In hard-currency times, and with the labor and iron market easy, these terms might have been sufficient to invite the ready aid of capital. But the close of 1862 and the year succeeding were the darkest periods of the war. Gold vibrated from 140 to 180. Iron, which in 1859, sold for $35 a ton, was now selling for $130. Moreover, while money was tight, labor was also scarce. The two great agencies on which a vast public work like this must inevitably depend proved utterly inadequate to the emergency. Nevertheless, both the companies which had already an organic existence bent themselves with no inconsiderable vigor to their task. The Central Pacific accepted the responsibilities and obligations of the charter six months after its passage, and commenced the work of grading in the succeeding February. Rails, chairs, and rolling stock were forwarded by sea, involving heavy expenditures for freightage, and a ten per cent war risk on insurance. The company endured further embarrassments from the lack of capital, and the fact that in California a metallic currency formed the only circulating medium. Nor was it the least of its difficulties that the enterprise met with an ambiguous reception in many portions of the State, San Francisco especially regarding it with cold indifference. The zeal with which the road was pushed amid these embarrassments is a striking evidence of the thorough faith of its projectors. Although it soon became apparent that further legislation would be needed to relieve them from the disabilities inherent in the meagreness of the government subsidy, they nevertheless succeeded by the 6th of June, 1864, in cutting their line through to New Castle, and in laying thereon a solid and continuous track.
In Kansas, the Leavenworth, Pawnee, and Western Railroad Company or, as they were beginning to style themselves the Union Pacific Railway, Eastern Division, had contracted for an immediate and rapid construction of their line as early as September 30th. By the spring of 1863, the contractors, Messrs. Ross, Steele, & Co., had involved themselves to the extent of five millions, of dollars, and were in full operation with an adequate corps of laborers, grading, quarrying stone, building culverts, etc. Suddenly, however, all this busy movement ceased. By one of those strange revolutions that occasionally occur in the management of corporations, a man notorious throughout the whole border, familiarly called Sam Hallet, assumed control of the company, denounced the contract as in nowise valid, and peremptorily ordered the agents of the contracting party to abandon the work. The agents refused. Affairs now assumed the aspect of war. Hallet procured a company of United States dragoons from Fort Leavenworth, and rode down upon the contumacious contractors. The result of this cavalry dash is rather picturesquely described in a letter of this novel railroad general, dated August 15, 1863:—
"I have had an awful row with Carter, a battle on the works, and a sharp 'pitch in' to get possession; we drove them back, and into the river, until they cried enough. S. S. Sharp, my foreman Section No. 1, led Carter to the river-bank by the collar; and but for his begging, he would have ducked him. I expect Steele and Carter on again with reinforcements. Let them come! We will put them into the river the next time. We have had to use strong force, quick and bold. We have taken all their ties, houses, and works, and shall hold them."
Triumphant on the battle-field, Hallet now made a rapid counter-movement, and effected a transfer of the ownership of the company to a new set of capitalists, putting them into immediate possession of the entire property of the old corporation. Of the legal merits of this singular manœuvre we are not prepared to give an opinion; but it is proper for us to add, that it met with vigorous resistance on the part of the former stockholders, at the head of whom stood Fremont. Sharp litigations and stormy altercations ensued; and for many months most vital to its interests the whole Kansas enterprise was shut from view.
While these two companies were moving forward, the one steadily overcoming financial and engineering difficulties, the other plunging into an inexplicable imbroglio of contested management and contested contracts, that great combination of capitalists which held the destinies of the Union Pacific met at Chicago in September, 1862, and took the preliminary steps for the formation of a company. Books for stock subscriptions were opened in every loyal State and Territory. In June of the next year the acceptance of the charter by a provisional direction was filed at Washington. Nevertheless, an annoying apathy filled the public mind. Capital was shy of the enterprise. The terms of the act of 1862 were deemed unsatisfactory. Up to August, 1863, only about eighty thousand dollars had been subscribed.
At this point, Thomas C. Durant, whose connection with Western roads had inspired so much faith in the Pacific project, threw the weight of his capital and influence so determinately into the scale, that by October the subscriptions had reached two millions, and the company was in a condition to organize. Major-General John A. Dix was elected president, Dr. Durant became vice-president and general manager, and the preliminary survey which he had ordered at his personal expense was approved and officially adopted by the direction. As, however, a wide-spread feeling existed, not only that additional legislation was necessary, but that it might also be obtained, the company contented itself that year with the selection of its eastern terminus. President Lincoln was consulted; and, acting upon his unofficial sanction, the Union Pacific broke ground for the railroad at Omaha, then a struggling village in Nebraska Territory, nearly opposite Council Bluffs. The inaugural ceremony took place December 2d, and with this event the year closed.
