A Counterfeiter's Paradise (28 page)

Philadelphians had strong economic ties to the South, which made them receptive to Southern concerns and resentful of the city’s vocal abolitionist minority. But as the disputes of the 1850s deepened into something resembling insurrection, Philadelphia’s sympathy wore thin. South Carolina seceded on December 20, 1860. By the time Lincoln took office in March, six more states had left the Union and Jefferson Davis had been named president of the new Confederate States of America. Then at four-thirty in the morning on April 12, 1861, Confederate batteries opened fire on federal troops garrisoned at Fort Sumter, outside Charleston, South Carolina.

Fort Sumter sparked an outpouring of patriotism throughout the North.
In Philadelphia, homes and shops and streetcars sprouted red, white, and blue; the hatred once reserved for abolitionists was now directed at the city’s pro-Southern Democrats and anyone else perceived as insufficiently patriotic. The change of heart had nothing to do with slavery. The nation had been attacked and needed to retaliate. Upham shared this view. While stopping in Rio de Janeiro on his way to California, he had felt little compassion for the city’s many slaves; they “appear to be well treated,” he noted. Upham undoubtedly saw the Civil War as the majority of Northerners did, not as a crusade to end slavery but as a necessary effort to preserve the Union and punish the insidious forces of secession.

The North faced enormous logistical challenges. Lincoln inherited a feeble federal government, an army of fewer than twenty thousand men, and an empty Treasury, its credit exhausted by decades of mismanagement. The government had run a deficit every year since the Panic of 1857, and revenue from taxes and tariffs, its main source of income, had dropped precipitously. The Union needed ships, trains, weapons, tents, uniforms. The war would be expensive, and Lincoln didn’t have time to figure out how to finance it. The man he counted on to deliver the funds was his treasury secretary: a tall, difficult man named Salmon Portland Chase.

Chase had no financial experience. He had been appointed to the Treasury for political reasons, as a reward for his support for Lincoln at the Republican convention. Neither of them could have anticipated how important a role it would become. Chase had grown up in Ohio, represented the state in the Senate, and served a term as governor. He belonged to the antislavery wing of the Republican Party, but his proud, patronizing attitude prevented him from going very far in politics. He had always been arrogant; even as a boy he had held himself apart from others, as if destined for greater things. His supreme confidence in himself, coupled with a relentless work ethic, brought him the success that he craved. He first made a name for himself in Cincinnati, as a defense lawyer advocating on behalf of fugitive slaves and those who harbored them.

The law suited Chase. He believed in the dispassionate justice of the courtroom, in process and precedent. His antislavery views had been formed in large part from his disgust for lynch mobs. In 1836, as local tensions over slavery grew, he met many of Cincinnati’s antislavery activists through his abolitionist brother-in-law Isaac Colby. One day an anti-abolitionist mob came looking for one of Chase’s friends at the hotel where he and his family had taken refuge. Chase planted his powerful frame in the doorway and refused to let them inside. This act of defiance helped sharpen his thinking on the issue. Even as he became convinced of the moral evil of slavery, however, his reverence for the law kept him from embracing the more radical positions of the abolitionist movement. Chase didn’t think the federal government had the authority to abolish slavery in the South; the aim, he reasoned, should be to limit slavery to the states where it already existed. While he had opposed Andrew Jackson, whom he denounced as a vulgar “ignoramus,” he shared Jackson’s conviction that the power of the federal government should be limited. He also shared another of Jackson’s beliefs, that gold and silver made the best currency.

After Fort Sumter, Chase secluded himself in the immense colonnaded structure that housed the Treasury and put together his plan to fix the nation’s finances. He worked ten to twelve hours a day, patiently beating a path through the bureaucratic wilderness. Like most people, he didn’t expect the war to go on for very long. True to his conservative nature, his measures were intended to raise the money required to suppress the rebellion without making any sweeping changes to the Treasury’s dysfunctional machinery.

