Odd Lots Podcast Summary Episode: The Treasury Payment System Elon Musk Now Has Access To
Release Date: February 5, 2025
Host/Authors: Joe Weisenthal and Tracy Alloway
Guest: Nathan Tankus, Author and Creator of the Notes on the Crises Newsletter

1. Introduction

In this episode of Odd Lots, hosted by Bloomberg's Joe Weisenthal and Tracy Alloway, the hosts delve into a critical and contemporary issue: Elon Musk's access to the U.S. Treasury's payment system. This access raises significant concerns about the security and integrity of the nation's financial infrastructure.

2. Setting the Stage: Increased Activity Under a New Administration

Joe Weisenthal opens the conversation by noting the surge in episodes over the past two weeks, likening it to emergency broadcasts during significant events like the onset of COVID-19.

"Tracy, the theme of the last two weeks has been, I don't know, emergency episodes of the podcast... there’s just a lot going on right now."
[01:24]

Tracy Alloway echoes this sentiment, highlighting the intensive coverage due to a flurry of unexpected developments under the new administration.

"We’re basically a daily show now, at least for the past two weeks."
[01:43]

3. The Bureau of the Fiscal Service: The Unseen Heartbeat of Government Payments

Nathan Tankus, the episode's guest, provides an in-depth explanation of the Bureau of the Fiscal Service (BFS), a pivotal yet often overlooked component of the U.S. Treasury.

"The Bureau of the Fiscal Service is what sends out tax refunds... 88% of government payments flow through this system every year."
[05:02]

Tankus emphasizes the BFS's role as the foundational infrastructure ensuring the seamless distribution of payments ranging from Social Security to government bond coupons.

"It is the beating pulsating heart of the federal government's payments... even though no one's ever heard of it."
[05:02]

4. Complexity and Vulnerabilities of the Payment System

The discussion shifts to the intricacies of managing such a vast payment system, highlighting the reliance on outdated technology and specialized (often aging) programmers.

Tracy Alloway questions the complexity involved in managing millions of individual payments, considering the potential use of legacy systems like COBOL.

"How complex is it to actually send out these payments?... seriously old mainframe type computers, like dinosaur systems."
[06:40]

Nathan Tankus elaborates on the challenges, noting the dependence on COBOL and the difficulties in modernizing these systems.

"It's an incredibly complex task... decades of business logic making the system run."
[07:14]

Joe Weisenthal interjects with a relatable anecdote about attempting to update COBOL code using AI, underscoring the system's complexity.

"I went on IBM's website and I found some files where they had some COBOL examples. I dropped them into ChatGPT... Can't they just do that?"
[08:25]

Tankus responds by explaining the limitations of current technologies in effectively overhauling such entrenched systems.

"It's especially true for COBOL system and especially true for older systems... there's no way to exaggerate how enormously dangerous this is."
[08:41 & 27:36]

5. Elon Musk's Access to the Treasury Payment System

The core of the episode revolves around reports that Elon Musk and his team have gained access to the BFS's key payment systems, raising alarms across multiple sectors.

Joe Weisenthal introduces the issue, highlighting the ambiguity surrounding the level of access Musk's team possesses.

"... Musk and his team have apparently gotten access to a key payment system within the Department of Treasury."
[03:10]

Tracy Alloway expresses concern over the implications of unelected individuals controlling such a critical system.

"... a group of unelected people who technically aren't government employees controlling the system through which the US sends basically all its payments."
[03:39]

6. Depth of Access and Potential Risks

The hosts probe into the specifics of Musk's access, exploring whether it’s read-only or includes administrative rights, and the associated risks.

Tracy Alloway queries the nature of Musk's access, seeking clarity on its extent.

"Do we know exactly what kind of access they have?... read only or maybe they have administrative rights."
[12:55]

Nathan Tankus reveals that initial reports indicating read-only access were later contradicted, confirming that Musk's team has both read and write capabilities.

"... phone is read and write access and I've reported as of 7:30 this morning confirms their reporting..."
[13:57]

This elevated access means Musk's team can view sensitive data such as Social Security numbers and medical information, and potentially manipulate the payment system.

