World Library  
Flag as Inappropriate
Email this Article

Independent Treasury

Article Id: WHEBN0003155527
Reproduction Date:

Title: Independent Treasury  
Author: World Heritage Encyclopedia
Language: English
Subject: United States Department of the Treasury, John C. Clark, History of the United States Democratic Party, James K. Polk, John C. Calhoun
Collection: United States Department of the Treasury
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Independent Treasury

The Independent Treasury (IT) was a system for the retaining of government funds in the United States Treasury and its subtreasuries, independently of the national banking and financial systems. In one form or another, it existed from 1846 to 1921.

Contents

  • Creation of the system 1
  • Problems and its demise 2
  • References 3
  • External links 4

Creation of the system

The Democrats won the election of 1844 and re-established the Independent Treasury System in 1846.

The Act of August 1846 provided that the public revenues be retained in the Treasury building and in sub-Treasuries in various cities. The Treasury was to pay out its own funds and be completely independent of the banking and financial system of the nation. All payments by and to the government were to be made in either specie or Treasury Notes. The separation of the Treasury from the banking system was never completed, however; the Treasury’s operations continued to influence the money market, as specie payments to and from the government affected the amount of hard money in circulation.

Problems and its demise

Although the Independent Treasury did restrict the expansion of credit, it also posed a new set of economic problems. In periods of prosperity, revenue surpluses accumulated in the Treasury, reducing hard money circulation, tightening credit, and restraining inflation of trade and production. In periods of depression and panic, when banks suspended specie payments and hard money was hoarded, the government’s insistence on being paid in specie tended to aggravate economic difficulties by limiting the amount of specie available for private credit.

The most serious weaknesses in the system were revealed during the Civil War; under the pressures created by wartime expenditures, Congress passed the act of 1863 and act of 1864 creating national banks. Exceptions were made to the prohibition against depositing government funds in private banks, and in certain cases payments to the government could be made in national bank notes.

After the Civil War, the independent Treasury continued in modified form, as each administration tried to cope with its weaknesses in various ways. Secretary of the Treasury Leslie M. Shaw (1902–1907) made many innovations; he attempted to use Treasury funds to expand and contract the money supply according to the nation’s credit needs. The Panic of 1907, however, finally revealed the inability of the system to stabilize the money market; this led to the passage of the Federal Reserve Act in 1913, which allowed the Federal Reserve System to issue Federal Reserve Notes (the powers of coining money and regulating its value were retained by the U.S. Mint and the Congress, respectively). Government funds were gradually transferred from subtreasuries to district banks, and an act of Congress in 1920 mandated the closing of the last subtreasuries in the following year, thus bringing the Independent Treasury System to an end.

References

  • See D. Kinley, The History, Organization, and Influence of the Independent Treasury of the United States (1893, repr. 1968) and The Independent Treasury of the United States (1910, repr. 1970);
  • D. W. Dodwell, Treasuries and Central Banks (1934)
  • P. Studenski and H. Krooss, Financial History of the United States (1963).
  • H.A. Scott Trask, Ph.D.,The Independent Treasury: Origins, Rationale, and Record, 1846–1861 Kurzweg Fellow, Von Mises Institute, Presented at the Austrian Scholars Conference, March 2002 pdf

External links

  • First and Second Banks of the United States – a digital collection of the original documents related to the formation of the First (1791–1811) and Second (1816–1836) Banks of the United States, as well as documents relating to the Independent Treasury System set up after the close of the Second Bank of the United States, digitized by the Federal Reserve Bank of St. Louis.
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 



Copyright © World Library Foundation. All rights reserved. eBooks from World Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.