Circa1865

Famed historian Douglas Southall Freeman edited the Richmond News Leader from 1915 to 1949 and lived by the maxim prominently displayed in his office: “Time alone is irreplaceable. Waste is not.” He lived to regret supporting Woodrow Wilson’s war in 1917, feeling that he had been swept up in the psychosis of war hysteria. In his commentary on the Republican party below, Freeman mentions the notorious GOP method of ballots being “distributed wholesale to rascals who were divided into “blocks of five” and paid to cast them illegally.”

Bernhard Thuersam, www.circa1865.org

Making the South a Political and Social Inferno

“On the political front, Freeman was writing his first partisan editorials on behalf of [Woodrow] Wilson’s reelection. Virginia was reliably Democratic . . . [and] Freeman lashed the Republicans with gusto and turned loose his most vicious attack with a history-laden philippic. “Yes, the country knows” about the Republican party he wrote:

“It knows that during the forty-seven years and more of power of their party since the close of the war between the States the Republicans, in 1876, stole the presidency, and in 1880 bought it with their “blocks of five.” It knows that they forced upon the South the reconstruction additions to the Constitution in violation of that instrument; it knows that they turned loose upon the South an army of alien cormorants to prey upon what little substance was left us after the wreck of the war.

It knows that they made parts of the South political and social infernos, and that in malice and envy they aimed to uproot and destroy the very foundations of Southern civilization. The country also knows that they, the Republicans . . . retarded Southern industrial recuperation and Development . . . bound the nation to a juggernaut of robber protection . . . and perpetuated a banking and currency system that entrenched a currency monopoly.”

Freeman tended to be more restrained in his attacks on the Republican nominee for president, former Supreme Court justice Charles Evans Hughes. “We have had in previous years a high respect for Mr. Hughes,” he wrote, “and we have believed him a man of courage and capacity.” Now that he was the leader of “the party responsible for the most criminal class legislation the United States has ever seen,” Freeman dismissed him as a “camp-following wagon-driver.”

(Douglas Southall Freeman, David E. Johnson, Pelican Publishing, 2002, pp. 120-121)

To quell the fears of Northerners who feared emancipated slaves flooding their way in search of employment and wages, Northern leaders began advancing interesting theories. Giving the freedmen political control of the defeated South would “drain the northern Negroes back to the South” as they fled the race prejudice common in the North. Lincoln and other Republicans advanced ideas of colonization; Grant as president gave serious thought to deporting freedmen to Haiti.

Bernhard Thuersam, www.circa1865.org

Freedmen Fleeing Northern Race Prejudice

“As the war for the union began to take on the character of a war for freedom, northern attitudes toward the Negro paradoxically began to harden rather than soften. This hardening process was especially prominent in the northwestern or middle western States where the old fear of Negro invasion was intensified by apprehensions that once the millions of slaves below the Ohio River were freed they would push northward – this time by the thousands and tens of thousands, perhaps in mass exodus, instead of in driblets of one or two who came furtively as fugitive slaves.

The prospect of Negro immigration, Negro neighbors, and Negro competition filled the whites with alarm, and their spokesmen voiced their fears with great candor. “There is,” [Illinois Senator] Lyman Trumbull told the Senate, in April, 1862, “a very great aversion in the West – I know it to be so in my State – against having free Negroes come among us.”

And about the same time [Senator] John Sherman, who was to give his name to the Radical Reconstruction Act five years later, told Congress that in Ohio “we do not like negroes. We do not disguise our dislike. As my friend from Indiana [Congressman Joseph A. Wright] said yesterday, the whole people of the northwestern States are, for reasons correct or not, opposed to having many Negroes among them and the principle or prejudice has been engrafted in the legislation of nearly all the northwestern States.”

So powerful was this anti-Negro feeling that it almost overwhelmed antislavery feeling and seriously imperiled the passage of various confiscation and emancipation laws designed to free the slave. To combat the opposition Republican leaders such as George W. Julian of Indiana, Albert G. Riddle of Ohio, and Salmon P. Chase advanced the theory that emancipation would actually solve northern race problems.

