Seven

Norfolk

IN LATE SPRING 1862, WHEN MAJOR GENERAL GEORGE B. McClellan launched his campaign to capture Richmond from the southeast by marching up the peninsula between the York and James rivers, the Confederates were forced to abandon Norfolk and nearby areas. After dueling the ironclad USS Monitor to a draw several months earlier, the armored ram CSS Virginia was scuttled. It drew too much water to move to a safe anchorage farther upstream. By the end of June 1862, the federals occupied Norfolk and a surrounding region encompassing a population of about forty thousand.1

McClellan's one-hundred-thousand-man army blocked Norfolk civilians from obtaining supplies from the Confederacy. If the civilians were to survive, it would be necessary for the federal military forces to make allowances for Norfolk-area citizens to trade with others outside the region. Because Norfolk was a blockaded port, the 1856 Paris Declaration of Maritime Law, which was the Lincoln-Seward basis of the federal blockade, required that it be opened for trade from any neutral country once it became a Union-occupied city.

MAJOR GENERAL JOHN DIX

However, sixty-four-year-old Major General John Dix, who was the occupation commander, did not want the blockade lifted. Rather, he desired to be given the authority to grant permits to individual businessmen, empowering them to import and export merchandise in sufficient quantities to sustain the area's economy. Essentially, he was reaching for monopolistic control over trade into and out of Norfolk.

Dix was a New York businessman and politician with connections to powerful characters who might be described as “robber barons” in the soon-to-arrive Gilded Age. In the final months of the Buchanan administration, Dix was secretary of the Treasury. His appointment was a gesture to a Wall Street community that was losing confidence in the Union during the secession crisis and threatening to discontinue bond purchases needed to finance government operations. The month before Dix's appointment, the federal government was unable to float a $5 million issue, even at a 12 percent interest rate. His predecessor supported the evacuation of Fort Sumter in order to avoid open warfare. New York financiers told Buchanan that they wanted such a man replaced by another who held strong Union credentials and suggested Dix. In 1853, he became president of the Mississippi & Missouri Railroad, which was to become an integral link across Iowa for the first transcontinental railroad. After the war, he was president of the Union Pacific Railroad during its scandalous construction phase. He was an ally of New York political boss Thurlow Weed's, who had earlier promoted legislation for the formation of the New York Central Railroad, which was the largest American corporation of its day.2

Along with Nathaniel Banks, John C. Frémont, and Benjamin Butler, Dix was one of Lincoln's four most prominent “political” generals. All four attempted to use their military positions to political advantage, while Butler and Dix also leveraged them for personal economic gain. The varied appointments over his career suggest that Dix was a skilled logroller and influence peddler.

At Norfolk, he first asked that Secretary of War Stanton request trading permits from Treasury Secretary Chase. Chase directed customs collectors at Boston, New York, Philadelphia, and Baltimore to grant limited permits to “reliable persons” for authorization to carry cargoes to and from Norfolk. One such permit went to a protégée of Hiram Barney's who managed Chase's New York real estate holdings and loaned the Treasury secretary $45,000, which may have never been repaid. Barney was also a Treasury customs collector whose duties included receiving and selling confiscated cotton from the Confederacy for a 5 percent fee.3

However, since Chase had presidential ambitions and wanted to avoid even the appearance of impropriety, he required that Stanton certify the shipments were a “military necessity.” As the summer wore on, trade in Dix's department grew rapidly. Stanton was letting Dix originate some of the certificates. But despite the growth, Dix wanted more volume and needed a way to eliminate “military necessity” as a restriction. His ambition was setting him up for a confrontation with the blockade policy of Navy Secretary Gideon Welles.⁴

Originally, the blockade at Norfolk was under the direction of Rear Admiral Louis Goldsborough, who was amenable to Dix's arrangements. However, Rear Admiral Samuel Lee soon replaced Goldsborough. Thus began a war-within-a-war as Dix and Welles fought a battle of words and letters. Welles took the position that Norfolk was still under blockade since Lincoln had not yet declared the port open for business. While Dix liked the idea of blockading everyone else, he wanted his ships to pass through under the authority of permits. Essentially, Welles responded that he did not care about permits. So long as the president had not lifted the blockade at a given port, Welles's ships would attempt to halt any merchant vessel trying to enter that port. Explicitly identifying Dix in his diary, Welles accused the general of “pressing corrupt schemes” for the benefit of the “rotten officers on his staff” and the gang of scoundrels who surrounded him.5

