The Treasury Payment System Elon Musk Now Has Access To

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, the theme of the last two weeks has been, I don't know, emergency episodes of the podcast. Look, in some respects, it's not surprising. New administration, new unexpected things. There's always gonna be a flurry of activity when a new administration comes, unexpected stuff, but there's a lot.

Tracy Alloway (0:44)

Yes, we're basically a daily show now, at least for the past two weeks.

Joe Weisenthal (0:48)

Well, it's like how we were a daily show. I mean, we used to just do one episode a week prior to COVID. That was like really the mark of the world changing. We're just like, as soon as COVID hit.

Tracy Alloway (0:57)

When you get more Odd Lots episodes, that's a bad sign.

Joe Weisenthal (1:01)

It's a sign, right? Some people would say it's a good sign that there's a lot of stuff going on that people want, but it's certainly a sign. And of course, there's been stuff going on on trade. I guess one of our emergency episodes was about the deep seek sell-off. There's just a lot going on right now.

Tracy Alloway (1:17)

Yes, indeed. And we're going to talk about one of the other things that's been going on.

Joe Weisenthal (1:22)

Right. And so obviously, we've known for a while since part of the administration that Elon Musk and his Department of Government Efficiency would be coming in. To my mind, there's like multiple questions here. I mean, there's just so many questions about what that is. Some people are like, oh, is it going to be about just making the government run more efficiently, sort of capital E, which probably a lot of people wouldn't object to in theory. And then there's, of course, the question about how much can an organization or an entity like this do unilaterally, because a lot of the big spending decisions, they come out of Congress. One of the things that's happened, though, there's been a lot of reporting on this from multiple outlets, is that Elon Musk and his team have apparently gotten access to a key payment system within the Department of Treasury.

Tracy Alloway (2:11)

Yeah, so this has been all over the news in recent days, and I guess the downside is we have a group of unelected people who I think technically aren't government employees controlling the system through which the US sends basically all its payments, like everything, social security to treasuries, all of that. But the upside is we get to talk about payments technology. So there's a small silver lining.

Joe Weisenthal (2:40)

Right. And, you know, look, this is actually, you know, we talk a lot about macro stuff on the podcast, so the amount of government spending that goes to this or that or deficits or debt or whatever. But it's actually we both like it when we get to talk about, like, how does money go from point A to point B? And this is an infinitely fascinating topic. But maybe sometimes people don't care.

Tracy Alloway (3:04)

But now they care.

Joe Weisenthal (3:05)

But now this is a time for people to care. Like, how does a payment actually get made to anything? Whether it's a social security recipient, whether it's to an independent contractor, whether it's to an employee, or whether it's to the holder of a government bond awaiting their coupon.

Tracy Alloway (3:22)

Yeah, absolutely.

Joe Weisenthal (3:23)

Well, we're going to be speaking to someone who really knows payments and the intricacies. He seems to get really I don't know many people who like are interested in going deep into how all these sort of like payments and accounting systems actually work going deeper than just the macro. The perfect guest. We haven't had him on in a long time. And we're going to originally talk about something else. We will get to that one day. We're going to be speaking with Nathan Tankus. He is the author, the editor, creator of the Notes On The Crises sub stack. So, Nathan, thank you so much for coming back on Odd Lots.

Nathan Tankus (3:56)

Well, we'll say not sub stack anymore. But yes, thank you very much, Adam.

Joe Weisenthal (3:59)

Newsletter, right. What is the Bureau of Fiscal Service?

Nathan Tankus (4:02)

The Bureau of the Fiscal Service is a sleepy, obscure part of the United States Treasury that makes sure that all of the sort of operational things that the Treasury Department is doing operates. So, you know, you can have big conversations about foreign currency, about issuing Treasury securities, about Social Security and Medicare and government spending and tax collection. Of course, you know, the tax collection is an IRS prerogative. But the other side of that, the sort of flip side of the IRS with tax collection is the payment side. And of course, those tax collections in turn run through the payment system. The Bureau of the Fiscal Service is what sends out tax refunds. So tax refunds are not actually technically an IRS prerogative in terms of making those payments going out. And the Bureau of the Fiscal Service is what does that. 88% of government payments flow through this system every year. And it is what I've described as the beating, pulsating heart of the federal government's payments. Before you get to the banking system, before you get to the Federal Reserve, this is the heart. This is the artery that is making it all function. It is the most important aspect of the federal government, even though no one's ever heard of it.