Instead of starting a mass migration of freedmen northward, they argued, the abolition of slavery would not only put a stop to the entry of fugitive slaves but would drain the northern Negroes back to the South. Once slavery [was] ended, the Negro would flee northern race prejudice and return to his natural environment and the congenial climate of the South.

One tentative answer of the Republican party to the northern fear of Negro invasion, however, was deportation of the freedmen and colonization abroad . . . the powerful backing of President Lincoln and the support of western Republicans, Congress overcame [any] opposition. Lincoln was committed to colonization not only as a solution to the race problem but as a means of allaying northern opposition to emancipation and fears of Negro exodus.

(Seeds of Failure in Radical Race Policy, C. Vann Woodward, New Frontiers of the American Reconstruction, Harold M. Hyman, editor, pp. 126-129)

The freedmen did not receive the franchise because of their political maturity and judgment as the clear intent was to simply keep the Republican party in power. The Republican party’s Union League organization taught the Southern black man to hate his white neighbor, and to vote for Northern men whose own States had initiated Jim Crow laws. An excellent source for Northern antebellum racial views is “North of Slavery: The Negro in the Free States, 1790-1860,” Leon Litwack, Chicago, 1961.

Bernhard Thuersam, www.circa1865.org

Lincoln’s Party of White Supremacy

“The Republican leaders were quite aware in 1865 that the issue of Negro status and rights was closely connected with the two other great issues of Reconstruction – who should reconstruct the South and who should govern the country. They were increasingly conscious that in order to reconstruct the South along the lines they planned they would require the support and the votes of the freedmen.

And it was apparent to some that once the reconstructed States were restored to the Union the Republicans would need the votes of the freedmen to retain control over the national government. While they could agree on this much, they were far from agreeing on the status, the rights, the equality, or the future of the Negro.

The fact was that the constituency on which the Republican congressmen relied in the North lived in a race-conscious, segregated society devoted to the doctrine on white supremacy and Negro inferiority.

“In virtually every phase of existence,” writes Leon Litwack with regard to the North in 1860, “Negroes found themselves systematically separated from whites. They were either excluded from railway cars, omnibuses, stagecoaches, and steamboats and assigned to special “Jim Crow” sections; they sat, when permitted, in secluded and remote corners of theaters and lecture halls; they could not enter most hotels, restaurants and resorts, except as servants; they prayed in “Negro pews” in the white churches . . . Moreover, they were often educated in segregated schools, punished in segregated prisons, nursed in segregated hospitals, and buried in segregated cemeteries.”

Ninety-three per cent of the 225,000 Northern Negroes in 1860 lived in States that denied them the ballot, and 7 per cent lived in the five New England States that permitted them to vote. Ohio and New York had discriminatory qualifications that practically eliminated Negro voting.

Ohio denied them poor relief, and most States of the old Northwest had laws carrying penalties against Negroes settling in those States. Everywhere in the free States the Negro met with barriers to job opportunities, and in most places he encountered severe limitations to the protection of his life, liberty and property.

[Many Republican leaders], like Senator Lyman Trumbull of Illinois, the close friend of Lincoln, found no difficulty in reconciling antislavery with anti-Negro views. “We, the Republican party,” said Senator Trumbull in 1858,” are the white man’s party. We are for free white men, and for making white labor respectable and honorable, which it can never be when negro slave labor is brought into competition with it.” [And] William H. Seward, who in 1860 described the American Negro as “a foreign and feeble element like the Indians, incapable of assimilation”; [and], Senator Henry Wilson of Massachusetts, who firmly disavowed any belief “in the mental or intellectual equality of the African race with this proud and domineering race of ours.”

(Seeds of Failure in Radical Race Policy, C. Vann Woodward, New Frontiers of the American Reconstruction, Harold M. Hyman, editor, pp. 125-12”

Lincoln reportedly gave a great deal of attention to the last half of his “House Divided” speech, a trumpet call to form ranks against a South which he claimed wanted to push slavery into the Northern States, when no such threat existed. With that paragraph, Lincoln “gently cut the [Republican] party loose from its old Whig moorings and warily charted its course to the port of the abolitionists.” This solidified his party of disunion, and forced the South to react.

