Bureau_Of_Public_Debt

Key Takeaways

• The Bureau of Public Debt was formed in 1940 as part of the U.S. Treasury.
• It was responsible for borrowing funds and maintaining accounts of federal debt.
• It sold securities like Treasury bills and savings bonds to finance government operations.
• In 2012, the Bureau merged with the Financial Management Service to form the Bureau of the Fiscal Service.

What Was the Bureau of Public Debt?

The Bureau of Public Debt was a United States Department of the Treasury agency that operated from 1940 to 2012, managing federal borrowing through the sale of Treasury securities and tracking outstanding public debt. In 2012, it merged with the Financial Management Service to form the Bureau of the Fiscal Service, which supports government operations and influences the broader economy.

Historical Context and Formation of the Bureau of Public Debt

The Bureau of Public Debt was formed in 1940 by President Franklin D. Roosevelt as part of a Treasury plan to reorganize the Public Debt Service, the former name of the agency.1 To finance its projects and fulfill outstanding debt obligations, the government can either print more money, increase taxes, or borrow the funds needed.

Printing money is costly and leads to inflation due to an increased supply of money in the economy. Increasing taxes means less disposable income for taxpayers and less incentive to spend money which could lead to a contraction in the economy. Since U.S. government debt issues backed by the full faith and credit of the U.S. government are generally considered risk-free, the cost of raising money through such government bonds is very low. To centralize the federal government and its debt, the Bureau of Public Debt was created.

Core Functions and Operations

The mission of the agency was not to repay any existing debt or to teach the public about responsible spending but to borrow money. The Bureau of Public Debt obtained debt financing for the government by selling fixed-income securities, such as Treasury bills, bonds, notes, Treasury Inflation-Protected Securities (TIPS), and U.S. Savings Bonds.

The agency, when it was active, borrowed about $5 trillion dollars worth of funds every year for the federal government. It managed to do this through over 200 auctions of marketable securities each year, in which investors bid for the securities as they were released by the government. The agency had over 40,000 offices located throughout the U.S. to facilitate the auctions and sales of its debt securities to the public.

Some of the debt paid interest due on debt instruments at maturity, when principal was repaid. Other debt paid interest periodically during the term of the securities and repaid the principal upon maturity. Each time the agency borrowed or repaid the loans, the outstanding debt of the country changed. Every morning at 11:30 am EST, the size of the public debt was reported by the bureau.

In addition to handling the physical sale, receipt, and safekeeping of US Treasury securities and Savings bonds, the Bureau of Public Debt was also responsible for processing claims of stolen, lost, or destroyed securities.

Transition to the Bureau of the Fiscal Service

On Oct. 7, 2012, the Bureau of Public Debt was consolidated with the Financial Management Service (FMS) to create the Bureau of the Fiscal Service (Fiscal Service) under the direction of Timothy Geithner, the United States Secretary of the Treasury.2 The Fiscal Service manages operations such as providing government-wide accounting and reporting services; managing the collection of delinquent debt owed to the government; providing central payment services to federal program agencies; collecting any voluntary donations made to the government for reduction of the public debt; etc.