Department of the Treasury

Fact Box

United States Department of the Treasury

Formed on September 2, 1789
Preceding departments- Board of Treasury
Headquarters- Treasury Building, 1500 Pennsylvania Ave NW, Washington, D.C.
Secretary of the Treasury- Timothy Geithner
Employees (2007) 115,897
Annual budget (2014) $446.9 billion ($22.6 billion operating budget for FY2015)

The Department of the Treasury is a cabinet-level department responsible for promoting economic prosperity and ensuring the financial security of the United States. The department carries out a wide range of activities, such as advising the President on economic and financial issues, encouraging sustainable economic growth and fostering improved governance in financial institutions. Treasury operates and maintains systems that are critical to the nation’s financial infrastructure, such as the production of coin and currency, the disbursement of payments to the American public, revenue collection and the borrowing of funds necessary to run the federal government. The department also supports national security by implementing economic sanctions against foreign threats to the US, identifying and targeting the financial support networks of national security threats (i.e. terrorists) and improving the safeguards of the US financial system. Among the department’s many offices is the Internal Revenue Service, perhaps the best known and most hated of Treasury operations. The IRS is often the source of much debate and controversy for the department, along with lesser known offices that regulate banks and savings institutions and manage the national debt.

On September 2, 1789, Congress established a “Department of Treasury” to manage the new federal government’s finances, and created the position of Secretary of the Treasury to run the new department. President George Washington appointed Alexander Hamilton as the first Secretary of the Treasury, taking office on September 11, 1789. Hamilton had served as George Washington’s aide-de-camp during the Revolution and was a key player in the ratification of the US Constitution. Hamilton was viewed as a good choice for the treasury because of his financial and managerial acumen, which was needed to solve the problem of the new nation’s heavy war debt.
Hamilton’s first official act was to submit a report to Congress in which he laid the foundation for the nation’s financial health. He surprised many members of Congress when he insisted that the country repay its war debt of $75 million dollar-for-dollar in order to establish a sound level of credit for the fledgling federal government.
In addition to handling the fiscal responsibilities of the new government, the Treasury Department was given many other functions to take care of. For instance, the Postal Service was supervised by Treasury until 1829, and the General Land Office, which was the nucleus of the Department of the Interior, was part of Treasury from 1812 to 1849.  Operations associated with business were Treasury activities until the creation of the Department of Commerce and Labor in 1903; and the functions of the Office of the Supervising Architect of the Treasury were eventually established within the General Services Administration in 1949.  The oldest seagoing armed service in the United States, the Coast Guard, remained in the Department of the Treasury until its transfer to the Department of Transportation in 1967. Other marine interests were administered by Treasury: the Coast Survey, the Lighthouse Service, and the Marine Hospital Service, from which the Public Health Service, and ultimately, the Department of Health and Human Services grew.  The Bureau of Narcotics was part of Treasury until its functions were relocated in the Department of Justice as today’s Drug Enforcement Agency.  The Bureau of the Budget, established in Treasury in 1921, was transferred to the Executive Office of the President in 1939 and now oversees the spending of federal funds as the Office of Management and Budget.
The Civil War had a great effect on the US Treasury, due to the loss of customs revenues from the seceded Southern states. As a result, the Bureau of Internal Revenue was created in 1862 by President Abraham Lincoln and Congress to enact an income tax to pay for the war. The tax was repealed ten years later, revived in 1894, and ruled unconstitutional by the Supreme Court the next year. In 1913, the 16th Amendment gave Congress the authority to enact an income tax. At the time, net personal incomes above $3,000 were taxed 1% and incomes over $500,000 were subject to a 6% surtax. In 1918, income tax rose as high as 77% to finance the First World War, dropping to 24% in 1929, and rising again during the Depression. Congress introduced payroll withholding and quarterly taxes during World War II.
During the 1950s, the bureau underwent a reorganization to replace a patronage system with career, professional employees, and its name changed to the Internal Revenue Service. The IRS Restructuring and Reform Act of 1998 (PDF) further reorganized and modernized the agency, based on a private-sector model of organizing operations around customer groups. The act also significantly enhanced taxpayers’ rights with regard to dealings and debates with the agency.
Bank Regulation
