Disunion follows the Civil War as it unfolded.Washington, D.C., July 17, 1861  Disunion follows the Civil War as it unfolded.  Each morning, Salmon Portland Chase arrived at the colonnaded building on Pennsylvania Avenue that housed the Treasury. Ten to 12 hours later, he emerged. He ate dinner at home and then worked another two to three hours, however long he could keep his enormous head from collapsing. The next morning, he repeated the same grueling routine.  A solemn man with tremendous self-discipline and unfaltering faith in himself, Treasury Secretary Chase faced the greatest challenge of his career — and the most urgent of the many problems plaguing the Union in those tense months after Fort Sumter. President Lincoln had given him the unenviable task of figuring out how to fund the war. Chase landed the job not because of any financial experience — he had none — but as a reward for supporting Lincoln at the Republican convention.  Neither of them could have anticipated how important a position it would become. Upon taking office on March 7, 1861, Chase inherited an epic mess. At the opening of the Civil War, the Treasury was a bureaucratic tangle of independent fiefdoms, marred by decades of mismanagement. The government had run a deficit every year since 1857, and revenue from taxes and tariffs, its principal source of income, had fallen dramatically. Lincoln commanded a poorly provisioned army of fewer than 20,000 men. He needed guns, ships, tents, uniforms. The war would be expensive, and Lincoln didn’t have time to find the money to fight it. For that, he needed Chase.  On July 17, 1861, Congress passed the first of Chase’s proposals. It enabled the Treasury to borrow as much as $250 million for the war effort by issuing bonds and notes. Chase hoped to sell these not just to the usual Wall Street banks but to a wide range of investors, including small-business owners and families. Ordinary Americans could show their support for the war by buying their government’s paper. There were bonds that matured in 20 years, interest-bearing Treasury notes payable in three years and notes that bore no interest but were payable on demand. These “Demand Notes” could be exchanged for coin at any time at one of the Treasury’s branches around the country. They came in small denominations like five, 10 and 20, which meant they could circulate as money.  Explore multimedia from the series and navigate through past posts, as well as photos and articles from the Times archive.  This seemingly innocuous bit of legislation in fact heralded a radical shift. By issuing government debt in the form of notes small enough in value to be traded for goods and services, Chase had created a primitive kind of federal paper currency. Like most people, he expected the war to be brief. He believed his measures were temporary stopgaps, to be promptly abandoned once the emergency had passed. He couldn’t have foreseen that his Demand Notes would, in time, entirely revolutionize the nation’s currency.  For the last several decades, America’s paper money had consisted of notes printed by private banks across the country. By the time of the Civil War, more than 10,000 different kinds of paper currency circulated. America’s chaotic financial landscape had been tolerated by countless administrations fearful of overstepping the limits of federal power.  But the Civil War made it a liability the country could no longer afford. At first Chase moved cautiously, reluctant to make drastic departures from tradition. As the war dragged on, however, the severity of the situation emboldened him to undertake a total overhaul of the nation’s financial system. The Demand Notes he created in the first summer of the Civil War would lay the foundation for the modern dollar. A century and a half later, the green slips of paper that sit folded in our wallets are perhaps the war’s most pervasive legacy, a direct link to the early days of a conflict that altered the fabric of American life forever.  Ben Tarnoff, the author of “Moneymakers: The Wicked Lives and Surprising Adventures of Three Notorious Counterfeiters,” writes a blog called Where the Buffalo Roam.
Lincoln's treasury secretary came up with a plan to pay for the war that led to an overhaul of the nation's financial system.