Bernhard Thuersam, www.circa1865.org

Moribund Republican Party Saved by Lincoln

“Lincoln possessed political sagacity to a high degree and well understood the force of public opinion. When [he] sounded the “eventually all free” note in his campaign against [Stephen] Douglas, he had a very definite political object in view. His immediate purpose was to win enough votes to get elected to the United States Senate.

His ground for asking for the votes of his fellow Illinois citizens was that he would represent those who did not want slavery to spread into any of the national territories. However, at the time he was making this race for the Senate with Douglas, it was becoming increasingly clear that slavery did not have the ghost of a show for establishment in any of the unsettled lands then belonging to the nation because the economic basis for the system was lacking in all of them.

The defeat of the slave-State constitution in Kansas made it certain that none of the land which Douglas had opened to slavery north of 36-30 would become slave. In view of the economic circumstances it was becoming more evident that unless the Republican party acquired new tenets there was no reason for continuing its organization.

The purpose for which it had been organized, i.e., restoring the free status of the land north of 36-30, having been accomplished, it would fall to pieces unless it acquired new reasons to continue its existence.

[William] Seward, one of the leading lights of the party, and [Horace] Greeley, the leading editor of the party, were willing at this time to dissolve the party, but Lincoln was unwilling for the Republicans to disband their distinctive anti-slavery organization and have nobody to follow but Douglas, who did not care whether slavery was “voted up or voted down.”

Accordingly, in his debate with Douglas, he had to supply additional material for the sustenance of the party’s life; for the time was rapidly approaching when it would become obvious to everybody that the extension of slavery into the territories had been checked permanently by prevailing economic conditions.

In order to win victory at the polls in 1858 it would be necessary for a Republican candidate not only to hold persons already enrolled in the moribund political organization, but also gain additional recruits . . . [and] two groups from which new members could be drawn were the bona-fide abolitionists and the Henry Clay “Whigs,” who had hitherto refused to enroll themselves in the sectional political party.

The abolitionists supplied the soul of the anti-slavery movement of the north, but they had in general refused to vote for anybody who compromised on anything less than a declaration in favor of abolition of slavery in the slave States. The Henry Clay Whigs of the North opposed further acquisition of territory which could be devoted to slavery but desired ultimate abolition only under conditions equitable to the South. They had the most kindly feelings toward the Southern whites and like Clay preferred the liberty of their own race to that of any other race, although they were no friends of slavery.

Lincoln so skillfully calculated the wording of his famous House-Divided speech that it won converts to his following from both the above-mentioned groups. It carried water on both shoulders, so to speak, for it was so constructed that it was acceptable to both radicals and moderate conservatives.”

(The Peaceable Americans of 1860-1861, A Study in Public Opinion, Mary Scrugham, Columbia, 1921, pp. 17- 20)

Lincoln’s endless levies for troops and dwindling enlistments forced him to scour Europe for mercenaries, sending agents with cash and promises of government land to attract military age immigrants. The editor of the Ulster Observer cited below pointed out that the Southern army was full of Irishmen and “asked on what principle the Irish people could leave their homeland to steep their hands in the blood of those who were their kith and kin.”

Bernhard Thuersam, www.circa1865.org

European Mercenaries for Lincoln

“[T]here had begun to be opposition to the departure of Irishmen from the country by the thousand, a migration greatly aggravated by the economic distress of the island. As early as January, 1862, the Liverpool Reporter observed that for several months young men loaded with gold watches and large bounties had been leaving Ireland, ostensibly to emigrate to America, but actually to serve in the Federal army, for which they were engaged by Northern agents.

An extract from the Ulster Observer of Belfast is typical of the comments appearing in the opposition press:

“We have more respect for our country and our countrymen than to see them wearing the livery of a foreign state in a cause which involves no principle with which they can be identified . . . [but America] cannot, and should not, expect our countrymen to be her mercenaries in the present fratricidal struggle. Already the battlefields are white with the bones of their brethren.  Thousand of Irishmen have, thanklessly, it would appear, laid down their lives for the North . . . and if President Lincoln still stands in need of human hecatombs, he should look elsewhere than to the decimated home of Ireland for the victims.”

In general, it can be stated that the public journals were loud in denouncing “Federal agents” and clamorous for their prosecution and punishment.

