The American civil war worried many people in United Canada. Things went from bad to worse when, on November 8th 1861, a British steamboat was stopped and boarded by the American navy. Two Rebel commissaries on their way to London were found and arrested. The relations between Washington and London reached a new low. Great Britain immediately sent 14 000 soldiers to help defend its colonies in case of American attacks.
At the beginning of the war, the majority of Canadians favoured the North and the end of slavery. Many French Canadians even offered their services to the Union troops. Renown composer Calixa Lavallée served as a musician with the Rhode Island Regiment.
But when some Confederate officers were posted in Montréal (to maintain relations with Great Britain), the opinions began to change. The South's Canadian headquarters were installed at the St. Lawrence Hall hotel. It is said that this headquarters was the second most important center of power in the Confederate organization, after their capital of Richmond in Virginia. For the most part, the officers originated from rich plantations and their refined manners quickly conquered Montréal high society.
From their Montréal headquarters, the Confederates organised several top secret sabotage missions. One of these caused a great deal of embarrassment to the province of United Canada and almost caused a new war with the United States. On October 19th 1864, a group of young Confederates under the command of lieutenant Bennett Young attacked the village of St. Albans in Vermont. They robbed the banks for the amount of 200 000$, burned several houses, caused the death of one person and harmed many others before coming back to hide in Canada.
The Americans were outraged by this and demanded that the desperados be arrested. The governor of United Canada, Lord Monck, ordered that the thieves be found. Fourteen of them were captured in the proximity of Saint-Jean with part of the stolen money (90 000$). They were taken to Montréal to be tried. After a few weeks, the judge released the prisoners. The Parliament voted the amount of 50 000$ to compensate the losses of the banks of St. Albans.
After this incident, Montrealers' sympathy for the Confederates crumbled. In 1865, many were shocked to learn that the men responsible for the assassination of President Lincoln, John Wilkes Booth and his co-conspirators, had sojourned to the St. Lawrence Hall Hotel a few weeks before the murder and might even have been recruited there. The American government soon announced that it would put an end to the Free Trade agreement. The free circulation of merchandise had only lasted 12 years.