Subtreasuries

SUBTREASURIES

SUBTREASURIES are the regional banks and repositories charged with the stewardship of the federal government's funds. After President Andrew Jackson removed government deposits from the second Bank of the United States they were placed in so-called "pet banks." This system did not prove to be satisfactory, and an act, approved 4 July 1840, set up an independent treasury. Until 30 June 1843, part of the payments to the government might be other than specie ("in coin"). The law was repealed 13 August 1841, but was re-enacted in August 1846, with the intent that receipts and expenditures were to be in specie or Treasury notes. Subtreasuries were established at New York, Philadelphia, Charleston, New Orleans, Saint Louis, and Boston; and later at Chicago, San Francisco, and Cincinnati.

The gravest trouble came when government surpluses caused a shortage in the money markets. The situation was helped after the establishment in 1863–1864 of the national banks, which were made government depositories. Secretary of the Treasury Leslie M. Shaw, from 1902 to 1907, used many devices to smooth the effect of Treasury operations on the money market. The Federal Reserve Act of 1913 provided that the Federal Reserve banks might act as fiscal agents for the government. This made the subtreasuries unnecessary. But political pressure caused them to be temporarily retained. By an act of Congress dated 29 May 1920, the nine subtreasuries were terminated; the last one closed its doors on 10 February 1921.

BIBLIOGRAPHY

Moser, Harold D. Subtreasury Politics and the Virginia Conservative Democrats, 1835–1844. Madison, Wis., 1977.

James D. Magee / a. r.

See also Banking: State Banks ; Federal Reserve System ; Money ; Pet Banks .