Confederate States of America--Produce Loan Office

Upon its creation in early 1861, the government of the Confederate States of America sought ways to generate finances to pay for it growing military forces and operations needed for the impending war against the Union. The earliest plans involved taking loans (like $500,000 borrowed from the state of Alabama) and issuing treasury bonds. The first bonds were part of the “Banker Loan” plan, which involved issuing bonds to banks and commercial businesses, who could pay with specie (or hard currency). However, Confederate officials, including the Secretary of the Treasury Christopher G. Memminger, knew these efforts would fall short of providing the Confederacy the millions of dollars needed. Many southerners did not have great amounts of cash or currency to purchase bonds. However, a significant number of white southerners did produce agricultural goods for sale and export. Therefore, in May 1861, the Confederate Congress passed legislation for the first “Produce Loan,” which authorized the Treasury Department to issue $50 million in bonds, payable at 20 years with an interest rate of eight percent, that could be purchased by southern citizens who paid for them with crops or raw goods. The Confederate Treasury did not directly accept crops for bonds with this first Produce Loan, but instead circulated subscription lists for farmers to pledge a specific portion of their products for the bond. The raw goods (most often cotton and tobacco) were placed into a warehouse and the sold by the farmer by a certain date. The net profit from that sale would then be given to the Confederate Treasury in exchange for the bond. This arrangement provided the Confederacy millions of dollars in currency in short order.

The Confederate Treasury created the Produce Loan Office to manage this new type of loan. Part of its success involved generating public interest; therefore, loan officials held rallies and events to play upon Confederate patriotism. The response was strong initially. Within a few weeks, Confederate president Jefferson Davis reported to Congress that the effort promised to raise as much as $50 million. In reality, the initial Produce Loan brought slightly less than $17 million to the Confederate Treasury, but the sudden surge of cash boosted confidence in the government and provided badly needed revenue to fund the Confederate military.

In August 1861, the Confederate Congress authorized another Produce Loan, this one for $100 million worth of treasury bonds. It functioned the same as the original $50 million Produce Loan but expanded the type of payment accepted for the bonds, including treasury notes, specie, and foreign bills of exchange. The second Produce Loan netted the Confederate government around $17.5 million. A third Produce Loan passed Congress in April 1862, this one for $250 million in bonds, which took payment options even further. This third loan accepted payment in kind—farmers or planters could directly trade cotton, tobacco, and wool for treasury bonds. The Produce Loan Office recorded nearly $36 million in revenue from this last loan.

The Produce Loan Office continued to oversee produce loan operations for the Confederacy until the end of the war. It played a vital role in financing the government, and in trying to reduce inflation rates among treasury notes. Additionally, the office was tasked with managing other loan and tax efforts, such as the Cotton Loans and Tithe Taxes in 1863 and 1864, which involved the Confederate government receiving millions of dollars worth of raw goods. Overall, the Produce Loan Office oversaw the receipt of $71.5 million dollars in revenue.

The Produce Loan Office (which had officially been upgraded to a bureau in 1863) spent the last months of the war trying to sell or relocate large stores of Confederate cotton and other supplies before encroaching Union armies could capture or destroy it. With the collapse of the Confederacy, so too did the Produce Loan Office dissolve. (Michael A. Martorelli, “Financing the Civil War,” Essential Civil War Curriculum; Richard C. Todd, “The Produce Loans: A Means of Financing the Confederacy,” The North Carolina Historical Review, 46–74)