone the front page, even if press agency adnkronos reported the news; same goes for the tv.

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Thanks for sharing this CB!

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Broke on Drudge........Thanks for breaking this story in the U.S. guy:

http://www.bloomberg.com/apps/news?pid=20601101&sid=ayy1QKcwcGN0

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

A few days ago I had trouble comming up with the asia news link. Today google stats had 12k entries on this subject. This link for JapanToday repeats the basic story and people speculate in comments that North Korea may have been involved - counterfeit bonds and fake passports... toward what end I have no idea - the amount is so huge.

http://www.japantoday.com/category/crime/view/2-japanese-carrying-134-bil-worth-of-us-bonds-detained-in-italy

The buuz seems to be that the amount was correctly reported and the incident did occur.

from comments:

Quote:

bertoldo at 03:06 AM JST - 12th June

weird, definitely. I'm italian, and I confirm that the sum is correctly translated ("miliardi" stays for billions). the story is covered mainly by blogs, conspiracy sites,local swiss newspapers, but it is on some italian mainstream media as well and on the police site, without great emphasis though (in the "strange but true" sections, so no analysis at all).

a blog published an interview to a police officer in which he confirms the fact, and that the police is collaborating with some Us secret agents to establish whether the bills are false or not: http://crisis.blogosfere.it/2009/06/96-miliardi-di-bond-intervista-al-co...

the two men apparently tried to reach switzerland mixed with ordinary commuters on a train.

nothing more, very few links on the international sites. it's usual that people crossing the border are asked if they have something to declare, and there can be a search, but not always and not in so accurate way.

  • bdiego at 05:51 PM JST - 12th June

    $134 Billion suggests it's either fake or from a sovereign fund. However that amount is a large fraction of what most countries hold of US treasuries - it's unlikely that China would just hand 5% or 10% of all US Debt they own to a pair of guys. It would be as likely as someone carrying 70 out of all 72 Monet's in the world across the border - fakes.

    What's more likely is this is North Korea smuggling forgeries, first by landing in port in Italy by private ship then crossing the border by land into Switzerland where NK's financial stash is known to be. The idea is there's less scrutiny at border crossings than by plane where it will pass through x-ray (true to a degree). Italy is the simplest entry to Switzerland by boat, and NK employs several boats for smuggling as has been thoroughly documented and in fact being discussed as we speak at the UN for the new resolution.

  • bdiego at 05:57 PM JST - 12th June

    More info: There are only three countries in the world that even possess that much in US bonds: China, Russia, and Japan. Furthermore the denominations are suspicious as they are no longer in print, and in any case as they are part of sovereign funds are almost definitely fake by this fact alone.

  • bdiego at 06:20 PM JST - 12th June

    Consider these background facts: * North Korean faced international sanctions over institutional counterfeiting of US $100 bills. The country has no qualms about mass producing counterfeit money. * North Korea has repeatedly manufactured fake passports, such as the Dominican Republica one used by Kim Il Jung's son to repeatedly enter Japan (where he was caught wearing a diamond encrusted watch). He claimed he was visiting Disneyland, but witnesses say he went straight to the red light district. The country has no qualms about mass producing counterfeit passports and claiming fake citizenship. * There are a million ethnic Koreans in Japan who are otherwise Japanese, about a third of whom identify with North Korea and have supported North Korea's policies including kidnapping, murder, and international terrorism. North Korea has in fact admitted to these allegations, which are the crux of Japan's stance in six-way talks. North Korea has no qualms about terrorism, murder, kidnapping, or any crimes in general. * North Korea's counterfeiting, missile sale, and opium production are all designed to generate hard currency it desperately needs to survive. It will do anything to get money. * One of the few safe havens in the world for North Korea is Switzerland due to its strong neutrality. Kim Il Jung's heir went to school there and Switzerland serves as a repository for much of North Korea's currency and banking needs. * North Korea has been known to use its small fleet of ships to transport agents into various countries for its crimes - as demonstrated by their use in kidnapping operations off Japan. Agents prefer to disembark by ship and cross borders by land. * As only China, Japan, and Russia even possess this amount in bonds these are the only nationalities any smugglers would claim. Alas, such denominations of bonds do not exist in this amount and would be accounted for in any case, and they are almost definitely forgeries. * North Korea has a colorful history of organized crime dating back decades - not many years have to pass for another bizarre pattern of crimes to emerge and it was only a couple of years ago they were caught for mass counterfeiting of dollars.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

