The first weeks of President Trump’s second term have been dominated by a blizzard of executive orders aimed at reversing diversity policies, trade wars with major American trading partners and intrigue over the most important federal office that most Americans have never heard of in the Bureau of the Fiscal Service.
Tucked within the Treasury Department, the bureau is staffed by career civil servants who operate a system that channels about 90 percent of the payments for the United States government, which spent about $6.75 trillion last fiscal year.
Sometimes referred to as the nation’s checkbook, the bureau has a trove of information about recipients of federal benefits, tax information and contracts associated with programs spanning the government.
That’s why it has become a point of interest for Elon Musk’s so-called Department of Government Efficiency, which has said its aim is to root out wasteful spending but which has also begun looking to stop expenditures that clash with Mr. Trump’s policy agenda.
Mr. Musk and his team got access last week to the payments system, giving them a window into every payment that the government makes. That includes personal data, such as Social Security numbers for those receiving federal benefits and bank account information. Access to the system could ostensibly offer them the ability to stop payments from being made, giving the Trump administration more power to starve programs that it does not like.
The revelation that Mr. Musk could interfere with the plumbing of the nation’s spending system created alarm inside and outside of the federal government.
Over the past week, a career Treasury Department official, David Lebryk, resigned after he was pressured to provide Mr. Musk’s team with access to the system; Treasury Secretary Scott Bessent was sued by unions representing federal workers because he granted the access; and Democrats in Congress have pushed for investigations into the situation.
The Treasury Department said late on Tuesday that it was not stopping or rejecting federal expenditures and that it was committed to safeguarding the nation’s payment system. In a letter to Congress, an official described the actions of Mr. Musk’s team as a review of the system to “maximize payment integrity” for agencies and the public.
Here’s how the payment system works and why it matters.
The plumbing behind federal payments
The federal government makes more than a billion payments each year, sending money to retired Americans who receive Social Security checks, state governments that help run federal programs and investors on Wall Street who bought government debt. The Treasury Department collects money from taxes and bond sales and then uses it to fulfill the nation’s obligations.
Agencies across the government prepare computer files detailing payments they need made and send them to the Treasury Department. Treasury officials then ensure the files are properly completed and run the data through a final series of checks, including whether any recipients are on the “do not pay” list. Entities facing sanctions, for example, are barred from receiving government money.
Personal information is included in the files to make sure the payments go to the right people.
“It would have a name, bank account information, some level of Social Security identifier,” said Don Hammond, a former fiscal assistant secretary at the Treasury. Corporate information about government contractors would also be in the system, Mr. Hammond said, as well as information about Americans’ tax refunds.
Given the sensitivity of the information in the system, access to it has historically been limited to the small group of staff members who need it, according to former Treasury officials.
Once the department runs the payment file through its filters, it reformats the file and provides it to the Federal Reserve, which then sends the money to its destination. The Fed’s role is strictly as a service provider. It has no ability to override or question directives in terms of who to pay and when.
Mr. Hammond said there are two kinds of access to the Treasury system, with one giving a user visibility into which payment files the department is processing and another that grants the ability to go in and make changes to the system.
“You could conceivably go into those files and enter entities you didn’t want to be paid, put them into the ‘do not pay’ list,” he said. “Even if it didn’t meet the legal criteria for going in there, if it were in that screening filter, it would stop that payment at that point in time.”
In a letter to Congress on Tuesday, the Treasury said that a team led by Tom Krause, a Treasury employee and software executive, currently has “read only” access to the data.
A debt limit wild card
Efforts to upend the management of the payments system come as the government has bumped up against the amount of money it can borrow — the so-called debt limit. The Treasury Department is relying on what it calls “extraordinary measures” to generate additional cash so it can meet its obligations.
Many Republicans oppose raising the debt limit, which they see as a sign of profligate spending by Democrats, making it likely that the United States will approach the brink of default this summer as lawmakers try to reach a deal.
Interference with the payments system adds another layer of complication. The Treasury will be very carefully tracking its bank account held at the Fed to make sure that it always has a positive balance, given its current inability to issue more government debt to cover its bills. Culling payments may mean less money flowing out of the government’s coffers and therefore more time before the Treasury’s debt limit is reached, but growing uncertainty about the payments system has generated concern.
“What’s super important for the financial system is that they have enough money to make principal and interest payments that are going to be coming due,” said Wendy Edelberg, the director of the Hamilton Project, an economic policy arm of the Brookings Institution. That’s because failure to make those payments to bondholders could result in the government defaulting on its debt, which would have catastrophic economic and financial consequences, according to policymakers and economists.
Ms. Edelberg called the fact that expenditures for the U.S. Agency for International Development, known as U.S.A.I.D., went to zero last week a “canary in the coal mine.”
The problem of privacy
Privacy is among the biggest concerns expressed by Democrats in Congress.
The Bureau of the Fiscal Service disburses Social Security payments, Medicare benefits, federal salaries, grants and tax refunds. This means that the bureau’s computer system has personal information about millions of Americans.
Lawmakers are alarmed because they do not know the intentions of Mr. Musk, who has publicly accused Treasury Department officials of breaking the law by allowing improper payments to be disbursed.
“Controlling the system could allow the Trump administration to ‘unilaterally’ — and illegally — cut off payments for millions of Americans, putting at risk the financial security of families and businesses based on political favoritism or the whims of Mr. Musk and those on his team who have worked their way inside,” Senator Elizabeth Warren, the top Democrat on the banking committee, wrote to Mr. Bessent this week. “It could also give them access to millions of Americans’ personal and financial information that is protected by law.”
Ms. Warren and Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, called on Wednesday for the Government Accountability Office to investigate the decision to give Mr. Musk’s team access to the payment system.
Concerns about conflicts of interest
Mr. Musk’s involvement in the federal government has raised a host of concerns about potential conflicts of interest surrounding his efforts to curb federal spending.
Mr. Musk’s rocket company, SpaceX, effectively dictates NASA’s rocket launch schedule. The Defense Department relies on him to get most of its satellites into orbit. And his companies were promised $3 billion across nearly 100 contracts in 2023 with 17 federal agencies.
Mr. Musk also regularly tangles with federal regulators about safety issues related to his car company, Tesla.
Access to the Bureau of the Fiscal Service data could theoretically give Mr. Musk insights into the federal contracts of his corporate competitors.
Speaking at the White House on Monday, Mr. Trump dismissed concerns about Mr. Musk’s interest in the data at the Treasury Department, saying that he would not be able to take any action without approval from the White House.
“If there’s conflict, then we won’t let him get near it,” Mr. Trump said.