Meanwhile, Dix tried to increase the trade volumes allowable under the permit system by replacing the “military necessity” constraint with more-liberal restrictions to amounts “essential to the maintenance of our authority.” Evidently sensing political liability, Stanton washed his hands of the matter by refusing to sanction any more permits, thereby motivating Dix to approach General in Chief Henry Halleck. In an effort to retain his trading monopoly, Dix began by complaining that a garrison commander in Washington, DC, had issued unauthorized permits for cargoes into and out of Norfolk, thereby implying that he wanted the practice stopped. Essentially, the general was trying to monopolize Norfolk trading permits. The Washington garrison commander was an earlier political rival to Dix.

Before Dix could make much progress, Admiral Lee told him that Secretary Welles had sent a directive requiring Lee to stop any vessel, whether with or without a permit. Dix decided to defy Lee and issued more permits. Welles felt compelled to raise the matter at a cabinet meeting with the president. Welles opined that if trade were to be initiated at Norfolk, it should be done by officially lifting the blockade. Chase advocated a permitting scheme similar to the one in use before Admiral Lee took charge. Lincoln instructed Seward and Chase to work together to formulate a policy. That night, Welles commented in his diary that Chase was generally “severe toward the Rebels except in certain matters of trade and Treasury patronage.”⁶

The matter was brought up at another cabinet meeting where Stanton threw his weight behind Dix. Although no decision was made, Stanton erroneously wrote Dix that he could freely issue permits. Another cabinet meeting on October 24, 1862, was indecisive until Seward urged that the matter be delayed until after the elections in early November. Simultaneously, Great Britain's textile industries were running low on feedstock. Consequently, the country's diplomats were lobbying Seward for action to increase the supply of cotton. On November 5, 1862, the Republicans learned they lost important elections in New York and evidently decided that Dix could help mend political fences. Therefore, Lincoln directed that commerce at Norfolk be operated under the authority of the Treasury, which Chase had already put under the de facto control of Stanton and Dix. Thus, Lincoln's decision overruled the Welles viewpoint and restored an uncontested permitting system of trade at Norfolk, which was Dix's objective.7

Soon the number of authorized trade permits at Norfolk doubled, and redoubled. One observer estimated that eight million pounds of bacon entered the Confederacy by this route in winter 1862–1863. A month before the battle of Chancellorsville in May 1863, the meat ration of General Lee's soldiers was reduced to four ounces per day. Lieutenant General James Longstreet's entire corps was relocated to southeastern Virginia in order to gain access to more food supplies, which is why the corps was unavailable for the battle. There was deep concern that even more of Lee's army might have to be repositioned owing to the shortage. Fortunately for the Confederates, supplies allowed through Dix's trading monopoly prevented a further reduction in the size of General Lee's main force on the eve of its greatest victory.⁸

Navy Secretary Welles persistently believed that the Dix-Chase trade policies were thinly disguised methods for lining the pockets of politically well-connected businessmen. Since blockading Norfolk on a permit-exception basis was a violation of the 1856 Paris declaration upon which Lincoln justified the blockade, it must be concluded that the president demonstrated he would not consistently apply the declaration's principles when they failed to conform to his objectives.⁹

MAJOR GENERAL BENJAMIN BUTLER

By summer 1863, Lincoln was dissatisfied with Dix militarily, especially for failing to advance on Richmond as Lee's army was invading Pennsylvania in a campaign that culminated at Gettysburg. Dix was sent to New York, where he was in his element among the businessmen, shippers, and financiers. A few months later, in November 1863, General Benjamin Butler, who had been the maestro of interbelligerent trade earlier in New Orleans, took over at Norfolk.10 Wherever Butler was in command, intersectional trade flourished. The general remained the district commander for fourteen months, until January 1865, which was three months before Lee's surrender at Appomattox. Historian Ludwell Johnson concluded:

 

From the evidence available, there can be no doubt that a very extensive trade with the Confederacy was carried on in [Butler's Norfolk] Department…. This trade was extremely profitable for Northern merchants…and was a significant help to the Confederacy…. It was conducted with Butler's help and a considerable part of it was in the hands of his relatives and supporters.¹¹

 

