Podcast Summary: "How to Run a $5 Trillion Payment System"

Podcast Information:

• Title: Statecraft
• Host: Santi Ruiz
• Episode: How to Run a $5 Trillion Payment System
• Release Date: April 23, 2025

Introduction

In this episode of Statecraft, host Santi Ruiz engages in a comprehensive discussion with David Liebrick, the former Fiscal Assistant Secretary of the U.S. Treasury Department. Liebrick, one of the highest-ranking civil servants in the federal government, oversaw the Bureau of the Fiscal Service—the backbone of the federal payment system handling over $5 trillion in transactions annually. This interview delves into the intricate workings of this massive payment infrastructure, the challenges faced, especially concerning fraud prevention, and Liebrick's insights on the future of federal payment systems.

Understanding the Bureau of the Fiscal Service

[01:11] Host: Ruiz introduces Liebrick, highlighting his 35-year civil service career and his role overseeing the Bureau of the Fiscal Service.

[01:34] David Liebrick: He explains the bureau's mission-critical functions, which include:

• Government Financing: Managing Treasury auctions, a foundational element of the global financial system.
• Payments Management: Ensuring timely distribution of over 70-80 million benefit payments monthly.
• Collections: Administering various collection mechanisms to maintain the Treasury General Account.
• Reporting: Providing transparent reports on the government's financial activities.
• Cash Forecasting: Predicting government cash flow needs to manage operations and navigate debt limits.

Liebrick emphasizes the bureau's importance by stating, “Treasury is the most consequential bureau or agency in government” ([06:02]).

Operational Excellence and System Reliability

[08:19] Host: Ruiz seeks a deeper understanding of the bureau's operations, noting its role in handling 90% of federal payments.

[08:41] David Liebrick: He underscores the bureau's commitment to reliability and efficiency, maintaining that every payment is processed "on time every time." He attributes this to:

• World-Class Operations: Ensuring high standards in payment processing.
• Stewardship and Resiliency: Protecting systems against disruptions.
• Privacy Protection: Safeguarding sensitive data like Social Security numbers and bank account information.

Fraud Prevention Initiatives

[16:06] David Liebrick: Liebrick discusses significant initiatives in fraud prevention, particularly the implementation of the Data Act in 2014, which aimed to enhance data accessibility for better decision-making.

[17:49] Host: Ruiz probes into the Do Not Pay system, a fraud detection mechanism.

[17:59] David Liebrick: He details enhancements made by his team, including:

• Data Sharing Agreements: Collaborations with the Department of Labor and HHS to cross-reference Medicaid data.
• Tiger Team Formation: A specialized group focused on innovative fraud prevention strategies.
• Enhanced Fraud Detection: Transitioning from $650 million to $7.2 billion in prevented fraud, with pilot projects indicating potential fraud prevention up to $30 billion annually.

Liebrick explains, “In the first year of the program, we went from $650 million of fraud prevention up to 7.2 billion” ([17:54]) and anticipates this could scale to $30 billion annually ([22:59]).

[19:55] David Liebrick: He enumerates types of fraud detected, such as:

• Stolen Social Security Numbers
• Duplicate State Program Applications
• Misrepresentation of Corporate Status

He envisions a future where every government payment is scored for fraud risk, akin to credit card fraud scoring.

Challenges in Payment Systems and Fraud Prevention

[11:53] David Liebrick: Liebrick identifies key risks in managing the payment system:

• Cyber Threats: Constant vigilance against system exploitation.
• Data Privacy: Protecting sensitive information from breaches.
• System Integrity: Ensuring uninterrupted and accurate payment processing.

[27:06] David Liebrick: He reflects on the COVID-19 pandemic's impact, highlighting the tension between rapid payment distribution and fraud risks. Liebrick notes frustration over the inability to achieve both speed and fraud prevention simultaneously, emphasizing the need for better data-sharing mechanisms to mitigate such conflicts in future crises.

Over-Regulation and System Constraints

[43:14] Host: Ruiz asks Liebrick about regulatory constraints impeding effective system management.

[43:33] David Liebrick: He outlines several obstacles, including:

• Complex Hiring Processes: Difficulties in recruiting skilled personnel due to bureaucratic hurdles.
• Technological Limitations: Outdated systems and slow adoption of modern technologies.
• Procurement Challenges: Inefficient procurement processes leading to subpar project outcomes.
• Privacy Regulations: Strict adherence to privacy laws that limit data sharing and innovation.

Liebrick shares an example where he successfully digitized 4 billion savings bond records for under $50 million by leveraging AI and machine learning, demonstrating creativity within regulatory frameworks ([48:57]).

Recommendations for Future Improvements

[33:28] David Liebrick: When asked to roadmap fraud prevention for the next five years, Liebrick prioritizes:

1. Enhanced Data Access: Facilitating better data aggregation across state and federal programs.
2. Centralized Authority: Empowering the Secretary of the Treasury to oversee and streamline fraud prevention efforts.
3. Mandatory Reporting: Requiring states to provide comprehensive data on federally funded programs.
4. Adoption of Private Sector Tools: Utilizing advanced data models and fraud detection tools developed in the private sector.
5. Best Practices in Program Design: Implementing proactive measures in program design to minimize fraud vulnerabilities.

[34:05] David Liebrick: He acknowledges roadblocks such as funding constraints, the need for strong leadership, and the imperative to protect data privacy while enhancing fraud prevention capabilities.

Impact of Administrative Changes on Bureau Operations

[32:32] Host: Ruiz touches on the administrative shifts affecting fraud prevention focus.

[32:49] David Liebrick: He observes that new administrations may prioritize different aspects of fraud prevention, often focusing on more generalized fraud notions rather than targeted, data-driven strategies that his team advocated.

Balancing Innovation with Stability

[13:37] David Liebrick: Despite the need for system stability, Liebrick champions innovation by engaging with industry leaders and applying cutting-edge technologies. He recounts transitioning from manual processes to AI-driven systems, significantly improving efficiency and fraud detection.

[47:12] David Liebrick: He stresses the importance of integrating technologists with program managers to foster real-time feedback and user-centered design, enhancing service delivery and trust in government systems.

Conclusion

David Liebrick's insights provide a rare glimpse into the complexities of managing the U.S. government's vast payment systems. His emphasis on reliability, fraud prevention, and the delicate balance between innovation and regulation underscores the challenges faced by civil servants in safeguarding financial integrity. As federal payment systems continue to evolve, Liebrick's recommendations highlight the critical need for enhanced data sharing, centralized authority, and the adoption of modern technologies to ensure efficiency, security, and trust in government financial operations.

Notable Quotes:

• [01:34] "These are the core functions. And there's a reason why there's a career civil servant who serves in this position because there's importance to having continuity." — David Liebrick
• [06:02] "Treasury is the most consequential bureau or agency in government." — David Liebrick
• [17:54] "In the first year of the program, we went from $650 million of fraud prevention up to 7.2 billion." — David Liebrick
• [22:59] "30 billion is the low end. So at least 30 billion." — David Liebrick
• [48:57] "We were able to digitize 4 billion records, and we have done that for less than $50 million." — David Liebrick

This detailed summary encapsulates the multifaceted discussion between Santi Ruiz and David Liebrick, providing listeners with a thorough understanding of managing a $5 trillion payment system, the importance of fraud prevention, and the systemic challenges within federal financial operations.