I am a resident of Pennsylvania.  About a month ago, give or take, I
took a series EE savings bond to my local bank with whom I have both a
business and personal checking account.  The bond was a $200 savings
bond.  I took it there and asked to have it cashed.  The cashier
cashed it and gave me approximately $225, and since I hadn't a clue
how the system worked, I had no reason to expect it could be the wrong
amount and thus I took the money and spent it.  Now, about a month or
so later, I got a call from the bank saying their teller mistakenly
cashed it as a series I bond rather than a series EE bond, and that as
a result I should've received only about half of what I received.  Now
they're telling me that they're going to remedy this by taking the
funds from my checking account.  I had no idea what to expect, and
this news was sudden and unexpected.  I spoke with one of the higher
level staff members at the bank, and she insisted that they were
taking the appropriate actions.  Now, the funds that are in my account
are very important to cover my living expenses, and losing $100+ of
them would cause me quite a few headaches.

My question, thus, is what is the actual legal situation here?  Who is
legally responsible, am I legally obligated to repay the difference? 
I would like to see specific legal code that demonstrates the answer
either way.  Finally, if I am correct in the situation, what should I
do to remedy it properly?

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Clarification of Question by ultimadesigns-ga on 08 Jun 2006 19:00 PDT

"she insisted that they were taking the appropriate actions."

By this, I meant that they were going to pull the funds from my account.

Now, they have put a lock on my account, so I cannot find the balance,
withdraw money, or anything.

Interesting question.

Given the situation you describe I think the bank could easily suck it up.

If they do deduct money from your account, I would insist on speaking
to someone much higher (i.e. the bank president)

And if that does nothing go to the media.

Just my view

Mongolia

You owe the bank the money. You are quite lucky you bank there and
have sufficient funds to cover the amount in question or you would be
visited by the sherrif.

If they did not give you enough money you would want them to recitfy
that mistake, right?  You owe them the money.  Suggest they take $25
per month for four months to lessen the impact.

Markvmd is correct.  The bank has what is called a "right of setoff"
which means they are allowed to recover any losses they sustained in a
transaction with you from the funds you have on deposit.  The bank
probably would not have cashed the bond for you if you were not a
depositor.

You can ask nicely if they will spread the recovery over a period of
time, but they do not have to do so.

You do have a legitimate complaint if the bank has truly frozen your
entire account, not just the amount in dispute.  You should go to the
bank and ask about this.  You do have a right to know your balance,
and to withdraw any funds over and above the amount you owe in the
savings bond transaction.

Remember that bankers are human, and can make mistakes.  The teller
who made the mistake is probably as miserable as you are right now. 
If you visit the bank with a cooperative, "let's see how we can get
this resolved" attitude, you should be able to get the hold removed
from your account, and perhaps work out a repayment schedule.