In June, 1860, a loan of twenty million dollars had been authorized by Congress. Of this amount, ten million was offered in October in a five per cent stock, and it had been bought by investors.
Before any installments were paid, the secession panic that followed the election affected credit, and many bids were withdrawn.
This so seriously crippled the Treasury Department, that as the New Year approached, it seemed likely there would be no funds with which to meet the interest on the National debt....essentially the failure of the Union treasury was at hand.
By the Act of December 17th, 1860, an issue of ten million dollars, in treasury notes, was authorized, to bear a rate of interest as might be offered by the lowest bidders, but so shaken was credit, few bids were made, and some of them at a rate of thirty-six per cent interest per annum.
The investors interested in the Government credit finally took one million five hundred thousand dollars of one-year treasury notes, at twelve per cent per annum (the amount was subsequently raised to five million dollars), on condition that the money should be applied to paying the interest on the national debt.
This was certainly a dark day in the Capitol, when the Federal Government, which had earned the honor of being the only nation that had ever paid its debts in full—principal and interest—and which in 1856, with an overflowing treasury, had paid twenty-two per cent premium for its own stock, was now reduced to give twelve per cent interest, for a few millions, and to engage to protect its credit with the money.
This, combined with the reality that as soon as the primary cotton and tobacco producing states seceded with the subsequent massive loss in exportable products, that the US Treasury was in extreme jeopardy.
Sure, but as with other Northerners of that time, they all soon made adjustments, adapted and continued to prosper.
Congress found other ways to collect revenues and tariffs soon became less important to the Federal treasury.