the directors of the Union Pacific owned a lot of construction companies, and those were the companies that got more than 1/2 of the govt contracts to build the cross continent railroad... at exorbitant rates, were 94 million dollars worth, by 1869.
Those construction companies for the Eastern portion of the transcontinental railroad were in a front company created by the UP directors, called Credit Mobiler, whose stock profits they used to buy senators, congressmen, cabinet officers, a future president, and two vise presidents.
The railroad cost only $50 million to build (equal to $1.2B today), Crédit Mobilier billed $94 million and Union Pacific executives pocketed the excess $44 million. (1.1B)
The ballooned costs swindled millions of dollars in taxpayer-backed funds, which went straight to the company's investors and directors
Within 3 years, those who owned shares of Credit Mobiler shared profits of 33 and 50 million dollars... in 1870s dollars
Congressman Oakes Ames sold discounted Crédit Mobilier stock to powerful Washington politicians to prevent a congressional investigation
When news of this reached the public in 1872, it resulted in the impeachment of two congressmen and a financial panic that brought on a nationwide depression
A congressional inquiry implicated high-ranking officials, including Vice President Schuyler Colfax. The event became a defining symbol of Gilded Age political corruption
The depression of 1873 as well as the one in 1882 and the one after that in 1893, resulted in layoffs and wage reductions that, in the railroad industry, were invariably challenged by workers, who formed unions and went on strike. Whenever possible the railroads broke up these strikes by hiring desperate men from from among the the most recently arrived group of immigrants.
Though Part of the excess cash and $9 million in discounted stock was then used to bribe several Washington politicians for laws, funding, and regulatory rulings favorable to the Union Pacific.
Train and Durant aimed to present to both the government and to the public the appearance that an independent corporate enterprise had been impartially chosen as the principal contractor and construction management firm for the project.
In fact, Crédit Mobilier was created to shield the company's shareholders and management from the common charge that they were using the construction phase of the project, as opposed to the operating phase, to generate profit.
Because the conspirators believed they could not expect conventional profits from the operation of the railroad, they created the sham company so they could charge the U.S. government extortionate fees and expenses during the construction phase.
In 1867, Crédit Mobilier replaced Thomas Durant with Oakes Ames, a member of the House of Representatives from Massachusetts.
Ames, being a member of Congress, distributed bribes in the form of cash and discounted shares of Crédit Mobilier stock to fellow congressmen and other politicians in exchange for votes and actions favorable to the Union Pacific
As I mentioned when commenting on a post last week, you can't tell when or where you might stumble across the little bit of info that results in an interesting research post, this came from the forward of a book about photography that I finally found cheap on Ebay, that I'd mentioned years ago when I learned of Angel Rizzuto's photography https://justacarguy.blogspot.com/2022/02/im-guessing-one-kid-lost-bet-coin-toss.html
Good for you for bringing this to the fore. As an Economics Major, this was part of my studies.
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