Treasury bill, note, and bond tender form, which automatically opens an account. Once they have an account, investors can submit noncompetitive bids for securities over the phone or the Internet, or by filling out paper forms. (Retail investors usually prefer noncompetitive bids, which allow them to buy the full amount of the securities they want at the price determined in the auction.) An ACH automatically debits purchase amounts from investors’ accounts and transfers the funds to the U.S. Treasury. Similarly, interest and principal payments are automatically credited to investors’ accounts. The minimum bid is $1,000, and each bid must be in multiples of $1,000. The maximum amount allowed for noncompetitive bids is $1 million for Treasury bills and $5 million for notes and bonds. The system also allows investors to either automatically reinvest proceeds when securities mature (through Reinvest Direct) or transfer the proceeds to their accounts. Selling government securities before they mature (through Sell Direct) is more complicated. Investors must send a complete <u>Sell Direct form</u> or securities transfer form to the Chicago Federal Reserve Bank and pay a fee of $34 for each security sold. The only other charge involved in investing through _TreasuryDirect_ is a $25 annual account maintenance fee for accounts containing more than $100,000.

# _Savings Bonds Direct_

Savings Bonds Direct is a system for purchasing paper-based savings bonds. (For more information on savings bonds, see _<u>ftp://ftp.publicdebt.treas.gov/marsbom0602.pdf</u>_ <u>.) The system works</u> the same as any online retailer that accepts credit cards. Purchases can be as low as $50. Investors place orders by completing a purchase request form that includes basic personal information (name, social security number, billing address). The information is transmitted to the Financial Management Service Collection system, which is run by a private firm called Govolution that obtains credit approvals and authorizes transactions while customers are online.

Govolution creates daily batches of all approved transactions and passes them on to Mellon Bank, the U.S. Treasury’s merchant bank. The bank debits customers’ credit cards and transmits the funds to the Bureau of Public Debt. Customers receive the securities in paper form. Every day the Bureau of Public Debt conducts reconciles the information in its customer service database with the Mellon Bank’s deposit files. Of the three online systems, this one is the most costly to administer, because the securities are in paper form and credit card purchases are more expensive than ACH payments. This system will be abandoned at the end of 2003 in favor of the new TreasuryDirect discussed below.

# _New_ TreasuryDirect _system_

The new TreasuryDirect system, introduced in October 2002, is an end-to-end purchase and delivery system for electronic securities. It currently allows investors to buy series EE and I savings bonds for a minimum of $25. Investors can open accounts online with a Web browser that supports 128-bit encryption. Payments are processed through an ACH, and investors’ identities are verified online using the Pay.gov authentication engine. (Pay.gov is an electronic transaction management system run by the Financial Management Service that offers electronic financial services—including access control and customer authentication—to other government agencies.) Investors’ personal data are cross-checked across a number of databases to which Pay.gov links. Verification takes about 20 seconds and can be done 24 hours a day, 7 days a week.

9