Autobiography of Seventy Years, Vol. 1-2

by George Frisbie Hoar

During the election of 1872 many rumors appeared in the press of the country that there had been great corruption in the management of the affairs of the Union Pacific Railroad. It was charged that the members of the House and Senate, some of whom were named, had been bribed by gifts of stock in the Credit Mobilier to secure their influence in legislation affecting the Union Pacific Railroad.

The Credit Mobilier Co. had been formed to take the contract for building the Union Pacific Railroad. The stockholders of the two companies were identical. Each stockholder of the Credit Mobilier owned a number of shares of the Union Pacific Railroad proportional to his holding in the former company.

The Union Pacific Railroad Company and Central Pacific Railroad Company received liberal land grants from the Government of the United States, that they might each build a part of the line which should connect the Atlantic States with the Pacific Ocean. In addition to the land grants, each road was to receive a loan of Government bonds, payable in thirty years, of $27,000,000, for which the Government was to pay interest, which interest was not required to be repaid by the roads. The roads were also authorized to give a mortgage on their properties for a like amount, of $27,000,000 each, which mortgage was to be prior to the Government's lien for its loan. The charter of the Union Pacific Railroad was granted by the Government of the United States. That of the Central Pacific was from the State of California. The Government undertook to remove all Indian titles from the public land granted to the Union Pacific Railroad for a space of 200 feet in width on each side of its entire route, and conferred the right to appropriate by eminent domain necessary private land for depots, turnouts, etc., and public lands to the amount of ten alternate sections per mile, within the limits of twenty miles on each side of the road. It was required by the charter of the Union Pacific Railroad that its stock should be paid in full in cash, and that the interests of the Government should be specially protected by the appointment by the President of five Government Directors. The Government bonds were to be handed over on the certificate of an officer appointed by the President, as the road advanced to completion. It was required that a Government Director should be a member of every Committee, standing or select.

The managers of the Union Pacific Railroad acquired the franchise of a Pennsylvania Company, known as the Credit Mobilier, divided its stock among themselves in proportion to their ownership in the Union Pacific Railroad, mortgaged the road to the extent permitted by the act of Congress, being a little more than $27,000,000 and mortgaged their land grants for a further sum of $10,000,000. Then they made a contract with the Credit Mobilier Company to construct the road at a price which would exhaust all the resources of the road, including the proceeds of the bonds of all kinds, and divided the proceeds among themselves as dividends on the stock of the Credit Mobilier. This left the Union Pacific Railroad to begin business mortgaged to its full value, without any resources for its operation, and utterly stripped of the ample endowment which the bounty of the Government had provided for it.

Congress supposed when this munificent grant of land and loan of credit was made it would create a great public highway across the continent for the use of the Government and the people, in war and peace, which should be a strong, solvent corporation, ready for every emergency, and as secure for the public use as New York Harbor, or as the Pacific Ocean.

The devisers of this scheme soon got to quarrelling among themselves. One faction was made up largely of Boston capitalists, and the other of men belonging in New York, New Jersey and Connecticut. The former wanted to have the headquarters of the corporation in Boston, with a Boston man for President; and the latter desired to have the management in New York. A suit in equity was brought, and the Boston men, headed by Oakes Ames, a member of Congress, and his brother Oliver, both eminent and highly respected business men of Massachusetts, were enjoined from voting at a stockholders' meeting held in New York for the election of officers. The injunction was issued by Judge Barnard, who was afterward impeached, and removed from office. On the day of the stockholders' meeting General Butler, counsel for the Ames faction, found Judge Barnard at lunch, and got him so to modify the injunction as to permit that the votes might be cast, the result of the election not to be declared until the further order of the Court. The other faction who had rested with fancied security under their injunction were taken by surprise.

The Ames ticket had a majority. Thereupon one of the other faction wrote a letter to Elihu B. Washburn, at Washington. He was an influential member of the House of Representatives, known as the "Watch Dog of the Treasury." The letter was put in the post-office. It exposed the whole transaction. He then informed his opponents what he had done. They knew very well that if Washburn moved an investigation by the House of Representatives, which was likely, the game was up. No further bonds would come from the United States Treasury. Judicial proceedings would in all likelihood be taken at once to annul the charter, or restrain further action under it. They instantly came to terms. The two factions agreed on a Board of Directors. The letter to Washington was withdrawn from the mail. Oakes Ames received a quantity of the stock of the Credit Mobilier, which he was to distribute among influential members of Congress at par, "putting it," according to his testimony given before a Committee afterward, "where it would do the most good." A list of members of the two Houses was agreed upon, to whom the stock should be offered. It was expected that they would pay for it at par. But there had been already a large dividend assigned to it, which with the dividend expected to be paid shortly, would amount to much more than the nominal par value of the stock. So the purchase of one of the shares was like purchasing for $1,000 a bank account which already amounted to, or shortly would amount to, more than double that sum.

A list of the men who were to be induced to take this stock was made out with wonderful and prophetic sagacity. It contained some of the ablest and most influential men in the two Houses of Congress, representing different parts of the country. It included men as conspicuous for integrity as ability. Each of them occupied already a great place in the respect of his countrymen, and nearly every one of them attained a much greater place afterward. This is the list of the members of Congress to whom stock was to be conveyed:

LIST OF MEMBERS OF CONGRESS TO WHOM STOCK WAS TO BE SOLD AGREED UPON IN NEW YORK, ENTERED IN OAKES AMES'S MEMORANDUM BOOK, AND TAKEN BY HIM TO WASHINGTON

James G. Blaine of Maine.
Senator James W. Patterson of New Hampshire.
Senator Henry Wilson of Massachusetts.
Schuyler Colfax of Indiana.
Thomas D. Eliot of Massachusetts.
Henry L. Dawes of Massachusetts.
George S. Boutwell of Massachusetts.
James A. Garfield of Ohio.
Glenni W. Schofield of Pennsylvania.
William D. Kelley of Pennsylvania.
Joseph F. Fowler of Tennessee.
John A. Bingham of Ohio.
Senator James A. Bayard of Delaware.
William B. Allison of Iowa.
James F. Wilson of Iowa.
Roscoe Conkling of New York.
James Brooks of New York.
John A. Logan of Illinois.