The Federal Reserve Banks as Fiscal Agents and Depositories of the United States

By Manypenny, Gerald D.; Bermudez, Michael L. | Federal Reserve Bulletin, October 1992 | Go to article overview
Save to active project

The Federal Reserve Banks as Fiscal Agents and Depositories of the United States

Manypenny, Gerald D., Bermudez, Michael L., Federal Reserve Bulletin

Gerald D. Manypenny and Michael L. Bermudez, of the Board's Division of Reserve Bank Operations and Payment Systems, prepared this article.

The Federal Reserve, the nation's central bank, is also the U.S. government's bank. Its role in providing banking services to the government is based on the Federal Reserve Act, which provides that, when required by the Secretary of the Treasury, the Federal Reserve Banks shall act as "fiscal agents" and "depositories" of the United States. As fiscal agents of the U.S. Treasury, the Reserve Banks provide debt-related services--issuing, servicing, and redeeming Treasury securities and processing secondary market transactions initiated by depository institutions. As depositories, the Reserve Banks provide payment-related services--handling the government checking account and disbursements and collections.

Today, the Federal Reserve Banks also provide banking services on behalf of many domestic and international government agencies, but the bulk of the activity is for the U.S. Treasury. The Treasury-related transactions are large: For example, the Federal Reserve Banks on average process about $476 billion per business day in privately owned, marketable Treasury securities transactions and handle $16 billion per year in sales and redemptions of U.S. savings bonds; and per average business day, they process about $6 billion in tax, fee, and loan receipts and about 4 million disbursements by check and wire.

This article describes the nature of the principal fiscal and depository services required by the U.S. Treasury; explains how the Federal Reserve Banks meet those requirements; surveys other fiscal and depository services performed by the Reserve Banks; and discusses the direction of developments in certain service areas.


The Federal Reserve Act of 1913, which created the Federal Reserve System, authorized the Federal Reserve Banks to provide fiscal agency and depository services to the Department of the Treasury. It was not until 1915, however, that Secretary of the Treasury W.G. McAdoo appointed the Federal Reserve Banks to act on behalf of Treasury. To that end, U.S. government funds on deposit with national banks were transferred to Treasury's account at each Federal Reserve Bank. These accounts established the Reserve Banks as Treasury's depository--the intermediary through which Treasury collects and disburses funds on behalf of the federal government; thus, the Federal Reserve literally acquired the government's checking account.

Since then, many other services, both for Treasury and for other agencies, have been added to the deposit services provided by the Reserve Banks. The Reserve Banks' fiscal agency role dates from May 1917, when they began the distribution, safekeeping, and redemption of the First Liberty Loan Bonds, offered by the government to finance the U.S. effort in World War I. The success of that offering, the effectiveness of the Reserve Banks in handling Treasury's accounts since 1915, and the government's growing need to borrow influenced Treasury in 1921 to end its network of Subtreasuries--field offices that gave Treasury access to regional money centers--and to transfer to the Federal Reserve many of the operational functions related to financing the public debt.

The massive financing required to wage World War II brought the next significant expansion in the Banks' fiscal agency role, handling the series E savings bond introduced in 1941. In the late 1960s, the Federal Reserve Banks began providing services--primarily securities-related--for other U.S. government and international agencies.


The Reserve Banks' fiscal agency and depository responsibilities to Treasury are authorized by statute, and the operating mechanisms are subject to Treasury regulations. In the main, Reserve Bank services for Treasury involve the two entities comprising the Treasury Fiscal Service: the Financial Management Service, for depository services, and the Bureau of the Public Debt, for debt-related operations.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The Federal Reserve Banks as Fiscal Agents and Depositories of the United States


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?