I grew up in Southern California. My neighbor, “Tig” was only a few years older than I. We’ve known each other a lifetime. He lives in Indonesia most of the year where he manufacturers a nice line of clothing. When I was 15, Tig 17, we started a leather business called “Leather Together.” We traveled all over the Western United States selling our hand-made leather goods at the major county and state fairs. We have many stories we could tell. I’m reminded of a Hoyt Axton song called, “Della and the Dealer” where the chorus sings, “…if that cat could talk what tales he’d tell about Della and the Dealer and the dog as well but that cat was cool and he never said a mumblin’ word!”

Tig became interested in the Civil War and became a collector. He acquired some very rare Confederate Notes and asked me to help him write an article and photograph the notes for a Civil War magazine. I’m pleased to present this work to you in the following paragraphs.

Tig and I wrote the article on a laptop plugged into the 12V outlet of his vehicle while we drove from Oregon to California a year or two ago. It turns out to be an interesting bit of history. Enjoy!

War clouds, that loomed ominously on the horizon, now appeared overhead.

The Big 6 – Montgomery Notes, plus the T-27 & T-35

It was December 20, 1860, when South Carolina seceded from the Union, once thought “one and inseparable.” By February of 1861, Georgia, Florida, Alabama, Mississippi and Louisiana joined in the secession. It began as a bitter dispute over Union and States rights that became a costly battle over the definition of freedom in America. The igniting spark was the question of slavery. Since colonial times the North and the South had been pulled apart by many ongoing disagreements that became violent. The tension was expressed by Thomas Jefferson of Virginia when he said, “Maintaining slavery was like holding a wolf by the ears, you don’t like it, but you didn’t dare let it go.”

A few months later, on February 4th, delegates from the seceded states assembled in a hotel room in Montgomery, Alabama to create a provisional government. The Confederate States of America was born. The twelve delegates who formed a committee from these six states drafted a constitution – an “improved” version of the U.S. Constitution. Christopher Memminger chaired the group, whose objective was to create a document that would meet the needs of the South. Pinned to the door of the hotel room was a plain sheet of stationary inscribed, “President’s Office.” When a visitor approached and asked Secretary of State Robert Tooms, “Where will I find the State Department?” Tooms replied, “In my hat sir and the archives in my coat pocket.”

Prior to the events separating the North and South, banks issued notes that were considered paper currency. As notes were generally a regional type of currency, it wasn’t always the best practice to take these notes from one area and try to redeem them in another.

Once the Civil War broke out, notes of the Confederate States were produced to fund the South. These notes typically carried the statement that they would be paid six months, or, in some cases, as long as two years after a treaty of peace. The U.S. notes of the North did not indicate when they would be redeemed.

It had always been a concern that the currency of the South was not “legal tender.” The North’s notes were respected as legal tender. What was the difference between those “greenbacks” of the North and the “bluebacks” issued by the Confederacy?

The U.S. notes held their value better. People had more confidence in them. Most of the manufacturing industries were in the northern states. The North had many more resources than the South. Another circumstance that created more widespread trust in Northern currency was the fact that prior to the Civil War the cotton growers of the South were dependent on the northern bankers for crop loans.

Understanding the need to maintain an active and viable economy, along with supplementing the costs of the war, the U.S. government passed Internal Revenue Acts in 1862 and 1864 (income taxes). The government also found ways to raise other taxes. Northern currency thrived. Although frowned upon by Southern officials, U.S. notes were highly prized by many in the South, especially during the latter years of the war.

A major failing of the Confederacy was not utilizing its tax base to the extent it should have. Instead, they relied heavily on loans and the sale of bonds. These efforts did not raise the monies expected. In 1861, the Confederate Congress provided for a direct tax on property, but the too lenient 50 cents for each $100 of goods and money again missed the mark.

According to a speech by Vice President Stephens, it was the desire of the southern government “to get along with as little tax as possible.” They also recognized that each of the Southern States making up the Confederacy valued their own sovereignty almost as highly as its unification against the North. Their taxation had little impact on the Southerners. The South issued more and more paper money to meet the needs of the war, thereby inflating its value further. Individual southern states also increased the inflationary trend by raising money through the issuance of their own bonds and printing their own paper money.

Gold of the Confederacy

Cotton was expected to be the equivalent of gold for the Confederate States. Montgomery notes were issued, the Southern States generated bonds, and a feeling of economic strength was anticipated. Cotton crops, valuable as gold itself, were their greatest asset.

There was a huge problem in their misjudgment, which affected the entire war effort for the South. Their “gold” turned to dust and the value of cotton melted away as quickly as the South invested everything into its presumed economic strength. Simply consider the role of cotton in world trade at the time the Civil War began: In 1860, the value of cotton exports from the South exceeded the combined total of all other commodities and manufactured products shipped by the United States. Over four million 500-pound bales of cotton were grown each year representing 80% of the world’s supply. Also, the aftermarket value was important in that it employed thousands of people from shippers to spinners who depended upon cotton for their livelihoods. An important player of the time, cotton did seem to be good as gold.

The Confederacy decided to exercise economic leverage with its cotton by judiciously controlling the amount of cotton being made available in the market. Typically, England imported two-thirds of the South’s cotton while another 10% went to France. The balance of the crops found its way into the Northern States and a few other countries.

In 1861, Southern planters were asked to “loan” one half of their cotton production to the Confederate government for which they would receive 8% bonds in exchange. These two million bales of cotton would have brought the treasury $100 million. The strategy seemed sound and would have covered the interest on the bonds, government expenses and supplied the troops. This was also designed to encourage planters to continue the legacy each year.

