Fiscal agency functions as fiscal agents of the

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FISCAL AGENCY FUNCTIONSAs fiscal agents of the United States, the Federal Reserve Banksfunction as the federal government’s bank and perform severalservices for the Treasury. These services include the following:Maintaining the Treasury’s funds accountClearing Treasury checks drawn on that accountConducting nationwide auctions of Treasury securitiesIssuing, servicing, and redeeming Treasury securities.Federal Reserve Banks also perform fiscal agency services forvarious federal and federally sponsored agencies. The Treasuryand other government agencies reimburse the Federal ReserveBanks for the expenses incurred in providing these services.One service performed by the Reserve Banks on behalf of the Trea-sury is the daily monitoring of federal tax receipts. Taxes paid bybusinesses and individuals flow into special, interest-earning ac-counts, called Treasury tax and loan (TT&L) accounts, at morethan 12,000 depository institutions (TT&L depositaries) nation-wide. The TT&L depositaries accept tax payments directly fromemployers and individuals and report the amount received to aFederal Reserve office. The TT&L balances that are not protectedby deposit insurance are fully collateralized at all times, and theReserve Banks monitor them for compliance with collateral re-
109RESERVEBANKSERVICESquirements. Each day the Federal Reserve Banks report the totalamount in TT&L accounts to the Treasury’s cash managers, whoin turn decide what portion of the tax receipts is needed to coverthe government’s daily operating expenses. The managers notifythe Reserve Banks of that amount, and the Reserve Banks transferthe needed funds from the TT&L accounts to the Treasury’s ac-count at the Federal Reserve.The Reserve Banks also handle the weekly,monthly, and quarterly auctions of Treasury secu-rities, through which the Treasury raises money tofinance government spending and to refinance thedebt. The Reserve Banks announce the sales, ac-cept the bids (called tenders), communicate thebids to the Treasury, issue the securities in book-entry form oncethe Treasury has chosen the successful bids, collect payment fromthe successful bidders, and deposit the money in the Treasury’sfunds account at the Federal Reserve. The Reserve Banks, on be-half of the Treasury and some other government agencies, also de-liver new book-entry securities, service securities that are out-standing, and redeem securities that have matured.The Federal Reserve Banks provide another unique securitiesservice for the Treasury: They maintain a separate safekeepingsystem, called Treasury Direct, which holds book-entry Treasurysecurities purchased by individuals who wish to hold their securi-ties directly with the Treasury instead of with a depository institu-tion. Individuals purchase Treasury securities directly but instructthat the securities be delivered to their Treasury Direct account.

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