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What is the Department of the Treasury?

2016-12-02T10:13:24+00:00

The term 'Department of the Treasury' is included in the Economics edition of the Financial Dictionary. Get yours now on amazon in ebook or paperback format. Read more here...

The Department of the Treasury is an American Federal government department which is tasked with financing the spending of the United States. It bears the responsibility for raising funds by issuing and selling treasury bills, notes, and bonds to banks and investors.

The treasury department has oversight for a number of other important government agencies. Beneath its umbrella and authority are the U.S. Mint, the Internal Revenue Service, the Secret Service, and the Bureau of Alcohol and Tobacco Tax. As such Treasury and its subsidiary government agencies wear many hats which include protecting both the President and Vice President of the U.S.

The Treasury itself has a variety of functions which both it and the bureaus under it perform. Among these are printing postage, bills, and Federal Reserve notes. It also enforces the government tax laws, collects taxes (via the IRS), and manages the Federal government spending accounts and debts. Treasury also must oversee the various U.S. banks alongside the Federal Reserve. Besides this the U.S. Secretary of the Treasury carries the responsibilities for financial policy, international monetary policy, and intervention in the foreign exchange rate of the U.S. dollar.

This cabinet level department in the United States was originally intended to encourage and facilitate economic security and growth in the country. The origins of the department itself go back to the United States First Congress that sat on March 4 of 1789 after the states ratified the Constitution. This makes it among the oldest and most important departments in the country. As a cabinet level post, the American President nominates the U.S. Secretary of the Treasury. It is the responsibility of the U.S. Senate to vet and confirm this nominee.

Once the U.S. Constitution received ratification in 1789, a much stronger centralized Federal government arose. It became necessary for the new government to have a centralized Treasury Department to manage its expenses and income.

The first Treasury Secretary proved to be Alexander Hamilton. He served the country well in this capacity until 1795. Hamilton accomplished numerous important achievements as secretary. He assumed American Revolution debts from the states to the Federal government. Hamilton made provision to pay off the war bonds the new country had issued during the war for independence. His greatest achievement probably lay in the new system he set up to collect Federal government taxes.

The Treasury Department today finances an enormous and increasing portion of the United States’ spending by borrowing money. It does this constantly by issuing longer term Treasury Bonds and shorter time frame Treasury Bills. The bonds can take as many as 30 years to reach maturity.

Treasury Bonds and Bills are guaranteed by the full faith and credit of the federal United States government. This makes them extremely popular around the globe. Other government central banks, individuals, corporations, commercial banks, and institutions alike all invest in these interest paying debt instruments.

Government Treasury Bonds and Bills pay extremely low interest rates because they are considered by the major ratings agencies Moody’s, Standard & Poor’s, and Fitch to be guaranteed safe investments. These U.S. Federal debt issues traded in a world wide market estimated at $12.9 billion at the end of the year 2015.

Once the Department of the Treasury issues these bonds and bills, it is up to the Federal Reserve Bank to work alongside them to manage them. The Federal Reserve Bank utilizes these government debt instruments by buying and selling them from banks. This way they are able to manage the money supply for the United States as they determine the interest rates for the country.

The term 'Department of the Treasury' is included in the Economics edition of the Financial Dictionary. You can get your copy on amazon in Kindle or Paperback version. See more details here.