Sovereignty and an Empty Purse: Banks and Politics in the Civil War

Sovereignty and an Empty Purse: Banks and Politics in the Civil War

by Bray Hammond


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Sovereignty and an Empty Purse: Banks and Politics in the Civil War by Bray Hammond

A sequel to his Pulitzer Prize-winning Banks and Politics in America from the Revolution to the Civil War, this book by Bray Hammond focuses on how Washington struggled financially to settle the Civil War and how its measures spurred the growth of federal government.

Originally published in 1970.

The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Product Details

ISBN-13: 9780691604688
Publisher: Princeton University Press
Publication date: 07/14/2014
Series: Princeton Legacy Library Series
Pages: 410
Product dimensions: 9.10(w) x 6.10(h) x 0.90(d)

About the Author

Bray Hammond (1886-1968) was Assistant Secretary of the Board of Governors of the Federal Reserve System from 1944 to 1950.

Read an Excerpt

Sovereignty and an Empty Purse

Banks and Politics in the Civil War

By Bray Hammond


Copyright © 1970 Princeton University Press
All rights reserved.
ISBN: 978-0-691-04601-3



I. Disunion, 1860-1861

II. Where was the power to stop secession?

III. Where was the money?

IV. From Buchanan, Cobb, and Dix to Lincoln and Chase


In May 1861, the month following South Carolina's shelling of Fort Sumter and President Lincoln's order instituting the blockade of Southern ports, the young English historian, Sir John Acton — not yet Lord Acton — described the dissolution of the American Union as an accomplished fact. He found the South's secession "no accidental or hasty or violent proceeding but the normal and inevitable result of a long course of events." The period, just ended, "between the convention of 1787 and the election of Mr Davis," president of the new Southern republic, possessed "an almost epic unity. The question," he said, "on which the founders of the Constitution really differed and which has ever since divided and at last dissolved the Union was to determine how far the rights of the states were merged in the federal power and how far they retained their independence."

Acton found support for his assumption of an end to the American Union not in the dubious ability of the North to curb the South but in fallacious principles the Union rested upon. The Union was a democracy, and democracy was a form of organization wherein the most numerous and least responsible class of persons held the power and drove with it to anarchy. The Union was also a federation, wherein he found sovereignty to be divided confusedly and mischievously between the whole body and its components.

Though the main thread of his account was political, Acton offered a relevant defense of slavery. He thought it "essential to democracy" wherever the population comprised an inferior race and a superior one; he thought it good for both the blacks and the whites. As to the inferiority and superiority of races, he relied on the observations of contemporary anthropologists.

These judgments, May 1861, were presented in an essay which Acton entitled "Political Causes of the American Revolution," the revolution he meant being not that of 1776, of course, but the current proceedings of the Southern states begun six months before in their attempt to withdraw from the Union. Acton, it should be repeated, was then a very young man. Five years later, after the end of the war, which had hardly begun when his earlier essay appeared, he discussed the subject very differently.

The premature judgments expressed in Acton's earlier essay were typical of much British opinion but not of all. In the same month that Acton's essay from which I have quoted came out, The Economist, London, could see "for the South ... no possibility of a good issue for the war which its statesmen have provoked and commenced." Wealth and numbers favored the North overwhelmingly and must in the end make it win. For the Southern leaders "to rouse by gratuitous insult the mettle of a nation three times as numerous and far more than three times as powerful, to force them by aggressive steps into a struggle in which the sympathy of every free and civilized nation will be with the North, seems like the madness of men whose eyes are blinded and hearts hardened by the evil cause they defend." The greater the Southerners' initial success, The Economist said, "the greater must be their ultimate humiliation." Back in December, when the South took its first steps in departure from the Union, The Economist thought the action anomalous. "It seems an infatuation," it said, "that the slave states should speak of secession. That the free states should do so would be intelligible." In January it still thought so. Why, it asked, in its issue of 12 January 1861, should the North feel outraged by the South's threat of secession? Why shouldn't it welcome the South's departure? Northerners, it said, "must have felt that the semi-barbarism of the South was infecting and degrading their manners, that the terrible social blot of the South was their ceaseless opprobrium in the eyes of the civilized world, and that the violence and cupidity of the South was forever marring their policy and disturbing their peace. We should naturally have fancied that they would ... have been anxious to shake off such an incubus and to purify themselves from such a stain; and have looked forward with sanguine enthusiasm to the noble and splendid career of progress which lay before them when relieved from such a moral weight and social fetter." Again, late in January, it was inexplicable to The Economist that the North should object to separation from the South, four-fifths of whose white population, it said, comprised "perhaps the most degraded, ignorant, brutal, drunken, and violent class that ever swarmed in a civilized country. ... Probably large bodies of the 'mean whites' will be organized into irregular troops, half soldiers, half police, in order to control and suppress the negro population; and the condition of restless fear, barbarism, and intestine hostility, already bad enough, will grow yearly worse, more shocking, and more intolerable." In the circumstances, The Economist thought the North should let the South go — gladly. Victory for the North would be an "objectless and unprofitable folly." These, one may suppose, were all the convictions of Walter Bagehot, who became The Economist's editor January 1861 and had been already a contributor to it. Certainly, five months later, October 1861, Bagehot had an essay in the National Review entitled "The American Constitution at the Present Crisis" and in it blamed the crisis, as Acton had done, on the Constitution itself, which, he said, "is now failing from the necessary consequence of an ineradicable defect" — its equivocal division of sovereignty between the states and the federal government.