In 1791 the federal government established the first Bank of the United States, a central bank founded at the urging of Secretary Hamilton. The Bank of the United States provided oversight of all banks in the country. When the Bank of the United States’ congressional charter expired in 1811, a second Bank of the United States was created in 1816 and operated until 1832. When the second Bank of the United States went out of business in 1832, state governments took over the job of supervising banks. In those days banks made loans by issuing their own currency. These bank notes were supposed to be fully backed by gold or silver reserves. It was the job of state bank examiners to visit banks and certify that institutions had enough gold or silver on hand to redeem its outstanding currency. Because this was not always done, many bank note holders found themselves stuck with worthless paper. It was sometimes difficult or impossible to detect which notes were sound and which were not, because of their staggering variety.
By 1860 more than 10,000 different bank notes circulated throughout the country. This system created financial havoc for the economy as counterfeiting became epidemic and hundreds of banks failed. Calls for a uniform national currency grew as time went on. In response, Congress passed the National Currency Act in 1863. In 1864, President Lincoln signed a revision of that law, the National Bank Act. These laws established a new system of national banks and a new Treasury Department agency headed by a Comptroller of the Currency. The comptroller’s job was to organize and supervise the new banking system through regulations and periodic examinations.
Under this new system, national banks bought US government securities, deposited them with the comptroller and received national bank notes in return. By being lent to borrowers, the notes gradually entered circulation. On the rare occasion that a national bank failed, the government sold the securities held on deposit and reimbursed the note holders.
When the Great Depression hit in 1929, it created complete turmoil for the American banking system. In the last quarter of 1931 alone, more than 1,000 US banks failed, as borrowers defaulted and bank assets declined in value. This led to scenes of panic throughout the country, with long lines of customers queuing up before dawn in hopes of withdrawing cash before the bank had no more to pay out. The banking crisis was the first order of business for President Franklin D. Roosevelt. The day after taking office, on March 5, 1933, he declared a bank holiday (PDF), closing all the country’s banks until they could be examined and either be allowed to reopen or be subjected to orderly liquidation. The bulk of this work fell to the Treasury Department’s Office of the Comptroller of the Currency (OCC).
Three months later, Congress approved the Glass-Steagall Act which created the Federal Deposit Insurance Corporation (FDIC). Under the FDIC system, bank accounts were covered up to $2,500 per depositor (now $100,000). Other laws were passed regulating bank activities and competition, with the objective of limiting risks to banks and reassuring the public that banks were, and would remain, safe and sound. This lasted until the late 1980s, when savings and loans (or “thrifts”) across the country collapsed in the wake of federal deregulation. The so-called S&L crisis resulted in 747 savings and loan associations going out of business at a total of $160.1 billion. Among the many S&L’s that failed was Silverado Savings and Loan, which was run by Neil Bush, brother of President George W. Bush, and son of then-President George H. W. Bush. Another prominent Republican implicated in the scandal was Sen. John McCain (R-AZ), who was part of the “Keating Five”—a group of lawmakers who pressured federal regulators on behalf of savings and loan mogul Charles Keating.
In 1999, the OCC was slammed in an internal report by the Treasury Department for not keeping a better watch for possible money laundering by banks. The report criticized the agency for a lack of independence when examining how well banks comply with federal laws prohibiting money laundering. The report stated that the comptroller’s '”examiners relied on bank management and/or the bank’s internal audit function instead of performing their own reviews.”
In 2008, the country was rocked by one of the largest housing crisis in US history, which threatened to bring down numerous banks. By the summer, the OCC had stepped in and closed several national banks, including First National Bank of Nevada and First Heritage Bank of Newport Beach, CA. As of July 2008, some banking experts predicted approximately 100 banks would fail by the time the crisis was over. Others, however, described such an estimate as wishful thinking, arguing the final number would be much higher.

What it Does

The Department of the Treasury is responsible for implementing the US government’s fiscal policies and maintaining the overall soundness of the US economy. The Treasury Department oversees the collection of all federal taxes and accounts for all monies in the federal system. It also manages the printing or engraving of US coins and paper currency, and any borrowing performed by federal agencies (including the national debt). Another key duty is monitoring banks and savings institutions which Treasury officials audit and take action on in cases of bank failures.

