Published by EH.Net (October 2022).

Roger Lowenstein. Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War. New York: Penguin Press, 2022. xii + 432 pp. $27.00 (hardcover), ISBN 978-0735223554.

Reviewed for EH.Net by Lynne P. Doti, Professor Emeritus of Economics, Chapman University.


Among the myriad books written about the Civil War, it is hard to believe that virtually none focus on how it was financed. War, and all government expenditure, is paid from taxes, borrowing, and/or expansion of the money supply. Lowenstein covers all three sources of funding by the Union and by the Confederate states. He explores the factors that influenced the choices among these three sources of funding, including success on the battlefield, blockades and embargoes, politics, European support, cotton markets, and public attitudes toward slavery and race. This coverage makes for a readable book as well as a complete view of the challenge of financing the war.

The Civil War centralized the country’s government in several important ways. The Federal government broadened its power of distributing land with the Homestead Acts and support of transportation projects like the transcontinental railroad. With tax increases, and creating money and debt to finance the war, both the Union and the Confederate governments demonstrated the benefit of centralized actions. While Lowenstein accepts the view of most historians that these centralized actions contributed to the nation’s long-term growth, he acknowledges the cost of the war to most of the population, particularly to the Native Americans cruelly displaced from their homes.

A wrenching description of Civil War-era Indian removal is not the only seeming digression from finance. Lowenstein gives attention to the role of the slavery issue in the war and attitudes of Northerners and Southerners toward the enslaved. Northerners began the war generally against slavery as a social system. They were less concerned with the plight of the enslaved individuals, but gradually come to the view that elimination of slavery was important, if not essential to the preservation of the Union.

Salmon Chase served as Secretary of the Treasury during the Civil War through Lincoln’s second inauguration. When Chase started the job, federal finances were in crisis. Government employees were owed pay. The two-million-dollar Treasury balance had been raised by the previous administration’s sales of bonds paying 10 ¾ percent. Federal revenue came mostly from duties on imports, and one-third of the duty ports were in the South. As states seceded, they took duty revenue. When Louisiana left the Union, the state seized nearly $600,000 in gold from the customs house.

The Confederacy chose a damaging strategy early in the war. Confident in their dominance of the world cotton supply, they withheld their cotton from the market. Prices were a low $0.10 a pound due to a large harvest the previous year and maturing rivals in India and Egypt, but the Confederacy could probably have collected over $100 million dollars in 1861 by selling the cotton they withheld. At the beginning of the war, when the Confederate Treasury holdings consisted of about $6 million in seized duties, the Confederacy floated a $15 million bond issue that drained the gold from private citizens in southern states.

The Union also made a strategic blunder. The British, who had a strong public opposition to slavery, favored the north, but they also favored free trade. The very high Morrill Tariff was increased in 1861 and was a major reason that Britain chose neutrality.

During Chase’s first three months in office, the Treasury collected $6 million in revenue but spent $24 million. Chase issued $3 million in bonds and $5 million in notes. But as both matured quickly, in May and then June, he had to borrow again. He approached major bankers to buy the bonds, but they insisted on discounts and at the interest rate demanded Chase felt the cost was too high. He developed the romantic vison of placing the notes directly with ordinary people who would buy out of patriotic motives rather than for profit.

At this point, the most decisive partnership in America’s financial history developed. Jay Cooke was a Philadelphia merchant also new to the New York financial world. His brother, a publisher, knew Chase. Chase was a widower, with young daughters whom Cooke hosted at his family home. Cooke also thought the bonds could be marketed directly, rather than through banks. When Cooke sold $3 million in bonds at par by hiring agents and advertising in newspapers, the partnership was born.

Jay Cooke was a major figure in Union bond sales. Generally portrayed as a pioneer of bond marketing to the middle class, he is described here as Chase’s savior when bond sales lagged. Cooke had great success in selling bonds. By the end of 1863, $2 million in bonds sold every day, except for a brief period before the 1864 election. Cooke was the main agent for bonds issued by the Northern government. However, his success in selling was achieved with great increase in his own wealth and the use of bribery to get advertising that was not only free, but also deceptive. Supposedly objective newspaper articles that promoted the bonds and portrayed the buyers as individuals of modest means were actually supplied by Cooke to the editors along with large payments.

In July 1861, Lincoln asked Congress for $400 million to fight the war. Chase trimmed the cost estimate to $318 million and asked for $80 million and the right to borrow the rest. Congress gave him authority to sell 20-year bonds, three-year notes and $50 million in “demand notes” redeemable in coin. In the winter of 1861-62, Congress approved notes that paid no interest, but were legal tender (accepted payment for all debts). With these “Greenbacks,” the federal government eventually took control of the currency away from the individual states.

Chase understood that battleground success equaled improved opportunities for selling bonds and the value in gold of the Greenback currency. He tried to involve himself in cabinet discussions on military strategy, but his jealous rival William H. Seward, the Secretary of State, effectively blocked him. Chase’s strong anti-slavery views turned out to be a strength, as any shift in Union policies toward abolishing the institution or assisting enslaved people increased bond sales and the value of the Greenback.

The Confederacy experienced a history-making hyperinflation and ended the war in financial ruin to rival the physical ruin, whereas, thanks in large part to Chase, the Union ended the war with a healthy economy. The Greenback fell in value perhaps 80 percent and the Union debt was $1.74 billion, but new industries, immigration, public works projects, and land reform placed the Northern economy on a path to growth. After serving as Secretary of the Treasury for all of Lincoln’s first term, Chase became Chief Justice of the United States.

This book is suitable for, and should be accessible to, the general reader with an interest in finance or the Civil War. It also would be of interest to academics in either of these areas. Roger Lowenstein has written several outstanding books on business history. As usual, his research is thorough and accurate. My only complaint is that the author, while revealing his biases, does not display much passion in support of his views. A little more drama could enhance a very good book.


Lynne Pierson Doti is Professor Emeritus of Economics, Chapman University Argyros School of Business and Economics. She has authored or coauthored five books and many articles on financial history and entrepreneurs.

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