Speech to Austin Civil War Roundtable

(September 24, 2017) Provided below is a copy of my recent speech about inter-belligernt trade between the North and South to the Civil War Roundtable of Austin, Texas. It was preceded with this preamble from a Texas novelist, which is pertinent to the current Confederate monument controversy.

Trading With the Enemy

By

Phil Leigh

Austin Civil War Roundtable

September 21, 2017

On June 7, 1863, the day before Robert E. Lee attended a cavalry review before starting his second northern invasion that culminated early the following month at Gettysburg, the Confederate commerce raider Clarence forced the US flagged Alfred H. Partridge to stop off the North Carolina coast. The raider anticipated Partridge would be the second of an eventual string of twenty-one prizes. Normally, seized merchant ships were burned or used to transport previously captured crews to a safe harbor. But upon boarding the schooner the Rebels discovered she was bound for Matamoros, Mexico out of New York with a cargo of arms and clothing for Texas Confederates. Consequently, the Partridge was set free.

Since Matamoros was a neutral Mexican port federal warships could not blockade it. Before the Civil War only about one ship annually cleared New York for the Mexican town. However, a year after the War’s first important battle at Bull Run the average was about one per week. Ships to Matamoros were also cleared from Boston, Philadelphia, and other Northern harbors. Cargoes included a multitude of Northern-made items that would have been considered contraband if shipped directly into the Confederacy. They encompassed weapons, munitions, and military uniforms, among other articles. For Yankees willing to help arm the Confederacy at a profit, Matamoros was little more than a legal fig leaf to cover dubious, if not treasonable, conduct.

In exchange, Southerners provided cotton from fields as far away as Arkansas, Louisiana, and east Texas. They typically loaded wagons with twenty bales and set out in caravans over crude trails ending in Brownsville, Texas, across the shallow Rio Grande River from Matamoros. En-route teamsters were vulnerable to unpredictable water shortages and attack from hostile Native Americans, and outlaws of all types. Next to specie (gold and sliver coins), cotton was the most acceptable international exchange medium available to Americans, whether in the Union or Confederacy. Adroit, clever, and sometimes ruthless contraband-for-cotton traders accumulated fortunes in Matamoros and Brownsville.

One example was Connecticut-born Charles Stillman who sold Rebel cotton at Matamoros to buyers in Northern states, including the United States government. After the War, Stillman was one of the wealthiest Americans. Before two of his granddaughters married into the Rockefeller family he was a major shareholder in New York’s National City Bank. His son, a grandson, and a great-grandson each served as National City’s Board Chairman. The great-grandson – James Stillman Rockefeller – held the post as late as 1967 and lived until 2004. Presently the bank is known as Citicorp.

Despite its legal circumvention advantage Matamoros was a comparatively minor part of Civil War intersectional commerce. More often, the exchange was directly across enemy lines. The practice became important in the spring of 1862 about a year after the opening shots at Fort Sumter as the cotton trading centers at New Orleans and Memphis were captured.

When Union Major General Benjamin Butler arrived in New Orleans with 15,000 occupation soldiers in May 1862, his net worth was about $150,000, but six years later it was $3 million. Although the lawyer-general was too shrewd to incriminate himself, there is little doubt that the gain was primary achieved by trading with the enemy.

By the summer of 1862 Union Major General William T. Sherman at Memphis complained that Northern traders were buying southern cotton for gold, which he believed the Rebels next used to buy weapons in the Bahamas and even at Cincinnati. A few months later Major General Ulysses Grant captured Confederate cavalry in northern Mississippi armed with modern carbines evidently purchased at occupied Memphis.