Collecting Money
Internal Revenue Service: Charged with collecting taxes and enforcing tax laws, the Internal Revenue Service is popularly dubbed the “most hated” agency in the US government. The agency determines, assesses and collects revenue, including from personal and corporate income taxes, excise, estate and gift taxes, as well as employment taxes for Social Security. The IRS is the largest bureau within the Department of the Treasury—and according to the government, one of the world’s most efficient tax administrators: In 2004 the IRS collected more than $2 trillion in revenue and processed more than 224 million tax returns.
As the federal body responsible for carrying out the government’s tax policy, the agency finds itself at the center of an interminable, and usually bipartisan, debate over how America is funded. In 1998 the IRS Restructuring and Reform Actaimed at transforming the culture of the IRS and significantly enhanced taxpayers’ rights in disputes with the agency. However, many still criticize IRS Criminal Investigation (CI) operations for a perceived abuse of unchecked power. And in recent years, operational changes—including the outsourcing of collections to private agencies and the introduction of online filing—have also been the subject of debate.
Financial Management Service: FMS acts as the federal government’s money manager and bookkeeper, developing financial systems to move the government’s cash flows “efficiently, effectively and securely.” FMS provides centralized payment, collection, and reporting services for the government. FMS disburses more than $1.6 trillion to approximately 100 million individuals via Social Security and veterans’ benefits, income tax refunds and other federal payments. It collects more than $3.11 trillion per year in payments to the government through 10,000 financial institutions, with more than $2.45 trillion collected electronically. The office provides cash management guidance to federal program agencies and serves as the government’s central debt collection agency by managing the government’s delinquent debt portfolio. In doing so, FMS collects more than $3.7 billion per year in delinquent debts.
Alcohol and Tobacco Tax and Trade Bureau: TTB is responsible for levying and collecting excise taxes on alcohol, tobacco, firearms and ammunition. By helping to develop legislation and regulations involving alcohol, tobacco, firearms and ammunition products, and ensuring that these products are labeled, advertised and marketed appropriately, the agency aims to protect consumers. TTB also conducts product analysis and ensures trade compliance with the Federal Alcohol Administration Act and the Internal Revenue Code. TTB is headquartered in Washington, DC, and maintains an office in the National Revenue Center in Cincinnati, Ohio. Staff members are analysts, chemists, investigators and auditors. Others serve as financial, legal, information management and computer specialists. 
Borrowing Money
Bureau of the Public Debt: BPD is responsible for selling treasury securities such as US savings bonds to members of the public. The money made from selling these securities is, in essence, borrowed in order to finance the activities of the federal government and to account for its resulting debt. The agency pays interest to investors who buy the securities, and when it’s time to repay the loans, the agency redeems investors’ securities. Every transaction affects the outstanding national debt of the United States. Today, that debt stands at $9 trillion. It took the United States a little over 200 years to exceed the trillion dollar mark, but less than 30 years to go from $1 trillion to almost $10 trillion. The constant accumulation of debt has created considerable debate over what the country should do about it.
Federal Financing Bank: The FFB provides loans for government agencies for expenses not covered by Congressional appropriations. FFB is a government corporation that functions under the general supervision of the Secretary of the Treasury. The FFB was established to centralize and reduce the cost of federal borrowing, as well as federally-assisted borrowing from the public. The FFB deals with federal budget management issues that occur when off-budget financing floods the government securities market with offers of a variety of government-backed securities that are competing with Treasury securities. Today, the FFB has statutory authority to purchase any obligation issued, sold or guaranteed by a federal agency to ensure that fully guaranteed obligations are financed efficiently.
Creating Money
United States Mint: The US Mint is responsible for producing, selling and protecting the country’s coinage and assets. The agency makes sure the economy has an adequate volume of circulating coinage for the nation to conduct trade and commerce initiatives (in recent years, this has meant an average of between 11 and 20 billion coins annually). Additionally, the US Mint produces domestic, bullion and foreign coins; distributes coins to the Federal Reserve banks and branches; maintains physical custody and protection of the nation’s $100 billion of US gold and silver assets; produces proof, uncirculated and commemorative coins and medals for sale to the general public; designs and produces the congressional gold medals; manufactures and sells platinum, gold and silver bullion coins; and oversees production facilities in Denver, CO, Philadelphia, PA, San Francisco, CA, and West Point, NY, as well as the US Bullion Depository in Fort Knox, KY. 
Bureau of Engraving and Printing: BEP is responsible for printing federal reserve notes for the Federal Reserve and producing a variety of government security documents. In addition to producing currency, BEP produces other government security documents, such as portions of US passports, materials for the Department of Homeland Security, military identification cards and Immigration and Naturalization (INS) certificates. These documents are designed and manufactured with advanced counterfeit deterrence features. BEP is also responsible for advising other federal agencies on matters of document security. The agency processes claims for the redemption of mutilated currency and uses its research and development efforts to focus on the continued use of automation in the production and counterfeit deterrence process for security documents. 
Overseeing Banks and Others
Office of the Comptroller of the Currency: OCC charters, regulates and supervises all national banks. It also supervises the federal branches and agencies of foreign banks. A national bank is a financial institution chartered by the OCC. National banks can usually be identified because they have the words “national” or “national association” in their titles or the letters NA or NT&SA following their titles. For example, Bank of America is a national bank (its legal name is Bank of America, NA). Other prominent banks that are national banks include Wells Fargo, Citigroup and JP Morgan Chase. National banks total more than 1,800 in the country today, representing about 23% of all insured commercial banks in the United States and holding 68% of the total assets of the banking system (or $6.6 trillion).
Office of Thrift Supervision: OTS monitors savings associations and their holding companies to ensure their solvency and compliance with consumer laws. OTS oversees savings associations, officially known as Federal Savings Banks (FSB), which have established their charters through the office. As of 2007, OTS kept watch over 831 thrifts with assets of $1.57 trillion plus 470 holding companies with US assets of $8.5 trillion. Examples of institutions that OTS monitors are Capitol One FSB, Chevy Chase Bank, Citicorp Trust Bank FSB, ING Bank FSB and Washington Mutual Bank. OTS carries out audits of Federal Savings Banks every 12-18 months, and when it finds violations, issues enforcement actions. Examiners also monitor the condition of thrifts through off-site analysis of regularly submitted financial data and regular contact with thrift personnel.
Financial Crimes Enforcement Network: FinCEN was established with the aim of sharing financial information in order to prevent money-laundering and terrorist financing. In its current form, FinCEN primarily analyzes information accumulated from the Bank Secrecy Act (BSA) in combination with other government and public information and compiles it into databases made accessible to 165 federal, state and local agencies. FinCEN is a member of the international Financial Action Task force and shares information with the 106 other Financial Intelligence Units (FIUs) that form The Egmont Group. It is the only federal agency devoted solely to gathering, analyzing and disseminating information from law enforcement, intelligence and public databases. Although most Americans know nothing about FinCEN, its work is key to major criminal investigations and, in some cases, high profile busts of public officials, such as former New York Governor Eliot Spitzer.
Office of Foreign Asset Control: An agency within the Under Secretary of the Treasury for Terrorism and Financial Intelligence, OFAC administers and enforces economic sanctions imposed on hostile states, nationals and organizations as determined by US foreign policy and national security. It publishes and updates the Specially Designated Nationals List, a comprehensive list of people, organizations and nations with whom it is prohibited for US citizens, residents and organizations to engage in business. The agency currently maintains a comprehensive ban requiring Americans to apply to OFAC for permission to interact commercially in any aspect with Burma (Myanmar), Iran, Sudan and Cuba. It also maintains a non-comprehensive ban in North Korea, Colombia and Iraq among other places, in where only certain industries and specific destinations are sanctioned. The difference between the two types of bans is practically negligible considering that the agency reserves the right to grant trading rights to any given applicant. Any activity conducted with any banned destination is tightly regulated and carefully monitored. Even though American nationals may send remittances to Cuba, those remittances allowed to be carried by travelers was reduced from $3,000 to $300 in 2004.

