Independent Treasury System
INDEPENDENT TREASURY SYSTEM
INDEPENDENT TREASURY SYSTEM, an alternative to a central bank. Critics of the first and second banks of the United States were legion. Jeffersonians and Jacksonians criticized their monopoly as sole financial agents of the U.S. Treasury and feared their significant financial power. President Andrew Jackson had little use for banks, and many citizens disliked the political influence usually required to obtain state bank charters.
By late 1837 the nation had twice experienced living under a central bank, had seen it liquidated, and then had endured a panic and a depression. The Democrats blamed it all on banks and wanted the Treasury to operate independently; the Whigs wanted a third central bank. In June 1840 Congress established an Independent Treasury System, but the first act of the Whig administration of President William Henry Harrison in March 1841 was to repeal the bill. After Harrison died in April, President John Tyler vetoed all attempts to set up a third central bank.
One of the major planks in Democratic candidate James K. Polk's platform in 1844 was to re-create the Independent Treasury System. Congress reestablished the system in August 1846 to trade only in gold and silver coin. The system tended to drain money out of commercial channels into government vaults, however, which damaged the economy. Because the system operated badly, the government made increasing use of banks, which promptly loaned money left in their hands. In 1914 the Federal Reserve System (established 23 December 1913), a central bank, went into operation. The Independent Treasury System ended in 1921.
Friedman, Jean E. The Revolt of the Conservative Democrats: An Essay on American Political Culture and Political Development, 1837–1844. Studies in American History and Culture, no. 9. Ann Arbor, Mich.: UMI Research Press, 1979.
Donald L.Kemmerer/c. w.