kredit in America

THE

CREDIT MOBILIER

OF AMERICA

ITS ORIGIN AND HISTORY

ITS WORK OF

CONSTRUCTING THE UNION PACIFIC RAILROAD
AND THE RELATION OF

MEMBERS OF CONGRESS THEREWITH

BY J. B. CRAWFORD

BOSTON

C. W. CALKINS & CO., PUBLISHERS
1880

V

SPBECKELS

Entered according to Act of Congress, in the year 1880, by

C. W. CALKINS & CO.
In the office of the Librarian of Congress, at Washington, D. C.

PRESS OF C. W. CALKINS & Co., BOSTON.

PREFACE.

In presenting this book to the public the author has
been led by the hope that it might, in a measure, clear
away much of the misunderstanding that has always
existed regarding the objects and accomplishments of
the Credit Mobilier. For years it has been received,
as a fact beyond dispute, that the work of this cor-
poration was one of fraud upon the Government and
the people of this country. It has been talked about
by almost every one. It has been commented upon in
the press and before the public until its name has
become a familiar sound in almost every household in
the land. In all this controversy there has been one
uniform opinion, and that opinion has been entertained
almost unanimously by the the public. Not less was
the author at one time impressed with this same
general idea. He. in common with nearly all others,
believed that those who had carried on this work had
used their power and influence to grow rich at the
expense of the government. As he read the reports,
which had been submitted to Congress by the com-
mittees of investigation, still more firmly did he find

184399

VI. PREFACE.

that opinion impressed upon his mind. A careful
reading of the testimony upon which those reports
were based, led to the conviction that an almost fatal
error had been committed, and that the judgment
which had been rendered by the public was one not
supported by the evidence, and which would never
have been pronounced had an opportunity been given
for the consideration of the truth. The judicial inves-
tigations that have been accorded by the courts have
done much to remove the doubts of many, and to
give a clearer insight into the true relations of the
most gigantic achievement of the present century.

Time had in a great measure overcome the feeling
against the Credit Mobilier, but during the past few
months the interest has revived and the public were
anxious to know the truth. The object of this book
:
is to furnish that information. How well that object
has been accomplished the public must judge. The
author has attempted to deal impartially, to give credit
only where it is due, and censure only where merited.
The work is not designed as a political work in any
sense ; the great blessings that have accrued to the
nation through the construction of that great highway
have carried the work of the Credit Mobilier above
and beyond the sphere of politics, and it is hoped that
when the truth shall become known the public will
not, alone comprehend but approve that work.

J. B. C.
Oct. 15, 1880.

CONTENTS.

I.

THE ORIGIN OF THE COMPANY

II.
THE ACT OF INCORPORATION

III.
THE UNION PACIFIC RAILROAD COMPANY .... 24

IV.
THE AMES CONTRACT AND ASSIGNMENT 3 8

V.
THE ASSIGNMENT TO SEVEN TRUSTEES 55

VI.
THE DIFFICULTIES OF CONSTRUCTION 73

VII.
THE DISAGREEMENT WITH MR. McCoMB 88

Vlll. CONTENTS.

VIII.

THE POLLAND COMMITTEE 121

IX.
DEFENCE OF OAKES AMES 186

X.

THE VOTE OF CENSURE 214

XL
THE CREDIT MOBILIER OF TO-DAY . .220

9F THE

UNIVERSITY

THE CREDIT MOBILIER

OF AMERICA.

I.
THE ORIGIN OF THE COMPANY.

COME eight years ago the country was startled
by the announcement of the grossest corruption
in our national legislature, arising out of the building
of the Union Pacific Railroad, and which involved
the names of many of the most prominent men in
Congress men whose reputation had before been
above suspicion men whose record had always
been spotless. The news came with terrible force
upon the community. The time that of a presi-
dential election was one well calculated to add
force to the calamity that had seemingly overtaken
our country. The name of " Credit Mobilier," un-
til then almost unknown and unheard of except
among a few, now came into most wonderful promi-
nence, and to this day, though spoken of by every-
one, has remained a mystery. The name, with its
foreign sound, was one well calculated to raise

IO THE CREDIT MOBILIER

additional alarm, and was one which politicians
could handle with ease to instil into the minds of the
people ideas of great corruption. Why should such
a name be selected if the purposes of that corpora-
tion were honorable ? and they who wished to use
it lost no opportunity of doing so ; and yet it is safe
to say that not one in a thousand of those who dwelt
upon the infamy of the Credit Mobilier had the
faintest conception of what it really was, what were
its objects, or what it had accomplished. But that
could not deter them in their argument ; they knew
its purposes were not honest, and that was enough
for them. It was as the cloud, small at first, but
soon the tempest that arose was sufficient to destroy
all that came within ,ts reach. Reputations which
had been towers of strength were suddenly over-
whelmed and covered with infamy ; they who had
been the leaders of public opinion and of public
morals were swept away in the maelstrom of public
condemnation, never again to regain their position.
So great was that condemnation by the people of
the acts of these men that in an evil moment they
sought to regain their lost positions by denying all
connection with, or interest in, the Credit Mobilier;
not stopping to consider whether that connection was
good or evil, but listening only to the clamors of
the present, they sought to shield themselves behind
the armor of their hitherto unquestioned word ; but
alas ! when revelation came, and that word was
found to be false, the last defence was gone, and
they fell. Years have passed, but still those names

OF AMERICA. II

have been enshrouded by the mystery in which they
had fallen. Time has indeed cleared away much of
the superstition that was created ; but the people, as
a mass, remain in ignorance of the real object and
workings of the Credit Mobilier. What was it ?
What did it accomplish ? These are questions that
are daily and hourly asked by the many. Let them
but go out beyond the Missouri, upon the Great
American Desert of a score of years ago, and behold
the mighty empire that has sprung into existence
there ; behold the towns and cities teeming with
population, farms that supply the world with bread,
homes provided with every comfort and luxury of
life ; behold on every side the school-houses where
children grow up amid the influence of popular edu-
cation, and as they behold this happy, contented, and
enlightened people, strong in their love of freedom
and equality, firm in their faith and allegiance to
their country there they may see some of the re-
sults that have been accomplished through the influ-
ence and instrumentality of those who guided and
governed the Credit Mobilier. In a word, the Credit
Mobilier and the Union Pacific Railroad Company
were one and the same. The men who governed
the one, governed the other. Whatever was done
under the name of Credit Mobilier may not be
known to the world in its true light, but we hope
that the facts concerning it may be made to appear
upon a perusal of this work. It is not our inten-
tion to accuse or apologize for any one, but only
to set forth as clearly as we can the history of the

12 THE CREDIT MOBILIER.

Credit Mobilier of America and its connection with
the building of the Union Pacific Railroad, and the
relation of members of Congress with it.

The excitement of the past is gone, in a great
measure, and the people of the present are prepared
to far more impartially judge of the merits or the
evils of its operation, and to decide whether the
actions of those men were right or wrong. That
any crime was ever committed was not a necessary
conclusion to be drawn from the revelations that
have been made public. Time, and time only, can
effectually clear away the clouds of suspicion that
have so long hung over many a once-honored name,
and only the impartial judgment of history can give
complete vindication to those who have been ac-
cused. A new generation is fast appearing upon
the arena of life, which will be prepared to judge
without the feelings of prejudice that have, and may
long continue to control public opinion.

Only a short time ago there appeared in the press
throughout the country a statement by the sons of
Oakes Ames in relation to the association of their
father with the Credit Mobilier, which, in connection
with the present political campaign, has centred
upon this matter an interest before unfelt, and has
created an almost universal desire on the part of the
public to know more concerning the history of that
corporation. Was it a work, as they allege, of such
great importance ? Was it so largely beneficial to the
country that, instead of the odium and disgrace that
was cast upon its principal character, a monument

OF AMERICA. 13

should be erected to his memory by a grateful
people ? No fact is, or can be made more plain,
than that no man had so much to do with the success
of the building of the Union Pacific Railroad as did
Oakes Ames. To his wonderful exertions, to the
great sacrifices which he made, is due the building
of that road. He assumed the responsibility, and
shirked not the ordeal through which he passed.
The road was completed, the whole country was
benefited, and the union of our states made more
strong than ever before ; but to Oakes Ames the
result was disastrous in the extreme. He was cen-
sured by the Congress of which he was a member,
and the disgrace which was placed upon him ended
his life in a few short months.

A proper study of the Credit Mobilier will make
necessary a consideration of the circumstances which
called it into existence ; and to do this, we shall be
compelled to go over the history of the building of
the Union Pacific Railroad. The Credit Mobilier,
as it came into prominence, was the construction
company that took the contract for building the road.
Owing to the same parties being the stockholders in
the road and the stockholders in the Credit Mobilier
it could not well take the contract direct from the
Railroad Company, but the contracts came through
the intervention of a third party. All this will be
seen in the pages which follow, and need not be fur-
ther alluded to here. Upon the organization of the
Union Pacific Railroad Company, under the act of
Congress of 1862, and as amended by act of

14 THE CREDIT MOBILIER

Congress in 1864, an attempt had been made by that
company to construct the road, which effort proved
to be a failure, not only because of the lack of con-
fidence which the public had in the scheme, and
refusal to invest in the bonds and stock of the
company, but their own lack of means, and the
responsibilities which such construction cast upon
those who undertook it. It was impossible for the
company to obtain any individual to take a contract,
as no one was willing to shoulder so great an obli-
gation as he must. It was therefore necessary that
some means be used by which there could be
a combination of capital and at the same time a limit
to the liability of losses. It was therefore deter-
mined to use the influence of a construction com-
pany. Questions of course arose, as to the legality
of the proceedings as contemplated, but under the
instruction and advice of the most eminent counsel
in the world the plan, as carried out, was com-
menced, carried on, and finished.

The Credit Mobilier of America, which was the
name adopted for the company selected for the
work, was fashioned after the Credit Mobilier of
France, which had long been known in that country.
The Credit Mobilier of France was a joint stock com-
pany founded in Paris November 18, 1852, under the
lead of the brothers Emile and Isaac Pereire, and on
the principle of limited liability, for the transaction of
general banking business, to facilitate the construc-
tion of public works, and to develop internal indus-
try. Its capital was 60,000,000 francs, divided into

OF AMERICA. 15

shares of 500 francs. It was authorized to hold
public and other securities, and to issue bonds of its
own to an amount equal to its subscriptions and
purchases, and after its original capital was all
taken, to issue bonds to ten times that amount. The
profits of the company were at first very large, a
dividend of forty-one per cent, was declared in
1855, and from that down to five per cent. In 1867,
having for some years paid only slight dividends
(though the average annual dividend for fifteen
years was seventeen per cent.), it lost confidence,
and the stock fell to twenty-eight per cent, of its par
value, and the company soon went into liquidation.
The managers retired with immense fortunes. The
High Court of Appeals decided (August i, 1868,)
that the brothers Pereire and other directors were
responsible for their acts, and that damages should
be given to the stockholders. Among the enter-
prises achieved by the Credit Mobilier of France
may be mentioned the construction of the Paris Gas
Company, the Paris Omnibus Company, the crea-
tion of the company of the Grand Hotel du Louvre,
and of the Maritime Company of Clippers, and im-
mense railway operations in Austria, Spain, Russia,
and Switzerland, together with heavy loans to
French railway companies. The company met
with much opposition, and was at times called the
greatest gambling house the world had ever seen.