 If this story is true. The implications are grave.  They are likely real.  Why fake those types of bonds?

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

K. Denninger's take on the story:

The Saga Of The Bearer Bonds

It just gets more and more odd after my original report, with the latest coming from a German newspaper (translation courtesy of Google):

Hit for the Zöllner: The contraband securities valued at 134 billion U.S. dollars are apparently real. Die italienische Finanzpolizei hatte zwei Japaner ertappt, die im doppelten Boden eines Koffers milliardenschwere Anleihen in die Schweiz schaffen wollten. The Italian financial police had two Japanese caught in the false bottom suitcase billion-dollar bonds in Switzerland wanted to create. Von dem Fund profitiert das hochverschuldete Italien.

Note that this has received very little coverage in the so-called "mainstream US media" - but it is everywhere in Europe and Asia.

Japan, for its part, oddly said the following as soon as this story started to hit the press:

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending a Group of Eight meeting of finance ministers starting today in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

Uh huh.  And the Japanese said in December of 1941 that all was well too.  Anyone remember what happened on the morning of the 7th?

Let's apply a little "Occam's Razor" to this entire story.

You're not going to walk into a bank with $130 billion in bearer bonds and cash them.  Nor are you going to sell a bond with a $500 million face value to someone without them authenticating it.  They will be authenticated before you get one dime out of them - no matter who you think you're going to "give" them to. 

So if they're fakes and you're "just screwing around", there is no reason to hide them.  Nor is there any particular reason to have authentic and recent original bank documents in your luggage with them, as has been reported.

Next, unless someone knew you were smuggling them, why would you be subject to that sort of search?  What made the people involved "interesting" to the authorities?  This doesn't sound like a random stop to me; how many people are carrying $130 billion in bearer bonds at any given point in time?  No, someone was tipped off that this was happening.  Now why would you bother to stop them here, prior to their attempted delivery of such instruments, if they were fake? 

Think about this: You know someone is smuggling a load of drugs.  You can either bust them immediately or you can tail them and bust them when they show up at the "meet" to exchange the dope for the money.  If you do the former the guys with the money get away, having committed no crime.  But if you do the latter, you get to bust both the courier and the purchaser - two times the effectiveness for the price of one, and double the seizure value, since you get to seize the cash too!

So let's assume that the certificates are real, as German media seems to believe and which, by the way, makes logical sense given what they were and the sheer impossibility of cashing a fake $500 million bond.

Ok, who has $130 billion in bearer bonds?  Remember, bearer instruments haven't been issued by the Treasury since 1982, when they became illegal to issue, at least to US institutions and residents (there was an exception carved out for Treasury instruments issued to non-US residents in 1985 - a time of high deficits)  The answer to that question: it is rather unlikely that there remains $130 billion of legitimate US Bearer issuance outstanding anywhere - to anyone.

Mr. Holmes would be initially puzzled by such a caper.  On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding.  On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.

This leaves us with more questions than answers at this point.  

Or does it?

As Mr. Holmes is famously rumored to have said, "once you eliminate the impossible, whatever remains, however implausible, must be the truth."

So what remains?  Let's run a theory here - one of the few possible remaining options, given the exclusion of what we know not to be true...

Are we willing to assume that all the "issue" of Treasury bonds has been done "above board" as required by law.  If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported over the last, oh, say 10 or 20 years, then the following is about to occur:

Who could have possibly been complicit in such a scheme?  I can come up with only two nations (and only nations could be involved due to size): The Japanese and Chinese.  Since the two individuals who were arrested were reported to be Japanese nationals......

