By the act to “provide for the better organization of the Treasury and for the collection, safe-keeping, and disbursement of the public revenue” all banks were discontinued as fiscal agents of the Government, and the paper currency issued by them was no longer permitted to be received in payment of public dues.  The constitutional treasury created by this act went into operation on the 1st of January last.  Under the system established by it the public moneys have been collected, safely kept, and disbursed by the direct agency of officers of the Government in gold and silver, and transfers of large amounts have been made from points of collection to points of disbursement without loss to the Treasury or injury or inconvenience to the trade of the country.

While the fiscal operations of the Government have been conducted with regularity and ease under this system, it has had a salutary effect in checking and preventing an undue inflation of the paper currency issued by the banks which exist under State charters.  Requiring, as it does, all dues to the Government to be paid in gold and silver, its effect is to restrain excessive issues of bank paper by the banks disproportioned to the specie in their vaults, for the reason that they are at all times liable to be called on by the holders of their notes for their redemption in order to obtain specie for the payment of duties and other public dues.  The banks, therefore, must keep their business within prudent limits, and be always in a condition to meet such calls, or run the hazard of being compelled to suspend specie payments and be thereby discredited.  The amount of specie imported into the United States during the last fiscal year was $24,121,289, of which there was retained in the country $22,276,170.  Had the former financial system prevailed and the public moneys been placed on deposit in the banks, nearly the whole of this amount would have gone into their vaults, not to be thrown into circulation by them, but to be withheld from the hands of the people as a currency and made the basis of new and enormous issues of bank paper.  A large proportion of the specie imported has been paid into the Treasury for public dues, and after having been to a great extent recoined at the Mint has been paid out to the public creditors and gone into circulation as a currency among the people.  The amount of gold and silver coin now in circulation in the country is larger than at any former period.

The financial system established by the constitutional treasury has been thus far eminently successful in its operations, and I recommend an adherence to all its essential provisions, and especially to that vital provision which wholly separates the Government from all connection with banks and excludes bank paper from all revenue receipts.

In some of its details, not involving its general principles, the system is defective and will require modification.  These defects and such amendments as are deemed important were set forth in the last annual report of the Secretary of the Treasury.  These amendments are again recommended to the early and favorable consideration of Congress.