Treasury Direct account security discussion at Bogleheads

[sophie]

A very helpful series of posts from a forum member who took the trouble to send repeated letters to the Treasury Secretary to try to figure out what Treasury Direct would do if your account is hacked:

https://www.bogleheads.org/forum/viewto ... 0&t=225415

Unfortunately the answer is that there is no answer. In theory, if hackers broke into TD's system and stole your password, then used it to drain your account, TD would refuse to make you whole. In practice, I can't imagine that this would be the case, but until a test case happens there is simply no way to know.

The helpful forum member did uncover a way you could protect your account by instituting a Customer Hold and then contacting the Bureau of Fiscal Service to lift it when you want to buy or sell bonds. However that process is none too clear, plus you're only supposed to use the hold if you "believe" that your TD account credentials have been compromised. This isn't too arduous a limitation, since I can believe just about anything given the number of times my various accounts have been compromised in data breaches.

[ochotona]

This is not good. Not at all. I-Bonds are cool, but I can do without them at the end of the day. I have too many accounts, would be helpful to get rid of one.

Here I am, with Schwab and Fidelity accounts that use reasonably modern continuously rotating six-digit additional security codes, and 2FA, and nice security guarantees, and there's just no excuse for putting up with TreasuryDirect's sub-standard customer service. Even if they have cool little security (::: cry :::).

[jhogue]

Has anyone actually lost any money from their account at Treasury Direct being hacked?

[pmward]

Nobody has lost anything as of yet, they are just looking at the policies that TD has if it were to get hacked. It's a very poor policy that basically holds them with no accountability for reimbursement if the account was compromised by using the username and password (and usernames and passwords get compromised all the time...). The only way that TD has accountability in their policies is if their servers got hacked directly. And even then, there's some grey area that they would likely try to fight in court.

[jhogue]

pug,
I am surprised you would say that after your adventures with the banksters at WaMu and JP Morgan Chase.

[ochotona]

I got robbed by Schwab's yield Plus fund during the GFC, but at least they made me partially whole after the blow-up.

http://articles.latimes.com/2011/jan/12 ... c-20110112

[jhogue]

As far as I can tell, no one has lost so much as a dime from a hacked Treasury Direct account.

The historical record of the U.S. Treasury is simple and clear: in roughly two hundred years of operation, it has never failed to return principal and interest on its bonds. The secondary market in Treasury bonds is the largest, most liquid, and most global in the world.

The history of banking in this country is also simple and clear: banks (and brokerages too) have repeatedly collapsed during or after market crashes. As Harry Browne noted, the creation of the FDIC curtailed bank runs, but did not stop individual bank failures. In fact, during the last market crash in 2008-2009, the U.S. Treasury bailed out FDIC to the tune of $100 billion. That action alone tells you all you just about all you need to know about who is the real lender of last resort in the global economy.

[ochotona]

The historical record of the U.S. Treasury is simple and clear: in roughly two hundred years of operation, it has never failed to return principal and interest on its bonds. The secondary market in Treasury bonds is the largest, most liquid, and most global in the world.

I only wish I could transfer my I-Bonds to a brokerage account!

[ochotona]

If you really want to own a security with a TIPS feature, I think it would be something like iShares 0-5 Year TIPS Bond ETF (STIP), yields 2.42% now.

[jhogue]

If you really want to own a security with a TIPS feature, I think it would be something like iShares 0-5 Year TIPS Bond ETF (STIP), yields 2.42% now.

There are problems with the use of TIPS for the HBPP:
1. In a deflationary scenario, the principal value of TIPS declines. US savings bonds will not decline in value.
2. Accrued interest on TIPS is taxable. Interest on US savings bonds are tax deferred for up to 30 years.
3. STIP has a net expense ratio. US savings bonds do not.
4. STP is an ETF, which have an institutional manager risk. US savings bonds do not.

I have suggested the use savings bonds on this forum as an appropriate cash alternative-- or “Deep Cash” -- for those interested in their unique features and frequent higher yield. I still think they are. If they don’t fit your investment plans, you are certainly free to do without them.