” . . . One might say that [Secretary of State] Seward did everything he could to encourage . . . [foreign enlistments] . . . the Homestead Act of May, 1862, which provided free farms to all aliens who had filed declarations of intention to become citizens of the United States. It further provided that foreign-born residents might become full citizens after one years’ residence on condition of honorable service in the army.

By an act approved July 4^th, 1864, the Office of Commissioner of Immigration was created under the Secretary of State; the duties imposed upon him were to gather information as to soil, climate, minerals, agricultural products, wages, transportation, and employment needs. This information was to be disseminated throughout the countries of Europe.”

(Foreigners in the Union Army and Navy, Ella Lonn, LSU Press, 1951, pp. 412-418)

The use of slaves as substitute soldiers for New England’s white citizens in the Revolution was duplicated during the War Between the States. As Northern governors feared election disaster should a federal draft be imposed, they gathered captured slaves in the South to be enlisted and counted against State troop quotas demanded by Lincoln. Like the Connecticut bill below, the Confederate Congress passed a bill providing for black soldiers in early 1865, but only after the owners themselves emancipated them.

Bernhard Thuersam, www.circa1865.org

Enticing Substitute Soldiers for New England

“The exigencies of war had moved both Connecticut and Rhode Island in the direction of emancipation, and both States considered enlisting slaves in order to relieve wartime troop shortages. In Connecticut, although an actual enlistment bill presented in the spring of 1777 failed to be enacted, the legislature passed a bill that fall allowing slave owners to free healthy slaves and indemnifying from financial responsibility.

Slave owners used the provisions of this bill to entice their slaves to serve as substitutes for them in the Continental Army in exchange for their freedom, and several hundred took advantage of the opportunity. In 1778 Rhode Island actually implemented an enlistment act that offered State-financed compensated emancipation: slaves were offered manumission and soldiers’ benefits in exchange for their enlistment, and slave owners were compensated by the State up to 120 [Pounds] for each enlisted slave.

There was considerable opposition to this law; in fact, with fewer than a hundred slaves actually emancipated under its provisions . . . In 1779 and again in 1780, bills for gradual emancipation failed to pass the Connecticut legislature. In 1779, Rhode Island did ban the sale of Rhode Island slaves out of State, but no further efforts to engage the slavery issue were made during the war.

In 1783 a fresh campaign to end slavery and the slave trade was mounted in Rhode Island by Moses Brown, Quaker convert and exasperated brother of wealthy slave traders Nicholas and John Brown. He produced countless anti-slavery articles and pamphlets . . . But with the American slave trade centered in Rhode Island and slavers forming the nucleus of Newport society, in February 1784 the legislature defeated this abolition bill; it passed another that stood silent on the issue of the slave trade but did provide for gradual emancipation.”

(Disowning Slavery, Gradual Emancipation and Race in New England, 1780-1860, Joanne Pope Melish, Cornell University Press, 1998, pp. 67-68)

The American Revolution can be said to have its origins in New England’s evasion of the Britain’s Navigation Acts which were aimed at controlling the former’s illicit sea commerce. By 1750, Providence, Rhode Island had become the slaving capital of North America, and surpassing Liverpool for this dubious distinction, and New England rum was preferred by African tribes for the purchase of their slaves.

Bernhard Thuersam, www.circa1865.org

British Interference with New England Commerce

“For the West Indies trade alone proved so logical, so sound for the ambitious Yankee traders that in spite of revival of trade with England it ranked in importance with the thriving coastwise and budding transatlantic commerce. Linked inseparably with the venture south to the Indies was [New England’s] brisk trade in rum . . . For the Indies trade was a three-cornered affair hinging on rum, slaves and molasses.

The British decided that one way to increase revenues [to maintain the North American colonies] would be to put a stop to [New England’s] open evasion of the Navigation Acts. It is hardly surprising, then, that among the first real troublemaker of all the British efforts to raise money was a new Molasses Act, for it was molasses brought in from the French West Indies from which New England’s rum was made.

There had been similar acts on the books as long before as 1733, but the duty of sixpence a gallon was such a prohibitive price for the rum distillers to pay that its only practical effect was to create the first of a caste that was to throw a long shadow indeed—the bootlegger.