The Credit Mobilier of America was originally a
company organized under the laws of the State of
Pennsylvania, in the year 1859, an ^ was tnen known

1 6 THE CREDIT MOBILIER

by the name of The Pennsylvania Fiscal Agency.
Under this name, however, it languished, and was
not, until shortly previous to its purchase by the
principal paities interested in the Union Pacific
Railroad, even organized as a corporation. And
after its final organization it never called any of its
powers or functions into action while it retained its
first name. The powers granted to it were of a
peculiar nature, and were what were so much needed
in the field in which it was soon to appear, that
every necessary object was amply provided for.
That a full understanding of its provisions may be
had, the act in full will be given.

II.

THE ACT OF INCORPORATION.

AN ACT TO INCORPORATE THE PENNSYLVANIA

FISCAL AGENCY.

Be it enacted by the senate and house of representa-
tives of the Commonwealth of Pennsylvania in
general assembly met, and it is hereby enacted by
the atithority of the same :

SECTION i. That Samuel J. Reeves, Ellis
Lewis, Garrick Mallory, Duff Green, David R.
Porter, Jacob Ziegler, Charles M. Hall, Horn R.
Kneass, Robert J. Ross, William T. Dougherty,
Isaac Hugus, C. M. Reed, William Workman,
Asa Packer, Jesse Lazear, C. S. Kauffman, C. L.
Ward, and Henry M. Fuller, be, and they are
hereby, appointed commissioners to receive sub-
scriptions and to organize a company, by the name
and style of the Pennsylvania Fiscal Agency ; and
the owners of the shares herein authorized to be
issued, when the company is organized, shall, under
the name and style aforesaid, have perpetual succes-
sion ; and may purchase, hold and acquire, by any
lawful means, estate real and personal, and the
same may use, sell, lease, let, mortgage, transfer,
and convey, and otherwise dispose of; and may sue
and be sued, plead and be impleaded, contract and
be contracted with, and have and use a common
seal, and the same may change at pleasure ; and

l8 THE CREDIT MOBILIER

may make by-laws and regulations for the govern-
ment of their affairs, and may have and use all the
rights, powers, and privileges which are or may be
necessary for them to have as a company incorpo-
rated for the powers herein stated : Provided, that
the said company shall not at any time hold, in this
State, more land than may be requisite for the con-
venient transaction of their business.

SEC. 2. That the purpose of this act is to organ-
ize an incorporated company, and to authorize them,
as such, to become an agency for the purchase and
sale of railroad bonds and other securities, and to
make advances of money and of credit to railroad
and other improvement companies, and to aid in
like manner contractors and manufacturers, and to
authorize them, as a company, to make all requisite
contracts, and especially to receive and hold, on
deposit and in trust, estate, real and personal, in-
cluding the notes, bonds, obligations, and accounts
of states, and of individuals, and of companies, and
of corporations, and the same to purchase, collect,
adjust, and settle, and also to sell and dispose thereof
in any market in the United States, or elsewhere,
without proceedings in law, or in equity, and for
such price and on such terms as may be agreed on
between them and the parties contracting with them,
and also to endorse and guarantee the payment of
the bonds and the performance of the obligations of
individuals, of corporations, and of companies.

SEC. 3. That the capital stock of said company
shall consist of fifty thousand shares of $100 each ;

OF AMERICA. Ip

and the commissioners aforesaid, or a majority of
them, may, in person or by proxy, open books of
subscription at such times and places as they deem
expedient, and when five thousand shares shall have
been subscribed, and five per cent, thereon shall
have been paid in, the shareholders may elect five
or more directors ; and the directors of the said com-
pany, when it shall have been organized, may, and
they are hereby authorized and empowered, to have
and to exercise, in the name and behalf of the
company, all the rights, powers, and privileges
which are intended to be herein given ; and may,
from time to time, increase their resources by bor-
rowing money on a pledge of their property, or
without such pledge, or by new subscriptions, not
exceeding fifty thousand shares ; and any citizen or
subject, company or corporation, of any State or
county, may subscribe for, purchase, and hold shares
of the said company, with all the rights, and subject
only to such liabilities as other shareholders are
subject to ; which liabilities are no more than for the
payment to the company of the sums due, or to
become due, on the shares held by them ; and when
new subscriptions are made, the shares may be
issued at par, or sold for the benefit of the holders
of the shares heretofore issued.

SEC. 4. That the by-laws shall prescribe the
manner in which the officers and agents of the com-
pany shall be chosen, and designate their powers
and duties, and their terms of service and compen-
sation ; and the principal office of the company shall

20 THE CREDIT MOBILIER

be in Philadelphia, but the directors, under such
rules and regulations as they may prescribe, may
establish branches and agencies in Europe and
elsewhere, and may deal in exchange, foreign and
domestic : but the said company shall not exercise
the privileges of banking, nor issue their own notes
or bills to be used as bank-notes or as currency.

SEC. 5. That three-fifths of the directors of said
company shall be citizens of the United States, and
the majority of the whole shall reside in this State.

SEC. 6. That the said company shall pay to the
State treasurer, for the use of the State, a bonus of
one-half of one per cent, on the sum requisite to be
paid in previous to the organization, payable in four
equal annual instalments, the first payment to be
made in one year after the payment on the capital
stock shall be made, and also a like bonus on all
subsequent payments on account of the capital stock
of the said company, or any increase thereof, paya-
ble in like manner ; and, in addition to such bonus,
shall pay such tax upon the dividends exceeding six
per cent, per annum as is or may be imposed by
law.

W. C. A. LAWRENCE,
Speaker of the House of Representatives.

JNO. CRESWELL, JR.,

Speaker of the Senate.

Approved the first day of November, anno Domini
one thousand eight hundred and fifty-nine.

WM. F. PACKER.

OF AMERICA. 21

Such is the original act of incorporation of the
famous Credit Mobilier of America, and under this
act the organization of the company was concluded,
and officers duly elected. The first election of
directors took place on the 2pth of May, 1863, and
the first officers of the corporation were Jacob
Zeigler, president ; Oliver Barnes, secretary ; and
Charles M. Hall, treasurer. The history of the
company under this organization was not of great
importance, but it was destined soon to assume a
place in the national history of our republic, and
call to itself the attention of the whole world.

On the third day of March, 1864, Thomas C.
Durant, then vice-president of the Union Pacific
Railroad Company, purchased the charter of the
lYnnsvlvunia Fiscal Agency for the purpose of using
the company for the construction of the Union
Pacific Railroad. But great changes were in store
for the Fiscal Agency. On the twenty-sixth of
March, 1864, only twenty-three days from the pur-
chase, the following act passed the Pennsylvania
legislature :

AN ACT TO CHANGE THE NAME OF THE PENN-
SYLVANIA FISCAL AGENCY.

Be it enacted by the senate nud house of represen-
tatives of the Commonwealth of Pennsylvania,
in general assembly met* and it h hereby enacted
by the authority of the same :

That from and after the passage of this act " The
Pennsylvania Fiscal Agency" shall be named

22 THE CREDIT MOBIL.IKR

instead thereof "The Credit Mobilier of America",
with all the powers, privileges, and authorities they
had under their former name, and be subject to all
the restrictions and liabilities to which they were
subject under the same.

HENRY C. JOHNSON,
Speaker of the House of Representatives.

JOHN P. PENNEY,

Speaker of the Senate.

Approved the twenty-sixth day of March, anno
Domini one thousand eight hundred and sixty-four.

A. G. CURTIN.

But the change in name was one of slight
importance with what followed. Under the pro-
visions of the charter an agency was established
in the city of New York, and when subscriptions to
the Company were made it was upon the express
condition that the full powers of the board of direc-
tors should be given to the New York agency ; it
was also stipulated that a railroad bureau should be
established at the New York agency, of five man-
agers ; three to be directors of the Company, who
should have the sole management of railway con-
tracts, subject however to the approval of the presi-
dent of the Company. The number of managers
was afterwards increased to seven. By these means
the Pennsylvania corporation, with name changed,
removed itself, so far as the management of its

OF AMERICA. 23

affairs was concerned, entirely from the state of
Pennsylvania, maintaining there only its corporate
existence, and with the extraordinary powers con-
ferred upon it by that state, took upon itself the
construction of the Union Pacific Railroad Com-
pany.

At this time the outstanding stock of the Union
Pacific Railroad Company amounted to $2,180,000,
upon which there had been made to the Railroad
Company a payment of ten per cent, or $218.000.
This stock was purchased by the Credit Mobilier, by
repaying to the stockholders the amount advanced
by them that is $218.000. When the Credit
Mobilier purchased this Union Pacific stock the par
value of the shares was $1000. By act of Congress
of 1864, this stock was cancelled and a reissue was
made to the stockholders of the Credit Mobilier in
shares of $100 ; and thus the stockholders of the
two corporations became identical ; the stockholders
in each taking pro rata with his interest in the other,
and thus the persons composing one corporation,
who were to take a contract to build the road, were
the very same persons who held complete control of
the corporation for which the road was to be built.

III.

THE UNION PACIFIC RAILROAD CO.

ET us turn for a few moments to a consideration
*"^ of the status of the Union Pacific Railroad at this
time, and to do this it will be necessary to investigate
briefly the circumstances which made that work a
national necessity. Twenty years ago had any one
advocated the building of such a road, he would
have been looked upon as insane. Yet we find that
the discovery of gold on the Pacific coast attracted
there a large population who, separated as they were
from the influence of the rest of our country, were
gradually acquiring a sentiment of independence
toward the common country; and the conclusion
was coming slowly but surely that their interests,
separated by so great a distance from the East, could
be best protected in a nation governed by their own
peculiar laws ; and at the breaking out of the great
civi] war, there was danger of our losing that
valuable territory west of the Rocky mountains
unless some means could be devised to place them
in closer communication with the East ; and to do
this it would be necessary to construct a railroad
across the entire country and thus, by placing them
in easy access to the East, strengthen the bonds

OF AMERICA. 25

of union between the Atlantic and Pacific coast,
develop the immense resources of the central portion
of the United States, and open a new route for com-
merce from the Atlantic and Europe, to the Pacific
and Asia. This was an idea that came uppermost
in the minds of the government during even the first
years of the great war. Every effort was made to
secure this end ; every means was tried to induce
capitalists to embark their fortunes in the undertak-
ing. The government in July, 1862, incorporated
the company, giving them vast grants of land along
the entire route, loaning them government bonds to
a large amount per mile of the road, and asking
only that its loan should constitute a first lien
upon the road when completed. Books for sub-
scriptions to the stock were opened throughout the
country, but the undertaking was too hazardous and
novel to secure the co-operation of any responsible
JHTSOIIS, and during the following two years only
$2,180,000 of the stock was subscribed for, and
only ten per cent, of that amount was actually paid in
in cash. Thus it will be seen that, in spite of all the
concessions and aid that the government tendered,
only $218,000 had been raised to complete this vast
work. One restriction which the government had
imposed, was that the capital stock of the com-
pany, which was placed at $100,000,000, should
not be sold at less than par, or $100 per share. In
order to have enabled any company to obtain the
control of the road would have required an invest-
ment of some $51,000,000.

26 THE CREDIT MOBILIER

In July, 1864, Congress deemed it necessary to
increase the inducement for capital to embark in this
great enterprise, and therefore it doubled the land
grant, and authorized the company to issue an
equal amount of first mortgage bonds, having pre-
cedence over those of the government ; thus in
reality reducing the lien of the government for the
bonds advanced by it, to a second mortgage. This
course led to practical action. In the meantime
however, attempts had been made to build the Union
Pacific Railroad. Immediately after the first organ-
ization of the company in 1862, they went to work
and commenced to build the road themselves by
putting men and laborers on. This was continued
through the fall and winter of 1863 and 1864, by
which time the company had expended upwards
of $600,000, leaving the company in debt beyond
the subscriptions received by them, of $281,000, to
the amount of more than $300,000. They found
it impossible to proceed with the work ; parties
would not take the stock, and they were forced to
sell some of the materials, cars, &c., which they
had bought ; and yet they did not entirely abandon
the work.

