Title: Tax History Project -- The Civil War
Headings: The Civil War
Tax History Museum: 1861-1865
The Civil War
Confederate War Financing
Union War Financing

Content: Patriotic newspaper advertisements and an army of 2,500 agents persuaded almost one million northerners (about 25 percent of ordinary families) to invest in the war effort; bond sales topped $3 billion. In this way, Cooke previewed the techniques with which governments in the 20thcentury would fund modern wars. In order for the bond program to be successful, the North needed an unrestricted currency supply for citizens to pay for them and a source of income to guarantee the interest. The Legal Tender Act filled the first requirement. Passed in February 1862, the act authorized the issue of $150 million in Treasury notes, known as Greenbacks. In contrast to Confederate paper, however, Congress required citizens, banks, and governments to accept Greenbacks as legal tender for public and private debts, except for interest on federal bonds and customs duties. This policy allowed buyers to purchase bonds with greenbacks while the interest accrued to them was paid in gold (funded, in part, by specie payments of customs duties). Investors enjoyed a bountiful windfall, since government securities purchased with depreciated currency were redeemed with gold valued at the prewar level. Taxpayers essentially made up the difference.