Leather boots sometimes have tassels, mostly for decoration:
tassel noun [ C ]
a group of short threads or ropes held together at one end, used as a hanging decoration on hats, curtains, furniture, etc.
The latter just means the second of two items (in this case, Marley's boots). Also, the former refers to the first of two items (and would indicate Marley's tights).
latter noun [ S ]
the second of two people, things, or groups previously mentioned:
- She offered me more money or a car and I chose the latter.
Compare with: former noun
To bristle just means to stand up (or stick out):
bristle verb [ I ] (of hair)
to stand up:
- The cat's fur bristled and it arched its back.
So, the tassels on Marley's boots were standing up (like his pigtail, coat tails, and hair).