May 12, 1864, a committee was appointed with
authority to receive proposals and let the work of
building the road to private parties. A contract was
made with H. M. Hoxie, August 8th, 1864, for the
construction of one hundred miles of road, commenc-
ing at the city of Omaha, at the rate of $50,000 for
each and every mile so completed ; the contractor

OF AMERICA. 27

to receive the securities of the company in payment.
It was but a short time after Hoxie had taken this
contract that he found he could not go on with
it, and he assigned his contract to the Credit
Mobilier, which corporation only a few months
before had been obtained by the principal stockhold-
ers of the Union Pacific Railroad for the very pur-
pose of taking the contract of constructing the road ;
and doubtless the contract to Hoxie was only for the
purpose of having it assigned. The date of that
assignment was March 15, 1865 ; but as early as
October 7, 1864, an agreement was made between
said Hoxie and Thomas C. Durant, president of the
Credit Mobilier, and who was also vice-president of
the Union Pacific Railroad Company, that such an
assignment should be made to such party or parties
as said Durant should name. One condition of the
contract of Hoxie was that he should subscribe for
the capital stock of the Union Pacific Railroad to the
amount of $500,000. Only three days prior to the
agreement to assign, and at a time when Hoxie had
virtually abandoned his contract, if indeed he had
ever taken it in good faith, the following correspond-
ence passed between the two parties :

NEW YORK, October 4, 1864.

To the President and Executive Committee of the
Union Pacific Railroad Company :

On condition that your railroad company will extend
my contract from its present length of 100 miles, so as to

28 THE CREDIT MOBILIER

embrace all that portion of the road between Omaha and
the* looth meridian of longitude, I will subscribe, or
cause to be subscribed for, $500,000 of the stock of your
company.

H. M. HOXIE,
By H. C. CRANE,

Attorney.

The above proposition is hereby accepted for and on
behalf of the Union Pacific Railroad Company.

JOHN A. Dix,
C. S. BUSHNELL,
GEO. T. M. DAVIS.

Special Committee.
October 3, 1864.

Thus the Hoxie contract was made to embrace all
the road between Omaha and the one hundredth
meridian, a distance of 247^^ miles, and three days
later this contract was virtually assigned to the
Credit Mobilier, though in form the assignment was
made in the following March, and the Credit Mo-
bilier, under this assignment, completed the contract
on the fifth of October, 1866.

It was alleged by some of the witnesses before
the Congressional committee that this contract cost
the Union Pacific Railroad Company $12,974,416.24,
and that it cost x the Credit Mobilier 7,806,183.33,
being a profit to the Credit Mobilier of $5,168,-
232.91. This alleged profit, it should be borne in
mind, was in stock and bonds of the Union Pacific
Railroad Company estimated at par, while the

OF AMERICA. 29

market value of the stock was only about thirty
cents, and of the bonds about eighty-five cents on
the dollar. The facts concerning this profit will be
spoken of further on.

The contract with Hoxie having been completed,
a new agreement was made by Thomas C. Durant,
vice-president of the Union Pacific Railroad, with a
Mr. Boomer, for the construction of 153^ miles of
road west from the one hundredth meridian. Under
this agreement Boomer was to receive $19,500 per
mile for that portion of the contract east of the North
Platte, and for that portion of the contract west of
the river $20,000 per mile the bridge across the
river, station buildings, equipment, etc., to be addi-
tional. This contract was never ratified by the
company, although some fifty-eight miles of the
road had been completed. It has been impossible
to ascertain what these fifty-eight miles cost the
company, but from the evidence of Mr. Durant, the
only evidence attainable, it appears that it did not
exceed $27,500 per mile, including station houses,
equipments, etc. Yet in view of all this, and with
the facts clearly before the company, on the fifth of
January, 1867, the board of directors, by a resolu-
tion, extended the Hoxie contract over these fifty-
eight miles, thus proposing to pay to the Credit
Mobilier the Credit Mobilier being in reality them-
selves $22,500 per mile for these fifty-eight miles
(amounting to $1,345,000) without any consideration
whatever, the road already having been completed
and accepted by the government.

30 THE CREDIT MOBILIER

The following is a copy of the resolution, of date
January 5, 1867.

Resolved, That the Union Pacific Railroad Company
will, and do hereby consider the Hoxie contract extended
to the point already completed, namely, 305 miles west
from Omaha, and that the officers of this company are
hereby authorized to settle with the Credit Mobilier at
$50,000 per mile for the additional fifty-eight miles.

This resolution was not carried out on account of
the protest against it by Thomas C. Durant, al-
though, as will appear hereafter, this road, fully
constructed and accepted by the government, cost-
ing in its construction, according to the statement of
Mr. Durant, though no record of it could be found
on the books of the railroad company, complete,
with station houses, equipment, etc., not over
$27,500 per mile, was included in the Ames con-
tract, which will soon be outlined, and paid for there
at the rate of $42,000 per mile.

The reader will more clearly understand the true
relations of this extension of the contract, and the
position of Mr. Durant concerning it, when he has
been informed that, at about this time, Mr. Durant
had been removed from the board of directors of the
Credit Mobilier, and that a desperate quarrel had
ensued, in which he openly made his boasts that the
Credit Mobilier should never have another contract
from the Union Pacific Railroad. The dissensions
that arose concerning this were of long duration, and
-entailed immense difficulties upon both companies.

UNIVERSIT

AMERICA. 31

From the evidence that has been produced, it has
also appeared that the contract with Boomer, just
alluded to, never had any existence, except in the
mind of* Mr. Durant ; that the work upon these fifty-
eight miles had, in fact, been performed by the
Credit Mobilier, under the expectation of receiving
the contract for its construction. The Credit Mobil-
ier had gone on with the work, had expended its
money in its construction, and, when it became ap-
parent that the opposition of Durant and his party
was strong enough to prevent the execution of the
contract, the board of directors of the railroad, in
doing what they supposed to be only just and fair,
voted to extend the Hoxie contract over these fifty-
eight miles, in order that the Credit Mobilier might
receive returns for their expenses. Mr. Durant then
protested against this action of the board, for the rea-
son, as it afterwards appeared, of having it a matter
of record, to which he could subsequently refer, to
show the purity of his motives, should any investiga-
tion ever be made. In spite of the failure of this ex-
tension of the contract, owing to the friendly attitude
of the railway company toward the Credit Mobilier,
and the promise to give them a contract as soon as.
possible, the Credit Mobilier continued to construct
the road, even beyond the fifty-eight miles above
spoken of.

On the first of March, 1867, another contract was
made, for building the road west of the one hun-
dredth meridian, to J. M. S. Williams. This con-
tract \vas to cover 267^0% miles, at a cost of $50,000

32 THE CRJEDIT MOBILIER

per mile, and included that portion which was al-
ready completed ; but at this time the completed
portion of the road west of the one hundredth merid-
ian, to be included in this contract, extended over
ninety-eight and one-fourth miles. This proposi-
tion was accepted by the company with the proviso :
"That $7,500 per mile be reserved out of the pay-
ment." At the time of making this contract, Wil-
liams had made an agreement with the Credit
Mobilier that he would assign his contract to them.
Thus in reality making the contract between the
Union Pacific Railroad and the Credit Mobilier ;
that is, a contract to the Credit Mobilier, by which
they were to receive payment for the road which was
already completed, at the same rate as under the
Hoxie contract. This contract of Williams was not,
however, carried out, owing to the protest of Mr.
Durant, which protest can best be understood by
reading the same, which is in the words following :

UNION PACIFIC RAILROAD OFFICE,
March 27, 1867.

To the Directors of the Union Pacific Railroad Com-

pany :

GENTLEMEN, I protest against the resolution of the
board of directors, passed at your last meeting, which pro-
poses to give the contract of the road of this company,
commencing at the one hundredth meridian of longitude,
for the reason that a section of road, already accepted, is
included in the contract, and it does not appear that this
company derives any benefit adequate to the price paid
over the cost of construction, and does not in future

OF AMERICA. 33

require, as an essential point in the contract, the completion
of the road within the shortest possible time, and for other
reasons named in a previous protest, in relation to the
Hoxie contract.

I beg to call your attention again to the fact that part
of this work has been done for weeks, and that contracts
have been made, and merchandise delivered, for nearly
one hundred and fifty miles of road, which the company
has paid for, as shown by the books.

Respectfully,

THOMAS C. DURANT.

The next important step in the history of this
transaction is the Ames contract, the most important,
perhaps, of any that was made during the construc-
tion of this great road. But, before touching on
that, it may be well to dwell a little on the relations
of these different corporations, that is, the Union
Pacific Railroad and the Credit Mobilier.

It must be borne in mind that the stockholders of
the one and the stockholders of the other were iden-
tical, and that whatever contracts were made by the
one were known to the other. The first large con-
tract that was made was with H. M. Hoxie, and it
may be interesting to inquire, who was Hoxie? The
contract which he had taken implied not merely an
expenditure of many millions of dollars in the con-
struction of the road, which was to be repaid him in
the securities of the company, but a subscription of
$500,000 in stock of the Railroad. These securities
could not easily be converted into cash, even far
below par, thus making it an outlay of cash
essentially.

c

34 THE CREDIT MOBILIER

Who was this man with such unlimited means?
The testimony of Mr. Oliver Ames before the Con-
gressional committee is that Hoxie was a man of
no responsibility ; that he was an employe of the
road, and had charge of the ferry over the Missouri
river at Omaha ; that it was never expected that he
would carry out the contract ; that he was simply a
figure-head ; a party to whom the contract was to
be let with the view of his turning it over to some
one else. That some one else proved to be the Credit
Mobilier the very parties who under the guise of
a different name, let the contract to him. The same
is also true of the contracts with Boomer, and the
one made later with Davis. Was it all the same
with the immense contract of Mr. Ames, which
was next to follow? We shall have occasion to con-
sider this farther on. Up to this time, then, there
had been built over three hundred miles of this
road, and the construction was by the Credit
Mobilier. Where did this corporation get all these
means? They took their pay from the Union
Pacific Railroad Company, in the stocks and bonds
of the road, and it became necessary to convert
these into cash. They could not buy, nor could the
directors of the railroad sell the stock of the road
for less than par ; and when it was placed upon the
market it would not bring more than thirty cents on
the dollar, and few sales could be made even at that
or any other price.

The road could not issue it for less than par, and so
the Credit Mobilier must lose at least seventy dollars

OF AMERICA.

35

on every share of the stock that they purchased.
It must appear upon the records of the Railroad
Company that this stock was paid for in cash ; that
was required by the articles of incorporation. They
could not use it to pay for the construction of their
road. The act of incorporation required that it
should be sold for cash at not less than par. But
through the influence of the Credit Mobilier, they
were enabled not only to evade one of these require-
ments, but both. They not only by this means used
the stock and bonds of the road, but also sold the
stock of the same far below par. The plan of oper-
ations, briefly stated, was that when any payment
was to be made on account of work done, the Rail-
road Company would give its check to the Credit
Mobilier for the amount, and thereupon the Credit
Mobilier would pass the identical check back to the
Railroad Company, receiving from them the stock
and bonds. This they called a cash transaction ;
and yet the Union Pacific Railroad Company had
no money, except as they sold their stock or bonds,
or converted the government loans into cash. The
Credit Mobilier had no money, except as they sold
these stocks and bonds ; for their capital, originally
of $2,500,000, afterwards increased to $3,750,000,
was soon used up in the construction of this road.
But to all intents and purposes, the two companies
were one and the same. Even this position was
claimed by Thomas C. Durant, the president of the
Credit Mobilier, and this was one ground of his
objection to the extension of the Hoxie contract.

