Eli5: do governments have bank accounts?
In: 3
Kinda, there’s the department of treasury ‘general account’ where the government makes its payments to. It’s owned by the federal reserve bank of New York
Yes, and the system of accounts can be pretty complex. In general though every government will have a “petty cash” account as a minimum.
Governments pay for lots of things, and these transactions pass through the banking system. For example the UK government uses Barclays for quite a lot of its transactions.
Check out [this comment chain](https://www.reddit.com/r/UKPersonalFinance/comments/k30iwt/comment/ge10wp7/?utm_source=share&utm_medium=web2x&context=3) for more detail than you could ever want.
Local and State Governments have bank accounts just like any business. The bank has to be designated a Qualified Public Depository (QPD). There are people within the bank that specialize in government banking. There are laws and regulations the bank has to follow to protect “public funds”.
All money on deposit in a bank for a govt entity is collateralized. This means that for every dollar in a govt account the bank has to put up a dollar at the federal reserve. This is to protect the government funds in the case of a bank failure. Similar to FDIC coverage, but the bank has to put up the money. This is the reason why government entities typically bank at larger banks. Smaller banks may not be able to afford to collateralize $100 million in deposits.
As for the US federal government. The federal reserve is the bank. Specific agencies within the federal government may open accounts at other banks for specific reasons, but most is done with the federal reserve.
Source: used to work in government banking in a major bank.
I work at a bank and I used to work for the government. I can confirm that governments have bank accounts. Usually at lower levels of government, like cities, it might all be from one account. Once you start getting to the state or federal level, it might be a dedicated account for a specific agency or department.
Yes, governments do have bank accounts. Just like you and your family have a bank account to save money and pay bills, governments also have bank accounts to save money and pay for things like roads, schools, and hospitals.
Because government employees and contractors need to interact with the private economy. What is your incentive to show up for work at your job in the Department of Weights and Measures if you aren’t paid? How can the officials who run the government make an account of what they’re doing and where their resources are going without using money?
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