This paper was published as a Faculty Working Paper (no. 197) for the Lubin School of Business, Center for Applied Research, April 2001.

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Wise investors in Treasury securities can deal directly with the Bureau of the Public Debt by opening a Treasury Direct account with a Federal Reserve Bank, thus avoiding charges imposed by banks and brokerage firms that frequently act as intermediaries for Treasury securities investors. Although there are several advantages to investing in Treasury securities, certain practices followed by the Federal Reserve Bank reduce interest rightfully due investors.

This article cites examples of how the Federal Reserve Bank takes unfair advantage of its investors by avoiding full payment of interest. Investor record keeping problems also arise when the Federal Reserve Bank reopens a previously issued security. Recommendations are made for strengthening the Treasury Direct system with specific suggestions on how to achieve fair treatment for investors.