Shortly after arriving in Norfolk, Butler became surrounded by such men, including a number who had been with him in New Orleans. Foremost among them was Brigadier General George Shepley, who had been military governor of Louisiana. Butler invited Shepley to join him and “take care of Norfolk.” After his arrival, Shepley was empowered to issue military permits allowing goods to be transported through the lines. He designated subordinate George Johnston to manage the task. In fall 1864, Johnston was charged with corruption. However, instead of being prosecuted, he was allowed to resign after saying he could show “that General Butler was a partner in all [the controversial] transactions,” along with the general's brother-in-law Fisher Hildreth. Shortly thereafter, Johnston managed a thriving between-the-lines trade depot in eastern North Carolina.¹²

There is no doubt that Butler was aware of Shepley's trading activities. His own chief of staff complained about them and spoke of businessmen who “owned” Shepley. Butler took no action. Evidently, family ties were even stronger, because Hildreth seemed to be closest to the general. Hildreth had been associated with the general's older brother Andrew when Andrew was prominent in the New Orleans trade. In Norfolk, Hildreth peddled his influence with Butler for a preferential few. For example, a Baltimore merchant seeking permission to open a trade store in the area was led to believe the matter would proceed smoothly if Hildreth were provided a share of the store's ownership. Consequently, Hildreth was given a 50 percent stake although he invested no money. Similarly, he intervened for the release of an incarcerated merchant under terms requiring that upon liberation, the man open a new between-the-lines store with Hildreth and another associate as dominant shareholders.13

As during the Dix era, much of Butler-managed Norfolk trade was via the Dismal Swamp Canal to six northeastern counties in North Carolina separated from the rest of the state by Albemarle Sound and the Chowan River. The counties were unoccupied by either army. Northerners holding permits established stores and depots in the region. Although cotton was not a major crop, area farmers purchased bales from the Confederate government and took them through the lines to the stores, where they would be traded for “family supplies.” Generally, the Southerners returned with salt, sugar, cash, and miscellaneous supplies. They used the salt to preserve butchered pork, which they sold to the Confederate commissary. After Atlantic-blockaded ports such as Charleston and Wilmington were captured, this route supplied about ten thousand pounds of bacon, sugar, coffee, and codfish daily to Lee's army. Ironically, Grant was trying to cut off Lee's supplies from the Confederacy when Lee's provender was almost entirely furnished from Yankee sources.¹⁴

Meanwhile, General Butler hungered for military glory and realized by late 1864 that he might never get a chance unless he acted quickly. Thus, when the opportunity came up to lead an expedition to capture Fort Fisher and thereby close the most important remaining port for blockade-runners, he jumped at the chance. His attempt, made over Christmas week 1864, was a miserable failure. Grant relieved him of command early the following month. Grant also wrote, “Whilst the army was holding Lee in Richmond and Petersburg, I found…[Lee]…was receiving supplies, either through the inefficiency or permission of [an] officer selected by General Butler…from Norfolk through the Albemarle and Chesapeake Canal.”¹⁵

Butler's replacement, Major General George H. Gordon, first served several months as a subordinate when he observed:

 

The control of the entire [Norfolk] region…was exercised by Butler. He made the laws and administered them, dealt out justice and inflicted punishment, levied fines and collected taxes. An enormous fund said [to approximate] $250,000 was created, of which Butler disposed of as he pleased. Under the permissive power of martial law he managed every movement of every person in his department.16

 

Upon assuming command, Gordon was appalled at the evidence swiftly discovered disclosing how trade at Norfolk aided the Confederacy. Reports were circulating that $100,000 of goods daily left Norfolk for Rebel armies. Grant instructed Gordon to investigate the prior trading practices at Norfolk. The result was a sixty-page indictment of Butler and his cohorts. It concluded that Butler associates, such as Hildreth and Shepley, were responsible for supplies from Butler's district pouring “directly into the departments of the Rebel Commissary and Quartermaster.” Some Butler associates sold permits for a fee. One example of such a fee was fourteen cents a pound for cotton loads. Thus, a shipper bringing in ten bales from the Confederacy was required to pay a Butler crony seven hundred dollars (14 cents x 500 pounds/bale) merely for the privilege of transporting the load across Union military lines. Nonetheless, the Butler ring suffered only modest penalties, as only a few associates were caught and only temporarily imprisoned.¹⁷

After Lincoln's assassination, most of his political adversaries nearly silenced their criticism of the martyred president. Similarly, Gordon's report received little publicity owing to the end of the war and discoveries that reflected unfavorably on Lincoln's policies.