There are tremendous implications in an event like this, again, assuming the bonds are real.

The owner is going to want them back, of course.  But Italy is going to keep a third as their statutory penalty for non-declaration on the border.  Oops.  That's great for Italy, but it blows bananas for the actual owner.

Of course Italy (or the US!) could declare them "fake" and as a consequence simply burn them.  If they are in fact real, that's an even bigger problem.  See, Bearer Bonds are issued without registration - they are as anonymous as a $100 bill in terms of who owns them.  That's one of their "features", and why they were often used for various clandestine money operations.  So if they are real and are destroyed, the owner is out of luck - their money is gone just as it is if you burn a $100 bill in an ashtray.

How much is $130 billion in this context?  About 1/5th or so of what Japan legitimately owns of US Treasury debt.  How would you like to take an instantaneous (and permanent!) 20% haircut on your securities?  That's what I thought.

To add some balance here, there have been stories about fake bearer bonds coming out of North Korea and other places for years.  But the idiocy of attempting to pass a $500 million certificate belies this possibility - who in the name of God would take such a thing and give you anything for it without authenticating it first?  While bearer instrument are "anonymous" in terms of who owns them, their authenticity is easily verified as they ARE serialized instruments.

I remain puzzled, and am not advancing the above theory as fact. 

It is, however, one of the few explanations that actually fits the facts, and for that reason, I think we need some answers.  If in fact previous administrations were issuing "off-book" Treasury debt in this fashion to sovereigns then implications are truly explosive as such issues are blatant and outrageous unlawful acts and would expose everyone involved to severe criminal penalties.

Let's hope we get those answers, and this isn't one of those "funny things" that just disappears into the night.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Speculation (with some interesting evidence and reasonable logic) that this was a simple scam in progress, one perpetrated by some Philippino con men with fake paper of a type that is reasonably well known.

http://cannonfire.blogspot.com/2009/06/mystery-bonds-enter-cult-now-it-gets.html

Worth reading if you are interested in this story.

This site:

http://www.marketskeptics.com/2009/06/italy-seizes-135-billion-treasury-bonds.html

has a link to a pdf of what what looks like a real billion-dollar letter of credit from the FRBofNY and also leans toward the Philippino fake bond scam.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

ZeroHedge has an excellent write-up on this event:

No doubt you are already aware of the wild stories circulating in response to the news that two Japanese nationals were caught trying to smuggle some $134 billion in U.S. Government bearer bonds into Switzerland from Italy. Since the Secret Service seems a bit slow in addressing the issue (What's the problem? Haven't you hired an undersecretary of Secret Service motivation yet? Couldn't you get Agent Frank Horrigan out of retirement and send him on special assignment or something?) and the Italians change their story about the instruments almost as often as they change governments, we thought you might benefit from some of our analysis.

Obviously, with respect to authenticity, there are three options:

1. All the documents are fake.

2. Some of the documents are fake.

3. None of the documents are fake.

Taking these in order-

1. All the documents are fake. (Likely)

If all the documents are fake then the possibilities narrow to some degree:

Perhaps the work of a technically sophisticated but socially inept counterfeiting operation that is most likely attempting to dupe gullible private citizens or low-level managers. As of today an Italian Colonel in the Guardia di Finanza was complimenting the workmanship of the documents and speculating some of them might be authentic (at least to the European press). Leaving aside for a moment the rather dire career consequences such pronouncements might have, one assumes the Italians have some experience with forged documents. Admittedly, however, such expertise might not readily flow up to an officer politically focused enough to reach the rank of Colonel in any Italian organization. (I think I met one at a party in Miami once).

(much more...)

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

The "letter of credit" pdf I mentioned above is part of another scam - seems this type of thing is relatively popular:

http://cryptogon.com/?p=9095

Quote:
  • Seattle Shortbus Says:

    Is this related to a notice published by The Fed in November 2007?

