When Was The Credit Mobilier Scandal

The Credit Mobilier scandal remains one of the most infamous examples of corruption in American history, deeply entwined with the construction of the transcontinental railroad. This episode of greed, bribery, and political maneuvering exposed the dark underbelly of the Gilded Age, leaving a lasting stain on the reputations of numerous politicians and business leaders. Understanding the timeline of this scandal, from its inception to its eventual exposure, is crucial to grasping its profound impact on American politics and business ethics.

The Credit Mobilier scandal unfolded primarily between 1864 and 1872, though its roots extend slightly earlier and its repercussions lasted for years afterward. At its core, the scandal involved the Union Pacific Railroad and a construction company called Credit Mobilier of America. By understanding the key dates and events within this timeframe, we can fully appreciate the magnitude and complexity of this historical event.

Genesis of the Scandal: The Early Years (1864-1867)

To truly understand the Credit Mobilier scandal, we need to rewind to the early 1860s, when the idea of connecting the East and West coasts of the United States with a transcontinental railroad was gaining momentum. The Civil War underscored the strategic importance of such a railway, and in 1862, Congress passed the Pacific Railroad Act, authorizing the construction of the Union Pacific Railroad westward from Omaha, Nebraska.

1864: The Formation of Credit Mobilier

The Credit Mobilier of America was initially chartered in Pennsylvania in 1859 as the Pennsylvania Fiscal Agency. However, it was purchased in 1864 by Thomas Durant, a vice president of the Union Pacific Railroad. Durant saw an opportunity to profit handsomely from the railroad's construction. He renamed the company Credit Mobilier of America, after a French investment bank, Crédit Mobilier, and transformed it into a construction company.

1864-1867: Lucrative Contracts and Initial Construction

During these years, Credit Mobilier secured contracts to build the Union Pacific Railroad. The scheme was simple yet audacious: Durant and other insiders awarded Credit Mobilier contracts at inflated prices. This meant that the Union Pacific was essentially paying Credit Mobilier exorbitant sums for the construction work. Since the same individuals controlled both the railroad and the construction company, they were effectively paying themselves with government-backed funds and shareholders' investments.

The inflated contracts allowed Credit Mobilier to generate massive profits. For example, the actual cost of construction might be significantly less than what the Union Pacific was billed. The difference went directly into the pockets of Durant and his associates. This siphoning of funds would later become the crux of the scandal.

The Height of the Scandal: Bribery and Cover-Ups (1867-1868)

As the construction of the transcontinental railroad progressed, so did the scale of the fraudulent activities. The years 1867 and 1868 marked a critical phase in the Credit Mobilier scandal, characterized by widespread bribery and attempts to cover up the illicit dealings.

1867: Oakes Ames' Involvement

One of the pivotal moments in the scandal occurred when Congressman Oakes Ames became involved. Ames, a Republican representative from Massachusetts and a member of the House Committee on Railroads, was brought in to help manage the scheme. Durant, realizing the need for political protection, offered Ames a large block of Credit Mobilier shares at a discounted price.

1867-1868: Distribution of Shares to Politicians

Ames then began distributing these shares to other influential members of Congress, including senators and representatives. The idea was to ensure that these politicians would turn a blind eye to the financial irregularities surrounding the Union Pacific's construction. By offering them a stake in Credit Mobilier's profits, Ames effectively bribed them to protect the scheme.

Among those who received or were offered shares were Vice President Schuyler Colfax (then Speaker of the House), Senator James A. Garfield (who would later become President), Senator Henry Wilson, and several other prominent political figures. The distribution of these shares was meticulously planned to create a network of complicity that would shield Credit Mobilier from scrutiny.

The Impact of Bribery

The bribery was remarkably effective. When questions arose about the Union Pacific's finances or the high costs of construction, the politicians who had received Credit Mobilier shares were quick to defend the railroad and dismiss any concerns. This political protection allowed Durant and his associates to continue their fraudulent activities without fear of serious repercussions.

Exposure and Investigation: The Unraveling (1868-1872)

The Credit Mobilier scandal might have remained hidden indefinitely if not for a series of events that led to its exposure in 1872. These events triggered a full-blown investigation, revealing the extent of the corruption and implicating numerous prominent figures.

1868: Completion of the Transcontinental Railroad

The transcontinental railroad was completed in 1869, marking a significant achievement in American history. However, the completion also brought increased scrutiny to the Union Pacific's finances. Despite the railroad's completion, questions lingered about the exorbitant costs and the financial dealings of Credit Mobilier.

1872: The New York Sun Exposé

The scandal finally broke into the open in 1872, thanks to an exposé published in The New York Sun. The newspaper obtained documents detailing the distribution of Credit Mobilier shares to members of Congress. The articles revealed the names of the politicians who had received the shares and outlined the scheme's mechanics.

The public outrage was immediate and intense. The idea that members of Congress had been bribed to protect a fraudulent enterprise shocked the nation. Calls for investigation and accountability grew louder.

1872: Congressional Investigations

In response to the public outcry, the House of Representatives and the Senate launched separate investigations into the Credit Mobilier scandal. These investigations aimed to determine the extent of the corruption and to identify those who were involved.

The House appointed a special committee, led by Congressman Luke Poland, to investigate the matter. The Poland Committee conducted extensive hearings, calling witnesses and examining documents related to Credit Mobilier's financial dealings. The Senate also formed a committee to conduct its own investigation.

Key Findings of the Investigations

The congressional investigations confirmed the essential details of the New York Sun exposé. They found that Oakes Ames had indeed distributed Credit Mobilier shares to members of Congress, and that these politicians had benefited financially from the scheme. The investigations also uncovered evidence of inflated contracts, financial mismanagement, and other irregularities in the construction of the Union Pacific Railroad.