36 THE CREDIT MOBILIER

Durant was opposed to the Credit Mobilier, as a
corporation, having any further contracts with the
Railroad Company, and it was not strange that such
should be the case. Gradually large amounts of the
stock of the Railroad Company had been absorbed
by the public, and unless some means were taken to
secure to themselves the benefits of these great con-
tracts, they might lose their advantage. Some
more stringent means must be used ; something
must be done by which the control of the two cor-
porations should remain undisturbed and secure,
until the mission of the Credit Mobilier should be
accomplished, and this was done most effectually in
the next great move in the history of this road.

After the proposition of J. M. S. Williams was
made, no great change occurred in the situation of
affairs. In spite of the allegations to the contrary,
the testimony of the many witnesses before the Con-
gressional committee was, that work was constantly
being done upon the road, and by the i6th of
August, 1867 the date of the Ames contract one
hundred and thirty-eight miles of the road west of
the one-hundredth meridian had been completed
and accepted by the government, and this construc-
tion had been done at an expense, on an average,
including equipments, of about $27,000 per mile, to
the Company. Still let us bear in mind that the
only evidence of the cost of this portion of the road
rests on the testimony of Mr. Durant, and that the
books of the Railroad Company do not give any evi-
dence of this cost.

OF AMERICA. 37

The Oakes Ames contract, of which we shall now
speak, was for the construction of 667 miles of road,
commencing at the one-hundredth meridian, at
prices ranging from $42,000 per mile, for the first
hundred miles, to $96,000 per mile. It has been
alleged by some, that there was an understanding
between the officers of these two companies, that
this contract, kno\vn as the Ames contract, should
be assigned by him for the benefit of the Credit
Mobilier. By others it was claimed that it was only
an implied understanding. But the facts show that
reliance was placed solely upon the honor, of Mr.
Ames to make the assignment for the benefit of all.
However this may be, whether the understanding was
expressed or implied, or whether there was no under-
standing at all, it is hardly material ; for within two
months from the signing of the contract by Mr.
AIIH-S, it was assigned to seven persons as trustees,
for the benefit of the stockholders of the Credit
Mobilier. We shall consider the nature of this
assignment a little further on. These trustees were
among the principal stockholders and directors of
the Credit Mobilier and the Union Pacific Railroad
Company, and under their direction, that portion of
the Union Pacific Railroad embraced in the Ames
contract was completed.

That this contract may be fully understood, as
well as the assignment to the trustees, they will each
be set out in full.

IV.

THE AMES CONTRACT AND ASSIGN-
MENT.

THE OAKES AMES CONTRACT.

AGREEMENT made this i6th day of August,
1867, between the Union Pacific Railroad Com-
pany, party of the first part, and Oakes Ames,
party of the second part, witnesseth
That the party of the first part agrees to let and
contract, and the party of the second part agrees to
contract, as follows, to wit :

First. The party of the second part agrees and
binds himself, his heirs, executors, administrators,
and assigns, to build and equip the following-named
portions of the railroad and telegraph line of the
party of the first part, commencing at the zooth
meridian of longitude, upon the following terms and
conditions, to wit :

1st roo miles at, and for the rate of $42,000 per mile.
2d 167 miles at, and for the rate of $45,000 per mile.
3d 100 miles at, and for the rate of $96,000 per mile.
4th 100 miles at, and for the rate of $80,000 per mile.
5th loo miles at, and for the rate of $90,000 per mile.
6th 100 miles at, and for the rate of $96,000 per mile.

THE CREDIT MOBILIER. 39

Second. At least 350 miles shall be, if possible,
completed and ready for acceptance before the ist
day of January, 1868, provided the Union Pacific
Railroad Company transport the material. The**
whole to be constructed in a good and workmanlike
manner, upon the same general plan and specifica-
tions as adopted east of the looth meridian of longi-
tude. The party of the second part shall erect all
such necessary depots, machine-shops, machinery,
tanks, turn-tables, and provide all necessary ma-
chinery and rolling-stock, at a cost of not less than
$7,500 per mile, in cash, and shall construct all
such necessary side-track as may be required by the
party of the first part, not exceeding six per cent, of
the length of the road constructed, and to be con-
structed under this contract. The kind of timber
used for ties, and in the bridges, and in its prepara-
tion, shall be such as from time to time may be
ordered or prescribed by the general agent, or the
company, under the rules and regulations, and
standard as recommended by the Secretary of the

Interior of the date of February , 1866.

Third. Whenever one of the above-named sec-
tions of the road shall be finished to the satisfaction
and acceptance of the Government Commissioners,
the same shall be delivered into the possession of
the party of the first part, and upon such portions of
the road, as well as on that part east of the looth
meridian now completed, the party of the first part
shall transport, without delay, all men and material,
to be used in construction, at a price to be agreed upon

40 THE CREDIT MOBILIER

by the party of the second part, his heirs, executors,
administrators, or assigns, and the general agent,
but not less than cost to the party of the first part.

Fourth. The party of the second part, his heirs,
executors, administrators, or assigns, shall have the
right to enter upon all lands belonging to the com-
pany, or upon which the company may have any
rights, and take therefrom any material used in the
construction of the road, and may have the right to
change the grade and curvature within the limits of
the provisions of the act of Congress, for the tem-
porary purpose of hastening the completion of the
road, but the estimated cost of reducing the same to
the grade and curvatures, as established by the chief
engineer, or as approved from time to time by the
company, shall be deducted and retained by the
party of the first part, until such grade and curva-
ture is so reduced.

Fifth. The party of the second part, his heirs,
executors, administrators, or assigns, is to receive
from the company, and enjoy the benefit of all
existing contracts, and shall assume all such con-
tracts, and all liabilities of the company accrued or
arising therefrom for work done, or to be done, and
material furnished, or to be furnished, for or on
account of the road west of the looth meridian, cred-
iting, however, the party of the first part on this
contract all moneys heretofore paid or expended on
account thereof.

Sixth. The party of the second part, for himself,
his heirs, executors, administrators, and assigns,

OF AMERICA. 4!

stipulates and agrees, that the work shall be prose-
cuted and completed with energy and all possible
speed, so as to complete the same at the earliest
practicable day, it being understood that the speed
of construction and time of completion is the essence
of this contract, and at the same time the road to
be a first-class road, with equipments ; and if the
same, in the opinion of the chief engineer, is not so
prosecuted, both as regards quality and dispatch,
that then the said party of the first part shall, and
may, through its general agent, or other officer
detailed for that purpose, take charge of said work,
and carry the same on at proper cost and expense
of the party of the second part.

Seventh. The grading, bridging, and super-
structure to be completed under the supervision of
the general agent of the company, to the satisfaction
of the chief engineer, and to be of the same char-
acter as to the workmanship and materials as in
the construction of the road east of the looth merid-
ian.

It is, however, understood that all iron hereafter
purchased or contracted for, shall be of the weight
of not less than fifty-six pounds to the yard, and to
be fish-bar joints.

Eighth. All the expenses of the engineering are
to be charged and paid by the party of the second
part, except the pay and salary of the chief engineer
and consulting engineer, and their immediate assist-
ants, and the expenses of the general survey of the
route.

42 THE CREDIT MOBILIER

Ninth. The depot buildings, machine-shops,
water-tanks, and also bridges, shall be of the most
approved pattern, and they, as well as the kind of
masonry and other material used, shall be previous-
ly approved by the general agent and chief engineer
of the company, and all tunnels shall be of the
proper width for a double track, and shall be
^arched with brick or stone, when necessary, for the
protection of the same.

Tenth. Payments to be made as the work pro-
gresses, upon the estimates of the chief engineer,
in making which the engineer shall deduct from each
section its proportionate cost of the equipment not
then furnished, station-buildings, superstructure, and
cost of telegraph ; but all materials delivered or in
transit for the account of the company, may be es-
timated for.

Eleventh. Payments hereon shall be made to the
party of the second part, his heirs, executors, ad-
ministrators, or assigns, in cash; but if the govern-
ment bonds received by the company cannot be
converted into money at their par value net, and the
first mortgage bonds of the company, at ninety cents
on the dollar net, then the said party of the second
part, his heirs, executors, administrators, and assigns,
shall be charged herein the difference between the
amount realized and the above-named rates ; pro-
vided the first mortgage bonds are not sold for less
than eighty cents on the dollar ; and if there shall
not be realized from the sale of such bonds an
amount sufficient to pay the party of the second part,

OF AMERICA. 43

his heirs, executors, administrators, or assigns, for
work as stipulated in this contract, and according to
the terms thereof, then such deficiency shall, from
time to time, be subscribed by said party of the sec-
ond part, his heirs, executors, administrators, or
assigns, to the capital stock of said company, and
proceeds of such subscriptions shall be paid to said
party of the second part, his heirs, executors, ad-
ministrators, or assigns, on this contract.

Twelfth. On the first one hundred miles on this
contract, there shall be added to the equipment now
provided for, and intended to apply on this section,
as follows, viz. : six locomotives, fifty box-cars, four
passenger-cars, two baggage-cars, and a proportion-
ate amount of equipment of like character, to be
supplied on the second section of one hundred miles
after the same is completed.

Thirteenth. The amount provided to be expend-
ed for equipment, station-buildings, &c., shall be
expended under the direction of the party of the first
part, and in such proportion for cars, locomotives,
machine-shops, station-buildings, &c., and at such
points as they may determine. The party of the first
part to have the full benefit of such expenditures
without profit to the contractor, or they may, in
their option, purchase the equipment, and expend
any portion of said amount provided, at any point
on the road where they may deem the same
most advantageous to the company, whether on
the section on which said reservation occurs or
not.

44 THE CREDIT MOBILIER

Fourteenth. The telegraph line is included here-
in under the term " railroad," and is to be construct-
ed in the same manner, and with similar materials,
as in the lines east of the one hundredth meridian.

The said parties hereto, in consideration of the
premises and of their covenants herein, do mutually
agree, severally, to perform and fulfil their several
respective agreements above written.

This contract having been submitted to the execu-
tive committee by resolution of the board of direct-
ors, August 16, 1867, and we having examined the
details of the same, recommend its execution by the
proper officers of the company with the Hon. Oakes
Ames, the party named as the second part.

(Signed)

OLIVER AMES,
C. S. BUSHNELL,
SPRINGER HARBAUGH,
THOMAS C. DURANT,

Executive Committee Union Pacific
Railroad Company.

This contract was adopted by the executive com-
mittee on October ist, 1867, and one condition of its
being adopted was that it should receive the written
assent of all the stockholders of the Union Pacific
Railroad Company. All this time the outstanding
stock of the Railroad Company was continually in-
creasing, and now amounted to about $5,000,000.
This had been sold almost entirely among the

OF AMERICA. 45

stockholders of the Credit Mobilier, and of this,
nearly, if not quite, eighty-five per cent, remained
in the hands of such stockholders. But it was
necessary that the control should be so absolutely
in the hands of a few of the principal stock-
holders, that the management of the two concerns,
until the completion of this immense contract, should
not be changed. This was the next step to be
settled, and it was settled beyond all controversy.
It might become necessary before the completion of
the contract, to place upon the market large amounts
of the stock of the railroad company. This might
pass into the hands of those hostile to the present
directors ; might, indeed, end in dissensions, and
even jeopardize the successful completion of the
road. Indeed, at the last election of directors pre-
vious to the making of this contract, the election was
a very close one, and nearly resulted in a change of
directors. The mighty responsibility that Mr. Ames
had assumed in signing this contract, was too great
to allow anything to stand between him and com-
plete success. He had obligated himself, his heirs,
executors, and administrators, for more than $47,-
000,000, perhaps the largest obligation ever assumed
by a single individual in the United States, if not the
world. Any error committed to defeat it, would
ruin him for ever, and all those associated with him.
Every point must be protected, every obstacle must
be removed. The calculations had all been made ;
the initiatory steps had already been taken. Every
avenue through which defeat could come had been

46 THE CREDIT MOBILIKK

guarded, and when the contract had been ratified by
the stockholders, the machinery was all ready for
operation. An assignment of this contract was
made, not to the Credit Mobilier direct, but to cer-
tain trustees for the benefit of the stockholders of the
Credit Mobilier, but not to #//, but only such as
being stockholders in the Union Pacific Railroad,
should have made and executed powers of attorney
or proxy, irrevocable, to said trustees, empowering
them to vote upon at least six-tenths of all the shares
of stock of the Union Pacific Railroad Company
owned by said shareholders of the Credit Mobilier,
and upon six-tenths of all that might come to them
through any dividend resulting from said contract.
This assignment is in the following words, viz. :

ASSIGNMENT OP^ CONTRACT TO T. C. DURANT AND
OTHERS.

