The system of public trading houses goes back to colonial days. At first in Plymouth and Jamestown all industry was controlled by the commonwealth, and in Massachusetts Bay the stock company had reserved the trade in furs for themselves before leaving England.[207] The trade was frequently farmed out, but public "truck houses" were established by the latter colony as early as 1694-5.[208] Franklin, in his public dealings with the Ohio Indians, saw the importance of regulation of the trade, and in 1753 he wrote asking James Bowdoin of Massachusetts to procure him a copy of the truckhouse law of that colony, saying that if it had proved to work well he thought of proposing it for Pennsylvania.[209] The reply of Bowdoin showed that Massachusetts furnished goods to the Indians at wholesale prices and so drove out the French and the private traders. In 1757 Virginia adopted the system for a time,[210] and in 1776 the Continental Congress accepted a plan presented by a committee of which Franklin was a member,[211] whereby £140,000 sterling was expended at the charge of the United Colonies for Indian goods to be sold at moderate prices by factors of the congressional commissioners.[212] The bearing of this act upon the governmental powers of the Congress is worth noting.

In his messages of 1791 and 1792 President Washington urged the need of promoting and regulating commerce with the Indians, and in 1793 he advocated government trading houses. Pickering, of Massachusetts, who was his Secretary of War with the management of Indian affairs, may have strengthened Washington in this design, for he was much interested in Indian improvement, but Washington's own experience had shown him the desirability of some such plan, and he had written to this effect as early as 1783.[213] The objects of Congressional policy in dealing with the Indians were stated by speakers in 1794 as follows:[214] 1. Protection of the frontiersmen from the Indians, by means of the army. 2. Protection of the Indians from the frontiersmen, by laws regulating settlement. 3. Detachment of the Indians from foreign influence, by trading houses where goods could be got cheaply. In 1795 a small appropriation was made for trying the experiment of public trading houses,[215] and in 1796, the same year that the British evacuated the posts, the law which established the system was passed.[216] It was to be temporary, but by re-enactments with alterations it was prolonged until 1822, new posts being added from time to time. In substance the laws provided a certain capital for the Indian trade, the goods to be sold by salaried United States factors, at posts in the Indian country, at such rates as would protect the savage from the extortions of the individual trader, whose actions sometimes provoked hostilities, and would supplant British influence over the Indian. At the same time it was required that the capital stock should not be diminished. In the course of the debate over the law in 1796 considerable laissez faire sentiment was called out against the government's becoming a trader, notwithstanding that the purpose of the bill was benevolence and political advantage rather than financial gain.[217] President Jefferson and Secretary Calhoun were friends of the system.[218] It was a failure, however, and under the attacks of Senator Benton, the Indian agents and the American Fur Company, it was brought to an end in 1822. The causes of its failure were chiefly these:[219] The private trader went to the hunting grounds of the savages, while the government's posts were fixed. The private traders gave credit to the Indians, which the government did not.[220] The private trader understood the Indians, was related to them by marriage, and was energetic and not over-scrupulous. The government trader was a salaried agent not trained to the work. The private trader sold whiskey and the government did not. The British trader's goods were better than those of the government. The best business principles were not always followed by the superintendent. The system was far from effecting its object, for the Northwestern Indians had been accustomed to receive presents from the British authorities, and had small respect for a government that traded. Upon Wisconsin trade from 1814 to 1822 its influence was slight.