Americans’ trust in their government has always ebbed and flowed, and those ebbs and flows have largely depended on whether the government and its officers have acted in ways that earned the trust of its citizens or in ways that led the government to be mired in scandal—therefore sullying its reputation. Some of the largest ebbs in trust have come after officials in the top echelon of government—Senators, Representatives, Presidents and their cabinets—have used their offices for their own benefit. Two months before the election of 1872, news broke of a scandal that would extend well into 1873 and implicate politicians as prominent as the Vice President, and that scandal foreshadowed the ways in which big business and politics would intertwine in not only the Nineteenth Century but the Twentieth and Twenty-First Centuries.
The railroad industry had become massive by 1872, and its influence in Washington was proportionate in scale. Congress, or, more generally, the federal government, did not have much precedent to reference when determining the appropriateness of an interaction between the railroad lobby and elected officials as industries of scale were just emerging. However, if an elected official wished to invest his money in the booming railroad industry (and likely earn a handsome profit), he could do so by buying shares of a construction company which performed most of the work for a railroad company’s project. One such construction company was Crédit Mobilier Company of America. The New York Sun uncovered the cozy relationship between Crédit Mobilier and members of Congress, and on September 4, 1872, it published a report with the headline: “The King of Frauds. How the Credit Mobilier Bought Its Way through Congress . . . Colossal Bribery . . . Congressmen Who Have Robbed the People and Who Now Support the National Robber . . . How Some Men Get Fortunes . . . Princely Gifts by the Chairmen of Committees in Congress.”[i] Many readers could have learned from the article that Crédit Mobilier had performed work for the Union Pacific, collected substantial profits, and used its influence in Washington, but some objected to the timing of the article as it was within weeks of the presidential election and its foundational information was not new; much of it had been gleaned from public testimony taken over a year before the New York Sun published.[ii]
Regardless of objections, the New York Sun article was only the beginning. After the presidential election of 1872, which incumbent Ulysses S. Grant won with Henry Wilson as Vice President, the Senate and the House of Representatives created respective committees to investigate the underlying transactions. There were two points of focus in the investigation: the alleged fraud “against the public in the construction of the Union Pacific” and the potential “bribery of members of Congress” by selling shares at “below-market prices.”[iii]
As for the alleged fraud (which would have affected taxpayers), investigators learned that there would be no way to prove or disprove its existence: the accounting practices of the time did not permit investigators to obtain a full picture of how the money flowed through Crédit Mobilier.[iv] In fact, even Union Pacific’s directors were unable to discern whether the “railroad had taken the loans and land proffered by the government and converted these into liquid assets siphoned off by” Crédit Mobilier’s shareholders.[v] Whether and to what extent that fraud existed was never going to captivate the public; whether and to what extent elected officials received bribes, on the other hand, would attract and keep attention.
And it did. In the New York Sun article was a list of politicians who had allegedly received bribes, and on that list were Speaker of the House James Blaine, future President and chairman of the House Appropriations Committee James Garfield, outgoing Vice President and former Speaker of the House Schuyler Colfax, and Vice President Henry Wilson.[vi] Republicans had their suspicions about the list’s veracity: not one Democrat’s name could be found—which provided more fuel to the speculation that the New York Sun article was nothing more than a political ploy—and the list lacked elaboration; Blaine had rejected an offer for Crédit Mobilier shares, and Wilson had accepted the offer for shares but later sold them.[vii] At the center of the allegations was Oakes Ames who had been a Representative from Massachusetts but by the time of Congress’ inquiry had left the House and was working with Union Pacific to promote investments.[viii] When he testified with the benefit of his “red morocco covered memorandum book” detailing the investors and the details of their transactions, “You could hear a pin drop” in the room.[ix] His log of the Crédit Mobilier transactions showed Blaine had not engaged in wrongdoing but that Colfax, Garfield, and others had been involved; the question remained what consequences would flow from their involvement.[x]
Ames, who had been one of the most active proponents of Union Pacific and its investments, had said of congressional members’ involvement, “There is no law and no reason, legal or moral, why a member of Congress should not own stock in a road any more than why he should not own a sheep when the price of wool is to be affected by the tariff.”[xi] One investor, former Representative from Pennsylvania Benjamin Boyer, saw no harm in the matter whatsoever: “as the investment turned out to be profitable, my only regret is that it was no larger in amount.”[xii] With an understanding that members of Congress were free to invest their money how they pleased—and that members of Congress legislature on a number of issues that may have a marginal effect on their personal wealth—attention turned to whether a quid pro quo had occurred: did Crédit Mobilier benefit from members of Congress purchasing shares at cut-rate prices? Ames argued that the gifts of stock could not be bribes because, as was typical of politics during that era, the parties on both sides of the transaction were already doing favors for one another as friends.[xiii] Bribery was not out of the question; it simply did not occur here because it was not necessary, Ames was arguing. To obtain the vote of a friend did not require any special gift (in fact, it would be an insult); to obtain the vote of anyone else may require bribery. However, if Ames was to be believed and the actions of all involved were so benign, it had been suspicious for Colfax to initially deny any involvement.[xiv]
In the end, the committee handed down its judgment: two members, Ames and James Brooks, Democrat of New York, were censured for attempted bribery; and perhaps relatedly, both would die before the end of 1873. They had acted with “dangerous character,” and no one else’s actions warranted censure because they had not known what Ames intended with his transactions and had only taken the shares “to make a profitable investment.”[xv] The scandal tarnished the reputations of Blaine and Colfax, but more than that, there was a sense of injustice. The New York Times printed: “To refuse to censure the holders of that stock is to say that the Congressional standard of morals is not high enough to condemn it.”[xvi] Ames was indignant: “I alone am to be offered up to appease a public clamor. It’s like the man in Massachusetts who committed adultery, and the jury brought in a verdict that he was guilty as the devil, but that the woman was as innocent as an angel.”[xvii] The New York Herald aptly summarized the saga: “Good government has received a deadly stab.”[xviii] Because Congress had gathered such damning evidence and took such little action on it, the Crédit Mobilier scandal served to lower Americans’ view of its federal legislature. Regardless of whether the actions behind the scandal were dressed up as ones between friends or quintessential bribery, ordinary Americans had every right to question whether their government was serving their best interests. It was not a coincidence that resentment was building in the American public against monopolies and big businesses, and although the resentment surrounding Crédit Mobilier did not translate into reform, that resentment would continue to build in the ensuing decades and bring to bear significant change in American government, business, and labor.
[i] H.W. Brands, American Colossus: The Triumph of Capitalism, 1865-1900, 357.
[ii] See id.
[iii] Id. at 357-58; Richard White, The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896, 256.
[iv] See H.W. Brands, American Colossus: The Triumph of Capitalism, 1865-1900, 358.
[vii] See id. at 358-59.
[viii] See id. at 359.
[x] See id.
[xiii] See Richard White, The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896, 256.
[xiv] H.W. Brands, American Colossus: The Triumph of Capitalism, 1865-1900, 360.
[xv] See id.