Fateful Lightning: A New History of the Civil War & Reconstruction Allen Guelzo (novels to read .txt) 📖

38th Congress (elected in 1862). As it was, Republicans on Capitol Hill turned the Civil War Congresses into an engine of legislative activity: House resolutions and congressional joint resolutions alone more than doubled during the war. Most of them emerged from a plethora of new House and Senate committees organized by the Republicans in 1861 to investigate disloyalty, war contracts, the New York City Customs House, and so on; still more were produced by the powerful Republican Party caucus, where the most radical measures on emancipation, confiscation of Southern property, and postwar reconstruction were hatched.55

Lincoln would need those majorities particularly for handling the needs of war finance and the impact the war would have on the Northern economy. From the first call for volunteers, it was clear that some way had to be found to harness the North’s unquestioned industrial and financial superiority to the task of winning the war. Lincoln professed to have no expertise in finance. “Money,” remarked Lincoln, when Treasury Secretary Chase brought a group of New York bankers to the White House to discuss war finance, “I don’t know anything about ‘money.’ I never had enough of my own to fret me, and I have no opinion about it any way.” In truth, Lincoln had been interested in fiscal issues as far back as his days in the Illinois legislature, when he had been the point man for the Illinois state bank, and he had been bitterly critical of the Democrats’ national financial policies all through the 1840s. “Finance will rule the country for the next fifty years,” Lincoln predicted to William Pitt Kellogg, and with that in mind, he wanted “the Capital of the country to become interested in the sustaining of the national credit.” He “had taken an especial interest” in Chase’s financial strategy, and “Mr. C. had frequently consulted him in regard to it.”56

It was actually not Lincoln but Chase who lacked experience in “money.” Chase was a onetime Democrat who had thrown his allegiance to the Republicans over slavery and Kansas-Nebraska, and he had never fit comfortably with the Whigs or the Whiggish economic views that abounded in the new party. Chase was skeptical on tariffs, hesitant about the virtues of federally financed “internal improvements,” and so resolutely set against banks that in 1853 he had supported a restructuring of the Treasury to prevent the Treasury from borrowing money (Congress should exercise the sole right to authorize borrowing), setting interest rates on Treasury securities, or using commercial bank accounts for government payables or receivables. He opposed “a mere paper money system of currency,” had railed “against the frauds and undue expansions of banks and their suspensions of payment on their issues and deposits,” and had criticized tariffs “in favor of free trade.”57 Now he was in charge of them all.

Of course, part of the rationale for appointing Chase as secretary of the Treasury was precisely that he was a former Democrat and so could assuage the fears of other Democrats for the nation’s fiscal policy. Still, that did nothing to ease the pains of Chase’s distaste for such responsibilities, or the flimsy structures of government finance that he inherited from his erstwhile Democratic friends. The nation’s financial and banking system was in 1861 still very largely what Andrew Jackson and the Democrats had made it in the 1830s. Suspicious of the market revolution and of finance capitalism, Jackson demolished the federally sponsored Bank of the United States, and the Treasury became little more than a warehouse for government cash and customs receipts. This meant that banking became a matter for individual state governments to charter, which each state did mostly by its own lights. Jackson also took the added precaution of restricting all federal government monetary transactions to specie (which the Democrats regarded as the only real money), so the Treasury would neither accept paper money for itself nor print its own. No such restriction applied to the state-chartered banks, and so by 1861 the American economy was riding on a crazy quilt of banknotes and bonds issued by more than 5,000 state-chartered institutions (including canal companies). No merchant could do business without publications like Day’s New-York Bank Note List, Counterfeit Detector and Price Current, Bicknell’s Reporter, Counterfeit Detector, and Philadelphia Prices Current, or the Cincinnati Price Current to learn which banknotes were worth the value printed on their faces, which had to be discounted, and which were no longer anything more than paper.58

The great virtue of this system in Democratic eyes was that it kept economic power dispersed and ensured that the national government would remain small and fiscally weak. However, whatever that might have meant as an asset in peacetime politics, it became another matter entirely in war. Northern banks that had acted as the South’s financial brokers for decades often had nothing more than Southern banknotes and bonds in their vaults as backing for their own accounts and banknotes, and with the secession of the Southern states, Northern bankers suddenly found that they no longer had any guarantee that Southerners would stand by those notes and bonds, or redeem them for specie. Southern bond prices in New York City plummeted like dead pigeons; of the 913 mercantile and banking firms in New York at the beginning of 1861, only 16 were still in business by year’s end. At the same time, as secession loomed larger and larger on the horizon, confidence in U.S. bonds and notes spiraled downward; by December 1860 the Treasury had to offer interest rates as high as 12 percent to sell its notes, and U.S. 6 percent bonds could only be sold at a steep 11 percent discount.

The unlooked-for blessing in this disaster was that the collapse of Southern bonds and notes wiped out any fiscal leverage the Confederates might have had on the Northern financial markets in 1861, something that was made worse by the Confederate decision to sequester loans owed by Southerners to Northern finance for the duration of the war. Northern businessmen