Aftermath and Consequences: Accountability and Reform (1873 and Beyond)

The exposure of the Credit Mobilier scandal had significant repercussions for those involved and for the broader political landscape. While some individuals faced censure and disgrace, the scandal also led to important reforms aimed at preventing similar abuses in the future.

1873: Censure and Disgrace

As a result of the congressional investigations, several politicians faced censure and disgrace. Oakes Ames and Congressman James Brooks were formally censured by the House of Representatives for their involvement in the scandal. Ames died shortly after the censure, his reputation tarnished.

Vice President Schuyler Colfax, who had served as Speaker of the House during the period when the bribery occurred, was also implicated. Although he was not formally charged with any crime, the scandal damaged his reputation and contributed to his defeat in the 1872 election.

Other politicians who had received Credit Mobilier shares also faced scrutiny and criticism. While some were able to weather the storm, the scandal cast a shadow over their careers.

Long-Term Consequences

The Credit Mobilier scandal had several long-term consequences:

• Damage to Political Reputations: The scandal damaged the reputations of numerous politicians and eroded public trust in government. It reinforced the perception that corruption was widespread in the Gilded Age.
• Calls for Reform: The scandal fueled calls for reforms to prevent similar abuses in the future. These reforms included measures to increase transparency and accountability in government and to regulate the relationship between business and politics.
• Impact on the Republican Party: The scandal particularly hurt the Republican Party, which was associated with the Grant administration and the expansion of railroads. The Democrats used the scandal to attack the Republicans and to argue for a return to more traditional values.
• Lessons in Business Ethics: The Credit Mobilier scandal served as a cautionary tale about the dangers of unchecked corporate greed and the importance of ethical behavior in business.

The Scientific Explanation of Corruption

The Credit Mobilier scandal provides a stark illustration of the scientific principles underlying corruption, which can be analyzed through the lenses of psychology, sociology, and economics.

Psychological Factors

• Rationalization: Individuals involved in corruption often rationalize their behavior by convincing themselves that it is justified or necessary. For instance, they might argue that they are simply taking advantage of opportunities or that their actions are for the greater good of the company or the country.
• Moral Disengagement: Moral disengagement is a psychological process that allows individuals to selectively deactivate their moral standards to justify unethical behavior. This can involve minimizing the harm caused by their actions, blaming the victims, or dehumanizing those who are affected.
• Groupthink: In situations where corruption is widespread, groupthink can reinforce unethical behavior. Groupthink occurs when individuals suppress their own doubts and concerns to conform to the consensus of the group.

Sociological Factors

• Opportunity Structures: Sociological theories of crime emphasize the importance of opportunity structures. Corruption is more likely to occur when there are opportunities for illicit gain and when there is a lack of effective oversight and regulation.
• Social Norms: Social norms can also play a role in corruption. In some societies, bribery and favoritism may be tolerated or even expected. This can create a culture of corruption that is difficult to break.
• Power Dynamics: Corruption often reflects power dynamics within a society. Those who hold positions of power are more likely to engage in corruption, and they are also more likely to be able to protect themselves from being held accountable.

Economic Factors

• Incentives: Economic incentives can drive corruption. When individuals are faced with the opportunity to make large sums of money through illicit means, they may be tempted to engage in corruption, even if it means violating ethical or legal standards.
• Principal-Agent Problem: The principal-agent problem arises when one party (the agent) is hired to act on behalf of another party (the principal), but the agent has incentives to act in their own self-interest rather than in the best interest of the principal. This problem is common in corruption, where government officials (agents) are supposed to act in the public interest (the principal), but they may be tempted to enrich themselves through bribery and other forms of corruption.
• Information Asymmetry: Information asymmetry occurs when one party has more information than another party. This can create opportunities for corruption, as those with inside information can use it to their advantage.

FAQ About the Credit Mobilier Scandal

Q: What was the Credit Mobilier scandal?

A: The Credit Mobilier scandal was a major instance of corruption involving the Union Pacific Railroad and Credit Mobilier of America, a construction company. Insiders awarded inflated contracts to Credit Mobilier, siphoning off profits for themselves and bribing politicians to avoid scrutiny.

Q: When did the Credit Mobilier scandal take place?

A: The scandal primarily unfolded between 1864 and 1872, with its exposure occurring in 1872.

Q: Who were the key figures involved in the Credit Mobilier scandal?

A: Key figures included Thomas Durant, Vice President of the Union Pacific Railroad; Congressman Oakes Ames, who distributed shares to politicians; and numerous members of Congress who received or were offered shares.

Q: How was the Credit Mobilier scandal exposed?

A: The scandal was exposed in 1872 by The New York Sun, which published documents detailing the distribution of Credit Mobilier shares to members of Congress.

Q: What were the consequences of the Credit Mobilier scandal?

A: The consequences included the censure of Oakes Ames and James Brooks, damage to the reputations of numerous politicians, calls for reform, and a lasting impact on American politics and business ethics.

Conclusion

The Credit Mobilier scandal stands as a powerful reminder of the potential for corruption when unchecked corporate greed intersects with political power. From its origins in 1864 to its explosive exposure in 1872, the scandal revealed the dark side of the Gilded Age and had a lasting impact on American politics.

Understanding the timeline, key players, and consequences of the Credit Mobilier scandal is essential for appreciating its significance in American history. It serves as a cautionary tale about the importance of transparency, accountability, and ethical behavior in both business and government.

The Credit Mobilier scandal's exposure led to significant reforms aimed at preventing similar abuses in the future. These reforms included measures to increase transparency and accountability in government and to regulate the relationship between business and politics.

How do you think similar scandals could be prevented in today's world, and what measures should be taken to ensure ethical governance and corporate responsibility?