‘He [Chase] thinks there is a fourth person in the Trinity’: Salmon Chase and the Civil War Treasury

As the guns of the Civil War fell silent across a scarred American landscape, one Confederate leader supposedly quipped, “The Yankees did not whip us on the field. We were whipped in the Treasury Department.” He was partly right. The American Civil War cost the federal government $3.2 billion and for the Confederacy, some $2 billion. The North raised nearly two thirds of the requisite funds from the sale of Union bonds, while the Confederacy relied more on churning out Confederate currency (to the tune of $1.5 billion, to say nothing of state currency issues) to cover expenses. The war itself however represented a new chapter in American finance and financial institutions. Financing the war required a degree of state-led financial innovation utterly at odds with American antebellum financial culture. The moral hazards of the anonymous marketplace from the antebellum era quickly became replaced by a statist response that called on all of the citizenry (North and South) to embrace an evolving financial world punctuated by wartime exigencies. But this only tells part of the story for successful execution of the financial war. The cause of Union and emancipation relied upon a triumvirate of financial instruments. Bond issues (more than $2 billion worth), the issuance of a new currency backed by the United States government referred to as greenbacks, and radical new taxation policy centered around the first income tax paved the way for Union success. And at the center of this all was Secretary of the Treasury Salmon Chase. Inexperienced in finance and monetary policy, Chase used his bravado to coordinate efforts between the government and Wall Street and between the executive and legislative branches in order to fiscally survive the Civil War. This paper explores Chase’s role in the conflict and the growing pains posed by wartime exigencies that the Treasury nevertheless overcome to facilitate northern financial success.