On This Day in Finance: July 29 - Bonus Army Invades Washington, D.C.

By Joseph Nguyen | July 29, 2009 AAA
On This Day in Finance: July 29 - Bonus Army Invades Washington, D.C.

In the summer of 1932, a group of over 40,000 people, including 20,000 World War I veterans - self dubbed the Bonus Expeditionary Force or Bonus Army - marched to Washington D.C. to demand payment of their service certificates. Service certificates were given out a few years after World War I by Congress. The problem was, the payment wasn't due until 1945, but the veterans, desperate and in the midst of The Great Depression, were drowning financially. (Learn more about the Great Depression in What Caused The Great Depression?)

Under the bonus payment plan, veterans who received bonuses of less than $50 were paid in cash, while those who received bonuses of greater than $50 received a service certificate that matured after 20 years, or 1945. In 1932, there were approximately 3.66 million of these certificates outstanding, with a combined face value of about $3.6 billion. To meet the obligation, Congress had planned to deposit $112 million installments each year into a trust for 20 years, for a total of $2.24 billion, and expected compounded interest to increase the total to make up for the difference. So at the time when the Bonus Army marched to Washington, the trust had just under $1 billion in it.

Because immediate payment of the service certificates would have required the government to come up with over $2.0 billion dollars, Congress felt it would have put the federal budget into a crisis at a time when they were trying to get the country out of the Great Depression. Thus, the proposed bill to move up the maturity date was blocked and the government ordered the forced evacuation of all the Bonus Army veterans.

On July 29, military troops and tanks, under the command of General Douglas MacArthur moved in on the Bonus Army camps are forcibly removed the veterans from the city. The troops set fire to tents and camps, killed one veteran and injured nearly 50 others.

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