Such assertions have led to calls for changes in the auction rules and
tighter regulation of the market for Treasury securities and evidently, such
measures are being contemplated by the Treasury. For instance, the same
issue of the Wall Street Journal (p. A5) reports that the "Treasury is
considering significant changes in how it sells government debt," and the
Wall Street Journal dated August 26, 1991 (p. Al) quotes the Fed Vice
Chairman David Mullins as saying "We need to examine mechanisms to
improve the efficiency of the market, (and) reduce the cost of Treasury
finance...'" While it is possible that technicalities such as position limits
were violated in Treasury auctions, models of rational economic behavior
predict that collusion cannot be sustained in a market with as many participants
as in the Treasury auctions. It is therefore important to investigate