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. Similarly, the Treasury collects taxes, but Congress sets tax policy. The Treasury prints money and manufactures currency, but the Federal Reserve manages the money supply.
Although the Treasury Department doesn't set financial policy, Treasury secretaries throughout our nation's history have played crucial roles in the U.S. economy.
Current Treasury Secretary: Janet Yellen (2021 - )
President Joe Biden nominated Janet Yellen to be Secretary of the U.S. Treasury. She was confirmed by the U.S. Senate on Jan. 25, 2021, by a vote of 84 to 15 (with one abstaining).
Yellen was formerly the Chair of the Federal Reserve between Feb. 3, 2014, and Feb. 3, 2018. She was the first female chair and is the first woman Secretary of the U.S. Treasury.
Yellen's experience as a Fed chair gives her a unique advantage as Treasury secretary. She will coordinate U.S. fiscal policy with the monetary policy of current Fed Chair Jerome Powell. They've already worked closely together while both were on the Fed board.
She took office during extremely challenging times. The COVID-19 pandemic has forced businesses to shut down, causing rising unemployment and shrinking tax revenue. Government spending to combat the recession has sent debt levels skyrocketing to record levels.
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 creditworthy, 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.
"In God We Trust": 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.
Trickle Down Economics: Andrew Mellon (1921- 1932)
Andrew Mellon's first task as Treasury secretary was to reduce the federal debt resulting from World War I. He proposed to do so by lowering excessive surtaxes on the rich.
He first proposed the supply-side theory in 1924 in his book, Taxation: the People's Business. He said the rich would use tax cuts to hire more people. That would boost the economy more than tax cuts to the poor. Lowering the rates would also more people to follow the law and pay their taxes. He cut the top marginal rate from 73% in 1921 to 25% in 1929. That lowered the debt from $24 billion in 1921 to $16 billion in 1930.
As an ex-officio member of the Federal Reserve Board, Mellon 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.
The New Deal: 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.
Deregulation: Larry Summers (1999 - 2001)
Larry Summers was Treasury secretary for President Bill Clinton from 1999 to 2001. He oversaw the repeal of the Glass-Steagall Act that 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.
The Financial Crisis: 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.
Paulson, along with Federal Reserve Chair Ben Bernanke, spearheaded the bailout efforts. He used his personal relationships in the banking industry to force them to accept government ownership. That shielded the weaker banks with the credibility of the stronger ones.
The Great Recession: 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.
Geithner oversaw the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It regulates banks to prevent another financial crisis. It also protects borrowers with the Consumer Financial Protection Bureau (CFPB).
Prior to serving as Treasury secretary, Geithner 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.
Balancing the Budget: Jack Lew (2013 - 2017)
Jack Lew's biggest challenge as Treasury secretary was to work with Congress to find the best way to reduce the national debt. Lew was selected by President Obama because he had a lot of experience dealing with budgets and administration.
Lew was Obama's former Chief of Staff, Director of the Office of Management and Budget (OMB), and Chief Operating Officer for Management and Resources in the State Department. He served as OMB Director under President Clinton, where he helped negotiate a bipartisan transition to a balanced budget.
Lew previously worked for Citi Global Wealth Management and Citi Alternative Investments. He also was the chief operating officer of New York University.
A Wall Street Insider: Steve Mnuchin (2017 - 2021)
As Treasury secretary, he oversaw negotiations in Congress for the $2 trillion CARES Act. This relief package helped families and businesses during the COVID-19 pandemic.
Mnuchin co-authored and implemented the Tax Cuts and Jobs Act. He also oversaw the subsequent increase in the national debt. He eliminated Dodd-Frank regulations on small banks.
Steve Mnuchin was Donald Trump's campaign finance chairman. Mnuchin earlier was chief information officer at Goldman Sachs. He also worked in mortgage securities. In 2002, he set up his own hedge fund, Dune Capital.
Role of the Treasury Secretary
The secretary of the Treasury has several important functions. First, he or she advises the president on financial, economic, and tax policies, both domestically and internationally. The secretary 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.
Taxpayers are most affected by federal tax policy and collecting income taxes through the Treasury's Internal Revenue Service (IRS). The Treasury secretary also oversees the department's function of manufacturing coins and currency, which affects everyone.
How the U.S. Treasury Department Works
You have the U.S. Department of Treasury to thank for the IRS, the U.S. Mint, and the Bureau of the Public Debt. These bureaus, along with nine others, are responsible for 98% of the department's workforce. The remaining 2% of the workforce is in the Treasury secretary's office. Although small in numbers, it is very influential in the global economy.