In addition to the land granted to the Union Pacific for the “purpose of aiding in the construction of said railroad and telegraph line, and to secure the safe and speedy transportation of the mails, troops, munitions of war, and public stores thereon, every alternate section of land, designated by odd numbers, to the amount of five alternate sections per mile on each side of said road,”[105] the company was given for “right of way” 200 feet each side of the track,[106] “including all necessary grounds” for stations, side-tracks and various other purposes enumerated, also to take from the public land “adjacent to the line of said road” (afterwards limited to 10 miles on each side) “earth, stone, timber, and other materials, for the construction thereof.” Further help was also granted by the provisions of the act (Section 5): “That ... the Secretary of the Treasury shall, upon the certificate in writing ... of the completion and equipment of forty consecutive miles ... issue ... bonds of the United States of one thousand dollars each, payable in thirty years after date, bearing six per centum per annum interest ... to the amount of sixteen of said bonds per mile.” The act provides that this loan shall constitute a first mortgage lien on the property, but the act of 1864 allowed the company to issue bonds to the same amount and subrogate the Government bonds to those issued by the company making the Government claim a second mortgage instead of a first. The Government gave similar grants and privileges to the Central Pacific, although it was a purely state corporation and, at first, was only to build to the east line of California. Apparently the last vestige of the traditions of Madison and Monroe, of Jackson and Buchanan had disappeared.
There was danger that other lines would be built. A line was preparing to go west from Leavenworth, lines were converging on St. Joseph and Sioux City, any of which might become rivals of the Union Pacific, so the act provides that they shall unite with the Pacific not farther west than the one hundredth meridian of longitude, and if they do so grants of lands and subsidy bonds will be given to them.
However, the demand for transcontinental lines was so great that three other lines were authorized. In 1864 the Northern Pacific Railroad to connect Lake Superior with Puget Sound, with a land grant of 58,000,000 acres; in the Atlantic & Pacific to follow the old 32d parallel route, now a part of the Southern Pacific, with a grant of 42,000,000 acres; and last, the Atchison, Topeka & Santa Fé received also a large grant. The total Congressional grants certified or patented to railroads and military wagon roads from 1850 to 1880 were as follows:
| To States | 35,214,978.25 | acres |
| To Corporation and Pacific Roads | 10,435,048.08 | |
| Military Wagon Roads | 1,301,040.47 | |
| 46,951,066.80 | ||
| Deduct lands forfeited | 607,741.76 | |
| Grand Total for Railroads and Military Wagon Roads | 46,343,325.04 | |
| Acres necessary to fill grants providing all roads are constructed | 155,504,994.59 | [107] |
Construction of Pacific Roads.
—It would be interesting to take up in detail the work of constructing these roads, but space will not permit. Nothing can be said of the intense interest throughout the United States; of the romance and adventure of penetrating 1700 miles of wilderness and desert with hostile Indians ready at any time to attack; with worse than hostile Indians in the rough-necks, gamblers, and prostitutes who followed the camps; of the magnitude of the work employing 2000 graders to go first, 1500 wood choppers and tie-getters spreading their labors over thousands of miles of Government forests; of the engineers and their feats of searching out easiest passages; of the track layers; of the boarding houses; of general camp life; of the exciting race with the Central Pacific ending in the union of the two lines and the driving of the golden spike at Promontory Point on the north shore of Great Salt Lake, 1086 miles westward from Omaha and 689 miles eastward from Sacramento, on the 10th day of May, 1869; and of the crowds in Omaha, Chicago, Cincinnati, New Orleans, Washington, New York, San Francisco, and every other place of importance in the whole nation, who patiently waited the sounds of the bells rung in unison with the sounds of the strokes upon the spike, transmitted instantaneously through the intervening space by the electric telegraph.
There is no doubt but that the benefits that have come from the railways through the increased facilities for transportation and the corresponding gain to civilization has amply repaid the Government for all its bounties, notwithstanding some of them were unnecessary, in fact, a willful waste and led to an orgy of financial and political corruption a little later.
The Crédit Mobilier.
—Perhaps the most widely noticed scandal connected with the railroads was the scheme known as the Crédit Mobilier. This was made much of by the Grange and other anti-monopoly movements which reached their height in the ’seventies. Charges having been made that many congressmen had been bribed by an organization known as the Crédit Mobilier, a Congressional investigation was made,[108] Thomas Durant, vice president, and other leading stockholders of the Union Pacific Railroad, secured a controlling interest in the stock of the Pennsylvania Fiscal Agency in 1864 and had its name changed to the Crédit Mobilier of America. One of the ostensible functions of the company was to loan money for railroad construction. The same men were instrumental in awarding the contract for the building of the Union Pacific Railroad to one of their number, Oakes Ames, a member of the United States House of Representatives, for stipulated amounts per mile for the different sections ranging from $42,000 to $96,000, amounting in the aggregate to $47,000,000. The contract was right away transferred to seven trustees composed of the same controlling stockholders, who were to execute it receiving therefor $3000 per year each, and the profits were to be divided among those stockholders of the Crédit Mobilier of America who would comply with certain conditions. The Crédit Mobilier agreed to furnish the necessary money at 7 per cent per annum and 21⁄2 per cent commission, not to exceed the amount provided in the contract to be paid by the Union Pacific company. These same leading stockholders of the Union Pacific being also controlling stockholders of the Crédit Mobilier were thus, because the contract prices were said to be twice the actual constructing prices, making a big profit, practically all of which was coming from the United States treasury. Complaints were being made and adverse legislation was feared. Stock in Crédit Mobilier was offered to members of congress at a very low figure on which it is said they made dividends of 340 per cent. It amounted to this: The men entrusted with the management of the road let the contract for its construction to themselves at a figure double its real cost, and pocketed the profits, estimated at about $30,000,000. These same men started the scheme, which afterward became common, of watering the stock, that is increasing the outstanding stock, and distributing it as dividends, upon the plea that the property had increased without any new outlay of money. It also appears to be a method of earning dividends upon money never invested.