Marshall grew rapidly. There were churches, and colleges and the palatial homes of those who not only grew the cotton and cut the trees but also shipped them to market. Although benefactor Peter Whetstone was shot down on the courthouse square during the Regulator-Moderator War, his city survived and thrived.

Then came the Civil War and Marshall turned to manufacturing the equipment needed by the embattled Confederacy and supplying men for such units as Lane's Rangers and the Texas Invincibles. At the center of the activity stood the new Capitol Hotel, just off of the courthouse square. The Capitol stood in three-storied brick elegance as one of the finest hotels west of New Orleans. The great, near-great and social wannabees of the Red River, Sabine and Trinity valleys flocked there for fine food and entertainment. So, it's not too surprising, that when the war clouds darkened, the states of the Trans-Mississippi Confederacy met there to discuss their mutual problems. When war became a reality, Marshall became a focal point for resistance.

By the middle of 1862, the Union virtually controlled the Mississippi River and severed the states of Missouri, Arkansas, Texas and Louisiana from the rest of the Confederacy. Some folks said that the West was abandoned. Others recognized that there was no real alternative. In any event, Arkansas Governor H.M. Rector called for western unity in case the East failed. Governor Francis R. Lubbock of Texas and Claiborne F. Jackson of Missouri met in Marshall and drew up a contingency plan. They called for a Trans-Mississippi Confederacy, complete with army, supplies, postal service and other trappings of government. Governor Rector of Arkansas and Governor Thomas O. Moore of Louisiana agreed. When Vicksburg fell in 1863 and the separation was almost complete, they put the plan into effect.

Marshall became, at one time, the capital of Missouri, with offices for Governor-in-exile Thomas C. Reynolds three blocks south of the hotel. The Capitol Hotel, in truth, became the Capitol of the Western Confederacy and home of the Trans-Mississippi Postal Department. General E. Kirby Smith was in command and he called all governors to another meeting. They discussed resources of men and materials, the restoration of confidence in cotton, currency and the Confederate cause, the exercise of civil authority and possible alliance with the French who had occupied Mexico. The conference recommended that Smith "assume at once and exercise the powers and prerogatives of the President of the Confederate States". Governor Lubbock, in his final message to the Legislature before being replaced by Pendleton Murrah in November, 1863, reported that the conference "proved highly satisfactory" and, with limited resources and almost no guidance from Richmond, the new government went into operation.

But, not soon enough to gain strength. Lee surrendered on April 9, 1865 and, ten days later, General Pope of the Union Army wrote to General Smith and offered the same terms. General John B. Magruder, the commander of the Confederate Army in Texas recommended a gathering of troops near Brownsville where the Confederacy had just won a great victory but Smith called another conference of governors. There was a rumor that Jefferson Davis had escaped from Richmond and was on his way to take control. General Smith refused Pope's offer to surrender. On May 15, the governors met in Marshall for the last time and drew up their own demands for surrender. But, again, it was too late. In June, on a Union gunboat in Galveston Harbor, the final surrender was signed and the Western Confederacy was no more.