MEMORANDUM of agreement, in triplicate,
made this I5th day of October, 1867, between
Oakes Ames, of North Easton, Massachusetts,
party of the first part ; Thomas C. Durant, of the
City of New York, Oliver Ames, of North
Easton, Massachusetts; John B. Alley, of Lynn,
Massachusetts ; Sidney Dillon, of the City of
New York; Cornelius S. Bushnell, of New
Haven, Connecticut; Henry S. McComb, of
Wilmington, Delaware ; Benjamin E. Bates, of
Boston, Massachusetts, parties of the second
part, and the Credit Mobilier, of America, party r
of the third part.

OF AMERICA. 47

That, -whereas the party of the first part has
undertaken a certain large contract, for the con-
struction of a certain portion, therein named, of the
railroad and telegraph line of the Union Pacific
Railroad Company, over the plains, and through
and over the Rocky Mountains, which will require a
very large and hazardous outlay of capital, which
capital he is desirous to be assured of raising, at
such times and in such sums as will enable him to
complete and perform the said contract according to
its terms and conditions ; and

Whereas, the Credit Mobilier of America, the
party of the third part, a corporation duly established
by law, is empowered by its charter to advance and
loan money in aid of such enterprises, and can con-
trol large amounts of capital for such purposes, and
is willing to loan to said party of the first part such
sums as may be found necessary to complete said
contract, provided sufficient assurance may be made
to said party of the third part therein, that said sums
shall be duly expended in the work of completing
said railroad and telegraph line, and that the pay-
ments for the faithful performance of said contract
by said railroad company, shall be held and applied
to reimburse said party of the third part for their
loans and advances, together with a reasonable in-
terest for the use of the money so loaned and ad-
vanced ; and,

Whereas, said party of the third part fully believes
that said contract, if honestly and faithfully execu-
ted, will be both profitable and advantageous to the

48 THE CREDIT MOBILIER

parties performing the same, are therefore willing
to guarantee the performance and execution of the
same, for a reasonable commission to be paid there-
for ; and,

Whereas, both parties of the first and third part
have confidence and reliance in the integrity, busi-
ness capacity, and ability of the several persons
named as parties of the second part hereto, and con-
fidently believe that said persons have large interests,
as well in the Union Pacific Railroad Company, as
in the Credit Mobilier of America, they will execute
and perform the said contract, and faithfully hold the
proceeds thereof to the just use and benefit of the
parties entitled thereto :

Therefore, it is agreed by and between the said
parties of the first, second, and third part hereto, as
follows, that is to say :

That said Oakes Ames, party of the first part
hereto, hereby, for and in consideration of one dol-
lar lawful money of the United States, to him duly
paid by the party of the second part, and for divers
other good and valuable considerations herein there-
unto moving, doth hereby assign, set over, and
transfer unto the said Thomas C. Durant, Oliver
Ames, John B. Alley, Sidney Dillon, Cornelius S.
Bushnell, Henry S. McComb, and Benjamin E.
Bates, parties of the second part, all the right, title,
and interest of, in, and to the said certain contract
heretofore made and executed by and between the
Union Pacific Railroad Company and the said OakeS
Ames, bearing date the i6th day of August, 1867,

OF AMERICA. 49

for the construction of portions of the railroad and
telegraph line of said railroad company, to which
contract reference is herein made, for them, the said
parties of the second part, to have and to hold the
same to them and their survivors and successors for-
ever in trust.

Nevertheless, upon the following trusts and con-
ditions, and limitations, to wit:

First. That they, the said parties of the second
part, shall perform all the terms and conditions of
the said contract, so assigned, in all respects, which
in and by the terms and conditions thereof, is under-
taken and assumed and agreed to be done and per-
formed by the said party of the first part herein
named.

Second. That they, the said parties of the second
part, shall hold all the avails and proceeds of the
said contract, and therefrom shall reimburse them-
selves and the party of the third part hereto, all
moneys advanced and expended by them, or either
of them, in executing or performing the said con-
tract, with interest and commission thereon, as here-
inafter provided.

Third. Out of the said avails and proceeds, to
pay unto the parties of the second part a reasonable
sum as compensation for their services as such trus-
tees for executing and performing the terms and
conditions of this agreement, which compensation
shall not exceed the sum of three thousand dollars
per annum, to each and every one of the parties of
the second part.

5O THE CREDIT MOBIL1KK

Fourth. To hold all the rest and residue of the
said proceeds and avails for the use and benefit of
such of the several persons holding and owning
shares in the Capital stock of the said Credit Mobilier
of America, on the day of the date hereof, in propor-
tion to the number of shares which said stockholders
now severally hold and own, and for the use and
benefit of such of the several assignees and holders
of such shares of stock at the times herein set forth,
for the distribution of said residue and remainder of
said avails and proceeds, who shall comply with the
provisions, conditions, and limitations herein con-
tained, which are, on their part, to be complied
with.

Fifth. To pay over, on or before the first Wednes-
day of June and December in each year, or w r ithin
thirty days thereafter, his just share and proportion
of the residue and remainder of the said proceeds
and avails as shall be justly estimated by the said
trustees to have been made and earned as net profit
on said contract, during the preceding six months,
to each shareholder only in said Credit Mobilier of
America, who, being a stockholder in the Union
Pacific Railroad, shall have made and executed his
power of attorney or proxy, irrevocable to said sev-
eral parties of the second part, their survivors and
successors, empowering them, the said parties of the
second part, to vote upon, at least six-tenths of all the
shares of stock owned by said shareholders of the
Credit Mobilier of America, in the capital stock of
the Union Pacific Railroad Company, on the day of

OF AMERICA. 51

the date hereof, and six-tenths of any stock in said
Union Pacific Railroad Company, he may have
received as dividend or otherwise, because, or by
virtue of having been a stockholder in said Credit
Mobilier of America, or which may appertain to any
shares in said Union Pacific Railroad Company,
which had been so assigned to him at the time or
times of the distribution of the said profits as herein
provided ; and this trust is made and declared upon
the express condition and limitation that it shall not
inure in any manner or degree to the use or benefit
of any stockholder of the Credit Mobilier of America,
who shall neglect or refuse to execute and deliver
unto the said parties of the second part his proxy or
power of attorney, in the manner and for the purpose
hereinbefore provided ; or who shall in any way, or
by any proceeding, knowingly hinder, delay, or in-
terfere with the execution or performance of the trust
and conditions herein declared and set forth.

Then follow other conditions, that said trustees
shall act with the majority of said trustees ; that
all their votes should be recorded ; that an office
should be kept in the city of New York ; meetings
of said trustees to be called by the secretary ; that
such secretary should be appointed by the trustees,
and should keep the accounts and vouchers of all
transactions, his books to be open to the inspection
of any trustee ; that said trustees should cause a
monthly statement, showing amount due from the
railroad, to be made to the Credit Mobilier : also, in

52 THE CREDIT MOBILIER

case of a vacancy in the board of trustees, the va-
cancy to be filled by remaining trustees ; in case of
wilful neglect or fraud of any trustee, he was to be
deprived of his trusteeship, and all interest through
or under the contract. The trustees agreed to accept
the trust, and faithfully perform its conditions. The
Credit Mobilier agreed to advance the necessary
funds at seven per cent, interest, and to guarantee
the performance and execution of the contract, and
to hold harmless and indemnify the parties of the
first and second part, from any loss through said
contract, for a commission of two and one-half per
cent, of the money advanced by it, and a further
agreement that the net profits of the work finished
on the first hundred miles prior to January i, 1867,
should be paid to the Credit Mobilier.

This assignment is signed by Oakes Ames, by
each of the seven trustees, and by the Credit Mobil-
ier of America by Sidney Dillon, president.

Such is the contract and its assignment ; and in
what respect does it differ from the contract of
Hoxie, except in its magnitude and difference in the
parties. The one was given to an irresponsible
person, who, it was never intended, should complete
the contract, but was used as a figure head to trans-
fer the contract to the Credit Mobilier in other
words, back to the Pacific Railroad. And it is in-
deed understood and claimed by many, even of those
who have paid the subject much attention, that the^
other, though a man of large means, of great execu-
tive ability, took the contract simply for the purpose

OF AMERICA. 53

of turning it over to a board of trustees composed of
the officers and directors and principal stockholders
of the two corporations, who should then hold the
absolute control of both corporations, and who, by
this means, could use for their own exclusive benefit
the extraordinary franchises, and concessions, and
loans which the government had made to push
forward the building of the Pacific Railroad ; but
this is a position which cannot be maintained by
any one who will give the subject a careful con-
sideration, and try to arrive at a true understanding
of this contract and its assignment.

We are ready to affirm and we believe this
contract and assignment will bear us out that
the Credit Mobilier, as a corporation, had nothing
whatever to do with this contract or its execution.
We have before alluded to the hostility of Mr.
Durant toward the Credit Mobilier. No contract
could, by reason of that hostility, be made to the
Credit Mobilier, or to any one who would assign
it to that company. As matters were standing, the
construction of the road must soon be brought to an
end. The Credit Mobilier had indeed been con-
structing a part of the road without any contract,
but this was a dangerous proceeding, and might end
in total loss. Efforts were made to get some con-
tractor to take a contract, but in all the country
there was no man so foolish. At last efforts for a
compromise were made, and rather than see the
road fail, rather than see that project, to which his
life was devoted, brought to an inglorious end,

54 THE CREDIT MOBILIER

Mr. Ames was prevailed upon to take the contract.
In taking it his motives were high, honorable, and
patriotic. The road was a public, a national neces-
sity. To falter now, the consequences might be the
abandonment for generations of any attempt to cross
the continent by means of a railroad. Mr. Ames
considered well the responsibility he assumed. He
believed also that by proper management the road
could be built at the contract price, so that a small
profit could be realized to the contractor, and he
firmly believed that when the road was once com-
pleted the increase of business along its line would
make its securities valuable. There was one con-
dition he imposed, and that was that the contract
must receive the assent of every stockholder of the
Union Pacific Railroad, in writing When the
question was raised as to the manner in which this
mighty contract was to be executed, Mr. Ames
insisted that he must take the contract untrammeled
by any promise, agreement, or understanding. He
could tell no man what he would do. " Of course,"
said Mr. Ames, "I must have associates, but no
man shall be wronged, no one shall be deprived of
his rights. I am an honest man, and I will see that
every man is protected."

V.

THE ASSIGNMENT TO SEVEN TRUS-
TEES.

