The summer of 1864 saw the Union cause in disarray and the Northern public depressed over the appalling battle deaths and worker strikes. Secretary of the Treasury Salmon Chase was a political opponent of Lincoln and presidential aspirant, and soon replaced by Maine Senator William Pitt Fessenden, a radical antislavery Whig. Lincoln appointed him for his close links to prominent northeastern capitalists, and to “find sufficient funds to pay for a vicious and expensive war that showed no signs of ending.”
Bernhard Thuersam, www.circa1865.org
Cash to Finance the Northern War Machine
“It would be easy to condemn Fessenden for his employment of a private banker [Jay Cooke] sell vast amounts of public securities. The secretary himself was uneasy about the idea. The Union was in a desperate financial condition for most of his term in office. [Former Treasury Secretary Salmon Chase] told Jay Cooke in September 1864 that Fessenden’s reluctance to employ the agency system was probably due to his unwillingness to encounter public criticism. “I hardly blame him,” wrote Chase bitterly. “What did I get – what did anybody get prefer[r]ing country and duty to private interests & compliant favor?”
The secretary’s treatment of financial questions was essentially pragmatic – informed by a characteristically Whiggish view of the economy and society but conditioned primarily by the urgent need for cash to finance the Northern war machine . . .
Beginning in July 1861 Congress passed a series of laws heavily restricting trade with areas outside the loyal States and giving the secretary of the Treasury and his network of agents wide-ranging powers . . . The system proved controversial, particularly in border-State communities traditionally reliant on trade with the South, and fostered widespread corruption centered on the smuggling of cotton from the Confederacy.
Cotton prices were increasing dramatically because of the war and a multiplicity of Treasury employees, military officials, and private citizens were soon caught up in the illicit trade. In the summer of 1864 President Lincoln endorsed the view of a Boston businessman, Edward Atkinson, that the government should procure as much Confederate cotton as possible in order to prevent the South from exploiting sales of its valuable staple.
On July 2, the day before Fessenden entered the cabinet, Congress gave the secretary of the Treasury exclusive power over all trade in the Rebel States, the aim being to establish a government monopoly over the cotton trade and thereby increase the national revenue at the enemy’s expense.
On September 24 Fessenden issued new trade regulations . . . These permitted persons claiming to control cotton beyond Union lines to sell their product to an appointed Treasury agent at three-quarters of the current cotton price in New York. A complementary executive order broadened the possibilities for intersectional trade by allowing cotton sellers to purchase goods up to bone-third of the price received and take them back across the lines.
Fessenden had grave reservations about this morally dubious trade . . . [but] Lincoln signed around forty special orders before December 1 authorizing favored individuals to bring out Southern cotton. Vast fortunes awaited those with sufficient political clout to secure the necessary permits or Treasury appointments.”
(The Grave of All My Comforts, William Pitt Fessenden, Robert Cook, Civil War History, John T. Hubbell, editor, Kent State University Press, September 1995, pp. 216-219)