Ladies also participated in such trade and were sometimes especially effective. They were generally held less accountable for violations and soldiers were hesitant to physically search them. For example, while Union Captain Julius Ochs was assigned to a unit guarding the St. Louis-to-Cincinnati railroad, his wife was caught trying to smuggle quinine in a baby carriage across an Ohio River bridge to Rebels in Kentucky. Somehow Captain Ochs got the charges dropped, but his wife’s dedication to the South persisted. After the War she joined the United Daughters of the Confederacy while her husband became a member of the Grand Army of the Republic, a Union veterans organization.

Their eldest son, Adolph, became a Chattanooga newspaperman. Shortly before the turn of the nineteenth to the twentieth century, Adolph bought a failing New York newspaper, changed its masthead to “All the news that’s fit to print” and launched the New York Times toward national prominence.

Large numbers of men are seldom motivated to enlist as soldiers merely to fight a war for monetary compensation. A higher calling is required to justify leaving their homes and risking their lives in a fight requiring them to kill strangers who normally have done them no harm. In the spring of 1861 the concept of “Union” became sufficiently noble to qualify as such a calling in the North. Southerners simply rallied to the equally high-sounding notion of “independence.” Both terms were facades. The North wanted an intact Union in order to sustain its emerging economic supremacy whereas the South wanted independence with slavery.

Without the South’s raw materials and favorable export trade balance, northern businessmen justifiably worried that the economies of the states remaining in the Union after southern secession might collapse. As Lincoln said in his first inaugural address, “Physically speaking we cannot separate. We cannot remove our respective sections…[The two sides] cannot but remain face-to-face and intercourse, either amicable or hostile, must remain between them.” Its unlikely that Lincoln realized just how prophetic his conclusion would become as trade continued – and sometimes even flourished – during four years of bitter warfare between the two regions.

World cotton market characteristics at the start of the Civil War explain how a bisected Union bereft of between-the-lines trading could lead to economic collapse in the North. Cotton textile manufacturing was the World’s biggest industry and it was largely dependent upon the South for raw material. Southern cotton alone accounted for about two-thirds of all United States exports. A truncated USA composed solely of Northern states could not hope to maintain a favorable international balance-of-payments. The situation would be exacerbated if the South ceased to be a market for Northern manufactured goods, which would be likely given the Confederacy’s lower import tariffs.

However, the South also had intersectional dependencies. Its focus on cash crops, such as cotton and tobacco, left it with a resultant need to buy wheat, corn, and pork from states northwest of the Ohio River. Similarly the South was dependent upon outside sources for nearly all manufactured articles. While such goods could be imported from Europe, American protective tariffs often made domestically produced alternatives from the North more economical. Initially the South required provender from the Northwest more than the North needed cotton. That changed quickly as New England’s cotton inventories dwindled and Lincoln discovered he could sell cotton to Europeans for gold thereby curtailing the outflow of bullion from the Treasury.

Since inter-belligerent trade was almost a certainty, each side adopted regulations to control it in a manner optimal to their interests. Generally President Davis looked the other way out of necessity, whereas Lincoln looked the other way out of policy.

While the Confederate Congress tried to restrict shipment of specific commodities such as cotton into the North, it never outlawed trade with states remaining in the Union. It was silent on the matter of imports because the necessities of life were often more readily available to Southerners on the far side of enemy lines than through the blockade.

Lincoln’s regulations were more convoluted due to conflicting interests. Prohibition on trade would leave destitute whites and former slaves in federally occupied regions of the Confederacy with no means of economic support. But less altruistically, New England mills wanted feedstock to keep their factories running and workers employed. For diplomatic reasons, Lincoln wanted enough cotton to slip out of the country to avoid a cotton famine in Europe that might otherwise provoke Old World intervention in the American war.

The first opportunity for the North to secure significant quantities of cotton materialized about six months after the opening shots at Fort Sumter. In November 1861 a combined naval and army federal force occupied the Sea Islands near Port Royal, South Carolina. It was hoped the area’s ex-slaves could be more productively employed as free laborers on cotton plantations managed by capitalistic northerners. Although not sufficiently productive to suppress inter-belligerent commerce elsewhere, the Port Royal Experiment encouraged northern businessmen to advocate other military adventures designed to yield occasions to operate similar plantations in other parts of the Confederacy.