Instead of shipping cotton, the Confederacy decided that the best way to gain quick recognition from England and France was to withhold cotton in order to force a “supply and demand” market. However, with an existing cotton surplus already in the market, this plan backfired. It wasn’t until the summer of 1862 that a shortage of cotton was felt. By 1863 cotton yarn production in England dropped from nearly 500,000 tons to 200,000 tons and many workers were unemployed. The South’s foiled embargo was not the only unforeseen failing that stumbled the Confederacy. Once the South was ready to ship cotton, the North had already established a fairly tight blockade along the coast, and it was no longer possible to export cotton in large quantities. All things combined, the South’s “gold” failed to produce the income that would prevent the depreciation of their currency.
(See figure 1, “Value Fluctuations”)

figure 1

Gazaway Bugg Lamar
A Southern Gentleman and Confidant in New York – Liaison for the Montgomery Notes

In 1798, Gazaway Lamar was born in Augusta, Georgia, and eventually became a contemporary money king and noted aristocrat of the cotton states. Before the Civil War, this imaginative and exceedingly ambitious man moved to Brooklyn, New York, and prospered as a commission merchant, cotton factor, steamboat proprietor and chronic speculator. Gazaway established the Lamar Insurance Company, an entity designed to provide security for his own activities. He was truly a masterful entrepreneur.

Among his many accomplishments, he founded the Bank of the Republic in New York (1851) where he gave preferential treatment to Southerners. The bank was a state institution with a capitalization of $1,000,000 – later expanding to over $2,000,000 and relocating to the prestigious corner of Wall Street and Broadway. He was a trusted financial advisor to the Southern politicians, including two of Georgia’s Governors, Howell Cobb and Herschel V. Johnson. Close ties with his Southern roots put him in a position to be extremely valuable as a Confederate resource well planted in the North.

Governors of several Southern states needed to build up their arsenals. Their need to purchase arms from both the Federal government and private Northern manufacturers had to be handled with extreme discretion. Lamar helped facilitate these purchases and even helped smuggle muskets into the South in November 1860, a few months before the war began.

Persistent and widely circulated rumors of large shipments of arms to the South soon aroused public indignation and provoked Edwin D. Morgan, Governor of New York, to take stern measures. On January 22, 1861 he ordered 38 cases of muskets headed for the South, onboard the “Monticello,” to be impounded by the State police.

The instability that was brewing between the North and the South put Lamar in a precarious situation. Much of the time he found himself under watchful eyes and in threatening circumstances. Loyalist groups, particularly the “Wide-Awake Clubs,” placed Lamar under such close observation that he began feeling powerless to continue his communications with Confederate leaders. During this period of turmoil, he was constantly receiving anonymous threats and warnings.

Act of March 9, 1861

The Act of March 9, 1861 authorized the first Confederate Treasury issued notes in the amount of $1,001,500.00. These were high-denomination interest-bearing notes at a rate of 3.65% per annum. The first group, consisting of four notes, was issued in Montgomery, Alabama, and is known as the “Montgomeries.” They were not intended for general circulation. These notes tended to be endorsed on the back when issued and cancelled when redeemed.

New York City was the center of the bank note engraving and printing industry during this time. It was logical for Treasury Secretary Christopher Memminger to contact someone there to place his orders, as there were no skilled engravers in the South.

It was an obvious decision for Memminger to approach Gazaway Lamar to facilitate the production of the Montgomery notes.

Christopher G. Memminger, CSA Treasury Secretary

Memminger implored Lamar to secretly arrange for the printing. Acting upon Memmingers’ instructions, Lamar successfully engaged in a printing contract with the National Bank Note Company of New York, which engraved a plate to print a four-note sheet with one of each denomination: $50, $100, $500, and $1000. The order was placed for 607 sheets and was delivered to Montgomery, Alabama, on April 2, 1861 – a mere ten days before the Civil War began.

Memminger quickly discovered that there was a demand for the smaller denominations. He contacted Lamar again, asking him to have the bank note company furnish an additional one thousand each of the $50 and $100 notes. The company resourcefully split their plates in half and ran off 999 half-sheets to fill the order.

However, the beginning of hostilities made delivery difficult. Internal struggles began within the bank note printing company. Problems getting the Montgomeries produced were further complicated when a disgruntled businessman named Waterman Lily Ormsby, then head of the New York Bank Note Company, lost his position. There had been a recent reorganization of the bank note industry, and in the turmoil, Ormsby had been shut out of both the National Bank Note Company and the American Bank Note Company (another major note producer of the time). In retaliation, Ormsby tipped off the Union government that the National Bank Note Company was printing Confederate currency. As a result, resources in place for the production of Montgomery notes and other war bonds were jeopardized.

Douglas Ball, noted Civil War historian, spoke of a group of U.S. Marshals who appeared at the National Bank Note Company with orders to confiscate the rebel plates. When they learned that 999 half-sheets had been loaded on a ship in New York Harbor, they raced to the docks to stop the shipment. Fortunately for the South, they were too late, and the ship had just cast off. The captain ignored the Marshal’s shouted orders to return. Unable to stop the ship, the Marshals could only watch in frustration as the ship headed out for international waters and its destination to a Southern port. This would be the final shipment and production of the Montgomery notes.

The Union authorities had seized the plates. Despite the desire of Confederate officials to further exploit Lamar’s cooperative spirit, the Georgian’s usefulness to the Confederacy had ended. Lamar’s son wrote Memminger, “that any letters from any officials may compromise him with the mobs (and) that he is powerless now to do anything for anyone.”

The loss of the New York Printing facilities was a crushing blow to Secretary Memminger, who now had to seek currency contractors within the Confederacy itself, a search that would prove to be a daunting task.