The passage of the Pacific Railroad Acts in 1862 and 1864 authorized the building of the transcontinental railroad, established Union Pacific and set the scene for what became known as the Crédit Mobilier scandal of 1872.

In 1864, George Francis Train, then a vice president of the newly created Union Pacific Rail Road, and Thomas C. Durant bought the Pennsylvania Fiscal Agency and renamed it Crédit Mobilier of America specifically to build the eastern portion of the transcontinental railroad. The intent was to create the impression that this company was independent even though ties between Union Pacific and Crédit Mobilier were such that there was little difference between the two.¹ For many, Crédit Mobilier of America would be seen as a shadowy entity.

The September 4, 1872 New York Sun ran a front page article with the headline “THE KING OF FRAUDS.” Much of what was reported featured the testimony of Henry S. McComb in his lawsuit against Crédit Mobilier of America. McComb, a leather manufacturer who had supplied the government during the war, was also involved in the effort to revive southern railroads.² His connections put him in a position to become a stockholder in Union Pacific and an original stockholder of Crédit Mobilier.³ In 1868, McComb filed a lawsuit over his share of the profits.⁴ The lawsuit and subsequent news story about Union Pacific and Crédit Mobilier would have reinforced ill feelings around the railroad and the people involved.

The scandal itself revolved around Union Pacific, the efforts to build the railroad, and the men who profited from it. Because there was no existing railroad, money was actually made constructing the railroad, not running it. To build the railroad, Union Pacific got money from the government, contracting with their company Crédit Mobilier to actually do the work. Crédit Mobilier, in turn, overcharged Union Pacific, and those profits were divided among investors who were also involved with Union Pacific. There were also accusations of bribes and stock manipulation.

One name that featured prominently in the story and scandal was Oakes Ames. Ames, a businessman and investor, was also a member of the House of Representatives who sat on the House Committee on Railroads and had been asked by President Lincoln to assist with getting the troubled railroad project back on track. Once in position, Ames ousted Durant from the company and then was able to use his position to ensure his family made a lot of money building the railroad and selling shares in Crédit Mobilier to members of Congress at below market value.

When the story broke, the names of many powerful Washington politicians were mentioned. In the course of the investigation, many of the men were either dropped from the investigation or were never proved to have been involved. This includes Vice President Schuyler Colfax; James Garfield who denied the charges and was still elected president; Senator Henry Wilson who was elected Vice President; and Representative John A. Bingham who went on to become Minister to Japan. Quite a few members of Congress were accused:

• Representative Oakes Ames
• Representative Henry Dawes
• Representative James Brooks
• Representative Thomas Eliot
• Speaker of the House James G. Blaine (later served as Senator and Secretary of State)
• United States Secretary of the Treasury George S. Boutwell (former Representative and Senator)
• Senator Henry Wilson
• Senator James W. Patterson
• Senator Roscoe Conkling
• Senator James Harlan (who was retiring)
• Senator John Logan
• Former Senator James A. Bayard Jr. (had retired, name dropped from the investigation)
• William B. Allison (elected to the Senate in 1873)

In the end, only Representatives Oaks Ames and James Brooks really suffered any sort of consequence. The expulsion case against Senator Patterson failed while Ames and Brooks were censured on February 27, 1873 for using their political influence for personal financial gain.⁵

Today, the scandal is known more as a political landmark that damaged the reputation of many politicians and became another black mark for business and politics during the Grant Administration. It is also a revealing glimpse into business during the Gilded Age and a part of the story of the Transcontinental Railroad.