US Government Debt Different - Finance Department - University of ...

Charles W. Mooney, Jrtem. 135 This would provide a direct relationship with the U.S. anddirect evidence of ownership of the Treasuries so held. But there aresome limitations. Only recently have entities, as opposed to naturalpersons, been permitted to open Treasury Direct entity accounts. 136Domestic U.S. governments are not eligible to open entity accounts.137 One single named individual, the account manager, mustbe able to act alone with respect to the account. Most organizationsmust have a U.S. Employer Identification Number in order to openan account, which might be difficult or impossible for some foreignholders. 138 Moreover, because the holder would be identified to theU.S., it is unlikely that states such as Iran or Cuba would be willingto hold Treasuries through Treasury Direct.219Although the system is not enforcement friendly, one way or anotherthe holder of defaulted Treasuries would find a way to pursue a claim135 31 C.F.R. § 363.206(b) (2012) (explaining how to transfer Treasury securitiesto the TreasuryDirect system).136 31 C.F.R. § 363.11 (2012) (“Only an individual or an entity is eligible to opena TreasuryDirect account.”). The amendment to this regulation noted that: “Todate, only individuals have been permitted to open a TreasuryDirect account. Thisfinal rule will permit certain specified entities to open accounts in TreasuryDirectand conduct transactions in eligible Treasury securities.” Regulations Governing SecuritiesHeld in TreasuryDirect, 74 Fed. Reg. 19416-01 (final rule April 24, 2009)(codified at 31 C.F.R. pt. 363.11). An earlier direct registration system, now knownas Legacy Treasury Direct, permits trusts, organizations, legal representatives of adecedent’s estate, corporations, sole proprietorships, and partnerships to hold Treasuries.See Comparison of Legacy Treasury Direct with Treasury Direct, http://www.treasurydirect.gov/indiv/myaccount/comparisonltdandtd.htm. Legacy Treasury Directis being phased out and new accounts cannot be opened. Id.137 Regulations specify that registration of entities is limited to “sole proprietorship;partnership; corporation; limited liability company or professional limited liabilitycompany (LLC or PLLC); trust; decedent’s estate; and estate of a living personsuch as an incompetent or a minor.” 31 C.F.R. § 363.20(c) (2012). Moreover, theregulations specify that in the case of a trust, decedent’s estate, or estate of a livingperson, registration is not available if the trust or legal representative of the estate“is acting on behalf of a federal, state, or local government.” 31 C.F.R. § 363.20(c)(5)-(7) (2012). The regulation is silent as to registration if such an entity is acting onbehalf of a foreign government.138 31 C.F.R. § 363.11 (2012) (“In order to open a TreasuryDirect account, an .. . entity must have a valid SSN or employer identification number. The accountowner must have a United States address of record and have an account at a UnitedStates depository financial institution that will accept debits and credits using theAutomated Clearing House method of payment.”).