Tightening the Grip: The Problem of the Gold Room in the Civil War North

Michael T. Caires

This paper considers the history of the New York City Gold Room and its relationship with the federal government during the American Civil War. After the passage of the Legal Tender Act of 1862, a thriving trade in gold emerged in New York City, as Americans looked to speculation in gold prices as a means to deal with the uncertainty created by the war. Among several markets that dealt in gold, the city’s “Gold Room” stood out as the preeminent market in the country. In short course, the value of gold over greenbacks quoted in the Gold Room, also know as the “premium,” became a prime financial indicator of the strength of the Union cause. Convinced that premium was causing financial chaos in the Union, federal officials struggled to find a way to regulate this new trade created by the Legal Tender Act. In the end, Congress attempted a short-lived ban on futures contracts in gold. This experiment in financial regulation backfired and was quickly repealed. This paper argues that the history of the Gold Room highlights the ways that habits and institutions of nineteenth-century American capitalism created novel problems for the government during the war. Moreover, it suggests that conflict between federal regulators and Wall Street was an origin point for a new relationship between federal power and the country’s financial markets in the century to come.