Crédit Mobilier Scandal

Among the numerous public scandals that occurred during President Ulysses Grant's second term, the Crédit Mobilier affair drew the most attention. In 1864, the federal government issued a cash payment of $100 million dollars to the Union Pacific Railroad to complete the transcontinental railroad west from the Missouri River. The government also provided a $60 million loan and a generous 20 million acre land grant with a cash value between $50 to $100 million. Due to the rough terrain, high freight costs, and fear of Indian attacks, no companies accepted this offer. A House committee led by Oakes Ames devised a plan in which the government assumed all the financial risk and backed all the stock. Ames and associates realized that the cost would be less than what the government had invested. To acquire the total capital needed to build the Union Pacific, stockholders formed a second corporation that they dubbed a “construction company,” known as Crédit Mobilier of America, which required the railroad to turn over its bonds and stocks. As a result, the Union Pacific lost control of everything except its road and equipment while the so-called construction company paid the rates and kept the profits.

People involved in the scandal included Thomas Durant, vice president of Union Pacific; Cornelius Bushnell, a Union Pacific financier; and John Alley, a representative from Massachusetts who became connected with the Union Pacific Railroad. They and their associates formed the Crédit Mobilier of America and obtained a majority of the stock. In 1866, the federal government also extended contracts to the Central Pacific Railroad to build transcontinental lines east from California, which began a race with the Union Pacific to see which railroad could lay the most track. By December 1868, Crédit Mobilier collected $43,929,328.34 in net profits, and as its stock prices increased, jealousy grew among the stockholders. They quarreled over the division of profits to the point that the stockholders almost exposed their scandalous operation. In 1867, H. S. McComb filed a lawsuit for alleged stockownership in Crédit Mobilier that sparked scrutiny of the company. When Representative Elihu Washburne of Illinois began an investigation, Ames paid congressmen in stock shares to stay quiet, and to appease McComb, he provided the names of the congressmen who had purchased Crédit Mobilier shares.

The impact of the Crédit Mobilier scandal is difficult to decipher. The investigation showed that the company had provided shares to 30 representatives in Congress, one of whom was James Garfield. He denied involvement in the scandal when he became president. Colfax lost his renomination bid on the Republican Party ticket for vice president as a result of his involvement. The Crédit Mobilier scandal serves as one of the best examples of railroad corruption during the Gilded Age.

Joshua A. Camper

See also: Railroad Regulation ; Railroads ; Union Pacific Railroad


Ambrose, Stephen. Nothing Like It in the World: The Men Who Built the Transcontinental Railroad, 1863–1869. New York: Touchstone, 2000.

Foner, Eric. Reconstruction: America's Unfinished Revolution, 1863–1877. New York: HarperCollins Publishers, 1988.

Morison, Samuel Eliot. The Oxford History of the American People. New York: Oxford University Press, 1965.