REPORTS. ON THE SAFE-KEEPING OF THE PUBLIC MONEY.* THE arrangements for keeping the public money which had been in successful operation for a few years previous to the passage of the deposite act of 1836 became partially embarrassed by carrying into effect some of its provisions. But the enforcement of them all, where not entirely perfected, was in seasonable progress in May last, when the department was compelled, by the act, to give notice to such of the selected banks as had suspended specie payments that they could no longer be considered as general depositories of the public moneys. (See circular I.)† A list is annexed of all before employed in that capacity which have been discontinued. (K.)† After due inquiries to procure other depositories, in conformity to the act, the department has completed the appointment of only one. This, and four more that have not suspended, with one that has resumed specie payments (making six in all), constitute the present bank depositories for general purposes. A schedule of them is added. (L.)+ During the inability to obtain specie-paying banks at other points, the treasurer being required, by the closing part of the 8th section of the act, to keep and disburse the public money according to the laws before in force has done it in conformity to the very wide discretion. which existed when no rules were in force that had been prescribed by Congress, except to "keep" and "disburse the same" under the general superintendence of the Secretary of the Treasury. A part of it has, therefore, been kept in special deposit in this city, a portion of it in the mint, and the residue with the officers collecting it, until * From the Report of the Secretary of the Treasury; made September 3d, 1837. + Printed with the Report, September 5, 1837. it was wanted for public purposes, or until it accumulated in such sums at any point as not to be, probably, wanted there for such use. (See two circulars, M and N.) In the first case, it has, from time to time, been applied to the payment of creditors, by drafts on the receivers or collectors; and in the last, the excess has been directed to be temporarily placed with banks not remotely situated, and in special deposite for safety, until wanted for expenditure elsewhere, or until some new legislation shall take place in relation to it. Under these circumstances, the department would respectfully suggest some provisions which may be more specific, and may be required for the safe-keeping and disbursing of the public moneys. In the present condition of the government and the country, two systems are proposed, either of which, it is believed, may be practicable and adequate to the exigencies of the crisis. One is, an enlargement and adaptation of the system partially employed since the suspension of specie payments, so as to make it answer all necessary purposes. This could be effected merely by assigning to our existing officers and establishments some additional duties. The treasurer, at the seat of government, the mint, with its branch at New Orleans, and another which has been contemplated, and is much needed at New York, for other purposes,-collectors of the customs, and receivers of money for the sales of land, as well as postmasters, might all be directed to keep in safety, not only the public money collected by them, but all actually placed in their possession, by transfer or otherwise. As fiscal agents, they might also be required to pay over and transfer it for such public purposes as may be authorized by Congress, and under such regulations as the treasury department from time to time may prescribe. Indeed, the third section of the post-office law of 1825, with the bond taken under it as to the agency of the postmasters, is, perhaps, already sufficiently broad for that class of officers. At points like New York, and a few others, where a likelihood existed that the sums would permanently be large, but which, under a reduced revenue and expenditure, would seldom occur, authority might be given to appoint the clerks now acting as cashiers or tellers under the collectors and receivers, or other more suitable persons, to act as keepers and paymasters of the public money. But they should be made independent of the collectors and receivers, and placed under the like tenure of office, and under suitable bonds. Additional means of safety, and such additional but limited compensation to any of the above officers, might be provided, as the increased risk and labor might render just; but in only a few cases would these last be much augmented at any place. Taking the year 1834 as furnishing a specimen sufficiently large of the probable business in future connected with the general operations of the treasury department, but, of course, not including the separate * Printed with the Report, Sept. 5, 1837. establishment of the post-office, the whole number of warrants issued in that year was a little under five thousand; and, though differing much in actual amount, averaging about five thousand dollars each. This would be less than twenty warrants a day, and hence would require less than one per day to be paid in each of the twenty-six States. They differed, in fact, from four per day in this district, and two per day in New York, which were the highest numbers, to only one per week in several of the States. (See Table P.)* The business at each office daily, or even weekly, in making payments of the drafts, would, therefore, be very little. If more than one draft issued on a warrant, the business would be increased in that proportion, unless the whole payments were reduced, as is probable, hereafter, to sixteen or seventeen millions yearly. In regard to the risk, five millions in the treasury at any one time, if all placed in the hands of collectors and receivers, would not, on an average, exceed thirty thousand dollars with each of the present number. But if the amount, besides one million in the mint, was chiefly in the hands of half the present number, which would approach nearer to the probable result, the sum with each would still be less than most of the existing bonds of receivers; and when exceeding theirs, or those of the principal collectors, the excess, in most cases, could be readily prevented, or reduced, by being drawn out to pay creditors, or be conveniently transferred to the treasurer of the United States, at the seat of government, or to the mint and its branches. Until one of the latter is authorized at New York, the substitute, before mentioned, of one of the present officers in the customs there as an independent keeper and paymaster of the public money, could be adopted, and, if deemed prudent, be extended to any other similar place. In this mode, the present number of officers connected with the collection and disbursement of the revenue throughout the United States need not be at all increased. Nor will it become necessary, except in a few cases, to augment their compensation. Twenty or thirty