The determination which led South Carolina, after Lincoln's election, to decide upon secession immediately and her closer neighbors to take very little more time was not matched in the North. There disbelief that secession was more than a conspiracy of hot-heads vied with uncertainty what to do about it and with some inclination to do the very thing The Economist expected. Among those Northerners who abominated slavery there was a disposition to let the South leave the Union and to consider it good riddance. For those who condoned slavery, coercion of the South was outrageous, and a few went so far as to leave the country for good rather than stay either as defeated champions of civil liberty or copperheads.

The same revulsion against extreme action had manifested itself among loyalists in the Revolution, among New Englanders in the War of 1812, and in the North generally in the forties against the war with Mexico. In like circumstances, such revulsion has manifested itself repeatedly since then.

Dissidence was minor, however, and Northerners were moved more by British hostility than by British sympathy. In June 1861 a private letter of admonition was addressed to Baring Brothers, merchants and bankers, London, by an American correspondent of theirs in New York. The letter concerned reports reaching the States by mail and by word of mouth that "men of eminent commercial standing" in Great Britain appeared "to favour the idea of forcing their supplies of cotton from this country, without delay, at any hazard or cost." For the British textile industry was accustomed to a constant supply of cotton from America of such quality as could be obtained in ample volume from no other source, and the prospect of finding its supply cut off by blockade was alarming to it and to its ancillaries. The Barings' correspondent was John Austin Stevens, president of the Bank of Commerce, New York, the largest bank in the States. The Barings had been among the bank's original shareholders and Stevens himself had been known to them long and intimately. Stevens sent the Secretary of the Treasury, Salmon P. Chase, to whom he was an unofficial adviser, a copy of what he wrote the Barings. His letter, dated 15 June 1861, was written immediately after his return from a visit to Washington, where he had been a house guest of Secretary Chase. The circumstances indicate that the letter's substance had been discussed in advance with members of the Lincoln Administration and that it was a diplomatic message sent informally through responsible private channels. It read as follows:

City of Washington Steamer

New York 15 June 1861
Bank of Commerce

Dear Sirs,

The ordinary bank letters have supplied all needful information since my absence in Washington.

Permit me to say that some uneasiness existed there and I find the same here amongst well informed men, arising from the tenor of recent advices and the reports of passengers by the late arrivals, to the purport that men of eminent commercial standing in G. Britain appear to favour the idea of forcing their supplies of cotton from this country, without delay, at any hazard or cost. If I can express any opinion with confidence it is that any such attempt will lead to an immediate and obstinate War — more, to a popular War.

Persons abroad can not well conceive of the intensity and universality of the feeling at the North — the whole United North — to put down this revolt in the most summary manner — once and forever — cost what it may of men, of treasure, or of suffering. They will brook no interference from abroad in this domestic quarrel. It will not shake this determination if every city on the sea board is threatened to be laid in ashes. The attempt to get cotton by force this season might fail or might succeed perchance, but it would be the last supply ever raised by slave labour, or perhaps even by white labour, for years, for the whole institution of slavery in any thing like its present form, or perhaps in any form would, before the war was over, disappear from this Union.

I repeat the conviction that the adjustment of our present difficulties will be final and thorough, and this is the opinion of every well informed statesman, and all that the most moderate can do is to endeavour to soften the tone of negotiations with foreign powers. The continental diplomats in this country aim at the same object but notwithstanding all that can be done in this direction, if the opinion shall get to be general here that men of distinction — outside of political combinations and the necessities of the moment — on your side look to a war as the best solution, rely upon it, it can very easily be had — at the hazard of all that men of our race hold most dear and most important to the well being and progress of mankind.

