The term “exchanged” came from the days of formal warfare,when it was customary to exchange prisoners of war by a complex formula of numbers and relative rank. Often, toavoid being burdened with large parties of prisoners, forces in the field would “parole” them ("parole" means "word" in French); that is, release them to go home on their oath not to perform any military service (or provide any intelligence) until exchanged.
At the beginning of the Civil War field officers informallyexchanged, or traded, captured soldiers right on the battlefield: a private for a private, a sergeant for a sergeant, a captain for a captain, etc. In 1862 this system broke down and caused the creation of large holding pens for prisoners in both the North and South.It was also discovered early in the war that that many paroled men would disappear into the civilian population, not to be found when ready for exchange. So keeping them under military control until exchanged and returned to their units became imperative.
With a far smaller reserve of able-bodied men and with fewer resources to keep prisoners, the South was eager to create a formal arrangement for continuing the exchange of prisoners.Although President Lincoln was hesitant to enter into an agreement that would tacitly recognize the Confederacy, he was swayed by public pressure. As a result, Major General John A. Dix of the Union Army met with the Confederate representative, Major General Daniel H. Hill on July 18, 1862, and a cartel was drafted providing for the parole andexchange of prisoners. Four days later, the cartel was formally signed and ratified, and became known as the Dix-Hill Cartel. The policy set forth called for captured soldiers of equal rank to be traded on a one-for-one basis, with 4 privates equaling one Lieutenant, 60 a commanding general, etc.
Despite occasional disputes--most concerning when and whether released prisoners could return to armed service--the arrangement lasted for about ten months. Approximately 200,000 men were exchanged during this period of time. The breakdown came when black troops began serving in the Union Army. Outraged at what it saw as the arming of fugitive slaves, the Confederate Congress in May of 1863 declared that captured black soldiers, fugitive or not, would be re-enslaved and that they—and their white commanders—could also be subject to execution. The North, demanding that the captured blacks be acknowledged as legitimate prisoners of war and included in exchanges, promptly suspended the agreement and the Union and Confederate prison camp populations swelled. The so-called "holding pens" now became permanent prisons.
Later that year the South altered its stance by promising that only actual runaways would be returned to bondage, but the impasse continued. U. S. Grant reiterated the North’s position in an April 1864 order, stating “no distinction whatever will be made in the exchange between white and colored prisoners.”
Finally in January 1865, as the faltering Confederacy was contemplating the use of armed slaves in its own military, it agreed to include blacks in prisoner exchanges. By the time the practice resumed, with three months left in the war, nearly 50,000 captured soldiers had died in prison.