To the colonists (especially in New England) it must have seemed that there were more acts than ships at this time, and they were in no mood to abide by any of them. American shipbuilding had reached a point where the Massachusetts colony, in a burst of civic pride that would challenge the lustiest chamber of commerce today, laid dubious claim to enough vessels to float every man, woman and child in its domain. It can be said with truth, however, that there were more sailors than farmers in New England.

In years past there had been frequent cases of corrupt officials of the Crown . . . as exemplified by New York’s governor, Lord Bellamont, and his equally-shady successor, Colonel Benjamin Fletcher, who had been in the habit of wining and dining such notorious pirates of their era as Captain Tew.

But Governor Fletcher was admittedly a political pirate in his own right and was ultimately recalled to London to answer graft charges. Now, however, there was a new generation of more upright gentlemen whose profits gained brazenly through bootlegging and illegal activities were overshadowed . . . by their courageous defiance of the ever-increasing strictures on their commerce.

In fact nine-tenths of the colonial  merchants and skippers had become smugglers as the break with England neared. Such men as John Hancock, a prince of contraband traders, on the eve of Paul Revere’s ride had for counsel before the Admiralty Court in Boston none other than John Adams answering for him a half-million dollar suit in penalties as a smuggler.”

(Yankee Ships: An Informal History of the American Merchant Marine, Reese Wolfe, Bobbs-Merrill Company, 1953, pp. 43-50)

Lincoln was not the first to invoke an emancipation of slaves in the South for the purpose of carrying off his enemy’s agricultural labor and inciting a bloody race war – Virginia’s Royal Governor Lord Dunmore did this in 1775 and Rear Admiral Sir Alexander Cochrane the same in 1814. As enlistments for his war machine had virtually ceased after the carnage of 1862, Lincoln saw more blue-clad troops in slaves carried off from their Southern plantation homes.

Bernhard Thuersam, www.circa1865.org

Lincoln’s Instrument of Subjugation

“Lincoln had laid aside his [emancipation] proclamation waiting for a victory. He waited two months, meanwhile giving out public statements based on his previous noncommittal attitude [regarding African slavery]; then on September 22, after Lee’s invasion had been foiled at [Sharpsburg], he issued the preliminary proclamation.

That this proclamation was far from an abolition document is shown by a careful reading of its provisions. The President began by reiterating that the purpose of the war was the restoration of the Union and reaffirming his intention still to labor for compensated emancipation. He then declared that on January 1, 1863, slaves in rebellious States should be “then, thenceforward, and forever free” . . .

The proclamation was not expressive of any general antislavery policy. On January 1, 1863, the definitive proclamation was issued, its chief provision being that in regions then designated as “in rebellion,” (with certain notable exceptions) all slaves were declared free. [But] the stereotyped picture of the emancipator suddenly striking the shackles from millions of slaves by a stroke of the presidential pen is altogether inaccurate.

The whole State of Tennessee was omitted [from the proclamation]; none of the Union slave States was included; and there were important exceptions as to portions of Virginia and Louisiana, those being portions within Union military lines. In fact freedom was decreed only in regions then under Confederate control.

“The President has purposely made the proclamation inoperative [declared the New York World] in all places where we have gained a military footing which makes the slaves accessible. He has proclaimed emancipation only where he has notoriously no power to execute it. The exemption of the accessible parts of Louisiana, Tennessee and Virginia renders the proclamation not merely futile, but ridiculous.

The proclamation is issued as a war measure, as an instrument for the subjugation of the rebels. But that cannot be a means of military success which presupposes this same . . . success as the condition of its own existence . . . A war measure it clearly is not, inasmuch as the previous success of the war is the thing that can give it validity.”

“We show our sympathy with slavery, [Secretary of State William] Seward is reported to have said, “by emancipating slaves where we cannot reach them and holding them in bondage where we can set them free.”

The London Spectator declared (October 11, 1862): “The government liberates the enemy’s slaves as it would the enemy’s cattle, simply to weaken them in the . . . conflict . . . The principle is not that a human being cannot justify owning another, but that he cannot own him unless he is loyal to the United States.”

