Credit Mobilier of America

Business venture that precipitated one of the greatest financial and political scandals of the 19th century in the United States.Oakes Ames and his brother Oliver, Thomas C. Durant, and other principal Union Pacific Railroad stockholders purchased the Pennsylvania Fiscal Agency in 1864, changed the name to Crédit Mobilier of America (named after Crédit Mobilier of France), and established it as a construction company.


Crédit Mobilier then purchased the remaining Union Pacific stock and offered a reissue to its stockholders. In this way, the ownership of the two corporations was combined.At this time, the federal government had chartered the Union Pacific to complete the railroad from the Midwest to the Pacific coast. Loans, subsidies, and land grants were also part of the government's assistance to the railroad.


The Union Pacific Railroad awarded the contract for the actual construction to Crédit Mobilier, in effect awarding it to itself as owner of the company. The construction costs reported by Crédit Mobilier for the 1074 km (667 mi) were grossly inflated. Crédit Mobilier charged more than $94 million for construction that actually cost only $44 million. As a result the company's dividends to its stockholders increased 500 percent a year in 1867 and 1868.


When suspicions became aroused concerning the relationship between the Union Pacific and Crédit Mobilier, Oakes Ames, in his capacity as a congressman from Massachusetts, attempted to stave off a congressional investigation into both the Union Pacific Railroad and Crédit Mobilier by distributing Crédit Mobilier stock among his colleagues in the House of Representatives.


Congressmen were allowed to make long-term purchases of the stock by using the interest and dividends to pay for the stock itself. No risk was involved, and the profits were high; a reported $33 million profit was made by those who accepted these bribes.During the 1872 presidential election a list of those congressmen owning Crédit Mobilier stock was published by the New York Sun along with letters written by Oakes Ames describing his dealings. The taint of this scandal permeated the government.


Crédit Mobilier's operations were halted, and the Union Pacific Railroad, stripped of all its assets except the roadbed and the machinery in order to repay the government loans, was left debt-ridden. Among those implicated in the scandal were Vice President Schuyler Colfax, Representative James A. Garfield, House Speaker James G. Blaine, and Henry Wilson, the Republican candidate for vice president.Although not all charges were proven and the full investigation was finally dropped, many political careers were ruined as a result of these disclosures.


A number of judges were impeached or forced to resign, and Oakes Ames was finally censured by Congress in February 1873; he died a few months later. This scandal brought to the public's attention the extent of widespread political corruption and unethical business practices, and as a result, new concern was shown for reform in both areas.