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 The law was repealed in 1841 and reenacted in 1846.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.  The system
has been entirely successful so far as safety is concerned, but the locking up of such large
amounts of money as the government always keeps on hand has been a distinct economic loss
and in times of monetary stringency an enormous Treasury surplus has been an actual menace to
the business of the country.