Crédit Mobilier scandal

Crédit Mobilier scandal
Name	Crédit Mobilier Scandal
Caption	Contemporary cartoon by Thomas Nast depicting the scandal (1873)
Date	1864–1873 (public revelation: 1872)
Location	United States
Type	Political and financial corruption
Cause	Union Pacific Railroad construction financing
Participants	Oakes Ames, Schuyler Colfax, James G. Blaine, Henry Wilson, Union Pacific Railroad, Crédit Mobilier of America
Outcome	Censure of Oakes Ames, damaged reputations, no criminal convictions

Crédit Mobilier scandal. The Crédit Mobilier affair was a major political and financial scandal in the United States during the Reconstruction era, erupting in 1872. It centered on the fraudulent construction and financing of the transcontinental railroad by the Union Pacific Railroad and its associated construction company, the Crédit Mobilier of America. The scheme involved the corrupt distribution of company shares to influential members of the United States Congress to secure lucrative federal subsidies and block official inquiry, becoming a symbol of Gilded Age corruption.

Background and context

The Pacific Railroad Acts of 1862 and 1864 provided massive federal loans and land grants to the Union Pacific Railroad and the Central Pacific Railroad to build the First transcontinental railroad. To manage the immense construction costs and profits, the Union Pacific's directors, including Thomas C. Durant and Oakes Ames, established a separate construction company named after the French Crédit Mobilier. This entity was awarded massively inflated contracts to build the railroad, effectively transferring the substantial federal funds and profits from the Union Pacific Railroad to the Crédit Mobilier's select shareholders. This arrangement occurred amidst the rapid industrial expansion and lax financial regulation characteristic of the post-American Civil War era, a period later dubbed the Gilded Age by Mark Twain.

Key figures and companies

The central corporate entity was the Crédit Mobilier of America, controlled by the leadership of the Union Pacific Railroad. Key figures included Congressman and railroad financier Oakes Ames, who managed the distribution of shares, and Union Pacific vice president Thomas C. Durant. Prominent political recipients of shares or cash dividends included the sitting Vice President Schuyler Colfax, his successor Henry Wilson, and powerful members of the House such as James A. Garfield and James G. Blaine. Newspaper editor Charles A. Dana of the New York Sun also benefited, while the investigation was notably led by Congressman Luke P. Poland.

The scandal unfolds

The scandal became public in September 1872 during the presidential election campaign between Ulysses S. Grant and Horace Greeley. The New York Sun, published by Charles A. Dana, broke the story based on documents provided by Henry S. McComb, a disgruntled Crédit Mobilier investor. The newspaper detailed how Oakes Ames had distributed shares of Crédit Mobilier to fellow congressmen at a steep discount, with the understanding that future dividends—funded by exorbitant payments from the Union Pacific Railroad—would far exceed the initial cost. This was a deliberate effort to secure continued favorable legislation and prevent congressional investigation into the company's fraudulent contracts and financial practices.

Congressional investigation and findings

In response to public outcry, both the United States House of Representatives and the United States Senate established investigative committees. The House committee, led by Luke P. Poland, conducted the primary investigation. Its report, issued in 1873, found that Oakes Ames had indeed sold shares below market value to influence his colleagues in the Fortieth United States Congress and the Forty-first United States Congress. The investigation concluded that while the transactions constituted a serious conflict of interest and an attempt to corrupt the legislative process, they did not technically violate any existing federal statute, as there were no specific laws against bribery of congressmen at the time.

Political and legal consequences

The political fallout was significant but resulted in minimal legal penalty. The United States House of Representatives voted to censure Oakes Ames and fellow representative James Brooks. Vice President Schuyler Colfax was deeply implicated and saw his reputation ruined, leaving office under a cloud. His successor, Henry Wilson, was also tainted by the revelations. Future president James A. Garfield faced allegations but denied wrongdoing and was not formally sanctioned. Notably, no individual faced criminal prosecution, and the Union Pacific Railroad retained its federal land grants. The scandal contributed to a growing public perception of corruption within the Ulysses S. Grant administration.

Legacy and historical significance

The Crédit Mobilier scandal stands as a defining emblem of the political corruption and cozy relationships between government and big business that characterized the Gilded Age. It demonstrated the severe weaknesses in federal ethics regulations and directly fueled the movement for civil service reform, culminating in the Pendleton Civil Service Reform Act of 1883. The affair is frequently cited alongside other major scandals of the era, such as the Whiskey Ring and the Star Route scandal, as a catalyst for the rise of Mugwump reformers and the eventual politics of the Progressive Era. It remains a primary case study in the history of American political corruption and the oversight of congressional ethics.

Category:Political scandals in the United States Category:Reconstruction Era Category:Gilded Age Category:1872 in the United States Category:Union Pacific Railroad