The Crédit Mobilier of America Scandal
There are two things that create the largest political scandals, sex and money. In the case of the Crédit Mobilier of America scandal, it was money that played the largest role. Money has always had a corrupting influence on politics, and the United States is no different.
As the US grew as a country, and as technology advanced, transportation also needed to grow. Between 1800 and the end of the Civil War, the newest and greatest transportation method was rail. The US saw staggering growth in the railroad industry during this time period With that growth came a lot of money, and where there is money, there’s corruption.
This scandal started small in 1864 as a cash-for-votes operation run by a congressman named Oakes Ames. It started when Congress authorized the creation of the Union Pacific Railroad and its primary creditor Crédit Mobilier. Ames then would pass out bribes, usually in the form of Union Pacific stocks to other politicians to vote on bills that would affect that particular railroad.
That was only the first part of the game, however. They also needed these politicians in their pockets because of the financial scam they were running during the construction of their railroad. The executives of the Union Pacific Railroad set up a bank called Crédit Mobilier of America. It was a front meant to show the US Government that they had financial backing, when they had none. Instead, they used Crédit Mobilier of America to take money from the US Government, and then skim off profits from that money when it should have been going towards construction costs.
In the end, the US Government shelled out around $95 million when the construction costs actually only ran around $50 million. That excess was split between the Union Pacific board members, US government officials, and the stockholders.
So, who were these people? The members of this scam were well distributed amongst the US government. It included the Vice President, Schuyler Colfax, four US Senators, and the US Secretary of the Treasury, all Republicans.
The scam was uncovered in 1872 by The Sun, a New York City newspaper. The outcome was yet more distrust in Congress, and further erosion of the Republican plans for Reconstruction, a plan to heal the nation after the Civil War (and a plan to eliminate the power of Southern Democrats).