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Credit Mobilier

November 2019

The company’s securities were distributed “where they will do the most good”— into the hands of leaders in Congress.

The time was right. The bloody bludgeoning of civil war was past, and the American people of the sixties and seventies went, headlong, about the manifestly destined business of making a continent into a nation. These Americans, their energies and enthusiasms so long sidetracked, were ready to support practically any patriotic-seeming venture put forward by men with brass and brains, with muscle and money. And government support was there too, and there aplenty. The reigning Republican party’s primary concern was for the interests of its “chief stockholders,” as Secretary of State William Seward called the northern industrialists. In July of 1866 Gideon Welles, Secretary of the Navy, noted in his diary: “Congress accomplishes little that is good.… The granting of acts of incorporation, bounties, special privileges, favors, and profligate legislation … is shocking.”

Indeed, in the matter of sponsoring a transcontinental railroad such acts, bounties, and privileges were freely granted by a complaisant Congress—and cheered by a populace that regarded a continent-spanning railroad as a suturing, a binding-up of a wounded nation.

That is not the way Thomas Durant, prime mover of the Union Pacific, saw things. Durant placed profit well ahead of patriotism, and he had no intention of waiting twenty or thirty years for freight and passenger traffic to put the line in the black. He wanted his loot now. The idea, as he so lucidly put it, was to “grab a wad from the construction fees—and get out.”

Tom Durant and his fellow boodlers in the U.P. directorate had just the device they needed to make their score. In 1864 they formed the Crédit Mobilier of America. (The original Crédit Mobilier was a French joint-stock company; during the 1850’s it had fleeced a number of its investors. It took a bizarre sort of bravado to borrow the name.) C.M. was the construction company by which these men would route to themselves the vast profits to be had in building a government-backed railroad at exorbitant rates. Land grants and money poured out of Washington, and many applauded Senator Henry Wilson of Massachusetts when, in an ecstasy of nationalism, he cried: “I give no grudging vote in giving away either money or land. I would sink $100,000,000 to build the road and do it most cheerfully, and think I had done a great thing for my country. What are $75,000,000 or $100,000,000 in opening a railroad … that shall connect the people of the Atlantic and the Pacific.… Nothing!” It just so happened that Senator Wilson, along with a goodly number of other “Railway congressmen,” owned stock in the Crédit Mobilier.

Their shares came from a colleague, Representative Oakes Ames of Massachusetts, who had invested heavily in C.M. and was the titular contractor (frontman) for over six hundred miles of U.P. trackage. In the latter part of 1867 he wrote to a crony, “We want more friends in this Congress”; in November he offered some of his peers C.M. stock for little or nothing; in December C.M. declared its first dividend—a whopping one hundred per cent on capital. Everybody was happy. As Ames shrewdly observed: “There is no difficulty in getting men to look after their own property.”

But congressional venality was no match for the unslakable greed of the promoters. Well on their way to nearly fifty million dollars in fraudulent profits, the thieves began to fall out over the division of spoils. There was periodic litigation—embarrassing and risky enough—over who owned how many shares, but the lid really blew off in the fall of 1872 when the New York Sun printed the names of the congressmen Ames had allegedly bribed. Not even this bit of sensation prevented the comfortable re-election of President Grant, but an investigation could hardly be avoided.

The congressional inquiry began late in 1872 and extended into the new year. The implicated statesmen showed themselves to be men truly fitted to their era. Ohio’s John Bingham frankly admitted that he had taken C.M. stock to make a profit, and “only wished he had ten times more.” William D. (“Pig Iron”) KeIley of Pennsylvania said he saw nothing wrong in obtaining his shares—“It was just like buying a flock of sheep.” Many other congressmen maintained that Ames had taken advantage of their innocence, had played on their credulity. Ames could see that he was caught up in an Establishment whitewash—and that he was meant to be sacrificed. He decided to name names and to cite figures from a “memorandum book.” His revelations contradicted the depositions of a number of witnesses (Vice-President Schuyler Colfax and Representative James A. Garfield, for instance, were formally adjudged by the congressional committee to have perjured themselves), but little was done about it. Exonerations came wholesale: the legislators had “misunderstood” or had committed naïve “indiscretions.” But Oakes Ames stood censured for offering bribes (interestingly, no one was punished for taking them); as one newspaper put it, the investigators had served warning “to corrupt Congressmen against turning State’s evidence.” Censured too was Representative James Brooks of New York. Brooks was no guiltier than any other C.M. stockholder, but he was, after all, a Democrat. For Ames and Brooks, the price paid was dearer than the mere loss of political reputation: the strain had been too much, and within a few weeks both men were dead.

A sorrowful Senator George Hoar of Massachusetts spoke for the nation when he observed, of the building of the transcontinental railroad, “that every step of that mighty enterprise had been taken in fraud.”

But the public eye, fascinated as it always is by fresh corruption, would soon shift its gaze to other disgraces—the abuses of the Departments of the Post Office and Interior, the arrant buccaneering of Secretary of War William Belknap. Monumental as it was, the Crédit Mobilier affair was simply an early phase of what Matthew Josephson calls “the Great Barbeque.” It was but one of many seminars in a publicly endowed school for scandal.

—John L. Phillips