The takeaway
When you hear commentary on the federal government’s financial situation, the information is often based on the money flowing into and out of the Treasury general account.
The US government’s checking account
As with any household or business, even the federal government needs an account to handle its bills and receive income from various sources. This account, provided by the Federal Reserve in its role as fiscal agent of the federal government, is called the Treasury general account. Our FRED graph above is updated with the account’s balance every Wednesday.
Reserves held at the Fed
The holdings of the Treasury general account are considered to be reserves at the Fed, equivalent to the reserves that banks hold there. The level of these balances in the general account was initially kept to a minimum to avoid interfering with Fed policy and the handling of reserve requirements. That changed in 2008 with the financial crisis, when it became routine for banks to hold excess reserves at the Fed and earn interest on them.
Since then, the Treasury general account has been holding considerable balances, at times over a trillion dollars.
There are also notable drawdowns on the balance. When new Treasury bonds are issued through the Fed at an auction, the proceeds land in the account. The balance gets reduced when Treasury bonds are bought back on the market, when the government issues stimulus checks, and when tax rebates turn out to be high.
When the balance gets close to zero, it’s often because a debt ceiling is approaching. At times like these, you often hear someone commenting that the federal government will run out of cash at some date. Such forecasts are made by looking at this account, its inflows, and its outflows.
How this graph was created: Search FRED for and select “Treasury general account.”
Suggested by Christian Zimmermann.
