With the outbreak of the Civil War, counterfeiters took the opportunity to increase their activity and pass their versions of the new national currency.
“By 1864 approximately half the paper money in circulation in the North was counterfeit. And if the American public lost faith in the value of the new paper money, the federal government would not have been able to finance the war,” Thomas Craughwell wrote in Stealing Lincoln’s Body (Cambridge, Mass.: Belknap Press of Harvard University Press, 2007: pg. 41-42).
Secretary of War Edwin Stanton hired William P. Wood, superintendent of the Old Capitol Prison system, to track down counterfeiters at the request of the Secretary of Treasury Salmon Chase. This was the beginnings of the Secret Service.
The First Director of the Secret Service
William Wood had fought in the Mexican-American War and was so daring in some of his exploits that some men thought him half-mad. However, after the war he gained a reputation of a somewhat shady character.
He was appointed superintendent of the Old Capitol Prison at the start of the Civil War.
“Persistent rumors had it that Wood had exceeded his authority by negotiating prisoner-of-war exchanges with the Confederate government. And there were stories of Wood’s sending counterfeit currency to Union prisoners of war, so that they could buy food, clothes, and other necessities from their clueless Confederate guards,” Thomas Craughwell wrote in Stealing Lincoln’s Body (Cambridge, Mass.: Belknap Press of Harvard University Press, 2007: pg. 42).
Chase and Stanton then gave Wood a free rein to bring in counterfeiters.
The First Secret Service Agents
Wood hired three men to help him.
Henry O. Wright had to be released from jail where Chicago police were holding him for being part of a counterfeit ring.
Virgil Barlow had been counterfeiting in New Jersey when Wood recruited him.
George Hyer was under arrest for forgery and suspected of murdering five men.
These men began their pursuit of counterfeiters and began recruiting others to their cause. They used a variety of techniques to achieve their goals. They also flirted with operating outside of the law in keeping some of the fake money they confiscated.
Cutting Down Counterfeiting
“In eight months, I rounded up counterfeiters in nearly every state east of the Alleghenies,” Wood said. (Lynn Glaser, Counterfeiting in America: The History of an American Way to Wealth, Philadelphia: Clarkson N. Potter, 1960, pg. 106)
Within a year, Wood and the men he hired had arrested over 200 counterfeiters and removed a great amount of fake currency from circulation as well as the tools of the trade the counterfeiters used to make their fake money. (David Johnson, Illegal Tender: Counterfeiting and the Secret Service in Nineteenth-Century America, Washington D.C.: Smithsonian Institution Press, 1995, pg. 76)
The Secret Service became an official government agency in July 1865.