This video can be viewed at the below link.[1]

What does the musical “Hamilton” have to do with our Treasury markets?

A couple hundred years before he became a Broadway star, Alexander Hamilton had a star turn as Secretary of the Treasury. In 1790, Hamilton told Congress that “the proper funding of the present debt, will render it a national blessing.”[2]

Hamilton’s prophecy has turned out to be prescient. Treasuries are called “risk-free assets” not just here in the U.S. but around the globe. They are the base upon which our entire capital markets are built. They are how we, as a government and as taxpayers, raise money to fund roads and bridges and public universities. You see, we the public, we’re the issuer. That means if we can lower the costs of U.S. Treasuries, we the public can raise money more readily.

Treasuries often are considered the safest, most liquid market in the world. Investors around the globe put their money in Treasuries to generate returns, but also to keep their money in a safe place. You might even have some Treasury securities yourself.

Over the years, however, there have been multiple times we’ve seen tremors in this market.

Back about eight years ago, there was even something called a “Flash Crash.” For 12 minutes, it was very difficult for investors to even trade in Treasuries.

Then in September 2019, the funding of the market—something called the Treasury repurchase agreement market, often called the “repo” market—experienced real issues. Again, at the beginning of the COVID-19 crisis in the spring of 2020, there were significant challenges in the Treasury markets.

Now, it’s sobering enough to see some of these issues, like flash crashes or the like, in the stock market. But the Treasury market? To see such significant disruptions in this safe, liquid market is especially jarring.

So the Securities and Exchange Commission plays a critical role in our overall efforts, working along with the U.S. Department of the Treasury, working along with the Federal Reserve, to ensure for the smooth functioning of this market—where we’re the issuers.

I’ve asked staff to work on three projects to help bolster the state of the Treasury market.

First, we have a project related to something called central clearing, the basic plumbing of the market. You might recall we’ve talked about plumbing in the stock market; this is about the plumbing in our Treasury market.

Secondly, we have a project about the trading platforms where Treasuries are traded amongst large institutions, sort of like the stock exchanges for Treasuries.

And then thirdly, we’re also making sure that principal trading firms—you might think of them as high-frequency trading firms—are properly registered as dealers. And that means they have some capital. They have requirements for their books and records.

We look forward to working with our partners, again, at the Federal Reserve and the U.S. Department of the Treasury to strengthen the resiliency and safety of this crucial market.

Two hundred and thirty years after Alexander Hamilton talked about the Treasury markets, let’s not throw away our shot to make them a little bit better for the American public.