The history of the United States of America is rich with many different events. One of them is the Credit Mobilier scandal that erupted in 1867 and was exposed by the New York Sun in 1872. The Credit Mobilier scandal destroyed the careers and reputations of several Gilded Age politicians and established the Credit Mobilier as a symbol of American corruption.
Explanation:
To understand the significance of this event, it is important to provide the Credit Mobilier scandal timeline. The story began in 1862 when the Union Pacific Company decided to build a transcontinental midway. It started selling a hundred million dollars of stock, promised up to $48,000 per mile in thirty-year government bonds, and also promised to build a two-hundred-foot-wide way across the continent – the Union Pacific Railroad.
The stockholders and directors of the new company bribed the Congress by giving the shares in this construction to influential congress members and persuaded them to pass the second transcontinental-railroad act in 1864. After that, the Credit Mobilier company was able to sell its own bonds and back them with the railroad’s real estate. Moreover, the company doubled that real estate and included coal and iron rights.
The businessmen and directors of the company decided to mortgage the unbuilt road for ten million, and the land for twenty-seven million dollars. Moreover, as they owned both finances and the construction firm, they could pay themselves huge amounts of money to build the railway and made a fortune from the central pacific railroad. In order to be able to do that financial tricks, the businessmen found a little investment firm, Pennsylvania Fiscal Agency, that was created by the government to buy and sell railroad bonds and to borrow and loan money without any limits upon the resources or without any resources of the company.
As the Credit Mobilier Company was using the Union Pacific’s stocks and bonds to steal money and pay itself twice the cost of the road building, the directors and businessmen were in constant danger of congressional investigation. That is why about twenty congressmen and even the Vice President of the United States were bribed with stocks. In 1872 the railroad was finally built, and the Credit Mobilier Company made a profit of up to fifty million dollars while the original investment was less than one million.
When in 1872 the New York Sun exposed the shameful story, James G. Blaine, Speaker of the House and a Maine Republican involved in this event, started the scandal investigation with the help of the congressional committee. It appeared that the two members of the House, Oakes Ames and James Brooks, were the participants of this event and became censured by the House. The two Vice Presidents, Henry Wilson and Schuyler Colfax, and Representative James A. Garfield were also accused of being involved in the Credit Mobilier scandal. However, Garfield did not agree with the accusations and was later elected president.
The scandal showed how corrupted the Gilded Age politicians were. The congressional investigation found and brought all the shameful details such as Oakes Ames’s incriminating letters to the public’s attention. The scandal ended Schuyler Colfax’s political career and led to the censure of two members of Congress. Many other government officials lost their reputations; the Credit Mobilier scandal played a rather significant role at the beginning of the panic of 1873.