Service Certificates: Definition, Transition, and Implications
AN
Summary:
Service certificates, also known as Adjusted Service Certificates, were granted to World War I veterans under the World War Adjusted Compensation Act of 1924. These certificates matured in 20 years and promised payment, including compound interest, to eligible veterans at the maturity date. Despite initial challenges, Congress eventually allowed veterans to collect payments through the Adjusted Compensation Payment Act in 1936, replacing the certificates with non-negotiable service bonds. The cash payments provided an efficient economic stimulus during the Great Depression.
Compare Savings Accounts
Compare savings accounts. Discover your best option.
Understanding service certificates
Congressional action and issuance
Congress enacted the World War Adjusted Compensation Act of 1924 to address the financial needs of World War I veterans. Under this legislation, service certificates, formally known as Adjusted Service Certificates, were issued to eligible veterans. These certificates functioned similarly to bonds, offering a face value with a promise of payment, including compound interest, upon maturity.
Terms and conditions
Each service certificate had a face value determined by the number of days of military service, whether at home or overseas. Veterans received $1.00 for each day of home service and $1.25 for each day of overseas service. The maximum face value was capped at $500 for domestic service and $625 for overseas service. The certificates matured in 20 years, with the maturity date set for 1945.
Challenges and response
The long-term maturity of these certificates posed challenges, particularly during the Great Depression. In the 1930s, veterans, facing financial hardships, demanded immediate cash payment of their service certificates. This led to protests, including the notable “Bonus Army” march to Washington D.C.
The transition to service bonds
Legislative action
In response to the veterans’ demands, Congress passed the Adjusted Compensation Payment Act in 1936. This legislation allowed veterans to receive immediate payment for their service certificates, replacing them with non-negotiable service bonds issued by the Treasury Department.
Features of service bonds
The newly issued service bonds, known as Adjusted Service Bonds, were redeemable for cash at any time after June 15, 1936. They bore an annual interest rate of 3%, higher than typical bank savings account rates at the time. While the bonds could not be sold, veterans had the option to redeem them for cash or hold them until maturity in 1945.
Frequently asked questions
What were the terms of the service certificates?
Service certificates were granted to World War I veterans based on the number of days of military service, with different rates for home and overseas service. The face value of the certificates was determined accordingly, capped at $500 for domestic service and $625 for overseas service.
Why did veterans demand immediate cash payment of their service certificates?
During the Great Depression, many World War I veterans faced financial hardships and urgently needed funds. The long-term maturity date of the service certificates, set for 1945, was not feasible for veterans in immediate need, leading to demands for immediate cash payment.
What was the outcome of the Adjusted Compensation Payment Act of 1936?
The Adjusted Compensation Payment Act allowed veterans to collect immediate cash payment for their service certificates. It replaced the certificates with non-negotiable service bonds issued by the Treasury Department, providing veterans with much-needed financial relief during the Great Depression.
Key takeaways
- Service certificates, or Adjusted Service Certificates, were issued to World War I veterans under the World War Adjusted Compensation Act of 1924.
- These certificates promised payment, including compound interest, at maturity, and had a 20-year maturity period.
- The extended maturity date caused challenges during the Great Depression, leading to the enactment of the Adjusted Compensation Payment Act of 1936.
- Under the Act, veterans could receive immediate cash payments or redeemable bonds in lieu of their service certificates.
- The bonds paid a competitive annual interest rate of 3% and contributed to an efficient economic stimulus.
Share this post: