Trading With the Enemy

Today we are happy to welcome back guest author Philip Leigh. 

General Robert E. Lee

General Robert E. Lee

On June 7, 1863, the day before Robert E. Lee attended a cavalry review prior to his second Northern invasion that would culminate 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 Northerners 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 cotton 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 gold or 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 and 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 as late as 1967. Presently the bank is known as Citicorp. Two of Charles Stillman’s granddaughters married into the Rockefeller family.

Despite its legal circumvention advantage Matamoros was a comparatively minor part of Civil War inter-belligerent trade. More often, the exchange was directly across enemy lines. The practice became important about a year after the opening shots at Fort Sumter, in the spring of 1862 when 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 the gain was primary achieved through commerce with the enemy.

Major General William T. Sherman

Major General William T. Sherman

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.

Men are seldom motivated to enlist as soldiers merely to fight a war for economic gain. 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 hinted 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.

General Edmund Kirby Smith

General Edmund Kirby Smith

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, resulted in a 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, 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 use the staple as a means of curtailing the outflow of gold from the Treasury.

Since inter-belligerent trade was almost a certainty, each side adopted the 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, 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 Southern civilians on the far side of enemy lines than through the blockade.

President of the Confederacy Jefferson Davis

President of the Confederacy Jefferson Davis

Lincoln’s regulations were more convoluted owing 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, 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.

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 noted 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 Major General Benjamin 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 were not necessarily 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. Additionally, Northern merchants sometimes used a variety of evasions to run the Union naval blockade themselves instead of using 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.

Benjamin "Spoons" Butler

Benjamin “Spoons” Butler

After General Benjamin 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 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 Treasury’s gold reserves in the second half of 1864, because efforts reduced on the amount of cotton Union traders had available to sell to Europe in exchange for gold. Moreover, Lincoln concluded that he could slow the gold drain by requiring that cotton buyers be restricted 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 altruistic and diplomatically excusable 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 prior to the War. 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 Chief Justice of the Supreme Court late in the War, Treasury Secretary Salmon P. Chase was largely responsible for issuing cotton-trading permits. Petitioners encompassing the full spectrum of ethical limits continually hounded him for the profitable certificates. Although considered personally honest, Chase was a prideful man whose ambitions required money. For example, he hoped to unseat Lincoln in the 1864 Presidential election. Furthermore, his beautiful daughter Kate employed her charms in furtherance of his ambitions.

Secretary of War Edwin M. Stanton

Secretary of War Edwin M. Stanton

Among those snared by Kate’s attractions was Rhode Island Senator William Sprague who was then America’s wealthiest man and a large New England cotton-textile producer. They married in 1863 and 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 all the favors he asked for. Consequently, the Senator entered into a treasonous partnership to trade weapons for Confederate cotton in an episode known as “The Texas Adventure.”

In November, 1862 Sprague met a former Texan named Harris Hoyt  as Washington’s venerable Willard Hotel in Sprague, which was a center of intrigue. Hoyt claimed he was thrown out of the Texas because of his Union loyalties. Nonetheless, he added, the Texas legislature authorized him to build a textile mill there if he could raise the funds. If the Senator 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.

The vessel and cargo were ready by December, but there was no official approval from Secretary Chase. Instead, Sprague wrote letters of introduction for Hoyt to Navy Secretary Welles, New Orleans occupation commander General Butler, and to the Commander of the 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 discover that the Hoyt-Sprague partnership held title. In December one accomplice confessed his involvement on the same day Secretary Chase was nominated to become Supreme Court Chief Justice and Hoyt partially confessed the following month.

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

Hoyt originally hoped that Chase’s Chief Justice appointment would lead to his release. When it didn’t, he augmented his confession to include Senator Sprague’s role. Hoyt’s version was supported by the confession of the accomplice noted earlier, thereby providing the two witnesses required for a treason conviction against Sprague.

The matter was referred to Secretary of War Stanton. While Stanton was pondering the matter President Lincoln was assassinated. Thereafter, Stanton took no action because there was little appetite for an inquest that would have damaged the reputation of the martyred President’s administration. Additionally, Stanton was politically cagey. He could undoubtedly foresee advantages in having a uniquely wealthy Senator obliged to him.

Salmon P. Chase

Salmon P. Chase

Nonetheless, the accusations resurfaced five years after the end of the Civil War in 1870 when a Rhode Island Congressman named Jenckes sought re-election 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.

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

* * * * *

Philip Leigh received his BS in Electrical Engineering from the Florida Institute of Technology, and received his MBA from Northwestern University. He has written 22 articles for the New York Times Disunion. In 2013 Philip authored his first Civil War book Co. Aytch: Annotated and Illustrated; which is an illustrated and annotated version of the memoirs of Confederate Private Sam Watkins. Next month, Westholme Publishing will release his newest work titled Trading With the Enemy, which is about intersectional commerce between the North and South during the War. Philip also authored and self-published an illustrated and annotated version of Lieutenant-Colonel Arthur Fremantle’s Civil War diary titled Three Months in the Southern States.

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4 Responses to Trading With the Enemy

  1. Phil Leigh says:

    Those preferring to hear me read the article aloud may connect to the YouTube videos below. There are two parts because YouTube does not permit ordinary videos longer than 15 minutes. (The combination of both sessions is about 25 minutes.) Thus, you can now absorb the article while driving or exercising at the gym.

    Part One:


    Part Two:

  2. Joe Anders says:

    Hi Phil! Don’t have time to read the whole thing now looks great!

    • Phil Leigh says:

      Thanks, Joe…You can try the videos. That way you can listen to that post and don’t have to read it. For example, I sometimes I plug my iPhone into my car speakers and listen to Civil War lectures.

  3. George Leigh says:

    A cousin of mine named Phil Leigh posted your article to FaceBook! Do you know where your family is from?

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