Earl Russell in England declared: “The Proclamation . . . appears to be of a very strange nature. It professes to emancipate all slaves in places where the United States authorities cannot exercise any jurisdiction . . . but it does not decree emancipation . . . in any States, or parts of States, occupied by federal troops . . . and where, therefore, emancipation . . . might have been carried into effect . . . There seems to be no declaration of a principle adverse to slavery in this proclamation.”

It will be noted that Lincoln justified his act as a measure of war. To uphold his view would be to maintain that the freeing of enemy slaves was a legitimate weapon of war to be wielded by the President . . . [and] in the new attitude toward slavery which the war produced [in the North] it was natural to find considerable support for the view that slavery was a legitimate target o the war power [of the President]; but it is a matter of plain history that prior to the Civil War the United States had emphatically denied the “belligerent right” of emancipation.

Indeed, John Quincy Adams, who has been credited by his grandson [Charles Francis Adams] with having originated the idea of the emancipation proclamation, declared officially while secretary of state in 1820 that “No such right [emancipation of slaves] is acknowledged as a Law of War by writers who admit any limitation.”

To Lincoln’s mind the war emergency justified things normally unconstitutional. “I felt that measures otherwise unconstitutional,” he said, “might become lawful by becoming indispensible to the preservation of the Constitution through the preservation of the nation.”

(The Civil War and Reconstruction, J.G. Randall, D.C. Heath and Company, 1937, pp. 489-493)

Today’s progressive religion of empathy with oppressed peoples worldwide emulates that of the antebellum abolitionist, who expressed deep concern with people he had never met, could not understand, and whose world was alien to him. To salve their own guilt and difficult grasp of reality, the abolitionist fomented a bloody conflict which unleashed forces no one could control, and an oppressive result we live with today.

Bernhard Thuersam, www.circa1865.org

Emancipation Regardless of Consequences

“Most Northerners before the Civil War, and indeed many slaveholders, were “against” slavery.” The abolitionists recognized also that they must continually reinforce their own commitment to their cause. The frequent meetings and intra-group journals of any movement for change serve an indispensable function even when they repeatedly pass the same resolutions and proclaim familiar truths to the already committed.

The twin tasks of refreshing the commitment of abolitionists and of converting outsiders’ passive disapproval of slavery into active opposition differed only in emphasis, especially after the movement had grown from a handful of pioneers into a network of societies with thousands of members.

In propaganda aimed at both groups, the abolitionists relied heavily on the same arguments: among others, that slavery denied the humanity of the Negro and prevented the slave from having normal family relations and religious life, that the North shared the slaveowners’ guilt, that absolute power of one individual over another encourages atrocities, that slavery was responsible for the degraded condition of Northern free Negroes . . . ”

[William Lloyd Garrison] deliberately [pictured] himself in the place of the oppressed. On the first anniversary of his marriage, he wrote to his brother-in-law describing his happiness and extolling the institution of marriage; and he added, how horrible it would be if he and Helen were slaves and were separated by sale. All the more reason, then, to rededicate his life to the abolition of slavery.

This theme, which for convenience will be referred to as “empathy,” appears repeatedly in abolitionists’ private discourse and public propaganda, in exhortations among themselves to increase their zeal and in efforts to induce complacent whites to imagine themselves in the place of the slaves.

But the abolitionist movement comprised mainly white men and women, most of whom had never been in the South. The empathy theme can thus be seen, perhaps, as a substitute for direct involvement in the suffering that movement was dedicated to end. It appeared in other forms as well. When Abby Kelley Foster was asked how she could leave her baby with others, to travel the abolitionist lecture circuit, she replied, “For the sake of the mothers who are robbed of all their children.” Beriah Green . . . [said]: You can act as if you felt that you were bound with those who are in bonds, as if their cause was all your own . . .”

Abolitionist propaganda reiterated that Northern whites were in fact indirectly “bound with” the slaves. Paradoxically, the North was not only an accessory to the enslavement of the Negroes; it was at the same time a secondary victim of the slaveowners. With their strong religious motive for proclaiming the duty of emancipation regardless of the consequences, the abolitionists could not in good conscious appeal to the North solely or chiefly on the basis of interest.

