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DISCUSSION DRAFT
Department of Treasury
I. Overview
Treasury has migrated from many of its original missions to become the center of USG policy and programs
affecting taxes, regulation of financial institutions, regulation of foreign assets/investments. Treasury manages
relationships with other nations’ and multilateral financial institutions and economic policymakers. As
international economic and financial relationships become broader, the Treasury has taken a larger role in
trade, national security, and other foreign policy issues.
Separately, in most administrations the Secretary of Treasury is the lead spokesperson and often the convenor
of interagency discussions on economic policy matters generally. Treasury is a major influence in
policymaking for Social Security, Medicare, pensions, trade, community economic development, and many
other matters.
Most observers expect Treasury to be focused in the near term on bailouts and taxes.
Reporting to the Treasury Secretary and Deputy Secretary are Undersecretaries for Domestic Finance, for
International Affairs, and for Terrorism & Financial Intelligence (formerly Enforcement), as well as a General
Counsel, two inspectors general, and staff assistant secretaries for tax policy, management, legislative affairs and
economic policy.
In addition, Treasury oversees the IRS, the Financial Management Service and Bureau of Public Debt, the Bureau of
Printing & Engraving, and two major regulatory authorities, the Office of the Comptroller of the Currency and the
Office of Thrift Supervision. (See attached organization chart).
II. Strategic Priorities
Campaign Commitments Among the many commitments made by Senator Obama, Treasury will be central to:

Stimulus: Emergency Energy Rebate; National Infrastructure Bank; Foreclosure Prevention Fund,

Tax/Budget: Provide tax relief to workers, seniors, & homeowners, as well as many other tax proposals.
Resolving Bush income/estate tax cuts, AMT.

Energy/Environment/Economic Development: Tax incentives for alternative energy use & for R&D. Reduce
capital gains for small businesses. Tax incentives against offshoring and for domestic investment.

Retirement Security/Health Care/Education: Creation of automatic direct-deposit savings programs. Tax
incentives for health insurance, education.
Other strategic year one priorities include

Deficit reduction via improved IRS management/collection and loophole closing.
Longer term, Treasury will be central to efforts to simplify and reform the tax code, to consolidate and improve
regulation of financial institutions, and to encourage greater international cooperation both for security and
development.
III. Major First Year Issues
Chief among the next administration’s challenges will be

Implementing and changing the Bush administration’s bailout programs for financial institutions, working
with the Federal Reserve, Congress, and international regulators;

Developing a consensus on taxes in light of the sunset of the Bush tax cuts1.
1
AMT and other extension items may be done as part of the bailout legislation.
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DEPARTMENT OF TREASURY
DISCUSSION DRAFT
There are, however, many other urgent matters: designing & implementing a foreclosure mitigation program;
developing a new consensus on foreign investment; working with other nations on financial, monetary,
counterterrorism, trade, aid, economic sanctions, and environmental issues; and developing a more effective
structure for the oversight of financial institutions (e.g., the possible combination of OCC & OTS).
By far the most organizationally challenging will be crisis management: implementation and improvement of the
multiple bailout programs & liquidity maintenance efforts already begun by the Bush administration. These include:

The Troubled Asset Relief Program (TARP) established by the Emergency Economic Stabilization Act being
considered by Congress, which involves establishing standards/pricing for auctions/purchases of mortgage-related
assets that are both consistent and effective, standards for investment in and oversight of a range of financial
institutions, standards for contracting with outside organizations to evaluate and transact purchases, etc.
managing potential conflicts of interest.

Fannie Mae/Freddie Mac-related programs, which involve governance of, debt guarantees for, and purchases of
securities owned or issued by both organizations. In addition, the administration will need to develop a proposal
for the long-term future of both institutions

Monitoring of AIG. The Federal Reserve is the lender, but Treasury is the holder of rights to acquire 80%.

Money Market Fund Guarantee Program, which involves guarantees to MMF’s and will require development of
standards for aid and for oversight.
In most cases, there are also complicated Congressional reporting/oversight requirements.
In the tax area, not only will the administration need to develop a resolution to the long-deferred sunset of estate and
income tax cuts, but also a range of other expiring provisions. A less well-known but important challenge will be the
negotiation of a budget and revenue baseline from which new proposals will be evaluated.
IV. Senior Personnel Issues
Treasury Secretaries are historically drawn most frequently from finance or business. Given current market
uncertainties, there would be major benefit to a person known to and respected by participants in financial markets,
but also skepticism. It also appears that international coordination will continue to increase in importance, so
experience and reputation beyond the US will also matter. Important, though less so, would be an ability to conceive
and sell both economic policy and financial issues to Congress and the public (Sec’y Paulson is considered by some to
be weaker in this regard). Managerial experience/skill has been viewed as less important & delegated to the DepSec
or Chief of Staff.
The role of the Deputy Secretary varies depending upon the needs and strengths of the Secretary. Frequently the
Deputy is the internal manager. For these reasons, deputies are sometimes drawn from alternative financial
backgrounds (e.g., commercial banking, which may involve management of larger bureaucracies than investment
banking) and sometimes from government.
Other critical early choices: Under Secretary for Domestic Finance, AS Financial Stability. Although neither can
take control before Inauguration Day, both should be chosen & cleared to begin consultation as quickly as possible
after Nov 4. Ideally, at least one would have prior governmental experience, both to help Congressional relations
and, ideally, with some experience in procurement/oversight of contractors.
Also the Under Secretary for International Affairs, who ideally would combine familiarity with capital markets and
policy experience. Given Treasury’s importance in China relations, either the US or one of the International Affairs
AS’s would benefit from having that experience.
In light of the need for fast action on major tax legislation, the AS/Tax Policy should also be identified before
inauguration. The IRS Commissioner, a Democrat who was just appointed, has a fixed 5 year term that ends in 2013.
The Comptroller of the Currency is a fixed term, but the incumbent can be replaced. Given the importance of
coherent financial institution regulation, the responsibilities and ideal skill set of both OCC & OTS could change.
Prepared by: Josh Gotbaum 202-321-1956 [email protected]; Erika Irish Brown; Mary Goodman; Marne
Levine, Cantwell Muckenfuss III, Jonathan Talisman, William Wechsler, James Wetzler, Jacqueline Wong.
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