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TeachMeFinance.com - explain Independent Treasury system historic definition...
Independent Treasury system -- After the removal of the
funds of the Federal government from the Bank of the United
States in 1833 public moneys were deposited in selected state
banks (called "pet banks" by the opponents of the administration).
The results were entirely unsatisfactory. Large losses
were suffered by the government and both political and business
chaos followed.
Finally, in 1840, an act was passed making the government
the actual custodian of its own moneys. Vaults and safes
were provided for the Treasury at Washington, Sub-Treasuries
were established in several of the larger cities and mints
and branch mints were made places of deposit. The law
was repealed in 1841 and reenacted in 1846. In the interim
the funds were handled under the independent Treasury system
without the authority of law.
From 1846 the system was exclusively in operation until
1863 when the national banking act was passed. This law did
not change the principle of the system, which is still in operation,
but modified it to the extent that national banks could
become depositories of public funds upon supplying United
States bonds as security in the full amount of the money deposited
with them.
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