Sailors, Diplomats, Tycoons and the Campaign to Control California’s Gold in the Civil War

Today, we are pleased to welcome back guest author Neil Chatelain

As massive operations spread across the United States during the Civil War, a secret and ever-important campaign was being waged at sea. This was not ironclad warships battling one another or amphibious assaults securing Confederate port cities. For four years, a continuous struggle, fought by sailors, diplomats, and tycoons, waged over control of the Panama Route and the valuable steamers carrying gold from California to Panama to New York. Waged across the Atlantic, Pacific, and Caribbean, this campaign would determine which side had access to hard currency, adding security and financial stability to the victor.

Control of the Panama Route remained crucial to both sides. By the end of the war, over $165 million in bullion traversed this avenue from California to New York, with individual ships carrying upwards of one million dollars in gold. These shipments, combined with wheat exports from the Midwest and war bonds, stabilized the Northern economy and helped to sustain its war effort. On the other end, the Confederacy had precious few gold reserves and needed funds in the hundreds of millions of dollars to sustain its armies. The opportunity to strike at the Union’s most important shipping route could not be forgone, and Jefferson Davis initially tasked the Confederate Army to seize a land route to California to intercept the gold being shipped overland. General Henry Sibley led a force of Texans into Arizona, hoping to secure a foothold in the west while stirring up Southern sympathizers in both Colorado and California. Instead, Sibley’s force faced defeat and the American southwest remained solidly in Union hands.[i]

With his ground campaign a failure, Davis next tasked Stephen Mallory and his naval forces to target the Panama Route directly, interrupting it by capturing gold steamers via three avenues: commerce raiders, privateers, and special operations teams. Even the capture of one Union steamer laden with gold would be, as President Davis reasoned, “more important than many victories in the field.”[ii]

Mallory’s first avenue of attack emerged through privateers. A group of Californians who sympathized with the Confederacy approached the Southern government and received a letter of marque, the document that legitimized civilians to act as government-sponsored privateers. Returning to California, they purchased the steamer J.M. Chapman and stockpiled weapons and supplies with the intention of interrupting the line of the Pacific Mail Steamship Company and capturing a ship laden with bullion. Just as the Chapman commenced leaving San Francisco harbor to secretly begin its cruise, a collection of sailors and San Francisco Police boarded and seized the vessel; a deserter had informed them of the imminent sailing of the Confederate sympathizers. Instead, the leaders of the Chapman faced trials for treason, including ultimate sentences of ten years in prison and fines of $10,000 each.[iii]

Mallory also dispatched commerce raiders. Confederate officers at sea and in Europe dreamed of raiding the Union coast, holding a major city for ransom, or of capturing a prized gold steamer, and the orders issued by Mallory to his squadron commander in Europe reflected that. The raiders Alabama and Shenandoah, along with the ironclad Stonewall, each received such orders. Word of their arrival near shipping lanes, along with speculation about others, often caused considerable panic among the wealthy merchants and business tycoons of New York. “I hope to strike a blow of some importance,” Captain Raphael Semmes of the Alabama noted in his diary while hovering among the known shipping lanes.[iv]

Raiders targeted gold steamers in both the Atlantic and Pacific; Alabama scoured the Caribbean in 1862 while Shenandoah headed towards the California-Panama route after cruising in the Bering Sea against the Union whaling fleet. Only news of the surrender of Confederate armies prompted the Shenandoah to abandon its raiding desires against California’s gold.[v]

Attempts by commerce raiders to capture gold steamers failed in virtually all aspects. Only one such steamer, the Ariel, surrendered to Southern ships – en-route to Panama and barren of any gold. Instead, the vessel contained passengers making the trip to California, including a detachment of naval officers and Marines on their way to reinforce the defenses of San Francisco. Captured by the Alabama in December 1862, Semmes released the ship days later with a bond $250,000 and paroles for the military personnel onboard. The Alabama continued plying the known routes of the gold steamers for a time before abandoning that venture for others.[vi]