Where Does the Money Go?

According to the, the Treasury Department has spent more than $30 billion on contractors since 2000. More than 30,000 businesses and organizations have been paid by the department for goods and services, such as telecommunications services ($4.9 billion), precious metals primary forms ($3.08 billion), nonferrous base metal refinery and intermediate forms ($2.1 billion), administrative support services ($1.7 billion) and advertising services $1.1 billion).

The biggest spenders within the Treasury Department are the IRS ($12.5 billion), the United States Mint ($7.08 billion), Bureau of the Public Debt ($4.1 billion), Bureau of Engraving and Printing ($2.06 billion) and the Financial Crimes Enforcement Network ($1.9 billion).
The top 10 recipients of Treasury contracts are:
Computer Sciences Corporation                                   $1,806,454,219
Northrop Grumman                                                     $1,725,405,127
Afinsa Bienes Tangibles SA                                          $1,507,562,369
Poongsan Corporation                                                 $1,116,939,657
The Interpublic Group of Companies Inc                       $1,090,399,012
IBM                                                                             $1,069,049,355
Crane & Co., Inc.                                                           $979,446,475
Apptis Inc                                                                       $729,647,020
Olin Corporation                                                             $690,140,511
Booz Allen Hamilton Inc.                                               $680,598,200
Data for Department of the Treasury