The intended term must have been "counterfeit money".
Although actress Julia Louis-Dreyfus did say "confederate money" in the actual episode, it's highly unlikely that the original script used that term. She probably delivered the line incorrectly.
Instead, the proper term would be "counterfeit money". "Counterfeit" describes a fake and fraudulent imitation of something else, something with real value, such as currency or an artwork. In context, "counterfeit" makes perfect sense in the scene, and would be a humorous way to describe fake breasts.
On the other hand, "confederate" doesn't make much sense at all in this context. Perhaps it's possible to devise a convoluted justification for writing the word "confederate" into this scene (as other answers here have attempted), but such explanations are really not very plausible.
So, "counterfeit" is the most appropriate word in the English language for the given context and "confederate" is similar-sounding but nonsensical in context. Therefore, the simple explanation is that the actress misremembered her line and substituted a similar-sounding word for the correct one. Another possibility is that the script itself contains an error, due to a flawed transcription or other mistake. Both explanations make more sense than "confederate money".