Biggest Holders of US Government Debt
By Paul Toscano
February 2, 2012
As the U.S. government spends an unprecedented amount of money to fix the economy, there is an equally great need to raise the cash to pay for it. This is accomplished through borrowing, whereby Uncle Sam sells Treasury securities of varying maturity.
For investors, government bills, notes and bonds are considered safe because they have a guaranteed rate of return, based on faith in future U.S. tax revenues. The government has been partially funding operations via Treasury securities for decades.
This borrowing adds to the national debt, which has recently surpassed $15 trillion and is rising every second. The amount of debt is quickly approaching the federal debt ceiling, a legal limit to borrowing that currently stands at $16.4 trillion.
Much of that debt is held by private sector, but about 40 percent is held by public entities, including parts of the government. Here’s who owns the most. Foreign countries listed include private and public investors, according to monthly U.S. Treasury data.
1. Federal Reserve and Intragovernmental Holdings
U.S. debt holdings: $6.328 trillion
That’s right, the biggest single holder of U.S. government debt is inside the United States and includes the Federal Reserve system and other intragovernmental holdings. Of this number, The Fed’s system of banks owns approximately $1.65 billion in U.S. Treasury securities (as of January 2012), while other U.S. intragovernmental holdings – which include large funds such as the Medicare Trust Fund and the Social Security Trust Fund – hold the rest.
In the monthly Treasury bulletin, both are combined into one category and the total accounts for a stunning $6.328 trillion in holdings as of September 2011 (the most recent number available). The amount is an all-time high as the Federal Reserve continues to expand its balance sheet, partially to purchase U.S. government debt securities. The Social Security Trust fund is required by law to invest in securities where the principal and interest is guaranteed by the Federal government.
About a decade ago, the total government holdings were “only” $2.5 trillion.