financegal27 replied: "Andy is absolutely correct, not sure why he got a thumbs down. The U.S. treasury issues new debt when the government needs to raise capital and the amounts and maturities are based on what the amount of capital is, what it is being used for and the federal budget and balance sheet as determined by congress. The Federal Reserve is supposed to be a quasi independent agency who is given the responsibility to manage monetary policy in a variety of ways, specifically through open market operations which aren't limited to buying and selling treasuries, they also control the fed funds rate, changes in bank reserve requirements, purchasing foreign currency, swaps, etc.. The U.S. Treasury is responsible for managing and executing the fiscal policy of the federal government, and for providing oversight and creation of the currency. While the two often get lumped together they are two very different agencies with different responsibilities."

Tom Z replied: "The US Department of the Treasury (also known as the Treasury or Treasury Department) is the primary federal agency responsible for the economic prosperity and security of the US. In addition to conducting monetary functions such as federal budgeting, currency production, and taxation, the Treasury also oversees some aspects of enforcement, economic policy development, and international treaty negotiations. Federal departments under the Treasury's purview include the Internal Revenue Service (IRS), regulatory bodies the Office of Thrift Supervision and the Comptroller of the Currency, and the US Mint Where do banks go when they need a loan? To the Federal Reserve System, which sets the discount interest rate, the base rate at which its member banks may borrow. Known as the Fed, the system oversees a network of 12 Federal Reserve Banks located in major US cities; these in turn regulate banks in their districts and ensure they maintain adequate reserves. The Fed also clears money transfers, issues currency, and buys or sells government securities to regulate the money supply. Through its powerful New York bank, the Fed conducts foreign currency transactions, trades on the world market to support the US dollar's value, and stores gold for foreign governments and international agencies."

gray shadow replied: "Generally they have gotten along quite well though sometimes they have different objectives. A nation's Treasury tries to maximize revenue while the central bank tries to find a balance between the money supply and inflation. This usually results in the Treasury prodding the central bank to increase the money supply beyond that balance. A little history lesson is in order here... Prior to 1935, the Secretary of the Treasury served as the defacto head of the Federal Reserve System. The Bank Act of 1935 overhauled the system and the Treasury was removed from the Board. This was, in part, because of loose money policies that were thought to have contributed to the crash and subsequent depression. During WWII, the FRS worked close with the Treasury to keep bond prices low. However, the Treasury influence was not seen as a good thing so the Treasury Accord of 1948 further separated those powers. Prior to the current financial crisis, the FRS and Treasury had a rather perfunctuary relationship. The FRS would coordinate currency and regulatory requests with the Treasury, and the Treasury tended to rubber stamp them. But everything has changed with the current financial crisis. All sides are desparate for a solution and the old rule books just don't apply. Will this have an effect on the markets? Absolutely. Hopefully it will be positive. We'll just have to wait and see."