In 1832, over a dispute arising from the tariff laws of the United States, South Carolina threatened to secede from the Union if its demands for reduced import duties were not met. President Andrew Jackson responded by proclaiming that, if necessary, he would invade South Carolina with Federal troops. The State backed down and Jackson had made his point: any attempt at secession would be met with armed force.
By the late 1850s Southern demands in several spheres, including both economic and the question of slavery, had again reached the crisis stage and many political leaders began to believe that secession was inevitable. The last year of peace, 1860, was marked by a presidential election that showed a nation divided along geographical and ideological lines. Abraham Lincoln won the election because his three main opponents – John Breckenridge, Stephen Douglas, and John Bell – had split the electorate.
The new chief executive would not be inaugurated until March 4, 1861, but in the meantime the Southern advocates of independence began to gather strength. The outgoing administration of President James Buchanan seemed powerless to halt the slide toward the breakup of the Union because many of the key officials were Southern, including in particular Secretary of War John B. Floyd, who transferred materiels of war to Southern locations, where they would be promptly seized in the event of armed conflict.
On Dec. 20, 1860, South Carolina struck the opening blow by voting for the dissolution of its bond with the Union and the independence of the State. Over the next several weeks other Southern states joined South Carolina and it was not long before a convention met at Montgomery, Alabama, to decide on a permanent national government. The Confederate States of America was soon a reality, President Jefferson Davis being inaugurated at Montgomery in mid-February 1861.
In the meantime Federal installations in the South fell like dominoes to the new powers. The three Southern mints – at New Orleans, Dahlonega, and Charlotte – were at first under the control of the individual states but it was only a relatively short time until Confederate authorities took over.
There was coinage executed with U.S. dies at these three mints after the United States lost control, but the modern belief that the Confederacy confiscated the gold and silver on hand is not quite correct. It did seize the silver, both coined and uncoined, but most of the gold belonged to private depositors and this was scrupulously returned as coins or ingots, unless of course the depositor did not live in the Confederacy.
The first Southern mint to be affected was that at New Orleans. In late December 1860, before the formal decision to secede from the Union was taken, Louisiana officials visited the Mint and informed the officers that they were to consider themselves unofficially under the State and not the Federal government. Until Jan. 26 the polite fiction was maintained that the New Orleans Mint was under Union control but on that day the State formally seized the Mint and its contents.
The actual seizure seems to have been precipitated by a request from Treasury Secretary John A. Dix that $350,000 belonging to the United States be transferred to Washington. (New Orleans Mint Treasurer A.J. Guirot also served as an Assistant Treasurer of the United States and had considerable money on hand for that purpose in addition to the Mint funds.) At first the Louisiana authorities stalled but in due course simply refused to hand over anything. Washington had now lost control of the Mint.
There has been considerable numismatic ink spilled in determining just which of the double eagles and half dollars, the only coins struck for circulation at New Orleans in 1861, were coined under the State of Louisiana and which were struck under the Confederate government. The latter had taken possession of the Mint at the beginning of April 1861.
The determination of which coins were prepared under which government is relatively futile as in real terms most, if not all, of the 1861 coinage was directly or indirectly controlled by the Southern authorities. That struck prior to Jan. 26 was officially under Federal rule, but reality was perhaps otherwise.
Because many in the South thought that secession would be peaceful, the idea arose at New Orleans to create a Confederate half dollar coinage. Designs were prepared and submitted to Confederate Treasury Secretary Christopher Memminger at the then Southern capital of Montgomery, Ala. The secretary approved pattern pieces being made and this was soon done, using a regular U.S. obverse and a special Confederate reverse die, prepared by a New Orleans engraver.
The local engraver, however, knew little about coinage dies and made the relief much too high. Mint officials then struck four half dollars on a screw press. One was kept by the coiner, two went to local dignitaries, while the fourth was sent to Confederate President Jefferson Davis. This last-named piece later found its way to the John Ford collection and in November 2003 was sold in a Stack’s auction for $632,500. Not long afterwards the Mint was shut down and the remaining monies sent to Richmond, by now the capital of the Confederacy.