Chase presented his proposal to Congress in the summer of 1861. The legislation, signed by President Lincoln after little debate, allowed the Treasury to borrow as much as $250 million by issuing bonds and notes. Chase hoped to sell these not just to Wall Street but to ordinary Americans, who could show their support for the war by lending their government the money needed to fight it. So he printed paper obligations
meant to be affordable to a range of investors: institutions, small-business owners, even families. There were bonds that matured in twenty years, interest-bearing Treasury notes exchangeable in three years for bonds or specie, and notes that bore no interest but were payable on demand. These “demand notes” were the most significant. They came in small denominations like five, ten, and twenty, which meant they could circulate as money.

Demand notes paved the way for a momentous 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 kind of federal paper currency. Uncomfortable with drastic departures from tradition, he moved cautiously, holding fast to his hard-money ways. His demand notes could technically be redeemed for coin at any time at one of the Treasury’s branches, or “sub-Treasuries,” around the country. This meant that as long as Americans had faith in the government’s promises, they would keep passing the paper. But if their trust wavered, they could exchange the notes for precious metals—and if everyone tried to exchange notes at the same time, it would drain the Treasury’s specie. Chase’s money thus made the government’s finances precariously dependent on the people, whose collective confidence had the power to make or break the credit of the nation.

A hundred miles south of Washington was Richmond, Virginia, the capital of the Confederacy, where Chase’s counterpart struggled to finance the other side of the war. Treasury Secretary Christopher Gustavus Memminger had blue-gray eyes, white hair, and a sharp-featured face. His department occupied the first floor of a beautiful Italianate edifice that looked more like a Renaissance palazzo than a government building. On the second floor, Jefferson Davis and his secretary of state had their offices, and down the street stood the War Department’s makeshift headquarters. Unlike most members of Davis’s cabinet, Memminger wasn’t a native-born Southerner. A German immigrant whose mother died soon after arriving in South Carolina, he grew up in an orphanage in Charleston, and would
have remained there if Thomas Bennett Jr., a distinguished local citizen, hadn’t adopted him.

A small, slightly built boy, Memminger had excelled in school, impressing his classmates with his tremendous self-discipline. Like Chase, he became a lawyer and then a politician, winning a seat in the South Carolina legislature. In the decades before the Civil War, Memminger played a moderating role in the disputes surrounding state sovereignty, urging South Carolina to remain in the Union until Lincoln’s election persuaded him secession was necessary. His allegiance was always to his adopted state, not his adopted country. South Carolina had delivered him from poverty to prominence, and he was determined to repay the debt. No matter how zealously he embraced the Confederate cause, however, Memminger stayed somewhat of an outsider: a foreigner and an orphan in the keenly class-conscious aristocracy of the South.

If Chase’s job was demanding, Memminger’s was nearly impossible. He knew about finance from his time as chairman of the state legislature’s Ways and Means Committee, where he had pushed banks to print fewer bills and maintain specie payments. But even with his expertise and earnestness, Memminger could only make so much of an unworkable situation. The Southern central government had very few ways to raise money. The states, emboldened by the recent reassertion of their sovereignty, resisted taxation, and tariffs from the overseas cotton trade dwindled with the Union naval blockade. So the Confederate Congress, starting in March 1861, authorized the issue of paper notes. These were, in theory, exchangeable for specie—either after a specific date or on demand—although the South suspended specie payments shortly after the war started. The Confederacy didn’t have much in the way of precious metals; in fact, New York City’s banks had more gold and silver in their vaults than all of the Southern banks combined. But Memminger had no alternative, so as war expenses rose, he printed more paper. With every new batch of Confederate notes, the possibility of ever being able to
redeem them all became more remote. Nonetheless, the value they generated for the time being gave much-needed financial fuel to the fledgling Southern nation.