    I’ve had bing translate the text on this page http://mercatoliberonews.blogs.....iganti.htm to confirm it was reporting on the $134B smuggling story, which does appear to be the case.

    There is .pdf attachment found on the page http://etleboro.com/documents/copy-title.pdf, but I am unable to tell if the documents are supposed to be directly related to the Japanese smugglers.

    However, the documents reference two names. One is Yohannes Riyadi, and the other is Teo Hui Kiat.

    A quick google search turns up a result for the former on the New York Fed’s page of banking scams http://www.newyorkfed.org/banking/frscams.html (no real useful results for Teo Hui Kiat).

    Full text here:
    The Federal Reserve is aware of a fraudulent scam involving individuals using the names Yohannes Riyadi and/or Wilfredo Saurin, or persons claiming to be representatives of these two men. In a typical version of this scam, Mr. Riyadi and/or his delegates falsely claim that they have on deposit with the Federal Reserve Bank of New York several U.S. Treasury Checks issued to Mr. Riyadi amounting to billions of dollars.

    The Federal Reserve Bank of New York has been contacted by several brokers and financial institutions worldwide inquiring about the validity of this fraudulent account documentation, which is being offered as collateral for lines of credit or other types of asset based financing. The fraudulent scheme includes multiple documents which purport to have the signatures of various Federal Reserve officials, including Chairman Ben Bernanke.

    In some instances, individuals involved in this fraudulent scheme claim to have met with Federal Reserve officials and claim to have verified that the alleged account is in order. We have also learned that the fraud may include the purchase of certain documents by the introducing brokers.

    If you have information regarding this fraud please contact either Robert Amenta, Special Investigator at the Federal Reserve Bank of New York, or Erik Rosenblatt, Senior Special Agent at the Department of Homeland Security, Immigration and Customs Enforcement.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Border checks are very rare in Europe. The customs must have been tipped off, there is virtually no chance of them being searched otherwise.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Tapani, the cannonfire blog linked above suggests a couple of suspects that may have been known to authorities. Agree that tip-off is likely.

Quote:

One news story -- immediately removed -- identified one of the "Japanese" as a notorious con man from the Philippines named Yohannes Riyadi, a.k.a. Wilfredo Saurin, whose associates in international crime are fairly well-known. The other guy may have been his comrade Joseph Daraman. These two men are the right ages, and they both could pass for Japanese. They've been trading in fake documents from the Federal Reserve for years.

Riyadi is the name on the fake letter of credit from a few years back.

Seems very likely that this was a lowbrow scam - and not the largest either. Amazing that ayone would believe that they could actually make a buck with this stuff as the amounts are too large to be reasonable. Just goes to show...

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Re: Huge sums of Treasury bonds seized on italian-swiss ...
Tapani wrote:

Border checks are very rare in Europe. The customs must have been tipped off, there is virtually no chance of them being searched otherwise.

If Switzerland was part of the EU I'd agree, but it isn't and has normal border checks between it and it's bordering countries. More likely is the fact that they travellers were Japanese was the tip off, rather than Italian/German/French etc.

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

One of the many "odd" things about this story is that the two Japanese nationals were not arrested.  Asia News reported on 6/12:

First of all, the men carrying the bonds had a Japanese passport. Secondly, they were not arrested. Under Italian law anyone in possession of counterfeit cash or bonds worth more than a few tens of thousands of euros must be arrested. By comparison the value of the seized counterfeit bonds is equal to 1 per cent of the US Gross Domestic Product (GDP).

I suspect that with the help of the US, these bonds could be very quickly analyzed in determining if they are fakes.  The bonds have serial numbers.  If they were fakes, wouldn't the two criminals be quickly arrested?

Denninger's theory (Sam's post #10) is really interesting. 

