By 1863 it had become exceedingly difficult, owing to the blockade, for the Government at Richmond to transmit funds to its agents abroad. Bullock, especially, required large amounts in furtherance of his ship-building contracts and was embarrassed by the lack of business methods and the delays of the Government at home. The incompetence of the Confederacy in finance was a weakness that characterized all of its many operations whether at home or abroad[1048] and was made evident in England by the confusion in its efforts to establish credits there. At first the Confederate Government supplied its agents abroad with drafts upon the house of Fraser, Trenholm &Company, of Liverpool, a branch of the firm long established at Charleston, South Carolina, purchasing its bills of exchange with its own "home made" money. But as Confederate currency rapidly depreciated this method of transmitting funds became increasingly difficult and costly. The next step was to send to Spence, nominated by Mason as financial adviser in England, Confederate money bonds for sale on the British market, with authority to dispose of them as low as fifty cents on the dollar, but these found no takers[1049]. By September, 1862, Bullock's funds for ship-building were exhausted and some new method of supply was required. Temporary relief was found in adopting a suggestion from Lindsay whereby cotton was made the basis for an advance of L60,000, a form of cotton bond being devised which fixed the price of cotton at eightpence the pound. These bonds were not put on the market but were privately placed by Lindsay &Company with a few buyers for the entire sum, the transaction remaining secret[1050].

In the meantime this same recourse to cotton had occurred to the authorities at Richmond and a plan formulated by which cotton should be purchased by the Government, stored, and certificates issued to be sold abroad, the purchaser being assured of "all facilities of shipment." Spence was to be the authorized agent for the sale of these "cotton certificates," but before any reached him various special agents of the Confederacy had arrived in England by December, 1862, with such certificates in their possession and had disposed of some of them, calling them "cotton warrants." The difficulties which might arise from separate action in the market were at once perceived and following a conference with Mason all cotton obligations were turned to Fraser, Trenholm &Company. Spence now had in his hands the "money bonds" but no further attempt was made to dispose of these since the "cotton warrants" were considered a better means of raising funds.

It is no doubt true that since all of these efforts involved a governmental guarantee the various "certificates" or "warrants" partook of the nature of a government bond. Yet up to this point the Richmond authorities, after the first failure to sell "money bonds" abroad were not keen to attempt anything that could be stamped as a foreign "government loan." Their idea was rather that a certain part of the produce of the South was being set aside as the property of those who in England should extend credit to the South. The sole purpose of these earlier operations was to provide funds for Southern agents. By July, 1862, Bullock had exhausted his earlier credit of a million dollars. The L60,000 loan secured through Lindsay then tided over an emergency demand and this had been followed by a development on similar lines of the "cotton certificates" and "warrants" which by December, 1862, had secured, through Spence's agency, an additional million dollars or thereabouts. Mason was strongly recommending further expansion of this method and had the utmost confidence in Spence. Now, however, there was broached to the authorities in Richmond a proposal for the definite floating in Europe of a specified "cotton loan."

This proposal came through Slidell at Paris and was made by the well-established firm of Erlanger &Company. First approached by this company in September, 1862, Slidell consulted Mason but found the latter strongly committed to his own plans with Spence[1051]. But Slidell persisted and Mason gave way[1052]. Representatives of Erlanger proceeded to Richmond and proposed a loan of twenty-five million dollars; they were surprised to find the Confederate Government disinclined to the idea of a foreign loan, and the final agreement, cut to fifteen millions, was largely made because of the argument advanced that as a result powerful influences would thus be brought to the support of the South[1053]. The contract was signed at Richmond, January 28, 1863, and legalized by a secret act of Congress on the day following[1054]. But there was no Southern enthusiasm for the project. Benjamin wrote to Mason that the Confederacy disclaimed the "desire or intention on our part to effect a loan in Europe ... during the war we want only such very moderate sums as are required abroad for the purchase of warlike supplies and for vessels, and even that is not required because of our want of funds, but because of the difficulties of remittance"; as for the Erlanger contract the Confederacy "would have declined it altogether but for the political considerations indicated by Mr. Slidell[1055]...."