U.S. Treasury: History, IRS, Treasury Bills and Bonds

What Is the U.S. Treasury?

The U.S. Treasury, created in 1789, is the government department responsible for issuing all Treasury bonds, notes, and bills. Among the government departments operating under the U.S. Treasury umbrella are the Internal Revenue Service (IRS), the U.S. Mint, the Bureau of the Fiscal Service, and the Alcohol and Tobacco Tax and Trade Bureau.

Key functions of the U.S. Treasury include printing bills, postage, and Federal Reserve notes, minting coins, collecting taxes, enforcing tax laws, managing all government accounts and debt issues, and overseeing U.S. banks in cooperation with the Federal Reserve. The secretary of the Treasury is responsible for international monetary and financial policy, including foreign exchange intervention.

Understanding the U.S. Treasury

The U.S. Treasury is the Cabinet-level department responsible for promoting economic growth and security. It was established by the First Congress of the United States, which convened in New York on March 4, 1789, following the ratification of the Constitution. The secretary of the Treasury is nominated by the president and must be confirmed by the U.S. Senate.

Establishment

The U.S. Constitution was ratified in 1788, replacing the Articles of Confederation, under which the U.S. had functioned during and immediately following the American Revolution. The Constitution provided for a much stronger federal government, and the establishment of a centralized Treasury Department was an important part of that.

Alexander Hamilton was the first secretary of the Treasury and served until 1795. Among his major accomplishments while he was secretary of the Treasury were the federal government's assumption of the states' debts related to the American Revolution, provisions for the payment of war bonds, and the institution of a system for the collection of federal taxes.

Internal Revenue Service

In 1861, President Abraham Lincoln implemented an income tax to pay for the Civil War and in 1862, he created the position of commissioner of internal revenue. That tax was repealed in 1872, but the office lived on. The income tax as it exists now began with the 1913 ratification of the 16th Amendment to the U.S. Constitution, and the IRS assumed responsibility for collection and enforcement.

Treasury Bills and Bonds

Borrowing by the Treasury is done through the issuance of shorter-term notes, called bills, and longer-term bonds. The bonds have a maturity of as long as 30 years. Treasury bonds are backed by the full faith and credit of the U.S. government, and as such are popular investments by governments, companies, and individuals worldwide.

The Federal Reserve Bank buys and sells the bills and bonds to control the country's money supply and manage interest rates.

Who Runs the Treasury Department?

The Treasury Department is headed by the secretary of the Treasury who is nominated by the president and confirmed by the Senate. Janet Yellen is the Treasury Secretary in the Biden–Harris administration. Yellen was previously the chair of the Federal Reserve from 2014–2018. She is the first woman to hold either position.

Yellen's top deputy at the Treasury Department is Adewale "Wally" Adeyemo. He is a veteran of the Obama administration and an expert on macroeconomic policy and consumer protection with national security experience.