FINANCING THE WAR
THE CONFEDERACY HAD HARDLY BEEN FORMED WHEN SECRETARY OF the Treasury Christopher G. Memminger aptly pronounced economy to be desirable in every government but in the Confederacy to be a necessity.1 The ante-bellum South had never possessed much financial surplus and a combination of circumstances during 1860 and 1861 had made it even more limited. The rapid growth of the states for the past few years had exhausted their credit and they were burdened with fiat money and large bond issues. At Lincoln's election the Northern banks had cautiously reduced their loans to the South; soon after the war began, the absence of specie caused most Confederate banks to suspend specie payments and curtail their credit. The states had lost much of their remaining cash in meeting the heavy expenses of secession. As a result, the Confederacy was forced to wage a four-year war on approximately $25,000,000 of gold. A further embarrassment was due to the fact that Southern merchants had restricted their orders during secession and when war commenced their stocks of goods were low.
To tide the government over until a revenue system could be established, the Alabama legislature lent the Treasury $500,000. With this small fund Congress set about putting the nation on a paying basis. The United States tariff rates of 1857 had been carried over by the blanket transference of laws; on February 14 Congress continued in office the same customs personnel with the request that Memminger formulate a plan to halve the expenses of collection.2 Congress then established a Treasury Department, provided for clerical help, designated ports of entry, set up minting, assay and coinage facilities, and provided for disbursing functions. After the spring of 1861 the only significant changes in the Treasury organization were the addition of certain