Erlanger Loan

Erlanger Loan, loan contract initiated by the Southern states during the American Civil War (1861-1865) through the French firm Erlanger et Cie. In order to secure more funds for their cause, Southern representatives James M. Mason and John Slidell contracted to sell $15 million in 7 percent bonds (see Bond (finance)). The principal of the bonds was to be payable in New Orleans cotton at 12 cents a pound within six months after a truce. The bonds were initially offered in Paris, France, and London, England. At first their price rose, but it later fell as the Northern states gained an advantage in the war. To support the price of the bonds, the Confederate government bought a certain number of them in the London market; however, the bonds ultimately collapsed. The Confederate government realized only about $6 million from the loan, and Erlanger made about $2.5 million.