Monday, August 16, 2010

August 16, 1841 – Tyler Signs New Charter for Third Bank of the United States

The Bank of the United States had a troubled past. The First Bank had begun in 1791 to aid in the central government of the young nation. Its charter had run out in 1811, and Congress chose not to grant a new one. Overall, the bank had done much good in loans to the growing country and its citizens, but it had also served as a haven for speculators. In 1816, the Second Bank gained a twenty-year charter, and it served much like the first, keeping down inflation caused by the War of 1812.

National banks, however, were terribly unpopular with the Democrats and, especially, Andrew Jackson. He and many others held that the bank was built for the rich and offered no real aid to the poor, only taking its money in taxation. While in office, Jackson worked to hobble the bank by giving an executive order not to deposit government funds there. John Tyler, a Whig, agreed with Jackson about banking policies despite the rest of his party being staunch supporters of improving the business environment.

In 1836, the Second Bank's charter expired, and it was not renewed. Despite efforts of Whigs and anti-Jacksonians, they could not override Jackson's veto during his presidency. The Bank became private, surviving only five years. After the Panic of 1837, Henry Clay and his Whig allies attempted a new charter, but it became obvious that Tyler would be against it as he had already vetoed much of the Whigs' agenda.

Swallowing his pride, Clay sat down with the president and the two talked for more than seven hours, finally working out a plan for a new kind of bank. Rather than a single national bank against the many state banks that stood around the country, this bank would serve as a link between the state and federal level, operating to moderate speculation but also supply good loans to growing areas. There was not precedent for it in the Constitution, but it could be enacted as a bill from Congress. At last, Tyler agreed.

The Third Bank of the United States was given a twenty-year charter like the former two and served with success. Scholars noted investment money from the South flow northward and then back again, creating a tie between wealthy Southerners and the growing industrial class in the North. With loans available in the South during bad growing seasons, farmers were able to float their harvests and maintain a booming agricultural environment. As the crisis over slavery loomed, it was decided that the economy was strong enough to put forth an effort to “buy out” the slaves from Southern owners, a bill put forth by Democrat Senator Jefferson Davis of Mississippi and signed by Republican Abraham Lincoln.

With a large available workforce and a system of loans, the South became heavily industrialized through the later half of the nineteenth century. It was estimated that the government made more than its money back through taxation for purchasing freedom for the former slaves. With its titan economy, the United States entered the world scene in the early days of the twentieth century, which it would dominate despite dark days of a southern communist rebellion in the 1930s.

In reality, Tyler vetoed the bill. Henry Clay was not a man to swallow his pride, and he began to make increasing political threats against the president. At the veto, the most violent protest on the grounds of the White House to this day took place as Whigs treated Tyler as a traitor. After a second veto in September, Clay led Whigs in resigning from the cabinet, which would cause Tyler great difficulty in replacing over the rest of his administration. Clay even pushed the Whigs to remove Tyler from their ranks formally. Still, Tyler did not waver.

Abandoned by the Whigs, Tyler turned to the Democrats. The increased party politicking caused regional recognition to take over, making the South more “Democrat” and the North more “Whig.” Over the next two decades, the regional separation would spark the Civil War, costing the lives of some 600,000 Americans.

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