On August 1, Tennessee voted to adopt the Confederate constitution. Brazil recognized the CSA.
August 3rd marked the first use of aerial reconnaissance from a ship when a Union naval officer went up in a balloon to look at Confederate-controlled Hampton Roads. Also, a Federal fleet bombarded Galveston, Texas.
In a naval action at Fernandina, Florida, the USS Vincennes ended the Rebel blockade of that port.
President Lincoln signed a variety of bills produced during the special session of congress. Among them were a new issue of bonds, tariff increases, and the first direct income and real estate tax. But the most important one was the Confiscation Act of 1861 which gave federals the right to seize property used in the insurrection. This meant that slaves forced to participate in the Confederate war effort were essentially freed.
Also, Union enlistments were increased from 3 months to 2 years.
On August 6th, the Second Wheeling Convention met to discuss the separation of Kanawha, what would eventually be the 39 counties called West Virginia. Votes in these counties had run as much as 20 to 1 against secession, which necessitated the division.
In Kentucky also on the 6th, a naval officer, LT Bull Nelson was ordered to build a camp for the training of the Kentucky militia for the Union.