The third naval approach involved secret teams of sailors who would capture a gold steamer from within. Several such attempts were planned, but only one major effort came to fruition in late 1864. Thomas Hogg, an acting master in the Confederate Navy, formed a small team that slowly and carefully made their way to Aspinwall – modern day Colón, Panama. Once there, Hogg’s men discreetly purchased gunpowder, arms, and tickets for passage on the Salvador, preparing for its voyage from Aspinwall to New York with a supply of gold. Union diplomats tracked their movements and preparations, alerting the United States Navy. On November 10, 1864, Hogg and his men boarded the Salvador for their voyage, but before they could act, a detachment of sailors from the USS Lancaster boarded the Salvador and took the Confederates prisoner, discovering among their baggage “instructions from the rebel Secretary of the Navy, Mallory, small-arms of all kinds, handcuffs, &c.”[vii]

Many in the United States recognized the importance of the gold steamers, resulting in numerous countermeasures taken to protect the ships. In the war’s first months, numerous shipping owners demanded assistance and protection, including none other than shipping tycoon Cornelius Vanderbilt. With the blockade on the top of Union priorities, ships could not be spared so early in the conflict. Instead, the government provided surplus cannon and rifles, so the ships could defend themselves.[viii]

When this failed to quell the calls for protection by the wealthy shippers, the Union Navy took direct action through the formation of the West Indies Squadron, tasked with protecting Union commerce and hunting Confederate raiders in the Caribbean Sea.

Following the capture of the Ariel, a system of convoys – the first established in the history of the United States and the first seen in the Americas since the Spanish Treasure Fleets – was organized and later expanded upon. In its full realization, warships provided escorts from New York to Aspinwall and from Aspinwall to the Yucatan-Cuba Passage. From there, gunboats on blockading duty took over and covered any gold steamers traversing through their area. Coal and supply stations established along the route ensured adequate support, sustaining the operation through May 1865. In the Pacific, all steamers assigned to the Pacific Naval Squadron, less one remaining in San Francisco for defense, remained on constant patrol along the gold shipping routes. To further protect the gold steamers, the government issued laws providing for inspections of all baggage brought onboard the ships, with contraband and firearms subject to immediate confiscation. These measures helped to maintain the constant flow of gold from California to New York.[ix]

The Confederacy’s campaign to interrupt the shipping lanes from California and to seize the gold steamers operating on them proved an abject failure. Confederate efforts were too disorganized to overcome the response by Northern naval and diplomatic agents. Gunboat convoys and diplomatic efforts interdicted Southern plots, protected the precious supply of gold, and mollified powerful shipping tycoons.

[i] John Haskell Kemble, The Panama Route: 1848-1869 (Berkeley, CA: University of California Press, 1943), 255.; William Seward, “William Seward to Charles F. Adams”, August 12, 1863, Papers related to Foreign Affairs, Accompanying the Annual Message of the President to the First Session Thirty-Eighth Congress (1863), vol. 1 (Washington, D.C.: Government Printing Office, 1864), 393.; Donald Frazier, Blood Treasure: Confederate Empire in the Southwest (College Station, TX: Texas A&M University Press, 1995), 231-258.

[ii] Asbury Harpending, The Great Diamond Hoax and Other Stirring Incidents in the Life of Asbury Harpending, ed. by James H. Wilkins (San Francisco, CA: James H. Barry Co., 1913), 47.

[iii] Ibid., 78.; United States v. Greathouse et al., 26 Fed. Cas. 18, Case No. 15,254. (1863).

[iv] Raphael Semmes, “Journal of the Commander of the Confederate States’ Steamer Alabama 1862-1863,” December 15, 1862, Semmes Family Papers, LPR43, Alabama Department of Archives and History.

[v] Stephen Mallory, “Stephen Mallory to Samuel Barron”, February 22, 1864. Official Records of the Union and Confederate Navies in the War of the Rebellion, ser. 2, vol. 1 (Washington, D.C.: Government Printing Office, 1884 – 1927), 593 (hereafter cited as ORN).; James Waddell, “Notes”, ORN, ser. 1, vol. 3, 831.

[vi] Raphael Semmes, “Journal of the Commander of the Confederate States’ Steamer Alabama 1862-1863,” December 15, 1862, Semmes Family Papers, LPR43, Alabama Department of Archives and History.

[vii] “From Panama,” Evening Star (Washington, D.C.), December 5, 1864.

[viii] Cornelius Vanderbilt, “Cornelius Vanderbilt to Gideon Welles,” April 16, 1861, ORN, ser. 1, vol. 1, 8.

[ix] “Gideon Welles to George H. Cooper”, December 30, 1862, ORN, ser. 1, vol. 1, 604.; “California Steamer Searched,” Evening Star (Washington, D.C.), December 24, 1863.