(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-526
The Treasury Department announced today that it will begin issuing non-marketable securities, called Depositary Compensation Securities (DCS), to compensate those financial institutions serving as financial agents of the United States for essential banking services provided to the Government. The combination of low interest rates and the need to draw-down compensating balances due to the debt ceiling have made it impractical to continue using compensating balances as payment for banking services.
The first Depositary Compensation Securities are expected to be issued to financial agents by mid-July. The phase-out of compensating balances, beginning on July 3, will lead to a short-term infusion of cash into Treasury accounts, and reduce the need for bill issuance this summer.
The Presidents Budget Request for Fiscal Year 2004 includes a permanent and indefinite appropriation proposal in order to provide a stable and consistent method of compensating financial agents. Since the proposed permanent and indefinite appropriation, if approved by Congress, would not be available until the beginning of FY 2004, Treasury must implement this temporary measure to pay financial agents on a timely basis and ensure that there is no interruption in their services.
Depositary Compensation Securities are similar to the non-marketable 2 percent Depositary Bonds first issued in 1941 as a means to compensate depositaries and financial agents of the Government for essential banking services including the collection and deposit of all Treasury receipts. The Depositary Bonds were phased out when other methods of compensation, including compensating balances, were used and the offering was terminated in 1994.