Are we willing to assume that all the "issue" of Treasury bonds has been done "above board" as required by law.  If Treasury has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn't want reported

The bonds are non-negotiable which I think means that they may only be redeemed by the issuer and can not be resold to others.  Do these types of bonds have a maturity date?  What if you wanted to sell them early, does the redeemer have to buy them?

In adding to Denninger's theory...it is possible that the US said no to an early redemption.  This would provide a motive for Japan to have the two smugglers caught.  If there is something smelly about the bonds that the US wants to keep secret, then Japan could demand they quickly and quietly redeem the bonds while publicly agreeing that they were fakes.

Larry

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Re: Huge sums of Treasury bonds seized on italian-swiss ...
Tapani wrote:

Border checks are very rare in Europe. The customs must have been tipped off, there is virtually no chance of them being searched otherwise.

Between Switzerland and the rest of the EU, they are more common despite Switzerland joining the open boarders piece of EU.  Having said that, I personally have experienced boarder checks at the Dutch/Belgian boarder and the German/Austrian boarder in the last couple of weeks

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Larry: My understanding is that these are bearer bonds that operate just as cash in that anyone can possess them. They belong to whom ever has them in possession.

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

The link below is to a Federal Reserve fraud warning and has an image of a fake coupon note:

http://www.federalreserve.gov/boarddocs/SRLETTERS/2003/SR0314.htm

The article excerpted and linked below discusses the reason that Treasury issued notes in 100 and 500 million denominations:

http://74.125.47.132/search?q=cache:dn-l4TULb_sJ:www.ehs.org.uk/ehs/conference2005/Assets/NollFullPaper.doc+bonds+denominations+%22%24500+million%22&cd=12&hl=en&ct=clnk&gl=us&client=firefox-a

Quote:

The High Cost of Debt: Very-High-Denomination Treasury Notes and U.S. Treasury Debt Management, 1955-1969 
 

A Paper for Presentation at the 2005 Annual Conference of the Economic History Society at the University of Leicester, 8-10 April 2005 
 

By Dr. Franklin Noll 

.................................................

The Treasury notes issued in the early 1950s were all couponed bearer securities, paying interest on a semiannual basis.  To receive his interest payment, the holder of the note would detach the appropriate coupon and present it to his bank, which would then send it on to the regional Federal Reserve bank.  The Federal Reserve bank would issue a payment, physically cancel the coupon, and send on the coupon to the Bureau of the Public Debt.4  The Bureau then recorded the payment and destroyed the coupon.   
 

With the ten-fold increase in the dollar amount of Treasury notes issued between 1952 and 1955, the amount of work handled by the Federal Reserve banks and the Bureau of the Public Debt exploded.  Correspondingly, the printing run of Treasury notes at the Bureau of Engraving and Printing increased from around 67,000 10-coupon notes in fiscal year 1952 to 690,000 10-coupon notes (or 6.9 million coupons in total) in fiscal year 1955.5  All these millions of notes and coupons would have to pass through the Federal Reserve system and the Bureau of the Public Debt. 
 

An investor buying millions of dollars in notes or a custodial bank holding billions of dollars in notes for their customers also had a lot of work to do when they wanted to cash in their coupons.  Every year two coupons had to be detached from every individual security and turned in for payment.  If an investor had $500 million in Treasury notes, and hopefully held the sum in $1 million denomination securities, he would have to detach and turn in 1,000 coupons a year.  Custodial banks handling larger sums and many smaller denominations had an even worse time.6  People had to be employed to cut, count, track, file, transport, and guard the coupons.  Vault space was needed to store the Treasury notes.  And, between 1952 and 1955, the number of notes and coupons involved was to expand ten fold.  The resulting increase in costs was burdensome. 
 

