Only a few years earlier in 1857, the country had experienced a serious economic recession so fiscal skepticism and anxiety was understandable at the beginning of the Civil War. The country lacked a strong banking system. Economic historian Bray Hammond wrote: “The source of the fright was not merely political, nor was there the slightest idea of what it was going to cost to regain the seceded states. Its most substantial cause was the enormous indebtedness of southern banks and business men to northern banks and business men.” 9 Secession disrupted the northern economy in many ways. Historian Allan Nevins noted that there was a “brief paralysis which accompanied and followed secession. The failure of banks whose notes were based on Southern bonds, the collapse of firms to which Southern interests owed large debts, the embarrassment of businesses trading in Southern cotton, sugar, and naval stores, the suspension of commission houses acting for Southern shippers, all added heavy blows to the initial shock and uncertainty. The breakdown of Illinois banks for example, which had based their note issues on Southern State bonds, was calamitous.” 10


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