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Origins of the Federal Reserve book-entry system

Listed author(s):
  • Kenneth D. Garbade

The conversion of U.S. Treasury securities from physical to book-entry form was a major event in the history of the Treasury market. The conversion, which began in 1966, resulted in an automated system that has greatly reduced market operating costs and risks. This article examines the origins and development of the Federal Reserve book-entry system for Treasury securities. It suggests that the system was the product of three important factors: the interest of the Federal Reserve Banks and the Treasury in lowering their operating costs and risks, the intention of the Reserve Banks and the Treasury to preserve the liquidity of the market, and the desire of the Reserve Banks to reduce member bank operating costs. Two critical incidents-a loss of securities at a Reserve Bank in 1962 and an "insurance crisis" in 1970-71-played major roles in the early development and subsequent expansion of the book-entry system.

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Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2004)
Issue (Month): Dec ()
Pages: 33-50

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Handle: RePEc:fip:fednep:y:2004:i:dec:p:33-50:n:v.10no.3
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References listed on IDEAS
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  1. Gerald D. Manypenny & Michael L. Bermudez, 1992. "The Federal Reserve Banks as fiscal agents and depositories of the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 727-737.
  2. Richard W. Lang, 1979. "TTL note accounts and the money supply process," Review, Federal Reserve Bank of St. Louis, issue Oct, pages 3-14.
  3. Michael J. Fleming & Kenneth D. Garbade, 2002. "When the back office moved to the front burner: settlement fails in the treasury market after 9/11," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 35-57.
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