T3 OTH sides to the controversy which made this con-
-^ tract necessary, placed the utmost confidence in
Mr. Ames, and in the integrity of his character, and
were sure that the rights of all would be protected.
Thus Mr. Ames took this great contract, with no agree-
ment, understanding, or promise. He made none,
and none was exacted of him. Yet all felt a confi-
dence in him that the contract would be so used that
the interests of all should be guarded. The contract
properly belonged to the Credit Mobilier, which had
commenced the construction of the road, and had
continued it up to the date of the contract. Its entire
capital had been absorbed in that work, and not one
cent of returns had been made to the stockholders.
What profit there was, if any had been made, had
been misappropriated by those who had for-
merly held the management. $3,750,000, which
those stockholders had paid for the capital stock of
that company, were now in the Union Pacific road-
bed. That road had reaped the benefit, while the
men who paid the money had nothing to show for it.
This was the view which Mr. Ames took, and he

55

56 THE CREDIT MOBILIER

determined that this contract should inure to their
benefit to them as individuals and not as a corpora-
tion. He therefore made his assignment to seven
trustees for their benefit, provided they would share
with him the responsibility of the contract ; and pro-
vided also that they were holders of Union Pacific
stock. It was an assignment for the benefit of cer-
tain specified individuals, those individuals being
also stockholders in the Credit Mobilier. This term
was used to designate them, because of its simplicity,
and had no relation to the corporation of which they
were members. If, instead of the fourth and fifth
clauses of the declaration of trust contained in the
assignment above, the wording had been "To hold
all the rest and residue of the said proceeds and
avails for the use and benefit of (here naming each
individual stockholder of the Credit Mobilier by
name), in the proportion following, to wit, to (here
designate the proportion which each was to have, it
being the same proportion as the stock owned by him
bore to the entire capital stock of the Credit Mobilier,
&c.") By doing this the exact object desired would
have been obtained, and the connection with the Credit
Mobilier unfortunate as it proved to be would
have been avoided. Then could have followed the
condition about giving proxies, and everything would
have been precisely as it was, without the compli-
cations that afterwards arose. At this time there
were about one hundred stockholders in the Credit
Mobilier, and so for convenience the designation of r
" stockholders in the Credit Mobilier " was used.

OF AMERICA. 57

Upon these grounds it is that we affirm that the
Credit Mobilier had nothing whatever to do with the
Ames contract. This position has also been affirmed
by the Supreme Court of Pennsylvania, where the
Credit Mobilier was sued for taxes to the amount of
$1,200,000, upon the dividends declared by the
trustees, and it was there decided that the Credit
Mobilier had declared no dividends. Could stronger
arguments be used than that the State of Pennsyl-
vania decided against its own claim to the amount
of more than a million dollars?

Upon this assignment being made, the Union
Pacific Railroad Company released Mr. Oakes
Ames from any personal liability under the con-
tract he had signed. The great liability which
Mr. Ames assumed, in less than two months had '
entirely vanished, and again he was as free as before
he signed it. Under that contract he incurred no
liability ; he did not even enter upon the fulfilling of
the contract, but for these two months it lay dormant ;
in fact, for nearly this entire time it was inoperative.
It needed the written assent of all the stockholders
of the Union Pacific Railroad, and this assent was
not obtained until after the first of October. So that
in fact and in reality, the personal liability of Oakes
Ames under the contract amounted to nothing.
There was, however, a difference in one respect
which should be noticed, and which, indeed, has a
very powerful bearing upon not only the liability of
Oakes Ames, but of every beneficiary under the
contract. One condition which Mr. Oakes Ames

58 THE CREDIT MOBILIER

insisted upon before he would accept the contract
was, that it should receive the assent in writing of
every stockholder of the Union Pacific Railroad.
This was obtained. He then assigned the contract to
the trustees, and then the agreement which all the
stockholders in both companies made, made them
each individually liable under that contract. Though
Oakes Ames was in reality released from personal
liability under the contract by the Union Pacific Rail-
road Company, upon his assigning the contract, he,
in common with all others, again took that liability
upon himself, and no man bore the brunt of that lia-
bility more than did he. His whole immense fortune
was involved in the undertaking ; and it came near
wrecking him financially. He was at one time
forced, by reason of the responsibility under this con-
tract, and his investments therein, to suspend pay-
ment in his regular business, and ask for an extension
by his creditors. His liabilities at that time amount-
ed to some $8,000,000. But, with a courage seldom,
if ever equalled, he continued on in this enterprise,
and at last was successful, and saw the road com-
pleted. In time all his creditors were fully satisfied.
From this time forth the control of the Union Pa-
cific Railroad passed from the hands of its directors
and officers, into the hands of the seven trustees who
were constructing the road, and into their hands,
irrevocable powers of attorney had been given by the
stockholders to vote upon their shares, thus enabling
them to hold absolute control so long as they should
desire. Certainly they were not long in understanding

OF AMERICA. 59

the position in which they were now placed. In
fact, had they not long worked for this ? Had
they not, by means of the influence of the name
of Oakes Ames among the stockholders, obtained it?
The very day following the assignment, these trus-
tees entered into an agreement among themselves
whereby they bound themselves to vote not only with
their own shares, but with the proxies held by them
for such directors of the Union Pacific Railroad as
should be nominated by a majority of the then exist-
ing board of directors, not appointed by the presi-
dent, and no others ; and, in case of a failure to
nominate by such directors, then to vote for the
elected members of the existing board, and, in case
any of said trustees should refuse to stand by this
agreement, he was to forfeit all claims for benefits
or dividends under the contracts assigned to them.

Though Mr. Oakes Ames had assigned his entire
contract ; though thereafter he had no more to do
with the contract than any other stockholder of the
Union Pacific Railroad Company ; though he had
no special authority, he was not without interest by
any means, for he was one of the largest stock-
holders in ea,ch corporation, and upon its success
depended its profits. His liability as a contractor
had ceased (though immediately assumed in anoth-
er form), yet his influence was in a great measure
necessary for the successful completion of the con-
tract. Under this contract no work had been done
prior to its assignment to the trustees, yet work had
been progressing, and the road was being pushed

60 THE CREDIT MOBIL1ER

forward rapidly by the Credit Mobilier ; and at the
date of the assignment which is essentially the
date of the ratification of the contract by the stock-
holders there had been 238 miles of the road
completed, which were embraced in this contract
in other words, more than one-third of the whole
contract was completed before a stroke had been
done. Yet these 238 miles, which had been com-
pleted at a cost not exceeding $27,500 per mile (in-
cluding equipment) to the company, were paid for to
the trustees at a rate of over $42,000 per mile. This
was a profit if such a name is applicable to it of
between $2,500,000 and $3,000,000 under this con-
tract for which no work was needed or ever done,
though all this work had been done by the Credit
Mobiler, or more strictly speaking, by the stockhold-
ers of the Credit Mobiler.

In less than two months after the assignment (viz.,
December 12, 1867,) the first dividend was de-
clared, which was $2,244,000 in first mortgage
bonds of the Union Pacific Railroad Company, and
$2,244,000 in the stock of the company. Consider-
ing the bonds at that time worth eighty-five cents,
and the stock thirty cents on the dollar, would
make the actual cash value of that dividend at
the time it was declared, about $2,580,600; and
this, beyond all question, is the extra compen-
sation paid to these trustees on account of the
road already completed, and to that extent a pay-
ment to the stockholders of the Credit Mobiler foif
the work done by them without a contract. From

OF AMERICA. 6l

this amount there should be deducted $1,104,000
paid by the trustees to the Credit Mobilier on
account of the road included in this contract, which
had been constructed by that Company. These
trustees continued to work under this Ames con-
tract until it was completed. The work was pushed
forward with wonderful rapidity, and as a natural
consequence greatly increased the 'cost of construc-
tion. It was asserted by one of the trustees that had
the full time been taken in which to complete the
road, it could have been built at scarcely more than
one-half what it did cost.

Great stress has been laid on the fact that at the
time the Ames contract was made, the estimated cost
of building the road over the mountains was greatly
in excess of what it really cost on account of the
discovery of a new route which was much more easy
and far less expensive. This is set forth as one
excuse why the Ames contract was to include all
from the looth meridian ; that by so doing the con-
tract would be less for the whole distance, and thus
the average expense would be the same, for there
being a large profit upon the first portion, the con-
tractor could afford to take a less sum per mile for
the more difficult portion. But it is a fact well set-
tled that the very route upon which the road was
built was known months before that contract was
given, and the advantages of that route were all
known to the contractor, and were considered by
him in his calculations, and in making these calcula-
tions no one believed that the more difficult portions

62 THE CREDIT MOBILIER

of the road could be built for the price named in
the contract, and had not this portion been included,
the average for the balance must have been neces-
sarily largely increased. But there remains the
other fact, which should not be forgotten, that the
completed work included in this contract had been
performed by the Credit Mobilier ; and by the con-
tract and its assignment, the trustees were to repay
the Credit Mobilier for this work, which was done,
and out of the money so received the Credit Mobilier
declared the only dividend it ever made.

It is claimed that the plan of letting this contract
to Mr. Ames, including as it did the finished por-
tion, ignored the right of the government in the
premises, and was calculated to destroy all that in-
terest. The government had given them the right
of way, had granted them large subsidies of money
for every mile of road to be built, and had consented
to take a second mortgage as security ; had given
them the privilege of creating a debt equal to the
amount advanced by the government, which should
have precedence ; and in return asked that a cer-
tain proportion of the net profits should go to the
government, and that the government should have
the right to regulate the fares when the net profits
should exceed a certain per cent, on the cost of the
road, and that by this vast increase in the cost of the
road the interest ol the government was practically
destroyed, and the claim to regulate tariffs made of
no effect. But'we shall have occasion to consider
this right of the government further on.

OF AMERICA. 63

The Ames contract was finished, but in the mean-
time another contract had been let and, in a few days
after it was made, was assigned to these same trusr /
tees. This, the Davis contract, was for the balance
of the road, from the end of the Ames contract, and
embraced about 125-^ miles, and it was upon the
same terms and conditions as the Ames contract.
Under these three contracts was constructed the
entire road.

The difficulties which were surmounted were such
as to attract the attention of the world. It was the
greatest enterprise ever undertaken in America. It
was the first, and public opinion must be controlled,
public confidence must be secured ; the capitalists of
the country must be induced to put their money into
an enterprise where failure was openly predicted
and by the many firmly believed ; there was no se-
curity except the obligation of the seven trustees, and
the bonds of the government, which then were below
par. It was a question open to discussion whether
the road would pay even if completed. The debt
that must be created was large, and seemingly im-
possible to meet ; the rate of interest was great, and
would eat up all the earnings of the road. The op-
erating expenses must necessarily be large. The
local business of the road could not be depended
upon for any considerable income, until the country
through which it passed should become settled, and
that country was then believed to be but little better
than a desert, where nothing but the hardy sage-
bush would grow, or else it was through the

64 THE CREDIT MOBILIKR

mountains, where even man could not live. Indeed
the undertaking was a hazardous one ; indeed it was
enough to appall the stoutest heart, and to frighten
the most reckless capitalist. Yet these men were
not to be diverted from their course ; they had
embarked their names, their fortunes upon its
accomplishment, and the most discouraging events
could not make them abandon the object of their
lives.