The situation for the Dahlonega Mint, in northeastern Georgia, played out more slowly than at New Orleans. Georgia had seceded on Jan. 19, 1861, but the status of the Mint was left up in the air. Over the next several weeks control gradually shifted to the Confederacy. The last report of coinage (covering February) was sent to Philadelphia in early March 1861 and after that the quantity of coinage is unknown.
Two kinds of gold coins were struck at Dahlonega in 1861, half eagles and gold dollars. Some 1,597 half eagles were coined in February, as well as an unknown number over the next few weeks. In addition there was a small coinage of gold dollars, probably in March or April.
The Dahlonega half eagles of 1861 were tolerably well made but the dollars were not. They were struck from poorly prepared planchets and the press was not set properly. Most of the survivors from the tiny coinage of dollars do not look even close in quality to the Philadelphia specimens of this era.
The 1861 Dahlonega coinage has long interested numismatists. In particular the gold dollar is famous as a very rare coin. That the mintage is unknown, having all been struck under Southern authority, has added to its luster and at present the book value of an XF–40 specimen, according to the price guide appearing in Numismatic News, is a strong $9,000. It is worth noting that some numismatists consider all of the 1861 Dahlonega coinage as Confederate even though a formal report of the February coinage was sent to Philadelphia in early March.
Parts of the Dahlonega story are not known because the archives of that Mint were lost – apparently in the 19th century, but we are on better grounds with the Charlotte Mint in North Carolina. North Carolina was hesitant about seceding and becoming part of the Confederacy, but on April 20 Governor J.W. Ellis seized the Mint without legal justification; at the same time he ordered the militia to occupy other Federal property.
Ellis did not have public support for these moves and it was not until May 20 that the State seceded. Had there been an open vote on the subject the secessionists would likely have lost but pressure from South Carolina and Virginia proved too great for the politicians.
The 5,992 half eagles struck at Charlotte through the end of April have all been assigned to Federal control. The final 887 pieces were minted under the Confederacy in late May 1861 but survivors from the May coinage cannot be distinguished from the earlier strikes; shortly thereafter the Mint was closed to coinage.
At San Francisco the year 1861 opened with the famous Paquet double eagle. In the fall of 1860 Assistant Engraver Anthony C. Paquet had executed a new reverse hub for the $20 gold piece and dies had been prepared for the mints at New Orleans, San Francisco, and Philadelphia. At Philadelphia it was quickly discovered that the new reverse dies did not quite match up in size with the obverses; Mint Director James Ross Snowden ordered that the revised reverse be scrapped in favor of the old hub. The director also notified New Orleans before that mint was able to begin double eagle coinage in 1861.
Snowden wrote the San Francisco superintendent immediately, notifying him of the difficulty and ordering that the new dies not be used. In those days, however, the telegraph line had not been completed beyond Kansas City and the message had to travel by Pony Express to the West Coast. It arrived after some 19,250 pieces had been struck, the San Francisco superintendent reporting that coinage had not been a problem after minor modifications had been made to the dies.
Coinage proceeded under normal conditions at the remaining mints of Philadelphia and San Francisco. Due to the gathering storm clouds in the weeks prior to Lincoln’s inauguration on March 4, the Treasury ordered increased coinage of the minor silver, the half dime through half dollar. The 3-cent silver (trime), which was the smallest silver coin, showed heavier coinage in 1861 but it was considered by that time to be a marginal coin in commercial affairs.
The Philadelphia quarter dollar of 1861 serves to illustrate the increased coinage. The total number struck in 1859 and 1860 had been about 2.1 million pieces but in 1861 this showed an increase to nearly 4.9 million. The other denominations, the half dime in particular, showed equal strength.
Coinage of silver dollars at Philadelphia in 1861 was relatively strong, at nearly 80,000 pieces, but these were struck on private account, depositors having the right to bring silver to the mints for this denomination. There has been speculation that such coins were meant for export but there is no clear evidence of this.
Gold coinage was also much heavier in 1861 than 1860 but here there are differences. The minor silver was struck only on government account but private depositors had the right to bring in gold bullion and receive coin in exchange. However, the much heavier mintage, especially for the half eagle and double eagle, appears to mean that a considerable amount of gold coinage was for the Treasury. (Throughout 1861 both the military and civil branches of the Federal government used gold when necessary, especially during the early months of the Civil War.)