The Civil War would be fought not just with guns but with the paper promises of two governments—competing promises tied to two incompatible visions of America. At the age of forty-three, Upham became an unlikely combatant in this conflict. The forgeries he sold at the store he opened after leaving the
Sunday Mercury
challenged the legitimacy of the Southern government in a way his caricatures of Jefferson Davis never could. After decades of drifting from one occupation to another, Upham had found the perfect job, one that let him serve his country and his pocketbook at the same time.

T
HE PRISONERS BEGAN ARRIVING AT FOUR
in the morning, the ones who weren’t too wounded to walk. It was June 28, 1862, the day after a decisive Southern victory at the Battle of Gaines’ Mill, outside Richmond. That summer the Union army tried to take the Confederate capital and failed; the war, it seemed, would go on much longer than anyone had thought. Thousands of Yankees now filed into Richmond, not as conquerors but as captives, columns of exhausted men in ragged blue uniforms. Women heckled them as they passed. “This is another way to take Richmond,” yelled one. The soldiers were headed for Libby Prison, a sprawling former warehouse overlooking the James River. They lined up in front, entering the clerk’s office four at a time to be processed and then corralled into one of eight large, lice-infested cells.

Waiting outside with the others was Private Robert Holliday, Company F, Eleventh Pennsylvania Reserves. Holliday was hungry, and he knew he couldn’t expect to eat well in prison. So he decided to buy some food. Reaching into his pocket, he pulled out a $10 Confederate note and called over a boy named James Ballou. Handing Ballou the bill, Holliday sent him to a nearby bakery to get bread.

An onlooker caught the exchange and, intercepting the boy, demanded to look at the note. It was one of Upham’s fakes—“a counterfeit of the
Philadelphia manufacture,” declared the
Daily Richmond Examiner
in its indignant report of the incident. Only a few months since he started printing his “facsimiles,” the Philadelphia forger had become notorious in Richmond. The $5 bills he copied from the
Philadelphia Inquirer
had surfaced there as early as April, and caused a sensation at the Confederate Treasury Department. One of Treasury Secretary Christopher Memminger’s men persuaded the editors of the
Richmond Daily Dispatch
, the most popular of the town’s papers, to spread the word about the new counterfeits. “This note is well calculated to deceive, and in nearly every particular is a fac-simile of the original,” they wrote, condemning the forgeries as “Yankee scoundrelism.” As more of Upham’s bills poured in, their outrage grew.

In May, the editors found an Upham reproduction with the bottom margin bearing his name and address still attached. “Who is this man Upham?” they asked. “A knave swindler, and forger of the most depraved and despicable sort.” Within a couple of days, they came up with a better answer, having researched the mysterious counterfeiter’s background. Upham, a name already “well known to many Virginians,” had edited the
Sunday Mercury
, “in which profession he failed, owing to his lack of brains and low standing in society.” Too stupid to make an honest living, Upham had since “taken to all sorts of low thieving and mean rascality.”

The venom of these attacks reflected how much had changed in the past year. Before the Civil War, counterfeiters had been, at worst, nuisances to the banks whose notes they forged and, at best, heroes to those too poor or isolated to acquire genuine bills. They were idolized, ignored, and disliked, but rarely detested. Upham belonged to a new class of counterfeiters, those who forged the money of governments, not just banks. The stakes were much higher: these notes were backed by regimes prepared to send thousands of their citizens to the most gruesome deaths imaginable to secure their sovereignty. Their paper obligations were symbols of that sovereignty, rectangles emblazoned with images that reminded people
from tiny towns in New Hampshire or North Carolina that they were part of a proud, powerful country. When Private Holliday tried to buy bread with a fake bill, it was an affront to the Southern nation as a whole. “The attempt to pass a counterfeit Confederate note is certainly an act of hostility against our government,” said the
Daily Richmond Examiner
. Upham provoked such vitriol because he enabled people like Holliday to undermine the Confederacy’s authority. The fact that he did it so openly—that he was brazen enough to put his name and address on his counterfeits—made Southerners even angrier. At 403 Chestnut Street in Philadelphia, a shopkeeper was selling stacks of fake Southern cash, and the Confederates couldn’t do anything about it.