Former Massachusetts Congressman and abolitionist Eli Thayer targeted Florida for such Northern colonization. His plans were blocked in February 1864 when an invading US army was defeated at the battle of Olustee near Lake City. It was the sunshine state’s largest Civil War battle.

Edward Atkinson was another Bay State proponent of capturing and redistributing southern lands to Northern colonists, but he focused on Texas. Atkinson was an abolitionist, mill owner, and antebellum weapons supplier to John Brown. Partly because of persistent lobbying by men like Atkinson, Union forces eventually launched an ill-fated offensive up the Red River about a month after Olustee.

Following the occupation of Port Royal, the next surge of intersectional trade developed in Matamoros. Shippers from the Northern states used the legal loophole in the federal blockade explained earlier to circumvent prohibition against selling contraband to the enemy. They merely pretended their cargoes were destined for Mexico whereas they were actually used to supply the Confederacy.

Intersectional trade swelled after Memphis and New Orleans were captured shortly before the summer of 1862. Both cities were near the center of the World’s richest cotton-growing lands. When General Butler assumed command in New Orleans he became a vigorous proponent of trading with the enemy, partly because he was the biggest shareholder in one of the largest textile mills in Massachusetts.

Contrary to popular belief, cargoes running the Union blockade did not necessarily represent shipments between the Confederacy and Europe. About twice as much cotton reached the North across enemy lines as was shipped to Europe through the maritime blockade. But by using a variety of evasions northern merchants sometimes ran the Union naval blockade themselves instead of employing overland routes across enemy lines.

One method was to first ship cargoes to Halifax where they could be converted into “Canadian” merchandise prior to running the blockade. On return, Confederate bales could be transformed into “Canadian cotton” at Halifax and thereafter shipped to New York or other Northeastern ports.

After General Butler became the Maestro of wartime intersectional trade in New Orleans he transferred to occupied Norfolk in November 1863. Once again he utilized family members and earlier New Orleans associates to promote commerce across enemy lines in Virginia. After the fall of the South’s last major blockade-running port at Wilmington, North Carolina in the War’s final months, General Robert E. Lee’s besieged army at Petersburg received most of its vital supplies from Butler-controlled Norfolk.

Following Vicksburg’s surrender in mid-1863 Rebel states west of the Mississippi River were isolated. Union gunboats patrolling the river made it difficult for Confederates to transfer supplies across the stream. Consequently, the Rebel Trans-Mississippi became almost a nation unto itself. Commanding Lieutenant General Edmund Kirby-Smith was not only the ultimate military authority throughout the vast region, but also controlled important aspects of civilian life including a near monopoly on cotton trade. The territory evolved into a near free-for-all of inter-belligerent trade as a result of its inability to obtain adequate supplies of necessities by any other means.

In the War’s final year Lincoln threw the gates of intersectional trade wide open. Efforts by Congress and the military to throttle such commerce caused a decline in the Treasury’s gold reserves in the second half of 1864, because the restrictions reduced the amount of cotton Union traders had available to sell to Europe in exchange for gold. Lincoln concluded that he could slow the gold drain by requiring that domestic cotton buyers be limited to using greenback currency, which was not convertible into gold. He also believed that a proliferation of greenbacks in the South would provide a powerful economic incentive among residents to favor reunification with the Union.

In the end, wartime intersectional commerce was a greater benefit to the Confederacy than to the Union and likely prolonged the War. While there were admittedly some unselfish and diplomatic reasons for Northerners to engage in such trade, the chief motivation was mercenary. During the War cotton prices climbed as high as $1.90 per pound as compared to about $0.13 in 1860, which was the year before the War started. For those willing to set aside morality in exchange for personal economic advantage, the profits were irresistible — particularly when favored access to inventories could be secured by means of political connections, bribery, or military status.

