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FEDERAL RESERVE BANK OF DALLAS F IS C A L A G E N T O F TH E U N ITE D ST A T E S Dallas, Texas, October 24, 1946 MEMORANDUM WITH RESPECT TO ARMED FORCES LE AV E BONDS AND CHECKS To All Banking Institutions in the Eleventh Federal Reserve District: There is reproduced herein a memorandum issued by the Treasury Department covering certain information of general interest with respect to Armed Forces Leave Bonds and checks. FEDERAL RESERVE BANK OF DALLAS Fiscal Agent of the United States TREASURY DEPARTMENT Washington The following information relative to Armed Forces Leave Bonds and checks issued pursuant to the Armed Forces Leave Act of 1946 is released by the Treasury Department for the information of banking institutions to assist them in rendering assistance to veterans in connection with these pay ments. This memorandum is not to be construed as a regulation but is issued for general information purposes only. Determination of Amounts Due. 1. All determinations of compensation due under the act will be made by the respective branches of the Armed Services, i. e. the Army, Navy, Marine Corps, and Coast Guard.. These determinations will be made on the basis of applications submitted by persons entitled. Application forms, which may be obtained at any post office, contain information as to persons eligible to receive this compensation, method of computing amounts due for unused leave, supporting papers required to be sent with claim, place to which applications are to be sent and other instructions relative to the manner in which the claim is to be prepared and submitted. Method of Making Payments. 2. On the basis of approved applications the respective branches of the Armed Services will make payments in bonds and checks on the following basis: a. Where the veteran was discharged prior to January 1, 1943, or where the total amount due is less than $50, the entire amount of the claim will be paid by check drawn on the Treasurer of the United States. The entire amount of the claim will also be paid by check where application is made by other than the person entitled (e. g. where veteran is deceased). This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) b. In all other cases the claim will be paid by issuance of one registered United. States Armed Forces Leave Bond to the highest multiple of $25, and a check drawn on the Treasurer of the United States for any balance. For example, a claim for $162.50 of a veteran discharged in August of 1943 will be paid by one bond for $150 and a check for $12.50. The War Department will issue checks and bonds through 24 Army Finance offices located in various parts of the United States, and 5 offices outside the continental limits. The locations of these offices are shown on page 2 of the application form. The Navy Department will issue all bonds and checks from Great Lakes, Illinois. The Coast Guard and Marine Corps will issue all bonds and checks from Washington, D. C. General Terms and Conditions of Checks Drawn on Treasurer of the United States in Payment of Terminal Leave. 3. Checks drawn on the Treasurer of the United States in payment of terminal leave will show on their face the legend “ Armed Forces Leave” . These checks are subject to the terms and conditions of Treasurer’s checks generally as contained in applicable Treasury circulars. They should be cashed by banks only on the basis of endorsement by the payee, or pursuant to a power of attorney completely describing the check and executed after the issuance thereof. Under no circumstances should a bank cash a check on the basis of endorsement by an executor, administrator or survivor of a deceased payee. Persons presenting such checks, which have not been endorsed by the payees, should be referred to the Federal Reserve Bank of the district. 4. Of special importance in the case of these checks are the provisions of the Armed Forces Leave Act, relative to payment to survivors in case of death of the payee. The Act specifically defines the sur vivors entitled to payment (later described herein) and authorizes the Secretary of the Treasury to settle all claims of survivors in connection with such checks. The settling of such claims will be delegated by the Secretary of the Treasury to the Federal Reserve Banks to whom survivors should be referred in connection with uncashed checks. General Terms and Conditions of Armed Forces Leave Bonds 5. Terms, Issue Date and Interest. Armed Forces Leave Bonds will be issued in denominations in multiples of $25, beginning with $50 (such as $50, $75, $100, $125, etc.) and will have a five-year term. They will bear simple interest at 2V& percent from issue date. Issue dates will be inscribed on each bond at time of issue and will be based on the date of discharge from the service and not the date that the bond is actually issued. Bonds issued to members still in the service will carry an issue date of October 1, 1946. The first quarterly issue date will be April 1, 1943 and the last October 1, 1946, making a total of 15 issue dates. Interest on each bond will start retroactively with the issue date shown thereon. Thus a bond issued to a veteran discharged in February of 1943 would be dated April 1, 1943, would mature and be payable in five years from that date with interest at 2^2 percent per annum (or 12^2 percent for the five years) on April 1,1948, regardless of when the bond is actually issued and sent to the veteran. 