Ulysses S. Grant won the presidential election of 1868 by, “waiving the bloody shirt,” reminding people of his Civil War record. The Civil War, President Lincoln’s assassination, and Industrial Revolution transformed society. It became gilded with hope and prosperity on the outside and corruption and greed in its inner workings. It was at once a time of great wealth for few and long hours with below poverty wages for the majority. Factories instead of farms won out as people moved to cities for jobs. One of the biggest scandals of the era involved Credit Mobilier (CM), the Union Pacific (UP), and corrupt government officials.
On July 1, 1862, President Abraham Lincoln signed the Pacific Railroad Acts into law that chartered the UP and Central Pacific Railroad to build an intercontinental railroad west of the Missouri River by July 1, 1874. The UP built from Omaha, Nebraska west; the Central Pacific Railroad started building from Sacramento, California east. The government granted right of way for their rail lines along with public lands within 100 feet on either side of the track. The act authorized extensive land grants along with 30-year government bonds at 6% interest. High freight costs for supplies and armed conflict with Native Americans in the western interior created a lack of investor interest.
Thomas C. Durant, UP vice president, along with his assistant George Francis Train created CM from the ashes of Pennsylvania Fiscal Agency, a loan and contract company established in 1859. CM accepted stock and bonds from UP at face value, but sold them to investors under par. The company overcharged the government to make up the difference. It also failed to keep stockholder records, operational accounts, or profits
. CM was an attempt to hide excessive profits by appearing as an impartial, independent company chosen by shareholders. The company fulfilled in full only the Hoxie Contract, a contract to build the first 100 miles of the railroad in the construction of the UP.
Durant gave CM stock to Massachusetts Congressional Representative Ames Oakes, to prevent a congressional investigation into the company. Along with his brother Oliver Ames, Ames took over controlling shares and ousted Durant in 1867. Oakes bribed other Congressional members and officials in Grant’s administration with a 160 shares, “where it would do the most good.” The New York Sun exposed corruption to block Grant’s reelection campaign. From testimony, 12 prominent members in congress received stock that was the equivalent of $20,000 each. These included Vice President Schyler Colfax, House Speaker James G. Blain, and Ohio Congressional Representative James A. Garfield. Congress uncovered that CM diverted over $50,000,000 to stockholders.
In the end, little came of the charges. Another round of, “waiving the bloody shirt,” got Grant re-elected. Durant had $20,000,000 in judgments against him from the CM scandal that absorbed his estate. Congress publically censored Ames for using political influence for personal financial gain. Garfield became the 20th president, and work moved forward. This type of corruption commonly occurred during the Gilded Age. Newspapers, however, referred the CM scandal as, “The Biggest Steal of the Age.” This scandal brought mistrust to government contracts for building the railroad.