The Reconstruction era after the Civil War was a time of chaos, reorganization, and corruption that affected not only lesser state officials but also federal government agents. The Crédit Mobilier affair, which had its early beginnings in 1864 but was not publicly investigated until 1873, is an example of the corrupt practices that characterized the period. In 1864, Thomas C. Durant, an administrator of the Union Pacific
Railroad, bought the Pennsylvania Fiscal Agency, which was chartered in 1859. The agency was renamed Crédit Mobilier of America and its proposed purpose as a construction company was the building of the Union Pacific Railroad. The federal government had granted the railroad generous loans and contracts for its construction, and the administrators of the railroad planned to divert this money into the Crédit
Mobilier Company, allowing the stockholders of the company to enjoy huge profits. Government officials first became involved in 1865 when
Oakes Ames, congressional representative from Massachusetts, and his brother Oliver bought shares of stock in the Crédit Mobilier and, indirectly, in the Union Pacific Railroad. The Ames brothers soon became the power behind the Union Pacific, and, in 1866, Durant was replaced by Oliver Ames.
The building of the railroad was fraudulently financed for approximately $50 million more than was necessary. In addition, Oakes Ames sold a large number of shares of stock in Crédit Mobilier at a reduced rate to several of his fellow congressmen. This move on the part of Ames was to allay any suspicious interest in the undertakings of the two companies and to encourage legislation beneficial to the railroad. This maneuver occurred in 1867, and for the next five years rumors surrounding the activities of Ames and other government officials circulated.
The scandal erupted in 1872 when the details of the Crédit Mobilier Company became an issue of the presidential campaign of that year.
Several important officials were involved including vice presidential candidate Henry Wilson, incumbent vice president Schyler Colfax, future president and member of the House of Representatives
JAMES A
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GARFIELD
, and Speaker of the House James G. Blaine. An investigation began in 1873. The punishments for such behavior were surprisingly lenient, however, and the Crédit Mobilier Company and Congressman
Ames were merely publicly censured.
West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
The Crédit Mobilier scandal of 1872-1873 damaged the careers of several Gilded Age politicians. Major stockholders in the Union Pacific
Railroad formed a company, the Crédit Mobilier of America, and gave it contracts to build the railroad. They sold or gave shares in this construction to influential congressmen. It was a lucrative deal for the congressmen, because they helped themselves by approving federal subsidies for the cost of railroad construction without paying much attention to expenses, enabling railroad builders to make huge profits.
When the New York Sun broke the story on the eve of the 1872 election, Speaker of the House James G. Blaine, a Maine Republican implicated in the scandal, set up a congressional committee to investigate.
The House censured two of its members who were involved in the scandal: Oakes Ames of Massachusetts and James Brooks of New York.
But the affair also tarnished the careers of outgoing vice president Schuyler Colfax, incoming vice president Henry Wilson, and
Representative James A. Garfield, all of whom were implicated (although Garfield denied the charges and was subsequently elected president).
The scandal also showed how corruption tainted Gilded Age politics, and the lengths railroads and other economic interests would go to assure and increase profits.
The Reader's Companion to American History.
Eric Foner and John A. Garraty, Editors. Copyright © 1991 by Houghton Mifflin Harcourt Publishing Company. All rights reserved.