Posts Tagged ‘confederate states’

Civil WAr 10a frontSince the founding of the country, counterfeiters had been devaluing currency through the use of fake bills and coins and the Civil War created opportunities for even greater profit.

Even as counterfeiting grew in prevalence, law enforcement seemed unable to prosecute effectively counterfeiters. Arrests were made, but it seemed like where one counterfeiter was arrested, two more sprung up.

“…neither New York nor any other American metropolis ever launched an all-out campaign to eliminate counterfeiting from its jurisdiction.” Thomas Craughwell wrote in Stealing Lincoln’s Body (Cambridge, Mass.: Belknap Press of Harvard University Press, 2007: pg. 38).

In part, the problem was police officers were investigators. They were men who enforced the laws.

The Cost of War

As with any war, once begun, the expenses to run a war became one, if not the largest, expense in the federal budget. In the case of the Civil War, the government’s expenditures exceeded its income. (Robert P. Sharkey, Money, Class, and Party: An Economic Study of Civil War and Reconstruction, Baltimore, Md.: Johns Hopkins University Press, 1995, pg. 18)

Preserving the Union

In the early years of the war as the North struggled for victory, the country’s gold reserves began to dwindle and the country faced a crisis. To put off the looming collapse, Congress passed the Legal Tender Act on February 24, 1862. The legislation allowed the treasury to move from coinage, which had been favored since the Revolutionary War to issue $150 million in paper currency and to recognize it as legal tender.

Counterfeiting National Currency

This created opportunities for counterfeiters.

“Like the rest of the American public, counterfeiters adjusted to the new national currency quickly. In fact, they preferred it to the old banknotes. A Philadephia shopkeeper who would have studied a fifty-dollar banknote from the Planter’s Bank of Tennessee would accept a U.S. fifty-dollar bill without a second thought,” Craughwell wrote (Cambridge, Mass.: Belknap Press of Harvard University Press, 2007: pg. 41).

Union citizens weren’t the only ones who used the new national currency. Confederate citizens sought the bills to offset the increasingly devaluing confederate currency. Counterfeiters took advantage of this need by taking larger amounts of counterfeit bills into the South. Since few confederates were familiar with real bills, the counterfeits escaped close scrutiny. (Lynn Glaser, Counterfeiting in America: The History of an American Way to Wealth, Philadelphia: Clarkson N. Potter, 1960, pg. 103)

The fake bills were also being circulated in the north and by 1864, estimates are that half the bills in use were fake. With this much fake currency, the U.S. financial system was in danger of collapse.

The Protectors of Currency

Treasury Secretary Salmon Chase hired William P. Wood, superintendent of the Old Capitol Prison system, to track down counterfeiters. This was the beginnings of the Secret Service.

Within a year, Wood and the men he hired had arrested over 200 counterfeiters and removed a great amount of fake currency from circulation as well as the tools of the trade the counterfeiters used to make their fake money. (David Johnson, Illegal Tender: Counterfeiting and the Secret Service in Nineteenth-Century America, Washington D.C.: Smithsonian Institution Press, 1995, pg. 76)

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