How the Confederacy Provided Paper for Union Banknotes

Many of the second and third issue fractional currency proofs as well as some of the regular issue fractional currency notes are printed on paper watermarked "CSA." How did this paper, the same type that had previously been used by Keating and Ball to print $10 Confederate notes in 1861 and $100 notes in 1862 come to the BEP.
The story begins at high tide on September 28, 1861, a dark and moonless night. A steamship, the "BERMUDA," neared the darkened coast of Savannah, Georgia. She flashed a light on the landward side below the level of her decks so it could only be seen by those on shore. Two lights then lit up on shore. Captain Eugene Tessier sailed forward until the two lights were in line with each other. Keeping the two lights in line as one, he used this as a steering guide for a safe run into the blockaded Confederate port with a much anticipated and needed cargo of dry goods, food stuffs, and other necessities as well as munitions for the Confederacy.
This secret run was necessary because when the first six states seceded from the union, President Lincoln declared them to be in a state of insurrection. On April 4, 1861, he imposed a blockade on all sea ports from South Carolina to the Rio Grande. Three weeks later, on April 27, 1861, following the secession of NC and VA, he extended the blockade north to the mouth of the Potomac. The blockade was intended to isolate the Confederacy from the world and deprive it of supplies, and weaken its' war effort. Most historians agree that the blockade was the most important factor in bringing about the fall of the Confederacy. In 1863, it was so effective, the South was referred to as "a land besieged."
Early in the war, there was a high probability of a successful blockade run. The runners were all privateers. This essentially meant that they could charge as much as they wanted for their goods, limited only by what the market would bear. Salt worth $16 per ton in Nassau, brought $700; Coffee worth $249 brought $5500. The captain of a blockade runner could make $5000 per run, compared to a normal fee of $150. The ships used as blockade runners were usually side wheel steamers and were much faster than the Union ships. They were built specifically for blockade running. They were long and low (often nine times as long as they were wide) with only two short masts and convex forecastle decks. When discovered, they relied on their speed and evasive actions to avoid capture. They normally entered port on moonless nights at high tide using the light alignment system to guide them in since the Confederates had darkened all their lighthouses to make navigation difficult for the Union navy. The runners burned anthracite coal because it burned without smoke; a fact when discovered by the Union, caused the government to ban its export to foreign ports. When runners discharged their cargo, they would re-load with goods bound for England, usually cotton, and make a return trip.
The first steamer chosen to challenge the blockade was a newly completed iron hulled screw merchant ship with a large carrying capacity, the "Bermuda." She was built in the United Kingdom at Stockton-upon-Tees on the eastern coast of England in 1861. Her first owner was Edwin Haigh, a British cotton broker, but within a few days after completion, a bill of sale was executed to A.S. Herschel and George A. Trenholm of Charleston. Eugene Tessier was her first master. She sailed on August 22, 1861 from Liverpool bound for Charleston, but changed her destination to Savannah, Georgia, ran the blockade without problem and docked on September 28, 1861. Her cargo was a large amount of general supplies and weapons valued at over one million dollars. On October 29, 1861 she left Savannah with 2,000 bales of cotton and arrived back in Liverpool, England in November 1861. Captain Tessier then changed ships to the "Bahama," and on January 17, 1862, Captain Westendorff, a South Carolina citizen, who arrived from Charleston in December 1861 as captain of the "Helen" was put in command of the "Bermuda." The "Bermuda" sailed again and arrived in St. George's, Bermuda on March 22, 1962 where she stayed for four weeks without discharging her cargo. She left under the British flag on April 23, 1862 bound for Nassau with the intent of transferring her cargo to smaller vessels for shipment to the Confederacy. Five days later, on Sunday, April 27, 1862, off Hole-in-the-wall, she was captured by the U.S.S. Mercedita commanded by Captain Steelwagen. She was searched and since her log showed she had previously run the blockade, had contraband among her cargo and since some papers were destroyed by the captain's brother when she was captured, Captain Westendorff and 12 passengers were made prisoners and the "Bermuda" was escorted to Philadelphia. She arrived on Saturday, May 3, 1862, placed in the hands of Prize-master Abbott and adjudged a prize of war.
