Why the U.S. Treasury began auctioning Treasury Bills in 1929.

Federal Reserve Bank of New York Economic Policy Review, July, 2008 by Garbade, Kenneth D.

* In the 1920s, there were several flaws in the structure of U.S. Treasury financing operations.

* The flaws were attributable to the war-time practice of selling securities in fixed-price subscription offerings and the newer practice of limiting Treasury debt sales to quarterly dates.

* In 1929, the Treasury introduced a new financial instrument to mitigate these flaws.

* Treasury bills were auctioned rather than offered for sale at a fixed price and were sold on an as-needed basis instead of on a quarterly schedule.

* By introducing a new class of securities, the Treasury was able to address the defects in the existing primary market structure even as it continued to maintain that structure.

1. INTRODUCTION

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