Though they were, many of them, men of immense
resources, though their credit had stood in business
circles the very highest, they soon found their credit
in many places badly shaken, and their ability to
carry on the mighty work greatly impeded. They
were compelled to take the securities of the road and
to hold them, because no market could be found for
them ; they were forced to borrow money at most
ruinous rates of interest ; they were forced to place
the bonds of the road in pledge for the necessary
capital, and that at times at the rate of three
dollars to one. It needed the most watchful care,
the greatest ability in the country, and the most
extraordinary energy to carry it on, and all this
it had. In spite of all discouragements the road
was completed completed seven years before the
time limited and it became at once a national
highway ; the country through which it passed was
found to be, a fair proportion of the distance, the
nearest approach to the Garden of Eden now found
on earth. Towns and cities sprang up along the line.
Territories became states, and a happy, prosperous

OF AMERICA. 65

people swarmed over those once desolate plains
to find there homes of contentment and peace.
Business was greatly increased, far beyond even
the expectation of its builders ; but there was yet
much to do.

Much capital was needed, and it was necessary
that the men who had risked their all in its com-
pletion should now stand ready to aid it still with their
means. Even with the success already attained, had
the support of these men been removed, the road
would have become bankrupt, and the millions that
had been spent in its construction would have been
wasted. At the completion of the road the company
found itself $6,000,000 in debt, and this burden must
fall upon individuals, to be followed by others neces-
sary to keep the road in active operation until a busi-
ness was created affording revenue sufficient to meet
the running expenses and interest, and this burden
was sufficient to destroy nearly all profit derived from
the building of the road.

What was that profit? Was it so great as to alarm
any thinking mind ? Was it such as to call forth the
criticism of the public ? Was it such as to convince
the world that great corruption had been used to se-
cure it? In estimating profit, we should always
consider the outlay, and the risk assumed. In con-
sidering this portion of the subject, the figures will
be taken mostly from the testimony brought out by
the Congressional committee of investigation, in
1873. From the report of the committee it appears
that

66 THE CREDIT MOBILIER

THE COST TO THE RAILROAD COMPANY OF

The Hoxie contract was - - - - $12,974,416 24
Ames contract ----- 57,140,102 94
Davis contract ----- 23,431,768 10

Making total cost ----- $93,546,287 28

THE COST TO THE CONTRACTORS OF

The Hoxie contract $ 7,806,183 33
Ames contract 27,285,141 99
Davis contract 15,629,633 62 50,720,958 94

Leaving a profit to contractors - $42,825,328 34
In addition to this, there was a pay-
ment to the Credit Mobilier on ac-
count of fifty-eight miles, - - - 1,104,000 oo

Making the total profit - - - - $43,929,328 34

This profit, it should be remembered, includes the
payments of bonds and stock at par, and not at its
cash value. It is therefore necessary to ascertain
the proportionate value of each of this class of pay-
ments in order to ascertain what was the cash profit
in the construction of the road. The books of the
company show that the profits under the Ames and
Davis contracts were composed of
$3,777,000 first mortgage bonds, worth ninety cents

on the dollar.

$4,400,000 certificates for first mortgage bonds,
afterwards converted into income bonds at above
par.

OF AMERICA. 67

$5,841,000 income bonds, at sixty.

$24,000,000 stock of Union Pacific Railroad Co.

$2,346,195 cash.

The stock of the Union Pacific Railroad, as has
been stated above, was worth about thirty cents on
the dollar. Sometimes the price would advance and
sometimes would fall, but for all their calculations
the average price was thirty cents.

Upon this basis the actual cash profits of the
Ames and Davis contracts would be as follows :

$3,777,000 first mortgage bonds at

ninety - - - $33993 oo

$4,400,000 certificates for first mort-
gage bonds ------- 4,425,000 oo

$5,841,000 income bonds at sixty - 3,504,000 oo

$24,000,000 stock at thirty - - - 7,200,000 oo

$2,346,195 cash 2,346,195 oo

Making a total cash profit - - $20,874,495 oo

The profits on the Hoxie contract consisted of
$1,125,000 first mortgage bonds at eighty-five, and
$5,147,232 71 stock at thirty, and making the same

reduction as above, we have

$1,125,000 bonds at eighty-five - - $956,25000
$5,147,232 71 stock at thirty - - - 1,544,169 81

As the cash profit of the Hoxie cont'ct 2,500,419 81
And if to this is added the profits as

above --------- 20,874,495 oo

Making total profit of the whole road 23,374,914 81

68 THE CREDIT MOBILIER

In this connection attention is called to the aid
which the government extended to the road, in its
own bonds, and in the first mortgage bonds which
the government had allowed the road to issue and
to make a lien upon the road prior to the claim of
the government.

First mortgage bonds issued- - - $27,213,000 oo
Sold at a discount of ----- 3,494,991 23

Net proceeds ------- $23,718,008 77

Government bonds issued - - -$27,236,51200
Sold at a discount of ----- 91,348 72

Net proceeds ------ -$27,145,163 28

The net proceeds of the two classes

of bonds -------- $50,863,172 05

We have seen that the actual cost of

the whole road to the contractors

was ---------- 50,720,958 94

Value of the bonds over cost of con-

struction - - - - 142,213 n

In other words, the net proceeds of the govern-
ment and first mortgage bonds were sufficient to pay
for the construction of the entire road, and from the
stock, the income bonds, and land grant bonds, the
contractors received in cash value at last $23,000,000
as profit, being about forty-eight per cent, of the
whole cost. This profit, which certainly is a large
one in whatever light it may be considered, it is
claimed by the directors of the Credit Mobilier Is
not the correct statement of the case, but that the

OF AMERICA. 69

actual profit received by them is far less than this
that it did not, in fact, aggregate more than about
fifteen per cent. ; but how any such conclusion can
be reached from the figures presented by the com-
mittee is far more than the ordinary intellect can
understand. The claim is made, and with some
force, that at times the stock which they took was
worth far less than thirty, and that sales were made
even as low as nine cents on the dollar ; but even
considering that the entire issue had been sold at
that rate the cash profit would have reached at least
$16,000,000, or about thirty-two per cent, on the cost.
But the evidence of all parties was that the average
net price of the stock was thirty cents on the dollar.
This is the reasoning of the committee on investi-
gation in Congress, but it seem^ to us as a most wil-
ful perversion of figures, an unauthorized use of
those figures to prove a proposition which had been
in their minds at the start, and which they were de-
termined to maintain and prove, it mattered not by
what means. This estimate made by the committee
leaves out from the cost of the road a large number
of items, which were expenditures of the Credit
Mobilier, but which might not enter into an estimate
of the ft actual cost " of building the road. Every
man who has done any business knows full well that
there are always expenses that could not be calcu-
lated as items of this " actual cost." Such was, in-
deed, the testimony of the witnesses before this
committee, but that testimony was utterly ignored by
the committee in their report. It would tell against

7O THE CREDIT MOBILIER

their argument, and the bias which it is manifest they
entertained from the beginning of the investigation.
Again, the committee refused to take notice of the
testimony of losses, amounting to millions of dollars,
which the Credit Mobilier sustained, notably the loss
of their entire capital of $3,750,000, which had been
paid in in cash, and was entirely used up in the con-
struction of the road, and which should properly be
deducted from the profits shown. The committee
also have recorded as profits the transfer of money
from one account to another ; as an instance, the pay-
ment by the trustees of $1,104,000 to the Credit
Mobilier. The committee cite it as a payment by
the Union Pacific Railroad Company. Again, the
committee have figured as -profits actual losses, as
may be seen in the bonus which the Credit Mobilier
was compelled to give in order to get the additional
capital subscribed for. As an inducement to the sale
of these additional shares, the Credit Mobilier gave
$1,000 in first mortgage bonds for each $1,000 sub-
scription to the stock. In this way $1,125,000 of
these bonds were disposed of, it being a loss to the
company of that amount, but which the committee
have set forth as a profit. Nor have the committee
noticed the great losses which the Credit Mobilier
and the trustees sustained in their endeavors to find
a market for the securities they had taken. It was
clearly in evidence that more than $5,000,000 of
Union Pacific stock was sold by the Credit Mobilier
at $4.50 per share, because it could be disposed of
in no other way.

OF AMERICA. Jl

But now the actual profit earned by the Credit
Mobilier and the trustees was in evidence before the
committee, but in their report they made no allusion
to it ; let us do that, and then we may understand.
There was never any question raised but that all the
profits made under these contracts were divided. In
fact, the committee states that such was the case.
Below will be found the date of each dividend, the
amount and the cash value of each, reckoning the
bonds at 85 and the stock at 30 :

Dec. 12, 1867, $2,543,208 First mortgage bonds, $2,161,726 80

Dec. 12, 1867, 2,543,208 Union Pacific Stock, - - 726,962 40

Jan. 3, 1868, 748,000 First mortgage bonds, - 635,800 oo

June 17, 1868, 2,201,204 Cash, 2,201,204 oo

July 8, 1868, 1,112,768 Cash, 1,112,768 oo

July 3, 1868, 2,804,050 First mortgage bonds, - 2,383,442 50

Dec. 29, 1868, 7,500,000 Union Pacific Stock, - - 2,250,000 oo

Dec., 1867, 420,000 12 per cent. div. Cr. Mob., 420,000 oo

19,872,438 11,891,903 70

Deducting the loss of the Credit Mobilier capital,
(which was an entire loss), -------- 3,750,000 oo

Leaves as the net profits, cash value, 8,141,903 70

To this there should, perhaps, be added the pres-
ent value of the Credit Mobilier stock. But that
value is uncertain, and if the utmost that is claimed
by some should be realized, there might be added
about $2,000,000 to this as the total profits. But
these claims are very uncertain.

This being all the profit realized from an expen-
diture of about $70,000,000 or about 1 2 per cent. But
not counting at all this loss of capital, the profit would

72 THE CREDIT MOBILIER

be but little over 16 per cent, upon the cost. This
conclusion coincides with all the testimony before the
committee, and to an unprejudiced mind shows the
bias of this committee, and the determination to un-
earth some gigantic fraud, whether it existed there
or not. From this report were derived nearly all the
arguments that were made before Congress upon
this subject, and which arguments have tended to so
large an extent to influence the public mind, and
prejudice the public against the operations of the
Credit Mobilier. But how changed is the result !
The immense profits of $43,000,000 which have
been paraded before the country, have dwindled
down to less than ten millions, upon an expenditure
of some $70,000,000. Certainly this is a profit that
may of itself sound large, but it was the result of
some four years work, and of great expenditure.
The profit was not larger than that which some of
our merchant princes were making at the same time
and against whom no thought of wrong was ever
entertained, but whose industry and skill were
highly commended.

VI.

THE DIFFICULTIES OF CONSTRUC-
TION.

\][7'E must at all times consider the risk, and the
circumstances under which that risk was
taken. It should be remembered that there was no one
else willing to undertake so great a contract, no one
who would be willing to risk all he had in such an
endeavor. He must feel sure that he could recover
himself from his great outlay, and this no one could
do. The company had tried to build the road itself
and had wholly failed, so that it became necessary
to even sell their rolling stock to pay their debts.
Whatever was done must be done under the greatest
disadvantage. All materials used in construction
had to be transported overland or by means of the
Missouri River, which was exceedingly expensive.
The people were afraid it would not succeed, and at
times could not be induced to buy its bonds, and thus
indeed the capital necessary for its completion could
not be obtained. Under all these discouraging cir-
cumstances this construction company took hold of
the work and pushed it forward to completion. Why

73

74 THE CREDIT MOBILIER

was a construction company necessary? It was
necessary in order to limit the liability in case of
loss. Individuals engaging in it might find them-
selves involved as partners to the full extent of all
debts contracted, while the liability of the construc-
tion company was limited to the amount of its capi-
tal. But this was only one reason. There were
others more powerful. By the charter under which
the road was built, it was provided that the capital
stock was to be $100,000,000, and that the books for
subscriptions to stock were to remain open until the
whole amount should be subscribed. To have ena-
bled any company or set of men to obtain control
of the road would have rendered necessary a sub-
scription of some $51,000,000. Such a subscription
was an utter impossibility. Every effort that could
be made was made at the beginning, and in two
years the total subscriptions amounted to only a
trifle over $2,000,000. No man or company could
be induced to engage in such a gigantic scheme
unless they could be assured that, when the work
was in progress, and success assured, they were to
remain secure in their hope of profit. Supposing
that a subscription of $36,000,000 (the amount of
stock finally issued,) had been made, and the work
gone on. Here there would have been no chance
for any profit to be made from construction, for the
work would then be done by the road itself, and the
only chance for any profit from this investment
would be in the running of the road after its com-
pletion. When the work was so far along that its

OF AMERICA. 75

successful completion was assured, another party of
capitalists might come forward, and by new sub-
scriptions, for the books must still remain open, could
obtain control of the road, while those who had built
the road, who had borne all the risk of the enterprise,
who had staked their money on the work, who had
risked their fortunes on its construction, would be
deprived of all voice in the management or control
of the road, by those who had borne no risk at all.
It was this fact that rendered it impossible to obtain
subscriptions, and build the road as the charter sug-
gested. By means of the construction company, all
these dangers were avoided. Under no other con-
ditions could the road have been built at all, and
under this plan every right of the government was
amply protected, and the interests of every stock-
holder fully secured.