Oddly enough, the coinage of copper-nickel cents in 1861 was only 10.1 million pieces, well off the pace of 1860 with 20.6 million and 1859 with 36.4 million. However, the very heavy coinages of 1857 through 1860 did mean that there was an ample supply of cent pieces for public use.
Despite the ongoing political problems there was an active collector market in the North. The Philadelphia Mint continued to strike proof coins for numismatists and it was even permitted to purchase individual coins. It was also possible to obtain an entire set of gold or silver proof coins. The latter set always contained the copper-nickel Indian Head cent, the only base coin being struck in 1861. The silver set cost $3 while the gold came in at a stronger $43.
The year 1861 proved to be a watershed of sorts in the proof coinage. At the beginning of 1862, Mint Director James Pollock changed the rules by requiring that full sets of coins be purchased; those specializing in proof quarter eagles, for example, now had to purchase the full gold proof set. Cent pieces could not be obtained separately, being included in the “silver” proof set.
In November 1861 a Pennsylvania minister, M.R. Watkinson, wrote a letter to Secretary Chase suggesting that an appropriate motto be added to the coinage in recognition of the importance of God. Chase liked the idea and instructed Mint Director James Pollock to have patterns executed with all due speed.
The motto GOD OUR TRUST was placed above the reverse eagle on two coins dated 1861, the gold eagle and the silver half dollar. Each reverse came in two varieties, with and without a scroll. The idea was pursued in succeeding years, with additional patterns being struck until a definite wording (IN GOD WE TRUST) was adopted in 1864.
While coinage went its appointed way, the Treasury was considering the role that paper money would have to play during 1861. In December 1860 Congress had authorized an emergency issue of paper money but by late February 1861 it was realized that the conditions stipulated in that law were no longer applicable to the current situation, which was looking worse by the day as the Confederate government became increasingly stronger and better organized.
There is a popular belief, among many collectors and historians, that the United States did not issue paper money for public use until the Civil War began in April 1861. This same view ascribes the reluctance to issue paper to a public memory of the disastrous Continental currency printed and issued in large quantities during the Revolutionary War.
Actually, paper money had been issued not long after the new Federal government began operations in the spring of 1789. Treasury Secretary Alexander Hamilton persuaded Congress to charter the Bank of the United States, which in practice was to become a semi-official central bank. This bank issued various denominations of paper currency, which were notes of the United States government in all but name.
The charter of this first Bank of the United States expired in 1811 and Congress refused to renew it, one of the greater mistakes of this era. War with England erupted in June 1812 and there was no unified banking system to coordinate the expenses entailed by the war.
A short time after the war began Congress realized the magnitude of the 1811 blunder and authorized the use of Treasury Notes. Technically these were small loans to the government as each note bore interest and the interest would be paid upon the redemption of the currency at some later fixed date. There were other paper money issues during the war as well as occasional emissions under exceptional circumstances, such as during the Mexican War of 1846–1848. The polite fiction was always maintained that these notes did not circulate as currency but in fact they did just that, although not in a broad sense as the issues were not all that extensive.
The modern history of U.S. paper money should perhaps be considered to have begun in the late 1850s. The September 1857 sinking of the S.S. Central America, which carried a large quantity of gold, was one of the factors that precipitated a financial panic the following month. Banks suspended specie payments on their bank notes and the Federal government found itself nearly bankrupt due to unwise spending on the part of Congress.
On Dec. 23, 1857, President James Buchanan signed a bill authorizing an issue of paper currency. These Treasury Notes, in denominations of $50 or higher, earned interest in varying degrees, but usually about 6 percent, payable one year after the note was issued. Each of the bills carried a dual date, that of the authorizing act of December 1857, as well as the exact day on which the note was actually issued.
The law specified a terminal date for the legislation of Jan. 1, 1859, and there was a limit of $20 million to be in the hands of the public at any given time. Although in a legal sense the Treasury Notes were receipts for small loans, they still circulated to a limited extent as currency.