The Rise of Very-High-Denomination Treasury Notes

An easy way to reduce the administrative costs involved would be to add a few zeros onto the existing denominations, and this is what was done.  In February 1955, the denominations of $100 million and $500 million were added to the existing ones of $1,000, $5,000, $10,000, $100,000, and $1 million.  Raising the maximum denomination to $500 million cut down the amount of work involved in large issues of Treasury notes for everyone.  The $500 million investor now had only two coupons to worry about, as did the Bureau of the Public Debt.  And, the Bureau of Engraving and Printing only had to print one $500 million security instead of 500 $1 million securities.  So, very-high-denomination Treasury notes were really money saving devices. 
 

The issue of Treasury notes bearing very-high denominations was to continue for the next 14 years, through three administrations and five Secretaries of the Treasury.  Their longevity was the result of the continuation of the trends first seen in the early 1950s: the Treasury’s inability to sell long-term bonds, market pressures toward short-term securities, and upward trends in servicing costs. 

The End of Very-High Denominations

The last issue of very-high-denomination Treasury notes occurred in October 1969.  After that, the maximum denomination returned to the earlier high of $1 million.  It was the drive for further cost savings in debt administration that led to the disappearance of very-high-denomination Treasury notes.  While very-high denominations saved on the costs of handling coupons and printing securities, they could not eliminate these costs or decrease the costs of safe-keeping and transferring bearer securities.   
 

The movement of paper certificates and their filing and refiling, increased the chances of them being lost, and the losses from theft were rising.  While the losses of Treasury securities due to theft amounted to less than $4 million in 1966 by 1969 they had skyrocketed to over $30 million.7  By late 1970, insurance companies were refusing to cover holders of Treasury securities against loss, threatening the functioning of the government securities market. 
 

Amongst the most hard-pressed by these developments were the Federal Reserve banks.  Federal Reserve banks performed numerous transfers and held securities for numerous entities, including the Federal Reserve’s System Open Market Account.  In the early 1960s, the Federal Reserve began to investigate whether the securities held by member banks and Federal Reserve banks could be held in book-entry form or managed electronically, eliminating the need for physical documents.  Beginning in January 1968, a book-entry option was offered by the Federal Reserve to member banks.  And by January 1970, the bearer securities held in the Federal Reserve’s System Open Market Account were converted into book-entry form.  This last action converted almost a quarter of all outstanding marketable debt into book-entry form.  The combination of the conversion of System Open Market Account securities with securities converted to book-entry since January 1968 brought the amount of outstanding marketable debt in book-entry form to some 40% of the total in January 1970.  It was at this point that the Treasury stopped offering very-high-denomination Treasury notes as there was no longer be any need for them. 

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CB
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Re: Huge sums of Treasury bonds seized on italian-swiss ...

virtual pool - my take:

Odds that:

the story disappears w/o definitive resolution 40%

the paper is fake 99.99%

it was a scam by a Philippino con artist 60%

the US Treasury/Federal Reserve will continue to sell bad paper on the international market in the trillion $/yr range for as long as the traffic will bear it 100%

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

 The story appears to be real.... Real enough for me to tell people about... I usually never mention news to anyone...

THIS IS HUGE...   real or counterfeit....  either way.... 

The fact that only bloomberg of all the mainstream U.S. Media outlets has confirmed the story makes it the biggest story of the year. So far anyway.

Who was recieving those securites? if they were ment to be recieved at all... 

Either way... to me the story has now been confirmed... if it gets 1984ed  and disappears... I dont care... I have it on paper... 

I Printed out the Article from bloomberg and The the Zero hegde letter... As chris has pointed out above, ZERO has a good take on the situation. 

Im passing out copies...

Spread the word... 

Otherwise...

It be forgotten

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

They're obviously fake. If you look at the photos put out by the Italian police, they have coupons in which one would clip to redeem interest payments. The Fed is familiar with these forgeries and states that it has never issued bonds with coupons (and kind of ridiculous to think that a soverign nation would clip coupons to get their money).

http://www.newyorkfed.org/banking/frscams.html

These scams run out of the Phillipines and they were most likely bringing them into Switzerland to try to scam some rich suckers, or possibly see if they could get a bank to accept even one (which would be a jackpot by itself).

