Independent Treasury

The Independent Treasury was the system for managing the money supply of the United States federal government through the U.S. Treasury and its sub-treasuries, independently of the national banking and financial systems. It was created on August 6, 1846 by the 29th Congress, with the enactment of the Independent Treasury Act of 1846 (ch. 90, 9 Stat. 59), and it functioned until the early 20th century, when the Federal Reserve System replaced it. During this time, the Treasury took over an ever-larger number of functions of a central bank and the Treasury Department came to be the major force in the U.S. money market.

Two months into the presidency of Martin Van Buren, on May 10, 1837, some state banks in New York, running out of hard currency reserves, suddenly refused to convert paper money into gold or silver. Other financial institutions throughout the nation quickly followed suit. This financial crisis, the Panic of 1837, was followed by a five-year depression in which banks failed and unemployment reached record highs.

To deal with the crisis, Van Buren proposed the establishment of an independent U.S. treasury. Such a system would, he asserted, take the politics out of the nation's money supply: the government would hold all of its money balances in the form of gold or silver and would be restricted from printing paper money at will, a measure designed to prevent inflation. Van Buren announced his proposal in September 1837; but that was too much for state banking interests, and an alliance of conservative Democrats and Whigs prevented it from becoming law until 1840, when the 26th Congress passed the Independent Treasury Act of 1840 (ch. 41, 5 Stat. 385). Although signed into law on July 4, 1840, it lasted only one year; for the Whigs, who won a congressional majority and the presidency in the 1840 elections, promptly repealed the law.

...
Wikipedia