A persistent attack upon the United States Bank, resulting in its downfall as a Federal institution, began in 1829. President Jackson in his first annual message in 1829 raised the question of constitutionality, and doubted the value of the bank In establishing a sound cur rency. In its place he suggested an institution more directly under the management of the Treasury Department with power to receive both public and private deposits, but with no right to make loans. Jackson undoubtedly voiced the conviction of Western democracy, that the affairs of the government should be divorced from private corporate undertakings. The suggestion had little immediate influence, for both branches of Congress made reports in favor of the bank. In 1831 Senator Benton took up the fight against the bank, resting his argument upon the evils of all kinds of bank notes, and in particular attacked the issue of branch drafts. In 1832 the bank petitioned for a new charter and was successful in carrying its bill through Con gress. Jackson interposed a veto, laying stress upon the evil of a money monopoly. He did not stop here but next determined on the re moval of the government funds from the cus tody of the bank; in this he was encouraged by his re-election in 1832 which he interpreted as a popular endorsement of his opposition to the bank. There were doubts, however, as to the legality of removal of the public moneys without the sanction of Congress. W. J. Duane, who was appointed Secretary of the Treasury in June 1833, refused to take the responsibility, and although Taney, the Attorney-General, sup ported Jackson's contention, Duane remained obstinate. He was forced from office and was succeeded by Taney, who on 26 September is sued an order directing the deposit of public moneys henceforth in certain local banks. These institutions, popularly known as Jackson's "pets," were chosen with care, and by the Act of 23 June 1836, the regulation of public funds was strictly prescribed so as to safeguard the interests of the government in every possible way.
In 1835 the public debt was paid off ; cus toms receipts had steadily increased; and be-* ginning with 1830 there was an enormous ex pansion in revenue from sales of public land. In 1834 and 1835 the annual receipts from this source alone were nearly $15,000,000 and in 1836, $25,000,000. A new fiscal problem of dealing with a surplus was thus created; many schemes were projected, chief among which was Clay's proposition that revenue from lands be dis tributed among the several States. Any plan to prevent a surplus by lowering customs was negatived on the ground that the tariff question has been, for the time being at least, settled by the Act of 1833 and ought not to be reopened. On the other hand, there was objection to the distribution of the proceeds of land sales on the ground that public lands had been ceded for paying off the Revolutionary debt; that this national income could not in fairness be given to States which had not originally shared in the gift, and that the Constitution required all revenues to be appropriated for specific objects. Others desired to make large expenditures for internal improvements, fortifications or educa tion. It was impossible to pass a distribution bill, but the same end was reached by the Act of 23 June 1836, providing for the deposit of certain surplus funds in the treasury, amounting to $37,000,000, with the several States in propor tion to their respective representation in Con gress. In law this was a deposit which could be recalled, but it was practically regarded as a gift to the States. The deposits were to be made in four quarterly instalments during the year 1837. Before the deposit was completed the country was involved in a commercial panic which made it impossible for the government to pay the fourth instalment.
On 1 July 1836 the Treasury Department is sued an order known as the Specie Circular, requiring all land agents to accept only specie in payment for public lands; as local bank notes had been previously received, and specie was scarce in the West where sales were made, speculative operations based upon land were sharply checked. Eastern banking institutions with Western connections were obliged to con tract their loans, and this, coupled with a heavy transfer of funds, in accordance with the De posit Act, proved a severer strain than many banks could stand. The evils were aggravated
by commercial failures in Europe, decreasing crops and Southern speculation in cotton. In May 1837 the banks throughout the country suspended specie payments, and as the treasury had parted with its funds it shared in the distress and was also forced to suspend. Dur ing the next few years treasury notes were issued amounting to $47,000,000, of which one third were reissues; and between 1841 and 1843 there were three long-term loans. With the exception of 1839, there was a series of annual deficits until 1844.
The failure of the banks to protect the funds of the government led President Van Buren to recommend the establishment of an independent treasury system by which the government might take care of its own funds. A prolonged dis pute within the party over the details of this plan, as well as the opposition of Whigs who wished to establish another United States Bank, deferred the passage of the independent Treas ury Act until 1840. In 1841 the Whigs gained the election and used their power by repealing the Treasury Law. Owing to the vacillating op position of Tyler, who succeeded President Harrison, it proved impossible to pass construc tive legislation, and for lack of other agencies the public funds were once more placed with local banks; this practice continued until 1846. Whig success also led to a revision of the tariff in the Act of 1842 along protectionist lines. Additional reason for higher duties was found in the embarrassment of the treasury and the need of increased revenue. In 1846 the Demo crats regained the Presidency and at once re established the independent treasury system and• enacted a new tariff. The Treasury Act of 1846 provided for the custody of public funds at mints, custom-houses and at subtreasuries in a few of the larger cities. It also provided that all public dues should be made either in specie or treasury notes, thus excluding bank notes. The system in its main features has remained unchanged to the present time, and it has been successful in safeguarding the funds of the government.
The tariff of 1846 was a free trade tariff;.. specific duties were abolished; and the duties were so rated as to yield the largest amount of revenue. Commercial enterprise was again at a high level; railroad construction and foreign immigration contributed to new industrial de velopment; and in spite of the temporary inter ruption occasioned by the war with Mexico, the treasury entered upon another long period of prosperity. Customs receipts were large; the sales from public lands again proved fruitful; and repeated surpluses made it possible to re duce the debt, until in 1857 it stood at $28, 800,000. In .1857 another reduction in tariff rates was made to which all sections of the country gave generous support. Railroad con struction, however, had been carried too far and capital for the moment was unprofitably tied up in unproductive investment. Bank note circulation was unduly expanded, and a panic occurred in August 1857. The treasury with weakened resources fell into embarrassment and was obliged to issue treasury notes to meet its obligations. In the years 1858-60 the deficits amounted to $50,000,000.
During the period 1816-61, the United States became a commercial nation, necessitating new methods of customs administration. The reg ulations affecting the appraisement of goods were made more strict. Credits to importers were abolished, and in its place a system of warehousing was established. Among the later Secretaries of the Treasury, Walker and Guthrie stand out pre-eminent, the first for his notable report in which he recommended the tariff of 1846 and the second for his development of administrative details. See also UNITED STATES - FINANCES (1861-1919).
Bolles, A. S., 'Financial History of the United States from 1776 to 1885> (4th ed., New York 1894-96) ; Dewey, D. R., (Financial History of the United States' (5th ed., New York 1915).