Hello! Kiah here. Welcome to Fintech Takes Banking, my weekly newsletter where I highlight things I think are interesting or important for bankers and the surrounding environs.  

I’m thrilled to bring you the sillier second part of my limited bearer bond series. Coming across these stories in the newspaper archives was like stumbling across gold in a creek bed, and I hope you enjoy them as much as I did. As with part one, this newsletter will heavily cite and link to The New York Times’ archive, the links of which may not be available without a subscription.

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We’re coming out of the holidays. You’re sloughing through a week or two of emails and do not want to read about banking in your favorite weekly banking newsletter. And so, my belated gift to you is the second part of my archival research into bearer bonds: Crazy stories of them going missing.

Two weeks ago, I shared a brief history and the slow death of the bearer bond. They were already on the way out by the time they made their iconic appearance in 1988’s “Die Hard” as the target of Hans Gruber’s gang. That’s because bearer bonds were the PERFECT thing to steal. The issuer or its agent didn’t keep a list of who purchased the debt and how much. And before centralized databases and repositories, physical ownership ruled the day, which meant it was a big problem and mystery when these pieces of paper would go missing. In my research, I came across several such examples. Here are a few of them.

In March 1963, the Federal Reserve Bank of San Francisco announced with “virtual certainty” that the bank had inadvertently destroyed $7.5 million in negotiable securities in the bank’s furnace the summer prior, according to The New York Times. 

The 12 bonds had a maturity date of May 1963; seven of them were $1 million denominations and five were $100,000 denominations. That sum is worth $80.5 million today. Based on the Fed’s periodic audit of vault content, officials believed that the bonds could have been destroyed in late May 1962; their absence was noticed in early August.

After discovering their absence, the bank notified its board of directors as well as the board of governors for the Federal Reserve System, the Department of the Treasury and the Secret Service. The securities had coupons that were due in November 1962 that had not been presented for payment, leading officials to believe that the securities were destroyed and not stolen.

The determination of destruction or theft mattered for the banks. If the bonds were stolen, it would be “the greatest single theft in the country’s history,” according to the paper. The bonds carried a $500,000 insurance policy; losses above that amount would be distributed among the 12 Reserve banks and prorated against the percentage of the capital each held. If they were merely destroyed, there would be no monetary loss.

“It is simply a matter of the Treasury in effect, crediting us with a shortage of unissued stock,” said San Francisco Fed President Eliot Swan.

The Fed outlined “the most probable explanation” of how it accidentally burned $7.5 million. Brace yourself.

The bonds were collateral in a member bank’s federal tax and loan account. They were printed on gray paper with red and blue ink and measured 4.5 inches by 11 inches and were placed in a large manila envelope to be stored in the Fed’s vault. The envelopes have accounting forms on the outside, which have space for entries that relate to the bond. Once that accounting form is full, the contents of the envelope are transferred to a fresh envelope that is once again placed in the vault. The old envelope would be burned in the Fed’s incinerator (excuse my new side quest researching the Fed banks’ vault/incinerator setups). Swan said “the most probable explanation” is that the securities weren’t actually transferred to the new envelope when the old envelope’s accounting form filled up. 

My read is that no one opened the old envelope to make sure that the securities were taken out. That sound about right? I am SCREAMING.

“We feel there is no question but that they were inadvertently burned with wastepaper,” Swan said in his statement. He described the accidental destruction as a “million-to-one human error” and said there would be no disciplinary action taken against employees associated with the destruction.

This theft was one of two incidents that led the Federal Reserve Board of Governors to ask the reserve bank presidents to explore whether they could convert to the book-entry form to keep track of Treasury securities held for safekeeping within their vaults, according to a 2004 paper from the Federal Reserve Bank of New York.

The Morgan Guaranty Trust Co. reported in October 1969 that $13.2 million in negotiable U.S. Treasury notes were missing from its vault, according to a Times article from the same month.

The bank declined to characterize the loss as a theft, and the article said the loss was covered by insurance. The bonds had been “properly received” by the bank “not more than a week before the loss was discovered.” The bank realized they were missing as part of a regular audit; the article also noted that the disclosure took place more than a week after the disappearance. The missing bonds ranged in denominations from $1,000 to $1 million and had a maturity of April 1970; that sum is worth $116.6 million today.

The bank was circulating the bills’ serial numbers to police departments and domestic and global financial institutions, which the paper noted would make it difficult to sell or redeem these bonds in “normal” financial channels. The paper observed that this circumstance seemed different than “Wall Street’s chronic paper problem” where larger amounts of negotiable securities would be reported lost, “only to turn up in the vault of the wrong bank or the wrong brokerage house, where they had been sent in error.” (I’m sorry: What?!) The article added the possibility that stolen bonds would be used as collateral for a loan rather than sold or redeemed, since it might be less likely that a lender at a smaller institution or one abroad would check the serial numbers.