[ochotona]

My credit union will redeem paper bonds. I can use them to some extent securely.

[ochotona]

I am going to keep buying electronic I-Bonds. But I won't convert my paper ones to Electronic. And when I turn 65 in a little more than seven years, I will sell all of the I-Bonds during my age 65-70 pre-Social Security window, and close the account, and keep buying paper bonds, as long as they keep selling them. And I'm changing my password every 90 days.

[jhogue]

I am not ready to hit the panic button over Treasury Direct’s annoying inability to assume full responsibility for the security of transactions in its electronic accounts. Their klunky written responses to the boglehead investor [above] remind me of why people hate dealing with august institutions like the US Postal Service or you local Department of Motor Vehicles.

That said, US savings bonds are US Treasury-issued debt instruments. With trillions held by the USA’s trading partners, and trillions more held domestically by individuals, banks, insurance companies, and corporations, I can’t see a credible scenario in which a Treasury Secretary would do anything that jeopardizes global perceptions of their safety, liquidity, and yield.

[ochotona]

Maybe if I want to write my Letter to an Important Person, I'd ask that I-Bonds be transferable to a brokerage account. Not that they be made sellable on the secondary market, but just that thy could be sent out of TD.

[jhogue]

Your post prompts a good question:

Why can't Treasury outsource the management of Treasury Direct to one or more brokerage firms?

[ochotona]

Love the spellign.


Hello Peter,

Thank you for your recommendation towards improvements to TreasurDirect.

We appreciate your investment in TreasuryDirect.

Treasury Services

[ppnewbie]

This discussion is very helpful as I am trying to figure out where to park my treasury bonds and bills.

[Libertarian666]

As far as I can tell, no one has lost so much as a dime from a hacked Treasury Direct account.

The historical record of the U.S. Treasury is simple and clear: in roughly two hundred years of operation, it has never failed to return principal and interest on its bonds.

Except for the minor breach of not repaying people in dollars equivalent to gold of the weight and fineness applicable at the time they bought the bonds.

But that was only about a 40% loss, so no big deal.

[ochotona]

Treasury Direct de Venezuela

[jacksonm2]

I used to buy the maximum amount of allowable I-bonds at Treasury Direct for both me and my wife but I quit doing it and even cashed them all out a few years ago.

Although they did seem to have good security when it came to authenticating the website seemed very unsophisticated.

Eventually I decided it was too risky and cashed out everything, moving it to Fidelity and Vanguard.

The reason - those two institutions have to please their customers to stay in business. If you've never had a bad experience dealing with a government bureaucrat maybe you won't feel the same way but it's hard to imagine getting the same kind of service from government employees if something does go terribly wrong.

[jhogue]

What makes you think that Fidelity and Vanguard are somehow safer than the U.S. Treasury?

[jacksonm2]

What makes you think that Fidelity and Vanguard are somehow safer than the U.S. Treasury?

If this question is directed at me I thought I gave the reason in my post. I have no idea which of those three are the most or least hackable. I just believe that if I was hacked I would rather deal with Fidelity or Vanguard than the U.S. Treasury.

[grapesofwrath]

I would think Treasury Direct is safer than Vanguard/Schwab/Fidelity because it has virtually no customer service.

[ochotona]

I would think Treasury Direct is safer than Vanguard/Schwab/Fidelity because it has virtually no customer service.

Interesting perspective. I've gone round and round in my head on this matter, and I think if you use the 2FA (I send 2FA emails to Hotmail), and if you vigorously defend said 2FA channel (I use 2FA on my 2FA, and it ain't a phone, it's an authenticator app), and if you change the password every once in a while (16 characters for me, upper / lower / numbers /symbols), and if you print out proof of ownership, you won't have problems.

[jacksonm2]

I would think Treasury Direct is safer than Vanguard/Schwab/Fidelity because it has virtually no customer service.

Exactly my point but we apparently see things in reverse as to whether or not that is a good thing.