I write in haste
and am very truly yrs
Jno A Stevens

Messrs Baring Brothers & Co

The Barings promptly and politely acknowledged Mr Stevens' admonition, to which they said "deserved attention" would be paid. But, they went on, "we do not think the European powers" — including Great Britain — "will interfere with the blockade of the southern ports should it be kept up rigourously." And they politely reminded their correspondent that since Great Britain's blockade of American and French ports in the War of 1812 had been evaded now and then by swift vessels of the Americans, the same thing might now be done successfully by others.

The letter of John Stevens to the Barings had been written a month after the arrival of Charles Francis Adams in London as American minister and about a fortnight after receipt in Washington of his first report to Secretary Seward. Though studiously private and within the scope of long-established relations between John A. Stevens and the Barings, the letter dealt directly with a prime question at issue just then between their respective governments, and might well have been instigated in Washington in order to strengthen Minister Adam's position vis-à-vis Downing Street in his efforts to avoid foreign recognition of the Southern Confederacy and foreign attempts to force the blockade of Southern ports.

Months later another friend and adviser of Secretary Chase's made a statement about the current conflict that goes along with what John Stevens had written the Barings. This was Samuel Hooper, a Boston merchant-banker, capitalist, and representative from Massachusetts in Congress. Hooper, pleading in the House for vigorous monetary action, 3 February 1862, said: "This is a war, on the part of the South, inspired by slavery against the free labor of the North; and hence the sympathy it receives from those who favor aristocratic institutions. The prosperity of the North, like that of England and France, is mainly to be attributed to the skill that it has developed in manufactures, the enterprise that it has displayed in commerce, and the constant investment of its accumulated wealth in industrial pursuits of every kind; while the South, from policy, has preferred that its labor should be unskilled and ignorant, suited only to the employments of a peculiar agriculture, keeping itself dependent upon foreign trade for many of the conveniences and luxuries which it has not the ingenuity to produce. It is important in this great struggle to show the superiority of the principles of freedom, of education, of the elevation of mankind, upon which society at the North is based, over those of slavery, which doom men to hopeless ignorance in order to insure abject obedience."

The two Americans just quoted, John A. Stevens of New York and Samuel Hooper of Boston, both responsible and practical men of affairs, were resolute. And most Americans in the North came to the same decision. As Anthony Trollope observed, to let the seceding states go was not "the way of men's minds." A minority would willingly or gladly have let the South depart in peace; another minority would have wooed it back in peace with compromise. But no; for those who prevailed neither alternative would do; preservation of the Union was a duty; the South was to be held by force.

Where, however, was the power, the means, to hold it? The answer is that it was decentralized, disorganized, diffuse. The federal government was as little ready to accomplish main purposes as a man for years bed-ridden; and it was in this condition not merely by inadvertence but, as Acton said, by deliberate policy, long and religiously pursued. In London, The Economist, which saw the political facts much as Acton did but held other opinions, expected that this weakness would end. "The war," it thought, "will draw together the Northern states as they have never been drawn together yet ... and finally will impress them with the absolute necessity of a closer union, a stronger central power ... in one word, with the duty of turning the federal government into a really supreme power." The war would teach the Americans that there can be "no genuine freedom without a strong central government and the surrender of those atomic political privileges which minister to local jealousies and general anarchy."


The foregoing observations from England might be taken as a prompting followed at once by the 37th Congress at its first sitting a few weeks later. For what the 37th began and what with recurrent anxiety and occasional reverses has continued in the hundred years and more that have since elapsed, is the strengthening of "central power" which The Economist expected. With the popular will behind it and a complete absence of coups and violent seizures of office by cliques, the federal government has been rebuilt "into a really supreme power." And at all times the extensions of its power have been such as, in popular opinion, there can be "no genuine freedom" without.


Excerpted from Sovereignty and an Empty Purse by Bray Hammond. Copyright © 1970 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents

  • FrontMatter, pg. i
  • PREFACE, pg. v
  • CONTENTS, pg. vii
  • 4. AUGUST TO DECEMBER 1861, pg. 107
  • 8. NORTH AND SOUTH, pg. 237
  • 9. THE REVENUE BILL, HR 312, pg. 261
  • 12. CONCLUSION, pg. 353
  • NOTES, pg. 365
  • WORKS CITED, pg. 379
  • INDEX, pg. 387

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