One example involves a name currently associated with a prominent bank and credit card operation. Until he became Supreme Court Chief Justice late in the War, Treasury Secretary Salmon P. Chase was largely responsible for issuing cotton trading permits. Petitioners encompassing the full limits of the ethical spectrum continually hounded him for the profitable certificates. Although Chase had a reputation for honesty, he was a prideful man whose ambitions required money. For example, he hoped to unseat Lincoln in the 1864 Presidential election.

Chase relied upon banker Jay Cooke to sell most of the bonds required to fund the Civil War. While Cooke’s efforts were exceptional they also enabled the financier to become enormously wealthy.

When Cooke opened a branch of his bank in Washington in February 1862, Chase was one of the first depositors. The secretary soon asked the banker, “How can you invest a few thousand dollars for me so as to make the best possible profit?” Evidently Chase could mollify himself that he was merely asking for a favor instead of a bribe. He soon discovered that the profits from the morsels that Cooke set aside for him were rewarding.

Ellis Oberholtzer who was the biographer selected by Jay Cooke’s children shortly after the financier’s death wrote:

“Throughout the year 1862, at Chase’s solicitation, Cooke was investing various sums of money for the secretary, with a view to obtaining for him the largest possible income…Every few weeks he received checks, which represented the proceeds of various speculations in railway and industrial stocks conducted with a practical banker’s acumen plus a very generous regard for a friend’s best pecuniary interests.” Finally, Chase’s beautiful daughter, Kate, employed her charms to advance his ambitions.

Among those ensnared by her attractions was Rhode Island Senator William Sprague who was then one of America’s wealthiest men. His family owned some of the largest New England cotton textile mills as well as other businesses including sawmills and locomotive manufacturing plants. They married in 1863. Kate wore a $50,000 tiara gift from her husband at the wedding.

Although Sprague’s mills badly needed cotton Secretary Chase did not grant him special favors. Consequently, the Senator entered into a treasonous partnership to trade weapons for Confederate cotton in an episode known as The Texas Adventure.

When visiting Washington as a bachelor Sprague normally boarded at the Willard Hotel, which was then – as now – a center of political intrigue. William Russell, who was the Washington correspondent for The London Times wrote that Willard’s probably contained more “scheming, plotting, [and] planning…than any building the same size…in the world.”

In September 1862 a former Texan, Harris Hoyt, arranged to casually meet Sprague at the hotel. Hoyt claimed he was thrown out of the state because of his Union loyalties. He aroused Sprague’s interest when speaking of his many Union-loyal friends in Texas who were anxious to sell cotton if they could get it through the blockade.

Sprague asked Hoyt to travel to Providence where he would host a meeting to see what might be arranged. Hoyt brought along an experienced Texas skipper named Charles Prescott and Sprague called in an associate named William Reynolds who had previously been dismissed by Chase due to account shortages while Reynolds was in charge of the Port Royal cotton-growing venture explained earlier. During the meeting Hoyt declared that the Texas legislature authorized him to build a textile mill there if he could raise the funds. If Sprague and Reynolds would give him enough money to buy a shipload of weapons and other contraband, Hoyt would take it to Texas, sell the arms to the Confederate army, and use the proceeds to construct the mill. Mill profits would be used to buy cotton for shipment to the North. Sprague and Reynolds agreed to finance the venture. Prescott went to New York to buy the necessary ship while Hoyt bought the contraband cargoes.

The vessel and cargo were ready by December, but there was no official approval from Secretary Chase. As a hopeful alternative, Sprague wrote letters of introduction for Hoyt to Navy Secretary Welles, New Orleans occupation commander General Butler, and to Admiral David Farragut who commanded the west Gulf Blockading squadron. His letters represented Hoyt as a Union loyal citizen.