It’s not clear from the Times archive what happened to these securities, including whether they were stolen or accidentally destroyed. But this particular loss contributed to Continental Insurance Co. announcing in 1971 that it would restrict or terminate coverage of insurance policies that covered thefts of securities from commercial banks, according to the 2004 Fed paper. This announcement risked severely limiting Treasury securities trading — since “dealers and clearing banks could not bear the risk of uninsured losses of the magnitudes that had been occurring,” the paper said — and changed the cost-benefit analysis of the book-entry record system.

U.S. Trust Co. was founded in 1853, which made it the country’s oldest trust company in July 1979, when it oversaw the holdings of New York City’s pension funds.

The bank realized that 41 bond certificates totaling $397 million that belonged to the pension fund were missing from the drawers in which they were stored in the underground vault. The Municipal Assistance Corp. bonds would be worth $1.8 billion today and included two bonds worth $15,000 and two worth $100 million. 

At the time of the theft, officials interviewed said that their denominations made them unlikely to be used as collateral for a loan without someone verifying them. And as an author aside, when you have a whodunnit that pits a storied Brahman-esque banker against New York City officials, you are going to get some colorful quips. I’ve included a selection in this retelling.

“There's no way you could turn them into cash,” said the city’s third deputy city comptroller at the time. “You could show the paper to your grandchildren.”

The city paid U.S. Trust $130,000 a year — more than $580,000 today — to act as financial custodian of its $8.5 billion — about $38 billion today — city certificates. “The service isn't as good as we get from the school custodians,” said Mayor Ed Koch.

The Times reported that some employees may have known about the disappearance for up to eight months, pushing the event back in fall 1978. The paper reported this, frankly insane, fact: U.S. Trust President Daniel Davison had told city officials there were employees who had known the bonds were missing, but that none were bank officers. “I do not consider that a satisfactory explanation,” snapped the New York Comptroller at the time, according to the paper. 

A bank spokesman told the paper that the bank was searching the nearly 10,000 files in the vault to make sure the bonds weren’t improperly filed — that they were in the vault but not where they were supposed to be. They were also not negotiable; when a search did not turn them up, duplicates were reissued to the pension funds. 

It’s not clear what really happened to them or when they went missing. The bank was also investigating “less plausible” avenues, including that it had been “cremated” with wastepaper or had been stolen. The city dismissed U.S. Trust as the custodian of the pension fund holdings.

Then, in January 1980, $2 million in “blank, unauthenticated” MAC bearer bonds were stolen from the same vault; that amount would be $7.9 million in 2025 dollars, according to The New York Times. The bank used these blank bearer bonds to facilitate sales and transfers of registered MAC bonds from the original bondholder to someone else. “In such cases, the original certificate is replaced with the bearer bond, which is signed by an M.A.C. trustee and registered as a valid certificate. The missing certificates lacked a trustee's signature, though one could have been forged.” 

The theft was discovered after a Los Angeles bond dealer came into possession of eight $100,000 bonds and called the bank to validate them. According to the article, the LA dealer had received the bonds from a Beverly Hills man who hoped to sell them. The dealer called U.S. Trust “in a routine check to validate the bond certificates,” which is when “the bank learned for the first time that 20 of the certificates, with a total value of $2 million, were missing.” The dealer likely did not know the bonds were stolen when making the call; at the time, reputable dealers and banks would conduct these checks if they were offered bonds to sell.

The July theft the year before led the bank to promise to conduct a complete inventory and put in place new internal controls. An official with MAC said at the time that a September 1979 inventory report indicated that the 20 stolen certificates were in the vault at the time of the report. 

“So it comes as a surprise to us that they now aren't,” the official said, according to the paper, “and we wonder what happened with the new internal controls.”

MAC demanded that the bank voluntarily resign as the trustee; it couldn’t fire U.S. Trust because the bank was working on behalf of the bondholders. The bank refused until the criminal investigation into the theft was completed by police. Shortly after news of the theft came out, the paper ran a profile about the bank and the changes it was undergoing. It said that President Daniel Davison considered these thefts to be “basically superficial.”

“The Trust Company, he continued, has paid a stiff price in bad publicity, lost top-management time, and legal and accounting fees,” the article read. “But after thousands of hours of audits of every account by the bank and the accounting firm of Coopers and Lybrand, Mr. Davison is confident that the loss of the securities was a fluke. He is far more concerned about profits… .”

