Banks which hold the public money are often tempted by a desire of gain to extend their loans, increase their circulation, and thus stimulate, if not produce, a spirit of speculation and extravagance which sooner or later must result in ruin to thousands.  If the public money be not permitted to be thus used, but be kept in the Treasure and paid out to the public creditors in gold and silver, the temptation afforded by its deposit with banks to an undue expansion of their business would be checked, while the amount of the constitutional currency left in circulation would be enlarged by its employment in the public collections and disbursements, and the banks themselves would in consequence be found in a safer and sounder condition.  At present State banks are employed as depositories, but without adequate regulation of law whereby the public money can be secured against the casualties and excesses, revulsions, suspensions, and defalcations to which from overissues, overtrading, an inordinate desire for gain, or other causes they are constantly exposed.  The Secretary of the Treasury has in all cases when it was practicable taken collateral security for the amount which they hold, by the pledge of stocks of the United States or such of the States as were in good credit.  Some of the deposit banks have given this description of security and others have declined to do so.

Entertaining the opinion that “the separation of the moneys of the Government from banking institutions is indispensable for the safety of the funds of the Government and the rights of the people,” I recommend to Congress that provision be made by law for such separation, and that a constitutional treasury be created for the safe-keeping of the public money.  The constitutional treasury recommended is designed as a secure depository for the public money, without any power to make loans or discounts or to issue any paper whatever as a currency or circulation.  I can not doubt that such a treasury as was contemplated by the Constitution should be independent of all banking corporations.  The money of the people should be kept in the Treasury of the people created by law, and be in the custody of agents of the people chosen by themselves according to the forms of the Constitution—­agents who are directly responsible to the Government, who are under adequate bonds and oaths, and who are subject to severe punishments for any embezzlement, private use, or misapplication of the public funds, and for any failure in other respects to perform their duties.  To say that the people or their Government are incompetent or not to be trusted with the custody of their own money in their own Treasury, provided by themselves, but must rely on the presidents, cashiers, and stockholders of banking corporations, not appointed by them nor responsible to them, would be to concede that they are incompetent for self-government.

In recommending the establishment of a constitutional treasury in which the public money shall be kept, I desire that adequate provision be made by law for its safety and that all Executive discretion or control over it shall be removed, except such as may be necessary in directing its disbursement in pursuance of appropriations made by law.