The Independent Treasury as a Source of Weakness in Our Banking System[280]
For many years the banks of this country have conducted a persistent agitation for the abolition of the Independent Treasury system. It has been their contention that the Independent Treasury was an archaic and inefficient system of administering the finances of the nation; that it worked serious hardship upon the banks and the business of the country, and that any system of reform should include its abolition.
The treasury is, in reality, a central bank of deposit with branches, run by the Government, in which the Government is the only depositor, and from which there are no borrowers. The central office of the Treasury is situated in Washington, while there are ten subtreasuries or branches scattered among the various large cities of the country. The most important subtreasury, from the standpoint of the volume of business handled, is located in New York City....
The United States is the only large nation in the world which has a treasury system of this sort, and this fact has been made much of in the agitation for its abolition.
DIFFICULTIES ARISING FROM THE TREASURY SYSTEM
There is no room for dispute that many features of the Independent Treasury have, in the past, been the source of serious difficulties. However, we must recognize that within the last decade, and particularly within the last two or three years, most of the glaring defects have been eliminated through a liberalization in methods, involving, in brief, a deposit of a very considerable amount of the Government's money in national banks rather than carrying it locked up in the vaults of the Treasury, through more liberal administrative regulations by which payments to the Treasury could be made with certified checks, and through facilitating in other ways the transactions of business men with the Treasury Department.
CORRESPONDENCE OF TREASURY RECEIPTS AND DISBURSEMENTS
... The real criticism against the Treasury is that it causes the tying up of money, not over a series of years, but during the months in which the banking system of the country most needs it. This condition is the result of the lack of correspondence between government receipts and disbursements.
During the first four months of the year the receipts are less than in any other period. During the month of May, the receipts sharply increase, reaching their maximum about the first of June, and continuing at a very high rate over that month. In July the income falls off, reaching by the end of the month a point a little above that which prevailed in April, after which it gradually increases during August and September. About October first the tide turns and the receipts fall off sharply during that month, while during December the revenue again increases. As contrasted with this the government expenditures change only in a general way....