Liberty Bonds were issued by the US Treasury to finance World War I and later the reconstruction of areas affected by the 9/11 terrorist attacks. The first bond was not successful, but advertising campaigns and higher interest rates led to increased sales. The bonds were a way for citizens to contribute to the war effort and the cost of the war was estimated to be $30 billion USD. The fourth Liberty Bond was issued in 1918 and the most recent was for the redevelopment of the World Trade Center site.
A Liberty Bond was a bond issued by the United States Treasury to finance World War I. The first Liberty Bond was not very successful due to lack of interest, but later bonds became more popular thanks to a variety of advertising campaigns. After the terrorist attacks of September 11, a bond with the same name was issued to finance the reconstruction of the affected areas.
Governments often issue bonds to finance wars because the cost of military campaigns can dwarf all other government spending. World War I is estimated to have cost the United States federal government $30 billion United States dollars (USD). Annual spending on the war was several times greater than all other government programs combined. The idea behind a war bond is that the financial sacrifice incurred by citizens will be worth the broader implications of victory in the war. Ties are also a way for citizens outside of the military to contribute to the war effort.
The first Liberty Bond did not achieve the popularity that government planners had hoped for. They ended up selling $2 billion (USD), less than half the $5 billion (USD) limit. Many viewed this underselling as an embarrassment to the US Treasury. Those who bought the bonds earned 3.5% annual interest, up to $30,000 (USD) of which was tax-free. The bonds were issued in 1917 and could be redeemed after 15 years.
In response to the performance of the first Liberty Bond, the Treasury mounted a campaign to increase the popularity of the bonds. Renowned artists were employed to design patriotic posters inviting Americans to participate in the bond program. Stickers, buttons and even films were produced. Finally, famous movie stars and celebrities organized demonstrations in defense of the ties. These efforts were largely successful, and coupled with the higher interest rates offered, led to an additional $3.8 billion (USD) in bond sales.
The fourth Liberty Bond was issued in 1918, near the end of World War I. Authorized sale of final $6 billion (USD). The bond’s redeemable period was in the early 1930s, during the Great Depression. Due to the financial circumstances of this period, the United States government was unable to meet the original terms of redemption of the bonds.
Most recently, the United States government issued a Liberty Bond to finance the redevelopment of the former World Trade Center site in New York City. Not only were the Twin Towers destroyed on the site, but many neighboring buildings were heavily damaged. Property damage estimates for the 9/11 terrorist attacks range from $20 billion to $50 billion (USD). A Liberty bond was issued to raise funds without incurring the high interest rates of commercial bonds.
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