Lambert here: Krugman interviews Nathan Tankus on breaking the Bureau of the Fiscal Service story; well worth reading in full. (Krugman’s substack includes a video, but sadly the video is only available in Substack’s walled garden.)
Like most people paying attention, I was and remain terrified by the predictable power grab by the Musk/Trump administration. But it never occurred to me that Musk’s people would try to seize control of the computer systems that, in effect, cut all the checks the federal government sends out. In fact, very few people realized it was happening.
One person who did realize it, however, was Nathan Tankus — an independent expert on the financial “plumbing” at the Federal Reserve and the Treasury Department.
[KRUGMAN:] Just to be clear, impoundment is like the director of the Office of Small Animals gets a memo saying no money for rabbits, even though Congress has allocated it. But this is some guy, some 19-year-old or whatever from DOGE gets into the computers and possibly, and we need to talk about this, possibly alters the code so that no money goes out for rabbits or possibly just doesn’t know what the hell he’s doing and just crashes the system. Is that a fair characterization?
[TANKUS:] Exactly. There’s one person in Marko Elez, a 25 year old who used to work at SpaceX. He’s, you know—as we’ll get to—he’s out of the Bureau of the Fiscal Service now, but he’s just been sent over to the Social Security Administration…
[TANKUS:] [I]t’s not something I’ve looked into a ton, but my impression is these are people who adore Elon Musk, are very personally loyal to him, are willing to do some very unusual things because they do not have a professional background. ‘This is cool and awesome and the internet and, you know, I’m a Reddit kid who gets to screw with the federal government in real life.’ I also think these kids are expendable. And also, I think the fact that these kids are kind of racist kids from chat lines who tweet like Marko Elez did to normalize Indian hate, these things are useful because it means that if things get too hot there’s a reason you can get rid of one of these kids. You can cite racist posts which, as we’ll get into, is what happened with Marko Elez even though that’s not actually why they’re getting kicked out of the government, and so it’s a perfect shield to make sure that there’s as much confusion and obfuscation about just how serious what Musk is doing on behalf of the Trump administration.
[KRUGMAN:] Yeah, that’s not too different. The theory that I heard, Josh Marshall (TalkingPointsMemo.com), has a post on all that, and has said that these guys are being asked to do things that are quite likely illegal and that if you’re a 35 year old experienced guy with a background and a career, you could blow up your life. But these are twenty-something-at-most guys who don’t have that, who don’t themselves have much to lose.
[TANKUS:] Yeah….: [T]he full scope of what these people are doing is not very clear. It’s, of course, under very unclear authority, likely illegal in so many cases. And so the most dangerous thing is just how little we know. In this case, with Marko Elez getting in there, it seems to be downloading data. For a time, I had sources right in the Bureau of the Fiscal Service office or building where he was bouncing around looking at all these very sensitive systems and my sources could see him download data. But the systems are so sensitive that even senior IT people in these places could see that Marko Elez was downloading data but couldn’t see what the data was because these systems are so sensitive, even they don’t have access to them.
[TANKUS:] One explosive court filing is that already by the time that I had come to find out about this on January 31st, they had been at the payments level of blocking payments, which, what I mean is there’s literally these payment files written basically the same way they would be written in the 1970s that get processed through these systems and get sent on to the Federal Reserve to be processed by ACH, Automated Clearing House, which is how any sort of small or medium-sized value payment works. You get a payment from Social Security and it’s a direct deposit to your account, it is an ACH payment. That’s the system.
[TANKUS:] And they were literally just taking the files and going, ‘we’re not handing those over. We’re not processing this because we’re shutting down USAID.’ And as we know, they’ve now taken over the building and shut down USAID, but they were also doing that at the payments level. And so with the Hamilton Projects tracker, you can see the payments from USAID go to zero, literally zero January 28th. So they were literally doing this.
[TANKUS:] They had been using these payment codes, what are called treasury account symbols, which is complicated, but basically what it means is you’re associating a specific type of payment with a specific type of appropriations, the type of legislation from Congress that authorizes spending. And they figured out what codes related to money for refugees. And they flagged three payments, three appropriations for three payment files related to refugees, funding the administrative expenses of programs to bring literally refugee aid to women and children in other countries, and then a couple others of a similar tenor, and flagged them.
[TANKUS:] Which, you know, sounds technical. But to me, what’s extremely dramatic, is that this spending was not USAID spending. This spending was Health and Human Services Department spending. And so they flagged the payments, the payment files, and sent them back to review. But they did not send them back to Health and Human Services. They’ve sent them to the State Department for the State Department to look over whether they were consistent with Trump’s executive orders. So to really break that down, they were talking to one agency, which maybe they feel like they’ve already gotten their favorite people in there. ‘
[TANKUS:] Yeah, I think that’s absolutely true. I do want to plug that one of the reasons why I was so sensitive to this issue and able to kind of quickly jump on it is that my colleague, a law professor at Willamette University, Rowan Grey, had actually written a draft of a law review article all about making the federal government’s internal payment system secure using our updated technologies, what are typically associated with what is now called central bank digital currency. But central banking is not really the essential place we need this. We need this in the Treasury. We need a Treasury issued digital fiat currency. And one of the essential really important things it would do is you could put a secure server in every agency. And so they could send payments directly out to people’s wallets that would then get onto the whole banking system without having one bottleneck, the Bureau of the Fiscal Service or the Federal Reserve that could choke off payments and not be able to get payments out of there. And that seemed frankly like an obscure, abstruse idea.
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