And as to all this crowing about being nearly perfect forgeries (and thus implying state involvement like North Korea), one shuold ask: how hard would it be to fake a 1930's document with modern technology?

 

 

 

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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Watch Glen Beck tonight. I caught him this afternoon and he is all over this story. BTW, I agree that this is probably a scam....But I find it interesting that the Italian PM was visiting Obama today.....Conspiricy theories....LOL

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DrKrbyLuv
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Re: Huge sums of Treasury bonds seized on italian-swiss ...

jerrydon10 - I'll try to pick Glenn up via youtube. 

BTW - did Drudge send you a check for the scoop - maybe a t-shirt?

Larry

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jerrydon10
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Re: Huge sums of Treasury bonds seized on italian-swiss ...

No....LOL........What kind of bothered me was that it was removed from Drudge almost as soon as he listed it. That was strange.

Anyone can send tips to Drudge on his site. You will get the standard message, I will investigate it. I don't know him personally, of course. On his behalf, I can say that I have done that twice and both were run on the site.

Some of you may have seen a video of black youth dressed in military uniform in formation praising the name of Obama. I also caught that video on a forum, sent that through the Drudge channel, and the next day it broke on his site. A couple days later it appeared on FOX and, well, you have probably seen it.

Don't underestimate the power that a single person can have on the Internet......;-)

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mono
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Re: Huge sums of Treasury bonds seized on italian-swiss ...

ZeroHegde wrote: 

"Perhaps you (T.Geithner) wanted an easy way to tip the debt crippled Italy 40% of $134 billion (the forfeiture fine for failing to declare) without congressional oversight. That buys a lot of Fiats. China or Japan will probably be blamed for the "incident" and no one will be surprised if it is hushed up. Instead everyone will assume that the remaining 60% went back to the original holder and Italy gets $53 billion without a lot of questions. Clever, Mr. Geithner, JamesTim Geithner."

 

I find this the most likely scenario.

mono

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joemanc
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Posts: 834
Re: Huge sums of Treasury bonds seized on italian-swiss ...

This is interesting, on March 30th, the Wall Street Journal reported that there was $134.5 billion left in the TARP fund, about the same as was found in their luggage.

http://online.wsj.com/article/SB123828522318566241.html

And I don't know who Richard Sauder is, but here is his conspiracy theory:

http://rense.com/general86/abit.htm

 

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DrKrbyLuv
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Re: Huge sums of Treasury bonds seized on italian-swiss ...

Here's more speculation by Bloomberg, who seems like the only US MSM interested.

Suitcase With $134 Billion Puts Dollar on Edge 

June 17 (Bloomberg) -- It’s a plot better suited for a John Le Carre novel.

Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.

Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit?

The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale.

The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren’t losing faith in the U.S.’s ability to control the dollar.

The dollar is, for better or worse, the core of our world economy and it’s best to keep it stable. News that’s more fitting for international spy novels than the financial pages won’t help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed.

Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?

These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border.

This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life. 

Let’s assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano’s “absolutely unshakable” confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan’s $686 billion of U.S. debt if more of these suitcase capers come to light. 

It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void.

On his blog, the Market Ticker, Karl Denninger wonders if the Treasury “has been surreptitiously issuing bonds to, say, Japan, as a means of financing deficits that someone didn’t want reported over the last, oh, say 10 or 20 years.” Adds Denninger: “Let’s hope we get those answers, and this isn’t one of those ‘funny things’ that just disappears into the night.” 

This is still a story with far more questions than answers. It’s odd, though, that it’s not garnering more media attention.

Larry

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Ken C
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Posts: 753
Re: Huge sums of Treasury bonds seized on italian-swiss ...
DrKrbyLuv wrote:

Here's more speculation by Bloomberg, who seems like the only US MSM interested.

 It’s odd, though, that it’s not garnering more media attention.

Larry

Larry,

That last sentence speaks volumes, does it not?

 

Ken

 

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