In March 1980, federal authorities had arrested two suspects in New Jersey, according to the paper. One suspect reportedly had $2.26 million in stock and bond certificates that had been reported stolen from a different Wall Street firm. The other suspect came under suspicion after an aborted sale of the blank bearer MAC bonds in December 1979. At the time of their arrest, 10 bonds were still missing. 

I wasn’t able to find more articles about the missing bonds in the Times. I don’t know what happened to the two suspects that were arrested, I don’t know if those missing bonds were ever discovered — I don’t even know how those bonds left the bank’s vault. 

But perhaps it was this incident that led the deputy executive director of MAC to praise the registered bond system in 1983, on the eve of the outlawing of bearer bond issuance. He said at the time: “The registered bond system is far simpler and precludes a host of problems. In the case of coupon bonds that are lost, stolen, or that have slipped the memory of the holder, there is no simple solution. In the case of bond calls, the only way we can notify holders is through purchases of newspaper advertisements listing the bonds that have been called.”

In 1986, police arrested and charged a Brooklyn attorney and a Long Island real estate speculator with stealing $20 million in stolen bank securities… from someone.

The two individuals tried to sell the securities to undercover agents for $250,000, according to a March 1986 article in The New York Times. The stolen sum is worth $59 million today; the payment is worth about $739,000. The securities were instruments called “banker’s acceptances” but were readily negotiable, making them similar to bearer bonds, the assistant United States attorney quoted in the piece said.

There was no mystery about the two guys and the securities, the paper noted. But there was a mystery about who was the victim. The criminal complaint stipulated that the banker’s acceptances “had been taken from the Republic National Bank of New York.” A representative of the FBI who filed the complaint said, “the bank’s reaction was one of astonishment…. They did not know the securities were missing until we called them in to identify them.”

That is because, according to the bank treasurer, the securities were not stolen from the bank, but from a third party. 

“These are bearer instruments we issued and sold into the market, and what has apparently happened is that some third party has suffered a loss and may not even know about it,” the bank’s treasurer said in the article. He emphasized that the bank has not suffered any loss but was assisting with the investigation. 

The feds disputed some aspects of this characterization. The prosecutor on the case told the paper that while the bank may have sold the securities to a third party — as in, they were the property of someone else — it was their “understanding that the physical documents were still in the bank’s custody when they were stolen.” In the article, the feds were still investigating how the two men had come into possession of the stolen notes.

One thing about these stories that struck me was the physical, tangible aspects of the situations. The bonds are pieces of paper. They are stored in a place called the vault. The broker is a person. The communication device is a phone. There may be a shredder or an incinerator nearby. It’s not clear if there is a computer in any of these stories. There are some time delays in discovery, which make it harder to know for sure if a bond was destroyed or actually stolen.

These stories are on the cusp of a technological revolution that will digitize every person, place or thing in these stories. Book-entry and centralized, digital records will negate many of these problems that made these situations possible in the first place. That technology itself will be clunky, cumbersome and expensive. It is surely out of date relative to today’s standards. And yet, it was the solution to these particular sets of problems and circumstances. 

Of course, technology has also, in some ways, recreated these problems. Bearer bonds arguably still exist in a digital form, a digital currency designed to belong to the person who is in possession of it. Evasion of authorities was central to the design. The vaults aren’t physical anymore; they’re cryptography and cold storage. That could be changing now — as cryptocurrency and digital assets become mainstream, they move from their bearer era into their registered future. 

In the meantime: history doesn’t repeat itself, but does it rhyme?

FROM THE VAULT

What I’ve been reading, watching and listening to this week:

🫆 Did you see: that a bank in Germany had its vault broken into over the winter holidays? Thieves drilled through the cement wall to enter the vault and stole an estimated “tens of millions” of euros worth of valuables from 3,000 safety deposit boxes. The bank, Sparkasse, is telling customers that more than 95% of safety deposit boxes have been broken into.

📚 Intrigued by: the idea of a “default day” as proposed by behavioral economics professors Ray Fisman and Michael Luca in Bloomberg. It’s an annual audit of your life’s “defaults” — contribution rates, subscriptions, beneficiaries. In the same spirit, I bumped up my retirement contribution by a percent after reading this column by Washington Post’s Michelle Singletary.

🎶 Listening to: an episode of “Curious Nashville” about why a local bank cut a vinyl Christmas album with their employee volunteer choir. It’s a nice story about how banking history in Nashville intersects with the city’s musical roots.

✈️ Catch me at: the 2026 Fintech Xchange, hosted by the University of Utah, from Feb. 4-6.

Thanks for reading! And happy New Year, hope you have a great start to 2026, and wish you all the luck in keeping your resolutions, if you’re in that camp.

– Kiah

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