United States Secretary of the Treasury
What Did Hamilton and Other Treasury Secretaries Really Do?
The secretary of the U.S. Treasury Department is the chief financial officer for the federal government. The Treasury secretary's job is to manage the public debt, even though the U.S. Congress controls spending and deficits. The Treasury collects taxes but doesn't set tax policy. The Treasury prints money and manufactures currency, but the Federal Reserve manages the money supply. Yet Treasury secretaries throughout our nation's history have played crucial roles in the U.S. economy.
First Treasury Secretary Alexander Hamilton (1789 - 1795)
Alexander Hamilton was the first Treasury secretary. His first task was to pay off the $50 million debt the United States had incurred to pay for the Revolutionary War. He also absorbed the states' debts. This responsibility established the new country as credit-worthy, allowing needed foreign direct investment to build the nation's economy.
Hamilton paid off the debt by issuing the first U.S. Treasury bonds and by establishing the first taxes: on liquor. He created the first federal mint to issue a national currency. He also successfully argued for the first central bank of the United States so the federal government would have a safe place to store funds.
Hamilton's vision was for the federal government to have political dominance over the states. He also pushed the new country to move toward an industrial economy. He was in favor of tariffs to protect these new industries and of increasing liquidity to help start new businesses.
Salmon Chase (1861 - 1864)
Salmon Chase was the Treasury secretary under President Abraham Lincoln. He did two important things: he created the country's banking system and invented the paper currency in use today. Like many Treasury secretaries, he helped fund a war. In this case, he helped fund the Civil War at a cost of $500 million. He did so even though he was opposed to the war and was an anti-slavery activist.
Chase created the first paper dollar bill in 1861, and made sure the phrase "In God We Trust" was stamped on it. In his memory, the $10,000 bill was printed with his face on it from 1928 to 1946. His name lives on in the name of JPMorgan Chase, since the Chase Manhattan Bank was originally named after him.
Andrew Mellon (1921- 1932)
Andrew Mellon first task as Treasury secretary was to reduce the federal debt resulting from World War I. He said, “The people generally must become more interested in saving the government’s money than in spending it.”
He first proposed the supply-side theory in 1924 in his book, "Taxation: the People's Business." He called it "scientific taxation." He said the rich would use tax cuts to hire more people. That would boost the economy more than tax cuts to the poor.
In addition, lower tax rates would encourage more people to follow the law and pay their taxes. He cut the top marginal rate from 73 percent in 1922 to 24 percent in 1929. That lowered the debt.
As an ex-officio member of the Federal Reserve Board, he favored interest rate hikes to curtail speculation in 1929. The Fed kept raising rates even though the economy entered a recession in August. That led to the stock market crash in October.
Henry Morgenthau (1934 - 1945)
Henry Morgenthau was Treasury secretary under both President Franklin D. Roosevelt and Harry Truman. He was a co-author of the New Deal, an aggressive spending program designed to create jobs, set up social safeguards, and end the Great Depression of 1929. Morgenthau oversaw the sale of war bonds to finance World War II.
After the war, he proposed the Morgenthau Plan to prevent Germany from building up the economic strength to ever be a military threat again. It was very harsh. It suggested that Germany be divided into two states, its industries annexed by neighboring countries, and its standard of living sharply reduced.
Truman opposed the severity of the plan, but the last part was implemented. A Directive banned assistance to German farmers and prohibited the production of oil, rubber, merchant ships, and aircraft until 1947.
Larry Summers (1999 - 2001)
Larry Summers was Treasury secretary for President Bill Clinton from 1999 to 2001. His oversaw the repeal of the Glass-Steagall Act. The repeal allowed banks to invest in risky assets like collateralized debt obligations.
Summers also was a strong advocate for the deregulation of derivatives. That was one reason why government officials had no idea that the subprime mortgage crisis would spread to the general economy. No one knew how pervasive the use of credit default swaps and other unregulated derivatives had become.
