Not originally. The honorary colonel system came into use as a way to preserve unit heritage, and was really in vogue after World War I, if memory serves. It continued on with fits and starts through the last re-org, and I don't know where it stands now. Under the old system the honorary colonel had to have served as an active officer with the regiment in question.

What you're thinking of, Marc, was the system used to create officers for militia and volunteer units during the Civil War (it was used in other conflicts, but obviously saw its greatest use during the Civil War). Typically if a person put up the money to raise and equip a unit, he was given command of that unit and the rank to go with it. So if a guy funded the "Livingston Light Rifle Company," he'd get the rank of captain or major from the state legislature to go with his unit. Many of those units also elected officers and NCOs, with often comical results. It was a purchase system, in a way, but also a way to show political patronage and clout.

After a year or so of war, most units abandoned the election process, but you would still see regimental commanders appointed by politicians. If they were idiots, they were fired or (if the clout was too strong) shifted to an assignment where they would cause little damage.