In the South, the agricultural economy was destroyed by the breakdown of the slave system, causing the region to fall into poverty. Food shortages were common, as even the wealthiest of families were affected by the loss of human life, the destruction of property and the affects of the Union blockade. In addition, many Union troops scouting in the South and Southwest clashed with Cheyenne and Arapaho Indians on hunting trips. These clashes got worse until, in 1864, the Cheyennes and Arapaho went to war with the United States.
Having been captured by Union forces in 1862, New Orleans was one of the largest Confederate cities to be occupied by the Union for an extended period. Gen. Benjamin Butler was appointed military governor. He established strict martial law, even hanging one gambler who tore down a US flag. Union troops were ordered to confiscate the property of people who refused to swear allegiance to the Union. Butler became known as "Spoons" Butler because of the rumors that he stole the silver from the homes he confiscated. New Orleans residents were most shocked, however, by Butler's General Order No. 28. The women of the city had made life very difficult for the Union troops, who were required by orders and by courtesy not to respond to their verbal and even physical assaults. In exasperation, Butler ordered that "when any female shall, by word, gesture, or movement, insult or show contempt for any officer or soldier of the United States, she shall be regarded and held liable to be treated as a woman of the town [prostitute] plying her avocation." While residents were scandalized by the order and nicknamed Butler "Beast," the order succeeded in stopping the civilian attacks on Union troops. Although he was hated by most residents of New Orleans, Butler succeeded in making some positive contributions to the city. He enforced sanitation measures, which resulted in clean streets and the prevention of the spread of illnesses like yellow fever. In addition, Butler provided Union rations for the poor of the city. By the time he was replaced, in December of 1862, one newspaper called him "the best scavenger we ever had."