The Treasury Borrowing Advisory Committee (TBAC) was established a long time ago in the maelstrom of World War II budgetary as well as wartime conflagration. That made sense. To fight all over the world, the government required creative help in figuring out how to sell an amount of bonds it hadn’t needed (in proportional terms) since the Civil War. A twenty-person committee made up of money dealer bank professionals and leaders was one of the few no-brainers of that day.
Outside of that, over the intervening decades, the TBAC has faded into obscurity. That doesn’t mean it doesn’t do anything, just what it has done hasn’t reached the level of public consciousness. And for good reason. The Treasury Department just hasn’t run into much if any trouble raising funds.
To give you an example of what I mean, on the Department’s website portion dedicated to the TBAC the last entry is from May 2016. It was a letter from then-outgoing Chairman Mathew Zames, at the time JP Morgan’s Chief Operating Officer. In it he describes three major contributions from the committee during his eight years in that position.
The most consequential, in his as well as any estimation, was one of the first undertaken by Zames as Chairman. As a consequence of the 2008 economic collapse, the federal government was suddenly in need of financing a trillion plus deficit. They did it initially in the manner the Treasury Department has historically met such needs – a flood of T-bills (and even some cash management instruments that weren’t strictly about budget deficits; i.e., repo).
What the TBAC advised, and what Mr. Zames was proud to have contributed, was that because Treasury was so shortening its effective outstanding duration it might want to consider instead lengthening it; which over time it did. In other words, the TBAC provided the kind of financial advice to the Treasury Secretary he could have readily received from any discount brokerage shop or single shingle RIA that has ever existed. That’s their big 21st century story.
It’s not hard to wonder exactly why the public doesn’t know a thing about the TBAC. They are, really, a relic of a different time.
And yet, there they are in the just-released meeting minutes of the most recent FOMC policy action. For December 2017, the Federal Reserve’s policymaking body referred directly to the TBAC. Why? A poor and really transparent attempt to answer (for) the yield curve.