The venture supplied its backers with high-grade cotton for almost two years, until a shipment was caught in the blockade in November 1864. Although cargo ownership was disguised, English insurance records enabled investigators to trace it to Prescott who then lived in Troy, New York. On the same day that Chase was nominated to become Supreme Court Chief Justice, Prescott gave a confession implicating Hoyt, Reynolds, and the Senator’s cousin Byron Sprague.

An earlier unrelated examination of New York customs irregularities disclosed that some officials colluded with selected shippers thought to be blockade-runners. The top New York customs officer was Hiram Barney who was appointed by Secretary Chase and was also a close associate of Senator Sprague. In addition, Barney managed Secretary Chase’s New York real estate and had lent him $45,000, which may have never been repaid.

Hoyt originally hoped that Chase’s December 1864 appointment to Chief Justice would lead to Hoyt’s release. When it didn’t, he felt betrayed and confessed everything including Senator Sprague’s involvement. Prescott independently augmented his confession to support Hoyt’s version, thereby providing the two witnesses required for a treason conviction against the Senator.

Three weeks before President Lincoln was assassinated, the political hot potato was referred to War Secretary Edwin Stanton. While Stanton took no action, it is commonly believed he declined because an inquiry would have reflected poorly upon a Presidential Administration whose leader was martyred shortly after the Secretary received the charges. Stanton may have also wanted to avoid embarrassing Chase who had been a persistent Radical Republican ally when the two had served on Lincoln’s cabinet together. Finally, Stanton was politically cagey. He could undoubtedly foresee advantages in having a wealthy Senator obligated to him.

Nonetheless, the accusations resurfaced five years after the end of the Civil War in 1870 when a Rhode Island Congressman named Thomas Jenckes sought reelection against a Sprague-backed candidate during the Grant administration. Sprague asked for a Senate investigation to clear his name, which was launched early the following year. Conveniently, Grant’s Secretary of War was the corruptible William Belknap who later resigned for bribe taking. Suspiciously, Belknap had little interest in cooperating on the Sprague inquest. For example, he failed to locate a copy of Hoyt’s full confession given earlier to Stanton and implicating the Senator. Additionally, the committee did not call Jenckes as a witness until shortly before Congress adjourned thereby leaving the Congressman no time to gather corroborating witnesses who were geographically scattered. The perfunctory investigation cleared Sprague because “there was nothing in the paper[s] implicating Sprague.” But key papers were missing, including most notably Hoyt’s confession, which Jenckes could have corroborated with witnesses.

No doubt, Kate married William partly because his money could help get her father elected President. Even though he was a Republican cabinet member during Lincoln’s Presidency and a sitting Supreme Court justice from 1865 until his death in 1873, he sought the Democratic nomination in 1868. Kate was his campaign chairperson, although she was not permitted on the New York conventional floor. She managed her delegates from a Fifth Avenue hotel, but the effort failed.

Thereafter, the marriage of William and Kate gradually deteriorated amid mutual infidelities, among other problems. Kate’s affair was with New York Senator Roscoe Conkling.

Upon returning unexpectedly from a business trip in 1879, William discovered during breakfast the following morning that Conkling was a houseguest. Consequently, an enraged Sprague confronted the New Yorker with a shotgun.

Pulling out his watch he told Conkling to leave the house within thirty seconds or “I will blow your brains out.” Conkling approached Kate to speak privately, “Mrs. Sprague, your husband is very much excited and I think it better for all of us if I should withdraw. If my departure puts you in any danger, say so, and I will stay, whatever the consequence.” Kate asked Roscoe to leave. To finish with an exclamation point William told her lover “if you ever cross my path again I will shoot you on sight.” Three years later Kate and William divorced and Conkling no longer visited Kate.

Perhaps because the cast of Civil War trading-with-the-enemy characters provides no heroes, little is written on the topic. Nonetheless, study of Civil War intersectional commerce underscores the ancient wisdom: “Money make the World go ‘round.’”

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