The Businessman And The Government


In the middle 1840’s, persons wishing to have the United States take over Texas’ debt as part of the annexation process encouraged Congress to see the merit of such an action by distributing extensive amounts of Texas scrip and bonds to its members. The scrip and bonds would be virtually worthless unless Congress voted the U.S. takeover—which it did, to the extent of $ i o million. Alleged congressional corruption by lobbyists for business interests was the subject of a flurry of suggestive, though inconclusive, investigations during the i85o’s. First, the House looked into—but perhaps not far enough into—the attempted bribery of members by a lobbyist for Massachusetts manufacturers with $58,000 to dispense for a favorable tariff bill. Nothing came of this investigation. Not long afterward, in 1856, the New York Times Washington correspondent charged in print that “a corrupt organization of Congressmen and lobby-agents” was at large in the Capital. When the Times man refused to testify under oath on the matter, he was arrested and detained. Still later in the decade, the House investigated the lobbying activities of the Pacific Steamship Company, which had spent $800,000 to win a government subsidy. Nobody ever found out who got the money, but as a contemporary put the matter, “It will be a cold day in Washington when $800,000 is spent to influence legislation and some members of Congress do not get a large share of it.” The Times man’s “organization” was never identified, either; but doubtless one of its principal lights was Edward Pendleton, king of Washington lobbyists of the time, who owned an elegant gambling house on Pennsylvania Avenue. It was called formally “the Palace of Fortune,” and informally “the Hall of the Bleeding Heart” by congressmen whom Pendleton affably allowed to win or favored with loans when he needed their votes. This relatively subtle form of bribery persisted in Washington until as late as the Harding administration.

After the Civil War, in which the banker Jay Cooke played a role some- what analogous to that of Robert Morris in the Revolution, came the golden age of graft, or, conversely, the dark age of American business-andgovernment ethics. Business, led by the railroads and subsequently the iron and steel industry, was becoming monstrously large, and its inclination to run roughshod over any obstacle in its way, government included, was supported by a newly conceived philosophy—Social Darwinism, the application to business affairs of Charles Darwin’s theory that man has evolved to his present state through the survival of the fittest.

This era in business-government relations was ushered in, and to some extent exemplified, by the Crédit Mobilier scandal, in which a few inner stockholders of the newly organized and government-backed Union Pacific Railroad took over a Pennsylvania holding company, Crédit Mobilier of America, and used it to make exorbitant contracts with themselves to build the railroad, and thereby pocketed profits running into many millions of dollars, much of it coming from the federal treasury. The process of forestalling investigation or interference by Congress or the executive branch involved some outright bribes of government officials by the conspirators, and many quasi bribes in the form of offerings of Crédit Mobilier stock to congressmen at half its market value. The affair derived a comic twist from the fact that Oakes Ames, a principal in Crédit Mobilier, was himself serving at the time as a congressman from Massachusetts. To offer his hush money he needed only speak in a congressional neighbor’s ear, or at most lean across the aisle.

Indeed, comedy became a hallmark of business-government dealings in this era. The “Erie war” of 1866-68, in which “Commodore” Cornelius Vanderbilt was pitted against the unholy trinity of Daniel Drew, Jay Gould, and James Fisk, was at one stage to all intents a contest to buy injunctions from judges kept in comfort by the competing forces; as for legislators, at one point in the war Gould went to Albany, the state capital, on a secret mission, carrying with him a valise containing $500,000 in cash, and subsequently left with an empty valise. It has even been alleged that on some occasions sessions of the New York State supreme court were held informally, and no doubt conveniently, in the rooms of Fisk’s mistress, Josie Mansfield. Over a period of many years the Vanderbilt interests openly maintained a captive legislator, Chauncey Depew, first in the Albany legislature and later in the U.S. Senate; the Commodore’s daughterin-law refused to sit at table with Depew on grounds that his status was equivalent to that of family butler.