2 Japanese carrying $134 bil worth of U.S. bonds detained in Italy

[Peter Presland]

More from Karl Denninger.

It's the wishy-washy caveat-loaded character of the Treasury and other official statements that scream 'there's more to this than we're telling'

Bearer Bonds Resolution?
Yes and no.
First, the "yes" part. Treasury says they're fakes:

June 17 (Bloomberg) -- U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland are fake, a Treasury spokesman said.
“They’re clearly fakes,” said Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington. “That’s beyond the fact that the face value is far beyond what’s out there.”

Ok, let's accept both parts of that statement (yes, there are two) at face value:

• The "bonds" seized in Italy are fake.
  
• "The face value is far beyond what's out there."
  

The latter is exactly what I noted is out there in authorized issuance in my second story on the matter:

Mr. Holmes would be initially puzzled by such a caper. On the one hand we have the impossibility of the bonds being real, because there simply isn't $130 billion of issues remaining outstanding.

As it turns out, the Bloomberg update tells us something surprising:

Meyerhardt said Treasury records show an estimated $105.4 billion in bearer bonds have yet to be surrendered. Most matured more than five years ago, he said. The Treasury stopped issuing bearer bonds in 1982, Meyerhardt said.

$105 billion? Uh, that's a lot more than the DTC estimates I've seen, which were in the area of $3.5 billion outstanding! Suddenly there's thirty times that on deposit with the DTC out there according to Treasury?
This also leaves the second part of the question open:

On the other hand we have the impossibility of negotiating a fake $500 million bearer instrument, making the exercise of counterfeiting one expensive and futile.

Finally, what happened to the two gentlemen caught with them?
The latter is a rather important question, I'd think. See, counterfeiting is a serious offense. Just try printing up some fake $100s or $20s and see how amused the Secret Service is (hint: don't try this at home unless you are interested in a free stay at Club "This Ain't Fun" Fed.)
There are conflicting reports: Some that the two individuals were not arrested or charged. Detained briefly, but not charged, with some sources claiming that an Italian lawyer is involved and essentially sprung them (whether on their own recognizance or via bail is unreported, and if on bail, how it was posted.) Others, particularly a recent article out of the UK, simply says they were "arrested." I have seen nothing from a credible news stream stating that they are being held at the present time. And then there's this:

We can't read Japanese, and Google Translate isn't particularly helpful, but a reader informs us that the gist of this story is that a newspaper sent a reporter to Como, Italy and found that the men had been released, with their whereabouts unknown.

Uh, do you really let two counterfeiters (suspected felons under American law and I suspect Italian as well) go without having any idea where they are and, it would appear, without retaining their passports?
The new questions that have now arisen are:

Why did it take Treasury six days to issue a statement that these bonds are "clearly fakes"? Does it really take more than one business day for the Italians to email someone a photo of the faces of the bonds, showing serial numbers and such? Either they're real or they're not - was Treasury hoping the story would "just die"?
Exactly who are the two who got caught with these things and where the hell are they? There's an English-language news report out of Japan that states:

Italian police say the 2 Japanese passport holders, one in his 50s, and the other in his 60s, were caught on July 3rd at the Swiss-Italian border on a train from northern Italy. They say one man is a resident of Kanagawa Prefecture, central Japan, and the other is from Fukuoka Prefecture, western Japan.

If they're not under indictment from the US side with an extradition request to Italy, why not? After all, counterfeiting $134 billion in alleged bonds is rather more serious than the usual guy who gets caught printing up a bad $20 or two, right?
And oh, by the way, America seems to get justifiably angry when an American counterfeits Japanese bonds:

The Commission alleges that, since at least October of 1997, the Northeast defendants have been engaging in an apparent scheme to defraud U.S. investors through the offer of fraudulent Japanese treasury bonds.

How many more bad bonds are out there? One would assume the answer is "not many", given that the US hasn't issued bearer-form debt since 1982. But then again the assumption by virtually everyone (myself included) was that the ~$3.5 billion that the DTC has in their vaults was the majority of outstanding issue in these instruments. Now we find out that Treasury itself says the number - just for Treasuries - is in fact $100 billion - 30 times that number. Hmmm...
Do we have a Treasury confidence problem? Maybe. The latest data released Monday shows that China was a net seller of Treasuries in April. Given that we think we can issue $2 trillion of new ones over the next year or so to pay for our profligate government spending programs......

There's still things that make you go "hmmmmmm" in this story.
Let's hope we get the rest of the answers.
CNBC has asked me to appear at 1:40 PM Eastern on Power Lunch in relationship to this topic; if you're around a TV at that time tune in! It should be fun considering Dennis Kneale's "lead" for it last evening....
Update: CNBC has preempted the 1:40 segment for Geithner's rambling; they MAY reschedule for this evening.
Update #2: Bloomberg has now updated its story to $105 million in outstanding Treasury Bearer bonds. That's in-line with what one would expect given the DTC data; as such (assuming the Bloomie article was simply in error) we can strike the questions related to that.