Residents of Mobile, Alabama, who had not been keeping up with the financial news were probably scratching their heads when they ran across the following notice issued by the city’s three largest banks in the local March 13, 1864, Sunday newspaper:
“Notice to Depositors
Depositors are requested to withdraw their Bank balances as soon as possible, and determine for themselves whether they will exchange the present currency for the new currency in the proportion of two of new for three of old, or fund their present currency in four percent Bonds at par, according to the act of Congress.
All Deposits, Bank Balances, Collections, Certificates of Deposit, Checks, Dividends, etc., remaining undrawn on the 28th, will be funded in four percent Bonds for account of Depositors or owners, unless specially directed to the contrary.
No Deposits in the present currency will be received after the 20th last. After the 1st of April next, the new Treasury Notes will be received in payment and on deposit.
J.S. GREEN, Cashier
Bank of Mobile
D.O. Sampson, Cashier
Southern Bank of Alabama
J.D. McMillan, Cashier
Mobile Savings’ Bank”
After all, who had ever heard of banks requesting depositors to remove their bank balances as soon as possible? And when had a bank announced it would convert all remaining funds into 4-percent government bonds? What the heck was going on?
Runaway Inflation
To answer this question, a brief review of Confederate monetary and fiscal history is needed. Confederate Treasury notes were first issued in 1861 in very modest amounts to finance a war that most believed would be short. This naïve view was shared in the North and the South, but both sides were quickly disabused of this misapprehension. By 1862 it was clear the conflict was going to turn into a long and costly war in terms of lives lost and money spent.
The Confederacy had few options but to run the printing presses, and the volume of Confederate currency blossomed by hundreds of millions of dollars. The numbers in the table below tell the story:
Although the Act of October 13, 1862, authorized $90 million, over $138 million in Treasury notes were issued using various means. The Act of March 23, 1863, approved a staggering $615 million in Treasury notes, but most authorities agree that only about $518 million were actually issued. The long and short of this is that by the early months of 1864, almost $954 million had been placed in circulation, leading to breathtaking inflation levels and a corresponding collapse in the value of the Confederate dollar. Inflation, in combination with the fact that the Confederacy was slowly but surely losing the war, caused the value of the Confederate dollar to plummet. It fell from being worth 97 cents in terms of gold in June 1861 to a mere 4.5 cents in gold by March 1864, when the Mobile banks published their notice.
If there was any chance of salvaging the situation, the amount of Treasury notes in circulation had to be drastically reduced. After much wrangling, the Confederate government came up with a rather draconian plan to try to right the ship.
(Photos: Wendell Wolka)
Confederate Notes
Enter the Act of February 17, 1864, which was an amalgamation of several legislative proposals. Several of its key provisions precipitated the Mobile banks’ March 1864 notice and many more like it across the South:
• $200 million in a new series of notes would be issued (eventually more than double that amount was issued).
• All older series notes, with a few exceptions like the 1862 $100 7.3-percent interest-bearing notes, could be exchanged for the new 1864-dated notes at the rate of 3 “old” dollars for 2 “new” dollars (for example, $300 in old series notes could be exchanged for $200 face value in 1864-dated notes). The original deadline for this, April 1, 1864, was extended to July 1, 1865, in December 1864.
• Alternatively, old-series notes could be exchanged for 4-percent 20-year bonds at par until April 1, 1864. (This date was also pushed out to July 1, 1865, in December 1864.)
• Any old-series notes (again with a few exceptions) not taking advantage of one of the two preceding options would be repudiated or the subject of a progressive redemption penalty that would eventually make the notes worthless.
Banks across the South, faced with this complicated plan with many parts and moving target deadlines, attempted to protect their customers’ interests.
Alabama Banks
In the case of the Mobile banks, the institutions took several actions as indicated in their notice:
• Customer deposits of all kinds in Confederate funds were to be withdrawn by March 27, 1864, so that customers could decide whether to exchange old-issue for new-issue Treasury notes at the prescribed 3:2 conversion rate or exchange the old-issue notes for 4-percent 20-year bonds. Customers were responsible for taking timely action.
• Any remaining cash items in the banks on March 28, 1864, would be exchanged by the banks for 4-percent bonds.
• No deposits of any old-series CSA Treasury notes would be accepted after March 20, 1864.
• After April 1, 1864, only new
Treasury notes (the recently introduced February 17, 1864-dated series) would be received for payments and deposits.
Interim Deposits
One can imagine that the initial demand for the new currency and bonds could easily overwhelm the supplies available in many areas because of the original imminent deadline. To handle this crush of demand, more than 180 offices, called depositories, with more than 250 agents or their deputies, were utilized to issue so-called Interim Depository Receipts (IDRs).
These IDR certificates took several forms and acknowledged that the recipient had deposited a fixed amount of old-issue Confederate Treasury notes that would be exchanged for 4-percent bonds (or new-issue Treasury notes) when such became available. In the meantime, these certificates could be transferred to others and, importantly, used to pay taxes. The certificates were also essential because they started the clock on when interest began to accrue on the new bonds, which would be delivered at a future date.
when bonds and new-issue notes were not yet available.
(Photo: Wendell Wolka)
Southern Defeat
In Mobile, Charles Walsh, president of the Bank of Mobile (one of the three banks issuing the March 13, 1864, notice), served as the depositary and issuing agent for these certificates. Additionally, Anthony J. Guirot, confederate assistant treasurer serving in Mobile, issued some IDRs.
It is uncertain how this would have all played out if the war’s conclusion in April 1865 had not abruptly ended the forced contraction of the nation’s currency. As it was, the entire effort led to only a one-month bump in the value of the Confederate dollar in terms of gold (from 4.5 cents in March 1864 to 5.9 cents in June) before settling back into a downward spiral that further reduced the Confederate dollar’s value to 1.7-1.9 cents in gold in March 1865.
A version of this article appears in the March 2025 issue of The Numismatist (money.org)