Who Are America’s Bankers?

Many of us are under the impression that any time now the Chinese will cut off US access to cheap loans and just like that the US will slide into the black hole of high interest rates and bankruptcy.  It would surprise many Americans to know that the Chinese Government is not our largest banker.  China does own a hefty chunk of our debt – about 6.7% of the total(1,2).  But China is far from our largest banker.

In fact, the largest holder of US debt is the Federal Reserve System.  The Fed owns approximately 33% of our total debt.  This is down from the 2006 level of 42.3%. (2).  Don’t let the precentages fool you though.  The Fed has increased its holding of US debt from $3.7 trillion in 2006 to $4.5 trillion in 2010.  In October, the Fed announced that is will be purchasing another $75 billion of US Government debt per month through June of 2011 for a total of $600 billion. 

This is known as quantitative easing and by doing so the Fed is attempting to pump money into the economy to aid the fledgling economic recovery.  Will this work?  The jury is very much still out.  (For more information on quantitative easing and the surrounding debate check out these articles:
http://www.pbs.org/nbr/site/onair/transcripts/fed_to_continue_buying_bonds_101214/
http://www.bmonesbittburns.com/economics/focus/20101217/feature.pdf).
So who owns the other 60% of the US debt?  Foreign entities other than China own about 25% including Japan who owns 6.6%.  The remaining 35% is owned by individuals, pension funds, corporations and investment entities right here in the US.   So in total, over two-thirds of US Federal Government debt is owned by either the US Government or US private entities.

Knowing who we, the American people, owe money to does nothing to reduce the record amount of US Government debt.  But we should know who the checks are being written to.

Notes:
1.  Major Foreign Holders of Treasury Securities  www.treasury.gov/resource-center/data-chart-center/tic/documents/mfh.txt
2.  Introduction:  Federal Debt www.fms.treas.gov/bulletin/b2010_3fd.doc

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