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The Big Road
Building the transcontinental railroad was the greatest engineering feat of the nineteenth century. Was it also the biggest swindle?
October 2000 | Volume 51, Issue 6
The engines backed up and hooked onto their cars. No. 119 then came forward until it had crossed the junction of the tracks, halted for an instant, then reversed. Jupiter came forward, crossed the junction, and also backed away. The transcontinental railroad was a reality.
Stanford invited the UP officials to his car for a celebratory lunch, with plenty of California fruit and wine to mark the occasion. Telegrams went out and came in. To President Grant: “Sir: We have the honor to report that the last rail is laid, the last spike is driven, the Pacific Railroad is finished.” Signed by Stanford and Durant. Another from Dodge to Grant. One to Vice President Schuyler Colfax. One from Dodge to Secretary of War John Rawlins, with a nice touch: “The great work, commenced during the Administration of Lincoln, in the middle of a great rebellion, is completed under that of Grant, who conquered the peace.”
Freight rates by train also fell incredibly. Mail that once cost dollars per ounce and took forever now cost pennies and got from Chicago to California in a few days. The telegraph, meanwhile, could move ideas, thoughts, statistics—any words or numbers that could be put on paper—from one place to another, from Europe or England or New York to San Francisco or anywhere else that had a telegraph station, all but instantly.
Together, the transcontinental railroad and the telegraph made modern America possible. Things that could not be imagined before the Civil War now became common. A nationwide stock market, for example. A continentwide economy in which people, food, coal, and minerals moved wherever someone wanted to send them, and did so cheaply and quickly.
Mistakes had been made all along the line, caused by both errors of judgment and a certain cynicism, encouraged by Congress and cheered on by the populace at large. There was an emphasis on speed rather than quality, on laying as much track as possible, without regard for safe grading. On September 4, 1872, the New York Sun had a bold headline:
THE KING OF FRAUDS. How the Credit Mobilier Bought its Way Through Congress. COLOSSAL BRIBERY. Congressmen who Have Robbed the People, and who now Support the National Robber. HOW SOME MEN GET FORTUNES. Princely Gifts to the Chairmen of Committees in Congress.
The newspaper had launched what became the biggest scandal of the nineteenth century. The House of Representatives had a series of hearings to inquire into the working of the Crédit Mobilier—the limited-liability stock company incorporated in 1864 to finance construction of the UP—and into the workings of the UP itself, as well as of the CP. Every official from the companies was required to testify, and in virtually every case the testimony was twisted and given the worst possible interpretation. The hearings went on for a full six months, featuring for the most part acrimony and sensationalism, although most charges were true and would be proved.
The UP and the CP were the biggest corporations of their time and the first to have extensive dealings with the federal, state, county, and township governments. They could not have been built without government aid in the form of gifts—especially land grants, plus state and county purchases of their stock and loans in the form of national government bonds. The CP’s directors became extraordinarily rich thanks to the railroad and the way it was financed. The men who held stock in the Crédit Mobilier also got rich from it. In large part this was done by defrauding the government and the public, by paying the lowest possible wages to the men who built the lines, and by delaying or actually ignoring payments of bills to the subcontractors and workmen. In many ways they used their power to guarantee profit for themselves. Most Americans found it difficult, even impossible, to believe that they had actually earned those profits. The general public sentiment was: We have been bilked.
The case was a smash hit. People couldn’t get enough of it. As in so much else since the road began, the Union Pacific was once again leading the way as the central character in the action. As well it should have been, since what was being argued about was nothing less than the relationship between government and business. Practical matters were involved, such as when government intervention or regulation is justified.
The Central Pacific, or more particularly the line’s Contract and Finance Company, which underwrote it, was also investigated, but all its books had been burned—whether deliberately or by accident was and is in dispute—so nothing was pinned on its directors, even though they were as vulnerable as the UP’s.