For the next few months the efforts of all the companies converged upon Congress. The Union Pacific Company appeared at Washington in great force. The Central, equally urgent, presented arguments that amounted to demonstration; the chief points being the energy with which they had striven to comply with the terms of the charter, and the painful failure that had attended their endeavor,—a failure clearly imputable to the insufficiency of the original bill. The Kansas Company, though rent in twain by rival boards of directors, was also on the ground, animated by very ambitious purposes, and with a determination to win its ends in spite of internal complications. The vigor with which the latter body took the field gave a complex character to the struggle, and very much prolonged it. On vital points, however, all parties were in accord, and in the main results of the campaign each achieved a splendid success. The supplementary bill, approved July 2, 1864, as much surpassed the legislation of two years previous as the sixteen hundred million national debt of 1864 exceeded the five-hundred million debt of 1862; The colossal expenditures of the war had led Congressmen to accept the estimates of railroad men with implicit credence, and to second their demands with generosity. The land grant was doubled, the government bonds were made a second lien to the roads under construction, the twenty-five per cent reservation was removed, and one half of government business was to be paid in money.
The Union Pacific Company effected an important modification of the charter in respect to their particular interests. Their maximum capital was still fixed at one hundred millions, but individual shares were lowered from a thousand to a hundred dollars each. Furthermore, the hitherto unwieldy board of direction was limited to fifteen members. On the other hand, the Kansas organization obtained the privilege of making their own road the grand trunk route, connecting with the Central Pacific, in case they should anticipate the Nebraska line in reaching the one hundredth meridian, and the latter road should not appear to be proceeding in good faith.
As the act which bestowed such signal favors had granted an extension of a year for the completion of the first division of each road, the Union Pacific was under no absolute compulsion to hasten its work. Nevertheless, surveying parties were kept in the field, and the contract for the construction of the road to the one hundredth meridian was signed in August. This agreement, though nominally known, as the Hoxie contract, derived the guaranty of its performance from the Credit Mobilier,—an organization with an actual capital of two millions and a half, recently created upon the model of the great Paris corporation, and in the hands of a few moneyed men whose enterprise and energy were admirably proportioned to their large wealth. Its heaviest capitalists were also stockholders in the projected road; and as payment was to be made in bonds and shares, the Credit Mobilier at once became an over-shadowing stockholder in the Union Pacific. The arrangement at a subsequent period may not have been wholly beneficial; but at the date of the contract the alliance was of incalculable importance. Although two millions of stock had been subscribed, the Nebraska line had in reality only twenty thousand dollars in its treasury. Without the Credit Mobilier, it would have faltered on the threshold of success. Even with this powerful auxiliary, it was not yet strong enough to prevent an unexpected and vexatious delay.
The first forty miles west from Omaha had been intrusted to Peter A. Dey, an engineer of some experience in the West. This gentleman, whose ideas seem to have been limited to a straight line, had constructed a track satisfactory in its alignments, but with a maximum grade of eighty feet per mile, and involving temporary grading of one hundred and sixteen feet at several points of the route. A later survey, made under the supervision of Colonel Seymour, demonstrated the existence of a far better line with forty-feet grades and but nine miles longer. Placed upon abstract grounds, there was no question of the relative advantage of the two routes. The combined opinion of several of the most skilful railroad managers in the country was unanimous for the lower grade, as essential to rapid and economical transportation. But there was another element in the case which gave a different aspect to the affair. Dey's line terminated at Omaha; Seymour's, at Bellevue. If the new route were selected, all the magnificent dreams of the Omaha land speculators would be summarily dispelled. The territorial population caught the alarm. Public meetings were called. A committee was sent post to Washington. It was asserted, on grounds that were not destitute of plausibility, that the change was attributable quite as much to motives of a stock-jobbing order, as to economic considerations. To this charge Dr. Durant indignantly replied, but this did not appease the clamor. Nor was the dispute ended until after five months of tedious investigation, and a guaranteed promise on the part of the company, that, in adopting the new line, there should be no alteration of terminus.