Accounting Best Practices, Fifth Edition

11–4. Purchase Debt Directly from the Government

A company that has excess cash is typically constrained by its lending policies to investments in a limited number of high-grade debt instruments that carry minimal risk and can be easily liquidated. In many cases, the only allowable investments are Treasury notes, bills, and bonds of the United States government. However, companies have been forced to pay commissions to brokers and resellers in order to obtain these types of investments.

But there is no transaction fee for purchasing government debt directly from the United States Treasury through its www.publicdebt.treas.gov Web site. One can use the site to create a TreasuryDirect account for making electronic purchases of debt. Though the intent of the site is to sell debt that is held to maturity, one can request a debt sale through the Federal Reserve Bank of Chicago via the Treasury’s Sell Direct system; the government will then sell one’s debt investments on the open market in exchange for a small fee per security sold. The usual investment will be in Treasury bills, since they have the shortest term to maturity and can therefore liquidate prior to any need for a commissionable sale to a broker or reseller. More information about this service is available by downloading the TreasuryDirect Investor Kit from the aforementioned Web site.

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