Just watched Die Hard and in the film the excellent antagonist Hans Gruber is trying to steal over $600 million in German bearer bonds from the Nakatomi corporation. It occurred to me that I have no idea what they are or why a company would have them.
In: 117
There are two parts, Bearer, And bond
Back to front, for the purpose of explanation.
a bond is just a debt to be paid back in a certain manner, normally with interest, at a certain time.
“X loaned Y $100. Y will pay back $200 in 2 years.”
Bearer just means who ever holds it, or *bears* it, is owed the debt.
So it’s “who ever has this paper, Y will pay back $200 in 2 years.”
Effectively it’s just a piece of paper that has value to it… so it’s nearly as good as cash for a lot of purposes.
They’re not common anymore due to them being used in various manners like money laundering or theft.
As far as I’m aware they’re effectively an IOU that banking/business collectives had an agreed upon value for. Allowed for large scale deals to go ahead without transaction/exchange fees. Now defunct since they were susceptible to theft & money laundering.
You can think of them as a parallel to crytpo currency – an alternative ‘coin’ for trading purposes – but without the digital verification
In order to understand what a “bearer” bond is, first we need to understand what a “bond” is.
A bond, generally, is a debt instrument — it represents a certain amount of money that has been loaned to a company, usually if the company needs to raise money to fund its activities or its expansion. The company promises to pay back the money it borrowed, plus a little extra — this extra is known as the bond ‘coupon.’
A “bearer” bond is unique in that no registration of ownership exists in the company’s ledgers; whoever bears the bond — that is, whoever physically has the piece of paper — is the presumptive owner of the bond and may claim it.
So, if Hans Gruber can steal over $600 million in bearer bonds, he can then go to the company, redeem the bonds, and be $600 million richer. Because they’re bearer bonds, the company has no way to say Gruber isn’t the rightful owner and isn’t owed the money.
A bearer bond is a bit like a 100 dollar bill. Whoever is physically holding the paper coupon owns the bond. If you want to cash it out, you need to mail the paper certificate to the bond agent. If you loose it, or its stolen, its gone. This is because the company has no clue who the legal owner is, so possession of certificate = ownership.
Modern bonds are all registered. Paper certificates are not even issued any more. If they were issued, they don’t really mean anything. The bond agent knows who the owner is. If I sell my bond to you, then the bond agent needs to be notified, and they need to transfer ownership in their system. So registered bonds can’t be stolen. (At least not die hard style)
Now, the Die Hard plot isn’t perfect. Bearer bonds do have serial numbers. I would have to imagine that when there are that many, the serial numbers are recorded by Nakatomi somewhere. So the exact serial number would be reported stolen. If you tried to cash it out, there would be A LOT of questions asked. Even without the serial numbers a theft that large would be reported, so you can’t just cash out millions without suspicion.
All cash functions as a bearer bond.
My $20 bill is a bearer bond issued by the Treasury that is accepted for all debts public or private.
If you steal my $20 bill, and I cannot prove you did it, that $20 bill is yours to spend as you please.
Think of it like crypto on paper, if you bear it you own it. A bond is just a financial instrument wherein you give a company or government money and after a certain amount of time they pay you back with interest. Think, war bonds during WWII, they won’t make you rich but they are going to pay better than a savings account.
A bearer bond records no transaction of who owns the bond, bearer literally means ‘whoever has it’. If you rob me and take my bearer bonds and then cash them out, the bank (or whoever) isn’t going to stop you. They [the robber] bear the bonds, therefore they [the bonds] are there’s [the robber] as far as anyone is concerned.
The obvious issue with bearer bonds is the same issue with crypto, it is used for illegal things. Tax evasion and the like. Hans Gruber was smart in this regard. You don’t steal cash or gold or whatever, you steal bearer bonds.
Alice’s company Megacorp Inc. needs money. One of the ways that Alice can raise money is to sell an IOU. The IOU is basically a piece of paper that says “Megacorp Inc. will pay you $1 million on May 9, 2025.” Alice then organizes an auction where this piece of paper is sold. It’s bought by some investor Bob.
These IOU’s are called “bonds.” They are an extremely common way for large companies and governments to borrow money.
In modern times, usually Alice records the identity and contact information for either Bob, or Bob’s stockbroker, so she knows who to pay when the time comes. The piece of paper itself is basically irrelevant. (Well okay, in theory, Bob might need to use the piece of paper to prove he’s entitled to be paid in some bizarre case where something goes wrong and Megacorp Inc. forgets it’s supposed to pay Bob, but in practice large companies are rarely that lax about their financial record keeping.)
In older times, instead of maintaining records of the borrowers, some companies would ask you to turn in the piece of paper to get paid. That is, the payment goes to the *bearer* — the person who bears (physically holds) the piece of paper (the bond).
Essentially the above listed piece of paper was worth $1 million — anyone who physically possessed it could show up at the company office on May 9, 2025 and walk out with $1 million in cash.
It seems absurd today, but a few things to keep in mind about the past:
– Verifying someone’s identity used to be a hard problem. The vast majority of the adult population having a government issued photo ID is a fairly recent phenomenon.
– Movement of money used to be much less intensely regulated.
– Printing equipment used to be rare and expensive, copying equipment didn’t exist or had limited capabilities, and anti-counterfeiting measures were cheap and effective.
According to Wikipedia [here](https://en.wikipedia.org/wiki/Bearer_bond), in the US new bearer bonds have been illegal since the 1980’s, but bearer bonds that were issued before the law changed can still be redeemed (provided the company that issued them still exists).
“You’re nothing but a common thief.”
“I Am An Exceptional Thief, Mrs. McClane. And Since I’m Moving Up To Kidnapping, You Should Be More Polite.”
You know how a check shows who wrote it and who received it?
And you know how cash is cash, if you have it you can spend it?
Most bonds are like checks, they’re identifiable with a chain of owners known to the government.
Bearer bonds are like cash, but you trade a paper for currency.
The government stopped using these because their nature made them really valuable to criminals who loved a single piece of paper that could represent enormous amounts of value relative to currency.
Ya all remember when Don Johnson (Yes THAT Don Johnson) was found with $8 BILLION dollars worth of bearer bonds?
[https://www.latimes.com/archives/la-xpm-2003-mar-13-me-johnson13-story.html](https://www.latimes.com/archives/la-xpm-2003-mar-13-me-johnson13-story.html)
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