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Crédit Mobilier of America

CR DIT MOBILIER OF AMERICA

CRÉDIT MOBILIER OF AMERICA, the classic case of corruption in the Gilded Age, concerned conflict of interest and institutional duplicity. When in 1862 Congress chartered the Union Pacific Railroad with a federal subsidy for a transcontinental railroad, it also established the Crédit Mobilier, a separate corporation for the rail-road's construction, to attract private investors. Huge profits were made. Stockholders in the Union Pacific and the Crédit Mobilier, who were usually the same people, paid themselves outrageous profits. A cynic might say that the first construction site was at the U.S. Treasury.

Within six years Representative Oakes Ames (R-Mass.), a major shareholder, lent money to congressional colleagues to purchase shares at par, half of the market value. He used this stock where it produced the most good. Ames distributed funds to fifteen House members, including several key committee chairmen; six senators; and Vice President Schuyler Colfax. In 1869 a perfunctory Justice Department investigation of Ames's sale of the shares found nothing irregular. Three years later, an unhappy promoter, H. S. McComb, released letters from Ames that provided damaging details about the scheme.

On the eve of the 1872 election the New York Sun exposed the relationship. A later investigation revealed that Ames and others had taken more than $23 million, intended for a congressionally approved permanent endowment for construction, for their personal use, including sharing the stolen funds with congressional members. After the election, during a lame-duck session, Speaker of the House James G. Blaine (R-Maine), who had prior knowledge of the situation, set up an investigative committee that recommended Ames be expelled. The House only voted for censure—not for conflict of interest but for bribing House members. The web of corruption was wide. Schuyler Colfax, the lame-duck vice president; the new Vice President Henry Wilson; and Representative James A. Garfield (R-Ohio) were implicated and tarnished. Garfield recovered from the scandal and was eventually elected president of the United States. Representative James Brooks (D-N.Y.) was censured. Other members escaped punishment.

Blaine, however, paid a price. In the atmosphere of moral outrage following public exposure of the scandal, he defeated the censure charge, but it cost him the Republican nomination for president in 1876. In 1884, as the Republican presidential candidate, Blaine lost a close election to the Democratic challenger, Grover Cleveland. The "Mulligan Letters," written by Blaine to a railroad contractor with whom he had questionable financial dealings (one containing the famous injunction to "Burn this letter"), significantly contributed to his defeat. In addition to the literary results of Mark Twain and Charles Dudley Warner's The Gilded Age (1873) and Henry Adams's Democracy (1880), the Crédit Mobilier scandal gave Grover Cleveland his political reputation as an active opponent of governmental corruption.

The larger historical significance of the Crédit Mobilier scandal was what it revealed about the political culture. It illustrated the famous distinction by the Tammany Hall politician George Washington Plunkitt between dishonest graft—theft or bribery—and honest graft, or taking economic advantage of inside governmental information. Ames's distribution of shares was classified as bribery, but the men receiving those favors were not considered as having received a corrupting gift. Only the provider of the bribe was guilty of wrongdoing. No code regarding official misconduct was forthcoming, and ad hoc judgments became the norm. Between 1873 and 1968 only one senator was mildly censured for having a lobbyist on his payroll, in 1929. The record of Congress in this area has been better codified since 1968, despite some mild judgments.

BIBLIOGRAPHY

Bain, David Haward. Empire Express: Building the First Transcontinental Railroad. New York: Viking, 1999. Richly detailed account of the scandal.

Crawford, Jay Boyd. The Crédit Mobilier of America; Its Origin and History, Its Work of Constructing the Union Pacific, and the Relation of Members of Congress Therewith. Boston: C. W. Calkins, 1880. A pioneer account and still one of the best sources for understanding the corrupt incident.

Huneke, William F. The Heavy Hand: The Government and the Union Pacific, 1862–1898. New York: Garland, 1985. A bit revisionist in emphasis.

Donald K.Pickens

See alsoMulligan Letters ; Political Scandals .

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Crédit Mobilier of America

Crédit Mobilier of America (krĕ´dĬt mōbĬlyā´, krādē´), ephemeral construction company, connected with the building of the Union Pacific RR and involved in one of the major financial scandals in American history. Oakes Ames, Thomas C. Durant, and a few other influential stockholders of the Union Pacific organized the Crédit Mobilier under an existing Pennsylvania charter, which they took over. Acting for both the Union Pacific and for their newly created construction company, they made contracts with themselves. Oakes Ames, as head of the Crédit Mobilier, in 1867 assigned contracts to seven trustees to build the remaining 667 mi (1,074 km) of road for a total sum that brought profits variously estimated at from $7 million to $23 million. This process depleted generous congressional grants to the Union Pacific and left it under a heavy debt by the time of its completion in 1869. The scandal became political when Ames (a U.S. Representative), to forestall investigation or interference by Congress, sold or assigned shares of the Crédit Mobilier stock to members of Congress at par, although the shares were worth twice as much at the time. He wrote to Henry S. McComb, an associate, that he had placed the stock "where it will produce the most good to us" and subsequently forwarded a list of Congressmen who had received or were to receive shares. Later friction between Ames and McComb facilitated the publication of these letters in Charles A. Dana's New York Sun in the midst of the presidential election campaign of 1872. A subsequent investigation by Congress badly smirched the political reputations of Vice President Schuyler Colfax, Senator James W. Patterson of New Hampshire, Representative James Brooks of New York, and others—most of all, of course, Ames himself. Ames and Brooks were censured by Congress, but there were no prosecutions.

See study by J. B. Crawford (1880, repr. 1969).

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"Crédit Mobilier of America." The Columbia Encyclopedia, 6th ed.. . Retrieved May 22, 2017 from Encyclopedia.com: http://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/credit-mobilier-america