18 - The US Treasury Department

Run by: Henry Paulson (2006-2009); succeeded by: Timothy F. Geithner


The Treasury Department traces its history back to the tumult of the opening days of the Revolutionary War, when a cash-strapped Continental Congress decided in 1775 to issue paper money backed by nothing more than the promise of eventual repayment in coin, and enlisted residents of Philadelphia to number and count the bills. The department was formally created by Congress in 1789. The first Secretary of the Treasury was Alexander Hamilton, who shortly after being appointed took the bold move of proposing that the federal government assume the wartime debt of the states and pay them off in full.

In the more than 200 years since, Hamilton's heirs have at times been among the most powerful figures in government, for better or worse. During the Civil War, Salmon P. Chase created the "greenback" paper currency that fueled the North's victory; Andrew W. Mellon helped bring on the Great Depression by his advice to President Hebert Hoover to cut spending and raise taxes during an economic downturn; after World War II, Henry Morgenthau, Jr., helped create a new system of international finance by leading the conference that created the International Monetary Fund and the World Bank.

President Clinton relied heavily on the advice of Robert E. Rubin, setting aside his desire for an economic stimulus package in favor of a mix of spending cuts and tax increases in 1993. Neither of President Bush's first two secretaries of the treasury, Paul O'Neill and John W. Snow, played much of a role in shaping administration policy, and both were pushed from office. Their successor, Henry M. Paulson Jr., saw his role increase along with the severity of the ills facing Wall Street after the mortgage market collapsed beginning in 2007. – nytimes.com

Fed vs Treasury

Tt's official: the Fed is monetizing government debt, Rebecca Wilder | Nov 27, 2008

The time has come to officially monetize government debt. Yesterday the Fed announced that it would purchase $100 billion in debt obligations from Fannie Mae, Freddie Mac and the Federal Home Loan Bank next week. And furthermore, it will purchase $500 billion in mortgage-backed securities (MBS) – I like to call this FARP (Fed Asset Relief Program).
The purchase of GSE debt is a direct attempt to reduce the spread on government agency (GSE) debt over comparable Treasury debt, the relative borrowing costs. Basically, the Fed is targeting a lower interest rate on GSE debt. Sound familiar? Yup, that’s monetizing government debt
The chart illustrates the difference between newly issued Fannie Mae debt and a comparable U.S. Treasury through 11/24/08. This spread has widened from an average of 29 bps (0.29%) spanning 2006-2007 to 90 bps spanning 2007-2008. Fannie Mae must pay more in order to finance its mortgage obligations, which limits its ability to roll over current obligations, and tightens the terms on new mortgage loans.
By driving down the spreads on GSE debt now, and later on mortgage-backed securities, the Fed gives the GSEs more flexibility in the mortgage market, and they can offer lower rates and better terms for potential homebuyers. That’s the theory.
Expect the Fed’s balance sheet to rise by another $100 billion (at least) in two weeks. It is official: the Fed is monetizing government debt.
Comment know, this is just step one. "Monetizing the Gov'ts debt" is just the same as buying outstanding obligations. Flooding the public with CASH.

Apparently this (monetizing) was necessary because of a "liquidity crunch". However, given a slight change in termiinology: This could also be seen as a "LOSS OF CONFIDENCE" in the "Government's" (Quasi) Debt (in the first place)!...Oh My God!

In this loss of confidence, step 2 is the loss in confidence of the dollar itself. Then we're all toast, except for our country's stockpiles of weapons and ammo!