Hank Paulson (2006 - 2009)
Hank Paulson was asked to become Treasury secretary by President George W. Bush in 2006. He was reluctant to leave his position as CEO of Goldman Sachs, but his experience at the firm gave him intimate knowledge that would prove useful when the 2008 financial crisis hit. He spearheaded the bailout efforts and used his personal relationships in the banking industry to force them to accept government ownership to shield the weaker banks with the credibility of the stronger ones.
Prior to the financial crisis, he managed the Bush tax rebates in early 2008. He has been widely criticized both for doing too much, such as bailing out the banks, and for not doing enough, such as allowing Lehman Brothers to fail.
Tim Geithner (2009 - 2013)
Timothy Geithner served under President Barack Obama during his first term of office. A month after he took office, he launched the $2 trillion Financial Stability Plan, using funds from the Troubled Asset Relief Program. Its goal was to seed a Public-Private Investment Program. He asked banks to match funds to purchase subprime mortgages. But the banks didn't want to participate in taking on more bad debt.
Prior to serving as Treasury secretary, he was head of the New York Federal Reserve Bank. In this role, he was intimately involved in guiding the bank bailouts intended to soften the 2008 financial crisis. He also guided European leaders during the financial crisis. Many of them did not have his experience in global finance.
After Geithner resigned as secretary, President Obama offered him the opportunity to replace Ben Bernanke as the Chairman of the Federal Reserve. Geithner turned him down. Instead, he is netting $100,000 - $200,000 a speech
Jack Lew (2013 - 2017)
Jack Lew's biggest challenge was to work with Congress to find the best way to reduce the national debt. Lew was selected by President Obama because he has a lot of experience dealing with budgets and administration. He was Obama's former Chief of Staff, Director of the Office of Management and Budget, and Chief Operating Officer for Management and Resources in the State Department. He also served as OMB Director under President Clinton, where he helped negotiate a bi-partisan transition to a balanced budget.
Lew has also worked for Citi Global Wealth Management and Citi Alternative Investments. He was also the chief operating officer of New York University.
Steve Mnuchin was Donald Trump's campaign finance chairman. As Treasury secretary, he promises to reduce the Dodd-Frank regulations. He wants to return Fannie Mae and Freddie Mac to the private sector. He didn't say whether the federal government would continue to guarantee its loans.
Mnuchin was chief information officer at Goldman Sachs. He also worked in mortgage securities. In 2002, he set up his own hedge fund, Dune Capital. It financed movies like "X-Men" and “Avatar.” He bought IndyMac Bank from the federal government when it failed in 2008. The renamed OneWest Bank had aggressive foreclosure policies. Five years later, he made a 150 percent profit when he sold it.
How the U.S. Treasury Department Works
You have the U.S. Department of Treasury to thank for the Internal Revenue Service, the U.S. Mint, and the Bureau of the Public Debt. These Bureaus, along with nine others, are responsible for 98 percent of the department's functions. The remaining 2 percent of the work is done by the Treasury secretary's office, but it is very influential in the global economy. The Treasury Department’s 117,000 employees function with an $11 billion budget. They manage $358 billion in tax credits and debt financing.
Role of the Treasury Secretary
The secretary of the Treasury has several important functions. First, he advises the president on financial, economic, and tax policies, both domestically and internationally. He also participates in setting fiscal and budgetary policies.
The Treasury secretary manages all the various functions of the Treasury Department. The most important is funding the public debt by overseeing the Treasury auction process. The one that is most important to most taxpayers is executing federal tax policy and collecting income taxes through the Treasury's Internal Revenue Service. The Treasury secretary oversees the department's function of manufacturing coins and currency, which affects everyone.
The Treasury secretary sits on many federal government financial boards and councils. He is the chairman and Managing Trustee of the Social Security and Medicare Boards of Trustees. He also sits on: the President’s National Economic Council, the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, and the North American Development Bank.