United States Treasury Securities

This chapter begins with a discussion of the purpose and goals of treasury securities. Treasury securities are a type of debt instrument providing limited credit risk. U.S. Treasury bills, notes, and bonds are issued by the Treasury Department and represent direct obligations of the U.S. government. Treasury securities are used to meet the needs of investors who wish to “loan” money to the federal government and in return receive a fixed or floating interest rate. The Treasury yield curve is a benchmark for fixed income securities across the spectrum of debt securities. The remainder of the chapter covers types of treasury securities, pricing, bond auctions and their effect on price, interest rates, and STRIPS (separate trading of registered interest and principal securities).

The original Operation Twist: the War Finance Corporation's war bond purchases, 1918–1920

In 1918 the United States Treasury delegated to the War Finance Corporation, a newly created off-budget federal agency, the task of buying Liberty bonds and later Victory notes in an effort to stabilize prices. Bayesian vector autoregression analysis of the security purchases indicates that the WFC purchases provided statistically significant price support, and marginally lowered bond yields while the program operated. Once WFC purchases ended, war bond yields increased substantially. Between bond issues, the Treasury financed its operations, including security purchases from the WFC, by issuing short-term debt, which affected the money market interest rate. The WFC's bond purchases are found to have a positive and significant impact on the call loan rate. Thus the WFC's bond purchases twisted the yield curve.

Blazing Trails: A New Way Forward for Virtual Currencies and Money Laundering

Virtual currencies grew up in virtual worlds. They were a central element in the game experience. They remain so and now represent a widespread form of value exchange on the Internet. They are an increasingly effective way to monetize games. Because of their versatility within games as part of game play and as a monetization method, they are a central tool of innovation for game developers. In tandem with their rise in use and complexity come anti-money laundering concerns. Their use for illegal acts is predicted to grow. Because of their still nascent state there is a window of opportunity to get regulation right and balance the cost of constraining innovation and online trade with the benefits of addressing anti-money laundering concerns. There is now some urgency because of recent regulatory guidance issued by the Financial Crimes Enforcement Network, a bureau of the United States Treasury Department.This paper presents a new approach. First, a data retention policy that includes identity authentication requirements. Second, restrictions on the use of payment systems at a high risk for abuse. Third, a safe harbor granting criminal and civil immunity for good faith efforts by game companies to help reduce the cost of compliance. Absent from this proposal are suspicious activity reports, which are expensive and place a burden that is handled better, and already done, by payment systems that connect to game companies, such as PayPal, and traditional services such as bank accounts or credit cards. Virtual currencies are an important tool for game developers that in turn provide real economic development and creativity that require unique treatment in the law. Regulation will occur—the question is how it will be crafted. This paper presents a path forward in that discussion.

Is This Pilot Test Over?

Beginning in 1994, members of the Financial Services Technology Consortium collaborated to design eCheck, an Internet-based payment mechanism. In the fall of 1997 a pilot project was launched involving the United States Treasury and U.S. Department of Defense. This case describes the issues involved in soliciting participants and resolving intellectual property, system architecture, regulatory, strategic and other issues. In July 2001 a server failed, prompting the eCheck team to question whether it was time to officially declare an end to the pilot. This case was prepared for use in an MBA-level class on IT Management or Project Management. The case provides a vehicle for discussing the following topics: Regulatory, business, technical, and project management challenges in managing complex IT initiatives. The project life-cycle. Guidelines for effectively learning from IT projects. Stakeholder analysis for consortium-led IT initiatives. Unique issues that arise in multi-organization systems development initiatives.