united-states securities
Why doesn&#39;t the Trust Indenture Act apply to Securities issued by the United States Treasury?
<p>The <a href="https://www.sec.gov/about/laws/tia39.pdf" rel="nofollow noreferrer">Trust Indenture Act</a> states:</p>
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<p>The provisions of this subchapter shall not apply to any of the following securities:</p>
<p>(4)(A) any security exempted from the provisions of the Securities Act of 1933 [15 U.S.C. 77a et seq.] by paragraphs (2) to (8), (11), or (13) of section 3(a) thereof [15 U.S.C. 77c(a)];</p>
</blockquote>
<p>And paragraph (2) of that section of the Securities Act states:</p>
<blockquote>
<p>(2) Any security issued or guaranteed by the United States or any territory thereof, or by the District of Columbia, or by any State of the United States, [etc]</p>
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<p>Are any securities issued by the United States required to be issued with a trust indenture?</p>

<p>No, securities issued by the United States are not required to be issued with a trust indenture. The United States has its own system for issuing securities, and this system does not require the use of a trust indenture. Instead, the United States issues securities through the Treasury Direct program. This program offers a variety of benefits, including lower transaction costs and greater flexibility in terms of maturity dates and interest rates. As a result, the Treasury Direct program is the preferred method for issuing securities in the United States.</p>

<p>It isn't as if Treasury bonds and municipal bonds and securities are completely unregulated. The Securities Act of 1933, the Securities Exchange Act of 1934, and the <a href="https://en.wikipedia.org/wiki/Trust_Indenture_Act_of_1939" rel="nofollow noreferrer">Trust Indenture Act</a> of 1939, however, were all enacted with an intent of primarily regulating privately issued securities.</p>
<p>There are different laws (mostly state laws and federal tax laws in the case of state and local government bonds and securities, and federal laws and regulations in the case of Treasury bills and bonds) that provide alternative means of regulation of publicly issued securities.</p>
<p>This makes sense because the risks that are most salient to investors in publicly issued securities are quite different from those that apply to private issuers. The bond issuers can't go out of business or relocate. Federal bonds can't be discharged in bankruptcy, and state and local bonds are very hard to discharge in bankruptcy when it can be done at all - normally, the payments are just reorganized. Full disclosure is the default rule for governments, while it is the exception for private security issuers in the absence of statutes compelling them to act. And, in general, if a municipal bond or Treasury bond is in default and a judgment for non-payment is issued by a court, a creditor can't simply go seize the Statue of Liberty or a government office building in order to be paid on that judgment.</p>
<p>The Trust Indenture Act was designed primarily to address collective action problems faced by individual bondholders of the same bond offering in the event of defaults or imminent defaults, who would like to enforce their rights and negotiate with the bond issuer. But, given the different collection environments for public and private bond debts, these concerns are radically different in the public issuer situation than they are for private bond issuers.</p>
<p>There are also limits on the extent that it is constitutionally permissible, or at least considered prudent in light of intergovernmental comity, for the federal government to pervasively regulation the operations of state governments, that need to be considered.</p>