thousand dollars a year would probably cover the whole additional expense of every kind. The other system to which the attention and consideration of Congress are respectfully invited, is a new organization, by means of commissioners or receivers-general, to gather the collections to more central points, and keep and disburse there a large portion of the public money, or such as could not be kept safely and expended conveniently in the hands of the collecting officers. Such an organization might be at only three or four of the most important points; or it might be made more extensive, and the number enlarged to eight or ten. This could be arranged, in all essential particulars, substantially in the manner which is now in very successful practice in some of the most *Printed with the Report, September 5, 1887. enlightened and opulent governments of Europe, and as was urgently recommended by this department as early as 1790. (See extract 0.) * The only material difference need be, to pay out more of the money near the places where it is collected, rather than first to transmit most of it to the seat of Government. This organization of fiscal agents would be advantageous as a separate establishment for this business alone, and as an independent check on most of those collecting the revenue. But it would require some addition to the present number of officers, and, in the first instance, would more increase the public expenses. But the whole addition of principal officers need not exceed ten. Nor would the increased annual expense to the government probably amount to over fifty or sixty thousand dollars, as the system would enable both the war and navy departments to dispense with several of their agents for making local disbursements. The danger of any losses will be nearly the same under both plans. It is impossible to conduct the affairs of government, or the ordinary transactions of society, without trust and risk of some kind. But one great object, wherever pecuniary confidence is reposed, should always be to require the best safeguards which appear reasonable; and in either of these systems, as hereafter explained, the amount trusted can be more easily kept from becoming excessive, and the hazard of losses, affecting the deposite agent by his lending or trading, be fully obviated, by the strict prohibition of both the latter, under severe penalties. Our direct losses from either collecting or deposite agents have always been comparatively small. Those by the former, it is believed, have not equalled those by the latter; though the latter, being banks, have usually in the end paid most of their deposites. The losses by the former are also supposed not to have exceeded one-fifth of those on the bonds of merchants for duties, and probably not one-eighth of those from the purchasers of public lands, under the credit system. Occasional and strict examinations of the money on hand, where large in amount, would furnish a strong safeguard beyond the character of the officer, and the property of himself and sureties, and which it might be provided should be made by a committee of Congress, or in any other mode deemed most eligible to constitute an effectual check. The plans which have been explained as to fiscal agents are suggested for consideration, under a belief that either is appropriate in the present posture of affairs; that they require but slight changes in our existing laws or usages; and, whatever objections can be adduced against them, will, at the same time, be found to possess many signal advantages. They will not, so much as some other modes of keeping the public money, expose the treasury to disappointments and delays, through a dangerous partnership of interest, or the use of that money for private * Printed with the Report, September 5, 1837. or corporate purposes. As the vicissitudes of trade or speculation affect the persons who borrow from the public banking depositories, the evil consequences must sometimes inevitably reach and embarrass the treasury itself. Nor, on the other hand, will these modes, like our former one, cause frequent injury to those who, trading on the revenue of the government, are subject to be most pressed to refund it when least able. It is believed, likewise, that the funds of the treasury can be always more readily commanded in a legal currency, and the hopes of its creditors not defeated, nor its faith violated so often, if the money is not loaned out, either in full or in part, but, as in other countries, is retained in specie or its equivalent, and in the actual custody of officers exclusively fiscal. In other countries, the public money is believed to be seldom, if ever, chargeable to the treasurer, till it is either paid over on some draft, so that he can get credit for the payment (and which mode is practised somewhat in England, as well as here, and extensively in France), or lodged, not in deposit in any bank, but in his own possession at the seat of government. In the former mode, the systems now proposed, and especially the first one, would operate so as to disburse at each point most of the public money collected near, and would thus enable the treasury to command its resources with less delay; the money not being previously paid over at some distance, and to a separate set of agents, as has usually been the practice here in the use of banks; nor much of it transported inconveniently to the capital, as has usually been the practice elsewhere. This mode would thus possess one of the greatest excellences in any fiscal system; which is, to pay over quickest to the public creditor, and with the least official complexity, whatever is collected from the public debtor. Besides these advantages, others would be, that the money in the treasury, under both of the plans submitted, can always be more easily kept down to moderate dimensions by reductions in the revenue, and by temporary investments of an occasional surplus, as there will be no antagonist interest connected with it, wishing for loans and the use of surpluses, and thus coöperating to prevent a reduction. The existing establishments and officers, whenever convenient, would be employed without a double machinery, or the organization of a new system of agents. Executive control would be diminished rather than increased by them, because any additional officers will be selected, not by the President alone, nor the treasury department, as the banks now are, but virtually be designated by Congress, and the principal incumbents appointed by the consent of the Senate. They would also remove all ground for the objection sometimes urged against the former system, that the executive alone exercises an extensive patronage and great monied influence through a host of bank presidents, directors, and stockholders, scattered through every section of the country, and selected without the assent or check of either House of Congress in any particular case, and making loans of the public money from |