Disappointment in recent domestic economic performance has sparked increasing interest in the role of the federal government in the U.S. economy. As it is widely believed that government deficits contribute to inflation, much of the public concern focuses on the size of the federal budget deficit and the growth of federal indebtedness. While the federal deficit is coming under closer public scrutiny, a substantial portion of federally related programs and their associated debt has escaped much of this attention. Specifically, the debt of federally owned and federally sponsored agencies is often overlooked. This article focuses on this additional source of federal influence on capital markets. To provide the necessary background and perspective, the article first examines the general nature and function of the agencies. Unlike most discussions of these agencies, which focus primarily on their microeconomic effects, this article considers the macroeconomic implications of agency debt operations.