On this date in history, August 16, 1841, President John Tyler vetoed a bill to charter a new national bank to replace the Second Bank of the United States. Tyler’s veto led to demonstrations that still rank as the most violent protest on White House grounds in history.
A national bank was Alexander Hamilton’s brainchild. He began the push to charter a bank just a few years after the ratification of the Constitution. His rationale wasn’t much different from those who later came up with the Federal Reserve. Hamilton thought a central bank was necessary to stabilize and improve the fledgling nation’s credit and to better manage the financial business of the United States government. He also knew that his vision of a powerful national government was impossible without a central bank to backstop government borrowing.
But what about the Constitution? How did Hamilton’s bank fit into the constitutional framework ratified just a couple of years earlier?
Simply put, it didn’t.
Thomas Jefferson and James Madison led the opposition against the bank, arguing that it is unconstitutional.
The arguments against the bank fit more closely with the vision laid out by supporters of the Constitution during the ratification debates, but ultimately, Hamilton won the day. Congress chartered the First Bank of the United States in 1791. This not only set the precedent for government-controlled central banking that ultimately gave us the Federal Reserve; it also sent the United States down the path to ever-growing central power.
But there were some people along the way who put roadblocks in the path of government central banking, including President John Tyler.
In 1811, the bank’s 20-year charter expired and it was not renewed by Congress. But it only took five years for the Second Bank of the United States to rise from its ashes. In an epic flip-flop, James Madison signed the bill establishing the bank on April 10, 1816, with another 20-year charter.
In 1832, as the expiration date approached, President Andrew Jackson vetoed an early attempt to recharter the Second Bank of the United States. The following year, Jackson announced the federal government would no longer use the bank and began diverting federal funds to private banks, effectively ending its role as the central bank. It became a private corporation when the charter expired in 1836.
The Whig ticket of William Henry Harrison and John Tyler won the presidential election of 1840. In the weeks after his inauguration, Harrison caught pneumonia and died having served just 31 days in office.
Tyler took over the presidency as an atypical Whig. He had only joined the party in opposition to Andrew Jackson. As a firm believer in state sovereignty and strict limits on federal power, he opposed the Whig program of internal improvements and protective tariffs, and he was adamantly against the establishment of a new national bank.
In 1841, Whigs under the leadership of Henry Clay began pushing to charter a new national bank. Despite his reservations, Tyler agreed to work with Congress to craft a compromise bank bill that would address his objections. Clay rejected the administration’s proposal and pushed through his own bill. On Aug. 16, Tyler vetoed it.
In his veto message, Tyler said, “I can not conscientiously give it my approval.”
“I will say that in looking to the powers of this Government to collect, safely keep, and disburse the public revenue, and incidentally to regulate the commerce and exchanges, I have not been able to satisfy myself that the establishment by this Government of a bank of discount in the ordinary acceptation of that term was a necessary means or one demanded by propriety to execute those powers.”
That evening, an “unruly crowd” gathered outside of the White House to protest Tyler’s veto. According to historical accounts, a drunken mob gathered two nights later. University of Delaware historian Gary May wrote that two crowds descended on the White House on August 18, 1841. The first discharged guns in the air and shouted: “down with the veto.” A second crowd arrived hours later with a scarecrow-like figure of Tyler that was hanged and then set on fire.
In a separate incident, police arrested a man who threw rocks at Tyler as he walked the White House grounds. Tyler refused to press charges.
Clay and other Whigs continued to try to establish a national bank, but Tyler’s veto power thwarted their efforts. The U.S. remained free from central banking until the Civil War.
Tyler was ultimately expelled from the Whig Party. He formed a third party for his run for reelection, but ultimately bowed out and supported Democrat James K. Polk.
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