The greatest point that is made against this pro-
ceeding is that the construction company, as organ-
ized, consisted of the same men who directed the
other company with whom they contracted. While
this may have been, under most circumstances in
which the government was interested, against policy
and good faith, there was certainly no law forbid-
ding it there was no question as to its technical
legality ; and it is a serious question whether a better
contract could have been made by or with any other
company, though wholly separate and distinct in
interest from the other. None save those who
were intimately interested in the success of the road,
could be induced to touch such a contract. It was

76 THE CREDIT MOBILIER

not as though other roads had reached across the
continent, demonstrating beyond a doubt that such
an enterprise was possible of success ; it was not as
though the certainty of its accomplishment had in-
spired the confidence of the public in it, and had made
it plain that it would be safe for capital to invest.
Like all first experiments, it had all these obstacles
to overcome and subdue. It was like the pioneer
who goes far into the wilderness to prepare a foot-
hold for the more timid to follow. The success of
the first endeavor has made it easy to inspire public
confidence in other similar endeavors, and now in
the popularity of such undertakings we are apt to
lose sight of the circumstances surrounding the first.
The first was completed, and has been in successful
operation for more than eleven years, but to this
day, though various lines have been started, and
have received the same fostering care and assistance
of the government, not one in this length of time
has opened a line to the Pacific, and will not for
some years to come. They certainly do not have
so great difficulties to surmount. Public confidence
has been established, and it has been demonstrated
that such roads can be built, and that when built,
are, or can be made, paying investments. However
great may be the cry against the immense profits
that the Credit Mobilier made in the construction of
the Union Pacific Railroad, all this cry has arisen
out of the fact that certain members of Congress
became interested in the stock of the Credit MobilieY,
and political capital was made out of it for the

OF AMERICA. 77

purpose of controlling elections. Other roads have
been built in the same way, and are still being built
in the same manner. How many people are there
now to whom the name of Credit Mobilier is per-
fectly familiar, who have ever heard of the Contract
and Finance Company ? and who, if asked to-day,
could tell when or where such an organization ever
existed ? And yet it is a corporation almost identi-
cal with the Credit Mobilier, so far as its purposes
and organization are concerned, and in the work
which it did. The Contract and Finance Company
was organized under the laws of the State of Cali-
fornia, and was used for the purpose of constructing
the Central Pacific Railroad from San Francisco to
its junction with the Union Pacific Railroad. It
was in operation at the same time that the Credit-
Mobilier was at work on the eastern side of the
Rocky Mountains, and was composed of the prin-
cipal stockholders of the Central Pacific Railroad.
This company had a contract to build some six
hundred miles of the road, and the profits that arose
from that construction were very large far larger
than those of the Credit Mobilier and this profit,
instead of being divided among the stockholders of
the Central Pacific Railroad, as were the profits of
the Credit Mobilier among the stockholders of the
Union Pacific Railroad, went into the pockets of a
very few individuals. In effect these few individuals
took the contract of building the road, of themselves
as representatives for that road, at an immense
profit. The government was interested in the road

78 THE CREDIT MOBILIER

the same, and to the same extent, as in the Union
Pacific Railroad. But how changed the circumstan-
ces when a few members of Congress happened to
own a few shares in the one. The one has been
condemned unmercifully'; its officers, and those inter-
ested in it, have been branded as felons ; its name
has become a by-word for infamy, while the other,
pursuing the same plan, only not half so liberal to
the general public, has gone free, and its name,
even, is almost unheard of outside of special circles.
Was the government defrauded by the one? then
also was it by the other. Was its principle wrong ?
then so was that of the other. Is the one to be
condemned ? then so must the other. Must a policy
of hate be inaugurated against the one ? then so
must it against the other. Must the one be held
up for public condemnation ? then so must the
other. They meet alike on common ground. They
were each actuated by the same motives. The
public has received the same great and wonderful
advantages from each. A great national highway-
has been constructed. The union of our common
country has been cemented by ties that can never
be broken ; and even though the loans made by the
government should never be paid, already has the
government saved enough to more than repay all
the outlay.

Whether all this has been the result of the labors
of the Credit Mobilier it is hard to say, and cer-
tainly as hard to deny. The interests of the Union
Pacific Railroad and the Credit Mobilier are so

OF AMERICA. 79

interwoven with each other that it is impossible to sep-
arate them. Certain it is that, without the interven-
tion of a construction company, the Union Pacific
Railroad would never have been built. But whether
it was absolutely necessary that that construction com-
pany should be identical with the Railroad Company,
is the only question that can be raised against the plan
of its operations. It is claimed that this combination
was against equity and good conscience, and that the
directors of the Union Pacific Railroad Company had
no right to make a contract with themselves, though
under the guise of another corporation, by which they
would make for themselves a profit from the funds of
the Railroad Company ; but that they must, even in
that capacity, be regarded as trustees for the Railroad,
and whatever profit was made through their contract
must inure to the benefit of the Railroad. While this
may all be true, the question would naturally arise, for
whom, in that capacity, would they become trustees?
The answer must be, for the holders of the stock of
the Union Pacific Railroad. What was the nature of
the agreement by which they held their trust? It was
that all the profits arising from the contract should
be paid to the holders of the stock of the Credit
Mobilier, and those stockholders were identically
the same as the holders of the stock of the Union
Pacific Railroad. It was clearly in evidence that
such was the case, and where there were any who
would not sign the agreement giving to the trustees
their irrevocable power of attorney or proxy to vote
on their shares, their stock was bought as far as it was

THE CREDIT MOBILIER

possible, so that no stock should be unrepresented
in the division of profits. It should also be remem-
bered that every stockholder agreed in writing
to the Ames and Davis contracts, and thus cer-
tainly no advantage was taken of their position.
Was the government a party who should have been
consulted? What was the interest of the govern-
ment? The government gave the right of way on
the condition that the road should be built ; it gave
on the same condition large subsidies of land. It
also loaned the road a certain amount of its bonds,
consenting that its claim should be a second lien on
the road, subject to an equal indebtedness, to be
created by the Railroad Company, those bonds to be
paid by the Railroad at the expiration of thirty years ;
and, in case of the net profits of the road exceeding
ten per cent, of the cost of the road, the government
to have the right to regulate the rates of fare, and
reserved to itself the right to appoint certain direct-
ors of the road, and the right to legislate upon the
charter as granted. Have any of the conditions
which the government required been unfulfilled?
The road was completed as required, a first-class
road, and was completed some seven years before it
was required. Upon the completion of the road the
grants of land and right of way became absolutely
the property of the road, and the government had no
cause to complain. In fact, the government became,
by the early completion of the road, a great gainer,
and saved, by that event alone, millions of dollars
every year. Was the cost of the road greatly

OF AMERICA. 8l

increased by the manner in which it was built? and by
that means were the future claims of the government
rendered of no account? Was it the duty of the
company to build the road by using as little of the
loan of the government as possible, or had the road
the right to use all of the loan which the government
granted? And if the company, in building the road,
let the contracts to themselves, did they thereby stand
in such a relation to the government that they must
account for all the profits they received? If any
question should arise as to the accounting to the
shareholders of the Union Pacific stock, those ques-
tions are fully answered in the fact that an equal
division of all profits was made with the holders of
that stock ; they not only all agreed to the contracts
and arrangements, but themselves received whatever
profit arose from the execution of those contracts.
But could the road have been built at a less price
than it was? Suppose that the $36,000,000 repre-
sented by the stock, had been paid into the treasury
in cash, it is even probable that, under such circum-
stances, the road could not have been built at all.
Economy and frugality, under such circumstances,
could not have been expected. The country at
large, seeing that the work was sure to go through,
urged, in every way possible, the utmost speed of
construction ; and more, Congress had given to the
Central Pacific Railroad Company the right to build
its road until it should meet the Union Pacific, and
thus set the two great companies on a race across
the continent. At this time there was no road across

82 THE CREDIT MOBILIER

the State of Iowa, and all the materials must be
transported overland, or by way of the Missouri
River, from Saint Louis to Omaha, at immense
cost. At the commencement of the building of the
road no satisfactory route had been selected across
the mountains. It was building a railroad across a
country without timber, without fuel, without water,
(all of which must be transported), with gold at 160
and iron $160 per ton, with gangs of men at work
both day and night, with half the force engaged in
keeping the Indians from killing the other half ; and
all these working together would have created a
spirit of extravagance that would have wasted the
entire capital of the company, and left the road un-
finished. As these men undertook the enterprise, it
seemed to those careful capitalists of the country a
wild waste of money, in the most favorable light.
There was a spirit of adventure about it, of loyalty
and courage, such as were never before seen in the
history of railroad enterprise. The conditions were
utterly inconsistent with anything like prudence or
economy. Had all that money been in the treasury,
the road would necessarily have been built by day's
work, for no responsible contractor could have been
found to take a contract when he had to freight his
materials at such vast expense, and where he had to
keep a standing army to protect his workmen from
the Indians ; and it has been asserted by those well
qualified to judge, that the contract assumed by
Mr. Ames was the wildest contract ever made by a
civilized man.

OF AMERICA. 83

In taking this contract as they did, these men were
forced to exercise as great economy as possible in
order to realize any profit at all, and the costs, outside
of what appears as the actual cost of construction, were
enormous ; and beyond all, it is a fact that even with
as much economy as could have been used, all the
money invested in the enterprise would have been
wasted except for the accidental discovery of coal -
along the route. At the time the road commenced
operations they were paying from nineteen dollars
to twenty dollars per cord for wood that was not the
equivalent of more than one third or one fourth of a
ton of coal. The cost of the road, then, as it was
built by the Credit Mobilier, is less than would have
been the cost could it have been possible to have
built the road otherwise. The intervention of the
construction company was necessary. The interest
which the stockholders had in the success of the
railroad is all that made it possible for the road to
be built. The government has not been wronged.
Every obligation which the road was to perform has
been performed. The government paid no money ;
it merely lent its credit, and its relation to the road
is that of a creditor to a debtor with a lien. The
government can not be in the slightest injured if the
debt is paid. But it is said the debt has not been
paid ; but it is not due, and the government, the
same as an individual, has no right to collect a debt
before it is due. The security which the government
took is that of its own choosing. It ought not to
complain of that, and the only right which the

84 THE CREDIT MOBILIER

government might assume is to prevent the waste ot
its mortgage security, so that the debt may be paid
vhen due. This right the government has assumed,
ind a sinking fund has been established, by means
)f which every dollar of the bo