Title: Financing the Civil War - Essential Civil War Curriculum
Headings: Financing the Civil War
Financing the Civil War
by Michael A. Martorelli

Content: By the end of the Civil War, the USA had financed about two-thirds of its $3.4 billion in direct costs by selling bonds. Printing Money
On the eve of the Civil War, the USA’s circulating currency consisted largely of $200 million worth of bank notes issued by more than 1,500 state banks. This system of independent issuers of money had its flaws, but it had been capable of handling the country’s financial needs. By the end of 1861, however, Treasury Secretary Chase was coming to view the existence of so many notes issued by state-chartered banks, and with varying denominations and degrees of security, as being detrimental to his attempts to finance the war. [ 5] Even while supervising the issuance of the bonds noted above, he suggested that the federal government issue $150 million worth of a new paper currency not backed by gold, but still considered an obligation of the USA. Printed on green paper, those “greenbacks” would be convertible into an equal amount of government bonds and considered legal tender for all public and private debts. [ 6] After two months of heated deliberation, Congress approved his plan. The new currency became quite acceptable as fiat money by merchants and consumers alike. Indeed, in July 1862, Congress authorized another $150 million greenback issue, and urged that about 25% of the notes be issued in denominations of one to five dollars. With the war’s costs steadily mounting, and the government’s ability to sell bonds still somewhat constrained, Congress approved the sale of an additional $150 million worth of greenbacks in early 1863.