The Civil War and the need for heavy government borrowing put American banks under pressure from the start. By the end of 1861, a combination of over-extended lending to the U.S. Treasury, poor news from the battlefields, and a possible rift with Britain over the Trent Affair, led to depositor withdrawals so heavy that the New York banks suspended all payment in specie. Banks in Boston and Philadelphia followed suit the same day. The suspension, and the February 1862 Legal Tender Act, hastened the widespread use of paper money. (By John Osborne)
Source Citation
Joseph French Johnson, Money and Currency: in relation to industry, prices and the rate of interest (Boston, MA: Ginn and Company, 1905), 272
Record Data
Date Certainty
Exact
Type
Business/Industry