The empathy theme enabled them in a remarkable way to combine interest with principle, for if a Northern white could be made to feel bound with the slave he would fight the slave power to defend himself, as Beriah Green suggested, as well as to exculpate himself. To free the slave would be to free himself of both guilt and bondage; the two motives would become one.”

(Means and Ends in American Abolitionism, Aileen S. Kraditor, Pantheon Books, 1967, pp. 235-238)

With his war bankrupting the national treasury and consuming available gold reserves, Lincoln’s solution was to create a national banking system controlled from Washington, claiming military necessity as the reason for printing paper currency of questionable value and legality. Radical Ohio Senator John Sherman knew national banking “would centralize power in Washington” and he urged congressional colleagues to “nationalize as much as possible,” even the currency, so as to “make men love their country before their States.” All private interests, all local interests, all banking interests, the interests of individuals, everything, should be subordinate now to the interest of the Government.”

Bernhard Thuersam, www.circa1865.org

Revolutionary War Financing Precedes the Federal Reserve

“At the time of the Civil War the [United States did not have a nationalized] system of banking and banknote currency, and one of the important matters of [Northern] war finance was the creation of such a system.

“[Treasury Secretary Salmon P. Chase] . . . in his report of December, 1862 . . . outlined his plan for national banks and national bank currency. What Chase proposed was a system of national banking associations under Federal supervision, which would issue bank notes based upon United States bonds and guaranteed by the Federal government.

It became law on February 25, 1863; but this law had certain defects, so that Congress faced the whole problem afresh and reframed the statute. It is therefore to the law of June 3, 1864, that one must turn for the legislative basis of the national banking system as it emerged from the Civil War. Other provisions of the act were concerned with the maintenance of a required reserve against both banknotes and deposits; the depositing of such reserve in “reserve cities” (which permitted the concentration of bankers’ funds in New York City); . . . and the use of banks as depositaries and financial agents for the government.

As a method of stimulating, or rather forcing, the sale of United States bonds, the national bank act became an essential feature of Civil War finance. After the war (1866) a tax was placed on State banknotes in order to tax them out of existence, so that national banks possessed a monopoly of banknote currency.

To think of the national banking system as a purely fiscal measure innocent of politics and free from exploitation would indeed be a naïve assumption. Investigation shows that it soon “developed into something that was neither national nor a banking system.

Instead it was a loose organization of currency factories designed to . . . [serve] commercial communities and confined…almost entirely to the New England and Middle Atlantic States.” One of the chief injustices of the system as actually administered was the favoritism shown after the war to the eastern States which received the lion’s share of the $300,000,000 of banknote circulation assigned by law as the maximum for the whole country.

As explained by George LaVerne Anderson, each State in the New England and Middle Atlantic regions obtained an amount of banknotes in excess of its quota, while not a State in the South received an amount equal to its quota.

“Massachusetts (writes Anderson) received the circulation which would have been necessary to raise Virginia, West Virginia, North and South Carolina, Louisiana, Florida and Arkansas to their legal quotas . . . The little State of Connecticut had more national bank circulation than Michigan, Wisconsin, Iowa, Minnesota, Kansas, Missouri, Kentucky and Tennessee . . . Massachusetts had more than the rest of the Union exclusive of New England and Middle Atlantic States.

[An] interesting comparison [he continues] can be made between comparatively small New England towns and the Southern States. Thus Woonsocket, Rhode Island, had more national bank circulation than North and South Carolina, Mississippi and Arkansas; Waterville, Maine, had nearly as much as Alabama; New Haven, Connecticut, had more than any single Southern State.

If it be said in answer to these facts that distributing according to population is absurd . . . it should be kept in mind that not a single Southern State had obtained, by October 1869, its legal share of the $150,000,000 which was to have been apportioned according to existing banking capital, wealth and resources.”

With some modification [this] national banking system continued for half a century. Though it had some merit, it created an inelastic currency, tended toward the concentration of bank resources in New York, opened the way for serious abuse in the speculative exploitation of bank funds, and contributed to the sharp financial flurry of 1907. Proving inadequate as a nationwide control of currency and banking, it was tardily superseded by an improved plan in the federal reserve act of 1913.”

The Civil War and Reconstruction, J.G. Randall, D.C. Heath and Company, 1937, pp. 455-458)