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Federal Reserve Participation in Public Treasury Offerings
This paper describes the evolution of Federal Reserve participation in public Treasury offerings. It covers the pre-1935 period, when the Fed participated on an equal footing with other investors in exchange offerings priced by Treasury officials, to its present-day practice of reinvesting the proceeds of maturing securities with “add-ons” priced in public auctions in which the Fed does not participate. The paper describes how the Federal Reserve System adapted its operating procedures to comply with the 1935 limitations on its Treasury purchases, how it modified its operating procedures ...
Managing the Treasury Yield Curve in the 1940s
This paper examines the efforts of the Federal Open Market Committee (FOMC) to first control, and later decontrol, the level and shape of the Treasury yield curve in the 1940s. The paper begins with a brief review of monetary policy in 1938 and a description of the period between September 1939 and December 1941, when the idea of maintaining a fixed yield curve first appeared. It then discusses the financing of U.S. participation in World War II and the experience with maintaining a fixed curve. The paper concludes with a discussion of how the FOMC regained control of monetary policy in the ...
Financial aid, debt management, and socioeconomic outcomes: post-college effects of merit-based aid
Prior research has demonstrated that financial aid can influence both college enrollments and completions, but less is known about its post-college consequences. Even for students whose attainment is unaffected, financial aid may affect post-college outcomes via reductions in both time to degree and debt at graduation. We utilize two complementary quasi-experimental strategies to identify causal effects of the WV PROMISE scholarship, a broad-based state merit aid program, up to ten years post-college-entry. This study is the first to link college transcripts and financial aid information to ...
Fiscal Dominance and US Monetary: 1940–1975
This narrative investigates the frictions that existed between the Federal Reserve?s monetary policies and the US Treasury?s debt-management operations from the onset of the Second World War through the end of the Federal Reserve?s even-keel actions in mid-1975. The analysis suggests that three factors can help explain why the Federal Reserve compromised the attainment of its statutorily mandated monetary-policy objectives for debt-management reasons: 1) the existence of an existential threat, 2) the fear that to do otherwise would create instability in the banking sector, and 3) the ...
The effect of “regular and predictable” issuance on Treasury bill financing
The mission of Treasury debt management is to meet the financing needs of the federal government at the lowest cost over time. To achieve this objective, the U.S. Treasury Department follows a principle of ?regular and predictable? issuance of Treasury securities. But how effective is such an approach in achieving least-cost financing of the government?s debt? This article explores this question by estimating the difference in financing costs between a pure cost-minimization strategy for setting the size of Treasury bill auctions and strategies that focus instead on ?smoothness? ...