Divisions that were added over the years include the U.S. Mint (1792), the U.S. Secret Service (1865, transferred to the Dept. of Homeland Security in 2003), the Internal Revenue Service (1862), the Office of the Comptroller of the Currency (1863), the Bureau of Engraving and Printing (1877), the U.S. Customs Service (1927, functions transferred to bureaus in the Dept. of Homeland Security in 2003), the Bureau of the Public Debt (1940), the U.S. Savings Bonds Division (1945, transferred to the Bureau of the Public Debt in 1994), the Federal Law Enforcement Training Center (1970, transferred to the Dept. of Homeland Security in 2003), the Alcohol and Tobacco Tax and Trade Bureau (1972 as the Bureau of Alcohol, Tobacco, and Firearms; law enforcement functions transferred to the Dept. of Justice in 2003 as the Bureau of Alcohol, Tobacco, Firearms, and Explosives), the Financial Management Service (formerly the Bureau of Government Financial Operations, 1974), the Office of Thrift Supervision (1989), the Financial Crimes Enforcement Network (1990), and the Community Development Financial Institutions Fund (1994).

Until 1829 the department supervised the U.S. Postal Service and until 1849 the General Land Office; before 1903 the department was also charged with many duties pertaining to commerce. The law enforcement functions formerly carried out by the department were transferred to other departments in 2003.

See also Bank of the United States; Federal Reserve System; Independent Treasury System; subtreasury.

Origins of the System

After President Andrew Jackson vetoed the bill to recharter the Bank of the United States, he transferred (1833) government funds from the bank to state banks (the "pet banks"). Those banks, however, used the funds as a basis for speculation, which was already rampant and was soon to be further increased by the distribution of the federal surplus among the states. The situation was brought to a head by Jackson's issue of the Specie Circular (1836), which led to a drain on the "pet banks" and their collapse in the Panic of 1837. President Martin Van Buren then proposed that an independent treasury be set up that would be isolated from all banks. The proposal met considerable opposition and failed to pass the House of Representatives in 1837 and again in the sessions of 1837-38 and 1838-39.

Creation of the System

In 1840 legislation for an independent treasury was passed and approved by the President; however, the following year the Whigs repealed the law. The intention of the Whigs was to establish a new central bank, but the objections of President John Tyler on constitutional grounds prevented the creation of another Bank of the United States. The Democrats won the presidential election of 1844, and measures were inaugurated to restore the Independent Treasury System.

The act of Aug., 1846, provided that the public revenues be retained in the Treasury building and in subtreasuries (see subtreasury) in various cities. The Treasury was to pay out its own funds and be completely independent of the banking and financial system of the nation; all payments by and to the government, moreover, were to be made in specie. The separation of the Treasury from the banking system was never completed, however; the Treasury's operations continued to influence the money market, as specie payments to and from the government affected the amount of hard money in circulation.

Problems and Its Demise

Although the independent Treasury did restrict the reckless speculative expansion of credit, it also tended to create a new set of economic problems. In periods of prosperity, revenue surpluses accumulated in the Treasury, reducing hard money circulation, tightening credit, and restraining even legitimate expansion of trade and production. In periods of depression and panic, when banks suspended specie payments and hard money was hoarded, the government's insistence on being paid in specie tended to aggravate economic difficulties by limiting the amount of specie available for private credit.

The most serious weaknesses in the system were revealed during the Civil War; under the pressures created by wartime expenditures, Congress passed the acts of 1863 and 1864 creating national banks. Exceptions were made to the prohibition against depositing government funds in private banks, and in certain cases payments to the government could be made in national bank notes.

After the Civil War, the independent Treasury continued in modified form, as each administration tried to cope with its weaknesses in various ways. Secretary of the Treasury Leslie M. Shaw (1902-7) made many innovations; he attempted to use Treasury funds to expand and contract the money supply according to the nation's credit needs. The Panic of 1907, however, finally revealed the inability of the system to stabilize the money market; agitation for a more effective banking system led to the passage of the Federal Reserve Act in 1913. Government funds were gradually transferred from subtreasuries to district banks, and an act of Congress in 1920 mandated the closing of the last subtreasuries in the following year, thus bringing the Independent Treasury System to an end.

Short-term U.S. government security with maturities ranging from one month to 26 weeks. Treasury bills are usually sold at auction on a discount basis with a yield equal to the difference between the purchase price and the maturity value. Because they are highly liquid (money not being tied up in them for long periods of time), their yield rate is normally lower than that of longer-term securities. Their prices do not usually fluctuate as much as those of other government securities but may be influenced by the purchase or sale of large quantities of bills by the central bank. First used extensively during World War I, treasury bills were initially regarded as an emergency source of revenue, but their flexibility and relatively low interest led to their adoption as a permanent element in the national debt. From 1970 to 1998 the minimum order for treasury bills was $10,000, after which it was reduced to $1,000. In 2001 the U.S. Treasury stopped offering treasury bills with maturities of 52 weeks.

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