By G. HALEY Garrison and RICHARD T. Gregg
Copyright ã International
Bond & Share Society 2001
In 1861, the Confederacy sent John Sliddell, a
southern statesman from Louisiana, to the Court of Louis Napoleon III, in order
to obtain diplomatic recognition by France as well as to try to enlist France
as an ally against the United States. The South desperately needed capital with
which to buy cannon, rifles, ammunition, and other war supplies. Benjamin
Franklin had fulfilled a similar role in the 1780s for the American Colonies
during the American War of Independence.
Sliddell spoke excellent French (his wife was the ‘queen’ of French creole
society in Louisiana) and his daughter Mathilde was known throughout the South
for her beauty. In the company of John Mason, the CSA envoy to England,
Sliddell sailed on the British ship Trent.
Forewarned, the US Navy intercepted the Trent
and removed both Sliddell and Mason as prisoners. The British were, of course,
incensed that their ship had been violated on the high seas, and threatened war
if the two gentlemen were not releaseed. Since the USA feared a widened war
against the combined forces of England and the CSA, it apologized and released
Sliddell and Mason.
On arrival in Paris, Sliddell’s courtly manners, and attractive wife and
daughter, quickly made him a Court favorite of Napoleon III. Napoleon dreamed
of an empire in Mexico and hoped that a Southern victory would suspend the
Monroe Doctrine, which up to then had prevented foreigh influence in the US
sphere of interest in the western hemisphere. Napoleon, however, stopped short
of recognizing the CSA, since France had an understanding with England that
France would not recognize the CSA unless England did, and England had no such
intention.
Though raising funds for the Confederacy
initially met with little enhusiasm in Europe, cotton was the key. With the
blockade by the North of Southern ports, cotton was in very short supply in
both England and France. A bond issue was offered in 1863 with a clause
permitting conversion of the bonds into cotton. The total of this loan was CSA
$15,000,000, but payable in Sterling (£3,000,000), French Francs (Fr75,000,000)
or in cotton (120,000,000 lb = 54,432,000 kg). The exchange rate was CSA $5 = £1 = Fr25 = 40 lb of cotton.
Interest was 7% per year, payable semi-annually. The conversion rate of the
bond into cotton actually offered the bond-holder cotton at 12 cents or 6 pence
per pound of cotton (approximately one-third of the market price). This meant
that investors were immediately attracted to the issue. Indeed, the speculators
looked on the bond as an option to acquire cotton at a low price, rather than
as an investment in the bond for a 7% return. Cotton was desperately needed by
the textile mills of France and England. The hitch, of course, was that it
would be delivered in the Confederacy, with the bond-holder being responsible
for shipment to Europe.
The right to convert the bond into cotton would expire six months after the
ratification of a Treaty of Peace between the belligerents. Notice of
Conversion was to be given to the representatives of the CSA in Paris or
London, and, sixty days thereafter, the relevant amount of cotton would be
delivered, if war still existed, at a point ten miles from a railroad or stream
navigable to the ocean, or, if peace existed, to the ports of Charleston,
Savannah, Mobile or New Orleans. Delivery would be free of all charges and
duties except the Export Duty of 1/8 cent per lb.
Frederick Erlanger, the son of Emile Erlanger
(one of the most important bankers in Europe after the Rothschilds) had become
infatuated with Mathilde Sliddell, with the result that the House of Erlanger
agreed to take the entire bond issue at a price of 77. The bonds were then
re-offered at 90. After an initial rise in price, the rumors of an imminent
collapse of the CSA and the defeat of General Robert E Lee at Gettysburg caused
a severe drop in the price. For a time, the market was supported by the use of
the bonds’sale proceeds to repurchase such bonds on the open market. Indeed, it
was felt at the time that the Erlangers took advantage of such support to sell
their remaining holdings, though the banking firm did hold a large position in
these bonds well after the war.
In due course, some bonds were presented for redemption in cotton, but it is
not known how much, if any, such cotton, reached Europe, or even if the
certificate owner had a valid claim after the war against any cotton already
set aside for the redeemers. A number of ‘Erlanger bonds’, possibly one-third
of the total issued, however, were held in the files of Erlanger &
Compagnie, but destroyed in the 1960s during a move of the London offices of
Leo Erlanger, the then-family owner of the banking firm, to smaller quarters,
following the sale of Erlanger & Cie. These had been acquired during the
1863 market support effort by Erlanger & Cie, following the price collapse.
Subsequently, the Erlanger firm reduced its contacts with the European
continent between 1880 and 1940, moving its operations to London.
These bonds wee printed in Europe, in four
denominations : £100 (Fr2,500 or 4000 lb of cotton), £200 (Fr5,000 or
8,000 lb of cotton), £500 (Fr12,500 or 20,000 lb) and £1,000 (Fr25,000 or
40,000 lb). In the CSA, it was the general practice to individually sign not
only the bonds, but also all the coupons. Faced, however, with a total of 3,000
bonds having 40 coupons on each, the need to sign 120,000 coupons was daunting
indeed ! It was decided to print the signature of Charles Walsh Jr on all
coupons of each bond, except the last coupon, no 40, which would be hand-signed
by Mr. Walsh, presumably as an assurance that the printed signatures were
valid.
While most of the bonds known today have the
Walsh signature printed on thirty-nine coupons, a certain number were initially
delivered to investors with all coupons
signed by Mr. Walsh. While the reason for this is not known, it might be
assumed that, in all probability, they were rushed out, fully signed, to meet
an immediate demand, pending receipt of bonds with the printed coupon
signatures. Only bonds of £1,000 denomination have been seen so signed. It has
been suggested that a total of about fifty of the £1,000 bonds were so created.
How such £1,000 bonds were initially selected for full signing is not known,
but possibly any certificate which was available was given to be fully signed
by Mr Walsh. (It should, of course, be kept in mind that all bonds, of all four
denominations, had coupon No 40 hand-signed by Charles Walsh Jr.) Certificates
known to be fully signed by hand include certificate no 11, four numbered in
the 50s and no 113. A total of only these six bonds is known today, but it is
always possible that other £1,000 bonds so signed might turn up, when owners
realize the £1,000 bond they hold is one of the fully-signed rarities.
References
White Gold by G Haley Garrison in
IBSS Journal, Spring 1990
Comprehensive Catalog
and History of Confederate Bonds by Dr Douglas B Ball 1998
Confederate &
Southern State Bonds
by Col Grover C Criswell, 2nd edition 1980
Copyright ã INTERNATIONAL BOND
& SHARE SOCIETY 2001
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