"... you can look at people's Social Security numbers, you can look at other confidential medical information... propose restructurings... implement what you want."
[14:35]

7. Implications of Unauthorized Access

The conversation delves into the potential consequences of having Musk's team, comprising young programmers familiar with legacy systems, in control of the BFS.

Tracy Alloway highlights the danger posed by individuals who may not fully comprehend the system's complexities.

"I find it kind of funny because I always thought COBOL was like, you know, this thing that not a lot of people understood... but apparently, there are 20-year-olds who seem to be able to understand it."
[26:46]

Nathan Tankus stresses the enormity of the risk, labeling the situation as "apocalyptic."

"... it is an absolutely enormously terrifying situation... Every financial market in the world... should be pricing in the operational failure uncertainties of this system."
[27:36]

8. Legal and Constitutional Concerns: The Issue of Impoundment

The discussion moves to the legal framework governing government payments, specifically the concept of impoundment, where the executive branch could potentially withhold payments authorized by Congress.

Tracy Alloway brings up the legal debate surrounding impoundment, questioning its constitutionality.

"There is this other theory that some in the Trump administration support that actually the executive branch does have discretion about payments."
[20:11]

Nathan Tankus clarifies the constitutional principle that only Congress holds the "power of the purse," making impoundment by the executive branch unconstitutional.

"Impoundment is the concept of the president deciding not to spend money that Congress has appropriated... the President does not have the authority to just stop those payments."
[22:50]

He further explains the historical context, referencing the Impoundment Control Act of 1974, which was enacted to prevent such executive overreach.

"... impoundment act of 1974 was meant to stop Nixon from impounding because he claimed that he could impound because Congress is spending too much."
[22:44]

9. Market Implications and Lack of Preparedness

Nathan Tankus warns that financial markets are not adequately accounting for the potential failure of the payment system, which could have catastrophic consequences.

"... every single financial market should be pricing in the operational failure uncertainties of this system. None of them are even close."
[27:36]

Joe Weisenthal concurs, noting that markets typically fail to anticipate such binary, high-impact events until they occur.

"... in the end the payments will be fine. I don't think financial markets are good at situations like this where it's very binary..."
[30:11]

10. Conclusion and Takeaways

The episode concludes with a reflection on the precariousness of the situation and the urgent need for awareness and action.

Joe Weisenthal summarizes the dual concerns: the unprecedented access granted to Musk's team and the high risk of systemic failure.

"... the idea that this team now just has such access to like such sensitive data is extraordinary to me... easy to screw up something that is truly at the lifeblood of essentially how the entire economy operates."
[29:00]

Tracy Alloway emphasizes the necessity to understand DOGE's (Department of Government Efficiency) ultimate objectives and the broader implications for U.S. financial stability.

"... we still have to learn more about what the end game is here and what DOGE is trying to accomplish."
[29:45]

Key Quotes

• Nathan Tankus on the BFS's role:
  "It is the beating pulsating heart of the federal government's payments... even though no one's ever heard of it."
  [05:02]

• Tracy Alloway on the risk of unelected individuals controlling payments:
  "... a group of unelected people who technically aren't government employees controlling the system through which the US sends basically all its payments."
  [03:39]

• Nathan Tankus on the severity of the situation:
  "It is an absolutely enormously terrifying situation... Every financial market in the world... should be pricing in the operational failure uncertainties of this system."
  [27:36]

• Joe Weisenthal on market preparedness:
  "I don't think financial markets are good at situations like this where it's very binary..."
  [30:11]

Final Thoughts

This episode of Odd Lots underscores a critical vulnerability in the U.S. financial system—Elon Musk's access to the Treasury's payment infrastructure. Through expert insights and detailed analysis, the hosts shed light on the potential risks posed by this unprecedented access and the broader implications for economic stability and governance. The conversation serves as a stark reminder of the importance of safeguarding foundational financial systems against unauthorized and potentially disruptive interventions.

For more detailed discussions and insights, listeners are encouraged to subscribe to the Odd Lots podcast and follow the hosts on their respective social media channels.