Much of the cargo of the "Bermuda" was very evidently contraband. Also, in a confiscated letter on board from Fraser, Trenholm stated "...we cannot too strongly impress upon you the adoption of the most certain means of preventing any of them falling into improper hands." She carried about 80 tons of munitions including heavy pieces of rifled artillery; six 5-1/2 inch Whitworth guns and five giant 8-1/2 inch Blakely guns, in cases with carriages and several thousand shells for each, varying in size from seven to 112 pounds each. She also carried two cases of Enfield rifles, .577 caliber rifles that were very popular infantry rifles for both sides; 300 barrels, 78 half barrels and 283 quarter barrels of gun powder; 700 bags of saltpetre; 72,000 cartridges; 2.5 million percussion caps, twenty-one cases of swords marked N.D. (Navy Department?); a large amount of army blankets; seven cases of pistols; several cases of military decorations, military buttons, some with a palmetto tree on them, some with an eagle surrounded by 11 stars (the number of states in the Confederacy); cases of cutlery some stamped "Jeff Davis, Our First President; The Right Man in the Right Place," and some stamped "General Beauregard; He Lives to Conquer." In addition, she carried five cases of lawns, thin or sheer linen or cotton fabric, each labeled with the "Flag of the Confederate States." She also carried 26 boxes marked P.O.D. (Post Office Department?) containing large numbers of Confederate States postage stamps, printing ink for postage stamps, copper plates for printing 400 rebel stamps at a time, 200,000 letter envelopes, a number of printing presses and other apparatus, including "CSA watermarked foolscap paper." In addition, the twelve passengers on board, listed as common sailors, were in fact printers and engravers. In another confiscated letter, they and the printing material were described as "presses and paraphernalia complete, obtained from Scotland by a commissioner of the Confederate government and sent with a lot of printers and engravers." Rounding out her cargo were some 50,000 shoes, 24,000 blankets, dry goods, drugs, tea, coffee, surgical instruments, books, leather, saddles, etc. Also on board, confiscated and used to prove that her intention was to run the blockade, were details on how to run the blockade using the series of lights.
The amounts and types of paper captured and sold to the Treasury department are difficult to ascertain. A letter on board the "Bermuda" to a Mr. Morris, a lithographer in Charleston who had run the blockade not long before was from a Mr. C. Straker, Stationery Dept., 80 Bishopgate within, 26 Leadenhall St., London and was dated February 12, 1862. It described his company's ability to provide this paper. He stated "we make and can buy paper of all kinds as well as any London house; so we could execute your order for foolscap loan paper, with watermark, "CSA" as shipped you, at 42s. per ream double, equaling two reams single." "Foolscap" is a British term meaning a size of drawing or printing paper. However, court records seem to refer to this paper as Bank Note paper, detailing "many reams of fine white Bank Note paper, watermarked 'C S A,' intended obviously for Confederate States banknotes and bonds." It seems from the court records that the United States Treasury Department acquired five cases (10 reams as the cases were double reams), at $2.00 per ream. The rest of the paper was described as 490 reams of Bank Note paper sold at $2.50 per ream, 35 reams foolscap sold at $6.00 per ream and 10 reams of damaged paper sold at $1.50 per ream. The paper bought by the Treasury department was primarily used to print proofs of Fractional Currency. Since these were primarily used for counterfeit detection, the Treasury opted to use this cheaper paper instead of the more costly and scarce regular banknote paper. It was watermarked "CSA" eight times in block letters. Each sheet was 13.25 inches wide and 16 inches long, an antique white woven deckle edge, full rag content paper. The watermarks appear on approximately 4 inch centers, are double lined, three inches wide and 7/8 inch tall. Most of the sheets, if not all of them, have a crease in the center where they were folded for storage.
After the "Bermuda" was adjudged a prize of war and her cargo sold at auction as contraband, her owners appealed to the District Court of the Eastern district of Pennsylvania. When this court sided with the prize court, the owners appealed to the United States Supreme Court. The case was heard in December 1865 with James Speed as the Attorney General and Salmon P. Chase as the chief justice. The opinion of the court was written by Chase. They concluded that "...the 'Bermuda' was justly liable to condemnation for the conveyance of contraband goods destined to a belligerent port,...the cargo having been assigned to enemies and most of it contraband, must share the fate of the ship...Our conclusion is, that both vessel and cargo, even if both were neutral, were rightly condemned, and on every ground, the decree below must be AFFIRMED."