6. Registration. The bonds will be issued only in registered form, in the name of the person entitled. (There will be no coowners, beneficiaries, etc.) The name and service or serial number of the person entitled will be inscribed in the bond. If desired by the issuing branch of the service the address also may be shown but it is not required. Payment on redemption will be made at maturity only to the ‘registered owner except in the case of his death. Federal Reserve Banks, as Fiscal Agents of the United States, will handle claims of survivors in the event of death of the registered owners. Claims on bonds and checks may be handled in one transaction. 7. Non-transferability. The bonds are not transferable by sale, exchange, assignment, pledge, hypothecation, or otherwise, and they cannot be used as collateral for a loan. As later described, they may, however, be assigned to the Administrator of Veterans Affairs in payment of National Service Life or Government Life Insurance premiums, cost of conversion of such insurance, and policy loans. 8. Redemption. The bonds are redeemable by the registered owner only at their maturity, at which time payment will be made in one amount for principal and interest. Since the earliest quarterly issue date is April 1943 and the last October 1946, the bonds will mature at quarterly intervals beginning April 1948. Redemption prior to maturity is authorized only in the case of death of the registered owner, in which case his survivors may obtain redemption (with interest to the end of the month in which redemption is made), and distribution of the proceeds prior to maturity as later described. 9. Taxability. The bonds are exempt from all taxation but the interest thereon is taxable. Form of Bond. 10. The bond will be in the form of a distinctively designed punched card, similar in principle to punched card Treasurer’s checks. Distinctively designed protective paper stock will be used. The bonds bear the portrait of the late Carter Glass, former Secretary of the Treasury, the facsimile signature of Secretary of the Treasury, John W. Snyder, an imprint in red of the seal of the Treasury, and the legend “ Armed Forces Leave Bond” . 11. The bond stock is time of issue. The amount the same way as amounts or serial number, will also non-denominational and the amount will be inscribed on the bond only at the will be imprinted twice, in specified blocks, on the face of the bond, in much are imprinted on Treasurer’s checks. The issue date and name, and service be inscribed on the bond at time of issue. Time Required for Processing Applications and Issuance and Delivery of Bonds and Checks. 12. Bonds have been delivered to the issuing branches of the Armed Services. However, the processing of the applications and issuance of bonds and checks may require considerable time, in view of the large number of applications involved. It should be noted that any delay in this respect will not penalize the veteran in connection with his bond, because the bond, when received, will in any event be dated on the basis of his date of discharge and will bear no relation to the date it was actually issued and delivered to him. Delivery of Bonds and Checks. 13. Bonds and checks will be mailed to owners by regular mail to the addresses indicated on their applications. In some instances the services may mail bonds and checks in the same envelope, while in others they may be mailed separately. Errors in Amount, Issue Date, or Inscription on Bonds. 14. Errors in the amount or issue date of a bond or in the inscription of name, service or serial number of the owner, (resulting either from an error in the original application or otherwise), should be taken up with the respective issuing office of the service. In such cases the issuing office, upon review of the facts involved and return of the bond, will issue a corrected bond. Bonds Lost, Stolen or Destroyed. 15. Registered owners, upon submission of required evidence, may obtain relief, by issuance of substitute bonds, in case of loss, theft, destruction, mutilation, or defacement, of Armed Forces Leave Bonds, where such bonds have previously been delivered to them or their representatives. In any such cases, notice of the facts (including as complete a description as possible of the bond as to amount, issue date, serial number, and name and service or serial number of the registered owner) should be given to the Treasury Department, Division of Loans and Currency, Washington 25, D. C., which will handle all claims of this nature. These claims will not be handled by Federal Reserve Banks. 