INDEPENDENT TREASURY SYSTEM.
Following experiences with the Bank of the United States and the State banks as cus todians of public funds, the Independent Treas ury System, by which the government might take charge of its own funds, dame into exist ence by the Act of 4 July 1840, though the law was repealed in the following year, and was not again re-enacted until 6 Aug. 1846. The operations of this law were substantially changed by the National Currency. Act of 1863, and the latter in turn by the Federal Reserve Act of 1913.
The method of handling the Treasury re ceipts has been the subject of much criticism. Instead of depositing the public funds in the banks in the ordinary course of business, to be drawn against as needed, it has long been the practice of the Secretary of the Treasury to make large withdrawals and deposits in bulk. Very often the deposits have been made for the purpose of affording relief to the money mar ket or for assisting in moving the crops and sometimes in the attempt to prevent panic.
That the system has worked badly is the belief of those most competent to judge. It has been remedied in part by the Federal Reserve Act (q.v.), but the Secretary of the Treasury is still clothed with large discretionary powers in handling the public funds. Charges have been made at times that the surplus revenues were being employed for the benefit of Wall street speculation, and at others that they were being deposited in banks in certain localities for political effect. Whatever truth there may be in these charges, it is certain that the alternate deposit and withdrawal of large amounts of public funds have exercised an artificial in fluence on the money market. This would be obviated were the receipts of the government deposited in the banks and withdrawn in the ordinary course in accordance with usual busi ness practice.