r, therefore,
share this class of business with the trust companies only, and where
it predominates have a distinct advantage in competition over the
national institutions.

_3. The Independent Treasury System_

While not a banking institution, the Treasury of the United States
handles its funds in such a manner and performs such functions with
reference to the currency that it has become an important part of the
banking system of the country.

Previous to 1840 the funds of the federal government were kept on
deposit in banking institutions, during the greater part of the time
in the First and Second United States banks. Friction between
President Jackson and the Second United States Bank resulted in their
withdrawal from that institution in 1834 and their deposit in selected
state banks, several of which failed and all of which suspended specie
payments during the crisis of 1837. The embarrassment which the
treasury experienced in consequence, combined with previous
unsatisfactory relations between the government and its depositories,
convinced President Van Buren that the Treasurer ought himself to keep
and to disburse the funds of the government. He made a recommendation
to this effect to Congress, which in accordance therewith enacted the
first independent treasury act in 1840. The revival of agitation for a
third United States Bank led to the repeal of this act the following
year, but in 1846 it was reenacted and with modifications has remained
upon our statute books to the present day.

In its original form this act provided for the acquisition of vaults
in certain cities, in which should be deposited the funds of the
government as soon as possible after they came into the hands of the
receiving officers, and out of which should be taken, upon drafts
issued by the Secretary of the Treasury, the money needed for the
payment of the government's obligations. It further provided that all
dues to the government in the future should be paid either in coin or
in currency issued exclusively by the government, and that all
expenses should be paid in the same forms of money.

Important modifications in this act were made during and after the
Civil War. In 1863 permission was granted the Secretary of the
Treasury to deposit in national banks funds accumulated in the
treasury, and derived from any source except duties on imports,
provided the banks selected for this purpose should deposit with him
government bonds fo