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Letter to the Secretary of the Treasury on the Need for Higher Interest Rates on U.S. Savings Bonds.

January 18, 1966

Dear Mr. Secretary:

Over the years, one of the strongest links between this Government and its citizenry has been the United States Savings Bond program. Born in the critical days before our entry into the Second World War, this program has been, for the Government, a vital source of noninflationary financing for needed Government programs. For the public, it has provided a matchless means for accumulating savings with absolute safety, and with an attractive rate of return.

A successful Savings Bond program is of particular urgency at this time--facing as we do a firm commitment to the defense of freedom in Vietnam and a strongly rising economy at home. We must not, and will not, at this juncture, permit our strength to be sapped by inflation.

Today, above all, is a time for all Americans to rededicate themselves to the spirit that animated the Minutemen of Concord-who serve as the symbol of the Savings Bond program. For today, as at the founding of our nation, it is freedom which is again at stake. Not all of us are called upon to fight in the jungles of Vietnam, but while our men are there, in the front lines of a distant land, none of us can remain aloof on the sidelines. We must all do our share--in every way we can--to support our men in Vietnam. One sure way is open to all Americans through the Savings Bond program.

On several occasions during the postwar period it has been necessary to improve the rate of return on Savings Bonds in view of the higher rates available to many savers in various private savings accounts. The last change was made in 1959. To have failed to make those adjustments would have been a disservice both to the Government and to the public at large--risking inflationary dangers, complicating the task of managing our Government finances, and depriving millions of small savers of a reasonable rate of return on their funds entrusted to the Government.

We are again at a point where rates available on a variety of alternative forms of savings have moved above the rate now paid on U.S. Savings Bonds. At the same time, we are at a point where maximum savings are vital to our national welfare--indeed, to our national future. Another increase in rate on those bonds is now timely.

In order to sustain and enlarge the vital role of the Savings Bond program, I therefore direct you to set in motion the necessary machinery for raising the interest rate on these bonds as of the earliest feasible date. Please submit to me as soon as possible your specific recommendations.

As in past rate changes, I would like you to make appropriate rate adjustments on outstanding savings bonds as well, so that no current bondholder need cash in his current holdings in order to gain the advantage of the attractive new rate, and no prospective buyer need feel that he should delay his purchase to await the higher rate.



[Honorable Henry H. Fowler, Secretary of the Treasury, Washington, D.C.]

Note: On February 16 the White House made public a letter from the Secretary of the Treasury to the President in response to the President's directive, together with the President's reply (Item 73; see also Item 72).

Lyndon B. Johnson, Letter to the Secretary of the Treasury on the Need for Higher Interest Rates on U.S. Savings Bonds. Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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