party members were also motivated to conform to party policies because of the electoral
advantages they could accrue from being a member of a well-established and successful political
party. Consequently, party leaders supported by congressional majorities could more easily form
coalitions in congress and policy change was facilitated, making it possible to enact the party’s
policies and repeal the opposition’s policies.
When Jackson left office in 1836, government finances and the economy were in great
shape. But by the time his successor, President Martin Van Buren, took office the situation had
changed and another revamping of the financial system was necessary. The result was the
Independent Treasury, which, despite its initial repeal, was reenacted and quite effective.
Van Buren’s administration was immediately confronted by the Depression of 1837.
There was a sharp decline in government revenue; the distribution of the surplus to the states had
to be cancelled; the Treasury had to issue almost $20 million in notes; and, nearly all state banks,
including government deposit banks, failed and suspended specie payments.
1837, Van Buren summoned an extra session of Congress to address the crisis. He dismissed the
creation of yet another national bank but also considered it impossible to rely on the state-
chartered banks. Supporting Van Buren, the Democrats in the house had already voted on two
resolutions opposing a new bank. But Van Buren’s alternative proposal fell on deaf ears.
He proposed that the government separate its fiscal operations from the private banking
system, and collect, keep, and disburse its own funds. But his measure, called the Independent
Treasury or Subtreasury system, did not pass. Even though the Democrats controlled majorities
in both chambers, the party only held 53% of all seats. Furthermore, partisan capacity was low
and the Whigs, despite their smaller seat share, had higher partisan capacity. The one advantage
the Democrats had was that the median chamber member was still close to the majority party’s
median member. Over all, these were not the ideal political conditions to push through the
Independent Treasury. Only when another crisis hit the economy in 1839 and private banks again
collapsed was Van Buren’s system implemented. Of nearly 1,000 banks in the country, 343
suspended specie payments entirely, 56 went out of business, and 62 resorted to partial
On June 30, 1840, the Independent Treasury was enacted. The house vote on final
passage was almost entirely along party lines; nearly all Democrats voted for the Subtreasury,
47
See Stabile and Cantor. The Public Debt of the United States An Historical Perspective, 1775-1990.
48
Kinley. The Independent Treasury of the United States and its Relations to the Banks of the Country, p.
40.
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Convention