Financing the War 

How did the United States pay for the Civil War? According to Prof. Thomson (Sacred Heart University), financier Jay Cooke was the critical actor in helping save the Union by inspiring confidence in Union and its cause by businesses and citizens, rich and poor, as well as by foreign actors, especially in Europe, largely through the medium of a great number of international bond sales.

Sovereign debt, an interest bearing financial tool, served as an I.O.U. for the U.S. government to pay soldiers and contractors during the conflict. Thomson argues that Cooke, who worked closely with Secretary of the Treasury Salmon Chase and others government officials, was able to raise over one billion dollars by selling government backed bonds. This, helped the Union to win the war and afterwards become an economic and military giant. By 1865 Cooke had become known popularly as “the Napoleon of Finance”. His influence continued into the twentieth Century, as the Federal government used similar type bonds to fight two world wars.

Thomson demonstrates that during the war and since, historians and other scholars have neither researched nor written very much about how the Civil War was financed. He concludes that various types of war bonds and treasury notes issued by the government provided two thirds of the $3.2 billion needed to fight the Confederates and keep the North afloat financially, which contributed to the long term development of America’s capital markets.

Thomson shows us that investors were found beyond the financial elites, who were primarily in the Northeast. These bonds were sold through newspapers, word of mouth, in speeches, public, events and places of worship, emboldening the masses – women, African Americans, the middle classes, even the poor – in all parts of the country, even in the soi disant Confederacy!, to invest in the future of the United States, not only as a means of making money through the interest, but also as a patriotic gesture, contributing to the war effort. Their investment helped sustain the economic stability of the Union during the war, and spurred the development of modern American finance. Thomson adds the Republicans were big political winners as a result of the success of the Union’s bond issues, which gained the party favor at the polls.

Thomson concludes that while European nations remained neutral, with both the Union and Confederacy finding it difficult to secure direct loans abroad, historians have missed the fact that foreign investment in Union bond issues flourished. Financiers in such cities such as Frankfurt, Amsterdam, London, and Paris, traded a great deal of American bonds and made a great deal of money. Their success demonstrated great confidence in American bonds and in the nation's economy to grow and succeed during and following the war.

Bonds of War examines how the bonds were marketed, how their importance grew in the U.S., and overseas, and the long term consequences of the bonds for the American and world economies. Thomson makes a valuable point in noting that the financial stability brought about by the success of the bond issues became a domestic commodity, contributing to the strength and durability of the economy during the war, in contrast to the emphasis on cotton and slavery in the ante bellum period.

Bonds of War, a volume in the UNC "Civil War America" series, is an important read for scholars and students interested in the war, helping to explain how it was financed, and how the domestic and international financial markets developed significantly because of men like Jay Cooke.

Note: Bonds of War is also available in hard cover and e-editions.

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