Due to the increasing rhetoric between North and South in the late 1850s, the government was unable to get its financial house in order. In particular Southern senators and congressmen wanted the import duties dropped on many of the items considered important to that part of the country but, as the Federal government essentially operated on receipts from the customs, their demands were unlikely to be met.
In June 1858 Congress passed a law authorizing a loan of $20 million, which was fully subscribed for the 15-year 5 percent bonds, but this did not solve the chronic deficit. It appears that a portion of the bonds was sold in the South or those areas subject to heavy fighting during the Civil War, because in July 1876 more than a quarter million dollars of this loan was still outstanding.
The urgent need for ready money was addressed again in March 1859 when the December 1857 law was resurrected and authority given to the President to issue these interest-bearing Treasury Notes until July 1, 1860. The total outstanding issue remained capped at $20 million, however, and they were still one-year notes.
So far as is known, the 1859 legislation did not result in new paper currency but rather the old plates from 1857 continued to be used. The hand-written dates now commenced with March 1859 and continued well into June 1860, when the law was again renewed, this time for a period of one year. (The 1860 law also authorized another loan, this time for $21 million, partly meant to pay off the Treasury Notes then falling due from the 1859 legislation.)
The 1860 loan, however, due to the political problems becoming worse as the administration of President James Buchanan lost control of the situation, was subscribed for just $10 million. Even that sum, however, proved elusive, and only a little over $7 million was actually received in the fall of 1860, pledges for $3 million never being paid.
In early December 1860 Treasury Secretary Howell Cobb, shortly before his resignation, notified Congress of the worsening situation. As a result, the solons worked with the new secretary, Philip Thomas, in the creation on Dec. 17 of yet another bank note law, the idea of a loan being discarded due to the June fiasco. Up to $10 million in Treasury Notes could be in the marketplace, with denominations of no less than $50. As with the notes under the December 1857 act, each one-year bill was to bear interest but in this case the Treasury Notes would be advertised in the form of a mass loan. This act had a termination date of Jan. 1, 1863.
Treasury Secretary Thomas promptly offered the notes to the public but only $5 million was issued in that month, all at 12 percent. The remaining $5 million in notes was mostly sold under a new secretary, John Dix, in mid-January 1861 but a limited portion appears to have been sold as late as mid-February, again at a high rate of interest.
Notes of the December 1860 issue were printed and distributed in short order, perhaps as early as the middle of January 1861; the buyers in December probably did not get their physical property until some weeks after their successful bids. From a financial viewpoint, the interest rates were exorbitant, ensuring that very few of these bills were used in commerce. Those dated December 1857 had been found in the marketplace on occasion, the buyer and seller agreeing to the current worth including interest, but the high rates of December 1860 meant otherwise.
In 1876 the Treasury stated that all of the December 1860 Treasury Notes had been redeemed, accounting for the lack of such bills in collections today. Proof or essay notes may exist of the 1860 issue but none has been seen by the writer.
Although the December 1860 law did raise $10 million via the issuance of Treasury Notes, this was little more than another stopgap measure in dealing with the ever-worsening financial situation. In late February, Treasury Secretary Dix, an energetic and capable Cabinet officer, suggested to Congress that fresh legislation was necessary. There was virtually no debate in Congress about this new act, which also dealt with loans to the government; in some ways the bank note legislation was similar to the preceding December in that $10 million was to be issued. Instead of one year, however, the notes would be for two years. The bill was signed into law by President Buchanan on March 2, 1861.
With the March 2 law, the complicated currency situation became even more so. According to John J. Knox, in his 1884 book on U.S. paper currency, new plates for the 1857 issue were made in March 1861 but also new plates for an issue originally authorized in January 1847. It is not clear if notes dated 1847 were actually issued in the spring of 1861 but this may have happened. (Knox was a high Treasury official, in various posts, from the 1860s onward and was in a position to know details of the various paper money issues.)
It is probable that the notes dated 1857 – but carrying later handwritten dates – were issued for several weeks into the new Lincoln Administration as a temporary measure, until the March 2 Treasury Notes were printed. It is known that $52.8 million was issued from 1857 through 1861, in denominations ranging from $50 to $1000, but less than $2,000 was outstanding in 1876.
End of Part I of two parts.