16. Claims arising from non-delivery of bonds (i. e. loss or destruction prior to delivery to regis tered owner) should be taken up with the issuing offices which, upon receipt of appropriate evidence will issue replacement bonds in such cases. Assignment of Bonds to Veterans Administration. 17. A veteran may assign his bond to the Administrator of Veterans Affairs, in connection with either National Service Life Insurance or Government Life Insurance, for any of the following purposes: a. Payment of premiums in advance on policy in force. b. Payment of premiums to cover new insurance applied for. c. Payment of premiums for reinstatement of a lapsed policy and payment of premiums thereon in advance. d. Payment for the difference in reserve for conversion of policy in force and payment of pre miums in advance. e. Payment of all or part of a policy loan made prior to July 31, 1946, and interest on such loan. 18. Regulations of the Administrator of Veterans Affairs will govern the procedure for the making of these assignments and the granting of credit on the books of the Veterans Administration. It is understood these regulations will be issued at an early date and that any office of the Veterans Admin istration will provide veterans with full information relative to their rights and privileges and the procedure to be followed. Applications of Survivors in Deceased Cases. 19. In the case of death of a person to whom an Armed Forces Leave Bond has been issued his survivors, as defined in the Act, may obtain redemption of the bond and distribution of the proceeds (including interest to the end of the month in which the bond is redeemed but not after its maturity), prior to, upon, or after its maturity, upon application at the option of such survivors. The Act specifies that the survivors entitled will consist of the surviving spouse and children, if any, in equal shares, and if no surviving spouse or child, or children, then in equal shares to the holder’s surviving parents, if any. If there is no such survivor, any such bond will be retired and the amount thereof covered into the general fund of the Treasury. 20. The same rules for rights of survivors apply in the case of Armed Forces Leave checks where payees have died before cashing them. This includes both odd amount checks and checks issued in full settlement of unused terminal leave (i. e. where amount of claim was less than $50, or where date of discharge was prior to January 1,1948.) 21. Applications by survivors on either bonds or checks will, under the Act, be handled by the Secretary of the Treasury. The applicable regulations will be contained in Treasury Circular No. 793. Federal Reserve Banks, acting as Fiscal Agents of the United States, will be empowered to settle these claims in behalf of the Secretary of the Treasury. This work will be done only by the twelve main Federal Reserve Banks and not by the branches. Where both a bond and a check are involved for the same deceased owner the application can be handled as one transaction and one distribution of the pro ceeds will be made for both. 22. Survivors who desire to make application for payment of either or both bonds and checks should be referred to the Federal Reserve Bank of the district which will supply the necessary form on which application should be made, and any other instructions. 23. In view of the specific provisions of the Act relative to rights o f survivors, it is important that Armed Forces Leave Checks not be cashed by banks on the basis of endorsement by an executor, administrator or survivor. Redemption of Bonds at Maturity. 24. It is contemplated that the Treasury will be in a position to have these bonds redeemable at /maturity through commercial banks, as paying agents, in much the same way as is now done for Savings Bonds of Series A-E. This will be contingent upon the enactment of the necessary authorizing legislation by the Congress. It is also contemplated that the Federal Reserve Banks will function as agents of the Treasurer of the United States in handling transactions by paying agents as they now do for Savings Bonds. Information relative to payment at maturity will be provided prior to April 1, 1948, the first maturity date. Records of Bonds to be maintained by Treasury Department. 25. The Treasury Department will maintain, in Washington, D. C., records of all bonds issued and outstanding. These will be maintained both by name of the owner and by bond serial number and will be used as a basis for servicing these securities. With the bond in punched card form the Treasury’s procedures will include a mechanical comparison of every bond redeemed against the corresponding record of bonds issued as a basis for audit of all bonds retired. General. The punched card type of bond has been used in the interest of economy and efficiency. The bonds have been designed for use in mechanical accounting machines; therefore, it is important that all persons handling such bonds avoid the use of pins, staples, or other mutilating devices. The cooperation of financial institutions in this respect will be greatly appreciated.