The fiscal legislation passed during the four years of Civil War transformed the social, political and economic landscape of the post-bellum era. The United States adopted a uniform currency, established a national banking system, embraced an aggressive, protectionist revenue policy and created an internal revenue system. Before the Civil War, the national government never collected more than $74 million in revenue; after the Civil War, the Treasury never collected less than $257 million in receipts. In 1861, the Treasury department employed roughly 4,000 workers nationwide; by 1866, the number had ballooned to over 10,390.

When the Lincoln administration arrived in Washington, DC, the Union carried the largest debt the government had ever accumulated without engaging in war. Empty vaults, unpaid bills, and large outlays awaited them. Creditors expected their interest payments as scheduled, a demand that would have to be met to keep investor confidence from sinking any lower. The law bound the Treasury to a fiscal system that barred it from using anything but coin and Treasury notes as a means of paying its obligations, including the pay promised to the thousands of soldiers assembling and preparing for battle. The currency circulating in the country worked where it was issued, but depreciated quickly once it left its locality. Congress had adjourned, so no immediate remedies to the financial problem were foreseen. Indeed, after his inauguration, President Abraham Lincoln ‘had hoped to cool passions and buy time … to organize his administration, to prove his pacific intent, to allow the seeds of voluntary reconstruction to sprout’. However, the president, and his cabinet, soon found themselves presiding over the deadliest war in American history.

The Secretary's Choices

The limitations inherent in fiscal federalism placed Secretary Chase in an awkward position. He could only sell bonds that Congress had authorized while in session. Because the war began after the close of the Thirty-sixth Congress, no additional revenue or loan measures could be enacted. President Lincoln did not want Congress to convene until July, because ‘he thought it best for the administration to have a free hand in coping with the emergency’. Chase could only acquire needed funds by selling undersubscribed loans approved during the Buchanan administration.