_Mostly Financial._
Preliminary Organization--Board of Commissioners--Company
Organized--Directors and Officers Elected--Hoxie Contract--Credit
Mobilier--Ames' Interest--Compromise Contract--Davis Contract--Cost of
Line--Land Grant.
When the Pacific Railroad Bill passed Congress and received the
President's signature in 1862, there was a well organized company to
take hold of the western or California end. The Union Pacific or
eastern end was not in such good shape. Thomas C. Durant, who was
afterwards Vice President of the Company had with a few associates
taken a prominent part in the matter but no regular organization
existed.
Under the Charter there were one hundred and fifty-eight persons
named, who, together with five to be appointed by the Secretary of the
Interior were to constitute a "Board of Commissioners" to effect a
preliminary organization, open books for the subscription of stock and
to call a meeting of the stockholders to elect a board of directors as
soon as two thousand shares had been subscribed and ten dollars per
share paid in.
When the board of directors had been elected, the property or rather
the proposition was to be turned over to them and the duties of the
Board of Commissioners should cease and terminate.
The Company thus organized, should follow established precedents,
stockholders should hold annual meetings, elect a board of directors,
and adopt bylaws and rules for the conduct of its affairs. The
directors thus elected to be not less than thirteen in number, two to
be added to their number by appointment of the President of the United
States. The Board of Directors to elect the officers of the company
and exercise supervision.
The Board of Commissioners met in Chicago in September, 1862, and
organized, electing W. B. Ogden, President and H. V. Poor, Secretary,
as called for in the charter, and subscription books were duly opened.
There was no disposition on the part of moneyed men to subscribe for
the stock and it was only owing to a few public-spirited men coming in
and taking the two thousand shares that the Charter did not lapse.
When the necessary stock had been subscribed, a meeting of the
stockholders was held in New York City, in October, 1863, at which a
Board of Directors were to be elected,--a strange situation confronted
them, there being no man or set of men who were able to assume
control, although there were no lack of cliques who were desirous of
doing so, but these were largely irresponsible parties either lacking
in the necessary capital or not command the confidence of those who
did have it.
Something had to be done, and accordingly thirty men of more or less
prominence were elected to the position of directors, some of them
without their knowledge and some declined to serve. The Company was
accordingly organized October 30th, 1863. General John A. Dix, who was
elected President, had been a member of the Cabinet and later a
general in the United States Army, was a man who was universally
respected. The position was not of his seeking, and he gave notice he
had neither the time nor inclination to give active attention to its
affairs and the burden was practically assumed by the Vice-President
Elect, Thomas C. Durant. But two hundred and eighteen thousand dollars
the ten dollars per share called for by the Charter on two thousand
one hundred and eighty shares had been paid in and further funds were
not obtainable. Agitation was kept up and due representation made to
Congress, resulting in an amendment to the Charter being passed. After
the passage of the Supplementary Act in 1864 made necessary by the
failure to secure funds, it was still regarded as an unpromising
investment for the reason that investors could not feel any assurance
that they or their friends would have any voice in the management of
affairs or control of the Company. The capital of the Company was
fixed by the supplementary act at one hundred million dollars, (one
million shares at one hundred dollars each), consequently any interest
holding over fifty millions of the stock would be paramount and vice
versa. Until it was determined who would be in control, investors
fought shy. Under the Charter the subscription books must remain open
until the completion of the road, making it possible for outsiders to
wait until the road was near completion and then step in and by large
subscriptions acquire control.
As there were some funds available, a contract was entered into in
May, 1864, with H. M. Hoxie, to build the first hundred miles. This
contract was extended to cover from Omaha to the hundredth Meridian,
two hundred and forty-seven miles, on October 3rd, 1864, and on the
7th of the same month assigned to a company (simple partnership)
composed of Vice-President Durant and six others, all stockholders of
the Railroad Company. The capital of this partnership consisted of
four hundred thousand dollars (but a small percentage of the amount
necessary to carry out the Hoxie contract). The members of the firm
were unable or else unwilling, owing to the immense personal liability
involved, to put up further funds and some other action was necessary.
Durant and his friends accordingly purchased the Charter of a
Pennsylvania Corporation of limited liability and elastic powers,
known as the "Pennsylvania Fiscal Agency" changed its name by
legislative enactment to the Credit Mobilier of America. Subscribers
of the two million one hundred and eighty thousand dollars of Union
Pacific Stock were given the option of either exchanging Union Pacific
stock for that of the Credit Mobilier, sell their Union Pacific stock
to the Credit Mobilier, or turn it back to the Union Pacific Railroad
Company and have it redeemed. By this the stockholders of the Credit
Mobilier became the sole holders of the Union Pacific stock.
The Hoxie contract was reassigned to the Credit Mobilier who duly
completed the work, finishing the line to the point specified October
5th, 1866. Owing to their inability to raise funds, it seemed as
though the two companies, Union Pacific and Credit Mobilier, would
fall down. There was no sale for the First Mortgage bonds of the
railroad, the Government bonds were but little better, being worth but
sixty-five cents on the dollar. Durant and his friends were not men of
wealth nor did they command the confidence of wealthy men. The Company
had become greatly involved and was compelled to sell some of its
rolling stock to pay pressing debts. It was at this junction that
Oakes Ames entered the field, being persuaded, it is said, to do so by
President Lincoln who desired to enlist his well-known executive
ability and capital in the enterprise. Through the efforts of himself
and associates the paid up subscriptions were increased to two and a
half million dollars.
The original or first contract made with Hoxie for a hundred miles had
been extended to cover up to the hundredth Meridian, and the line to
that point, two hundred and forty-seven miles from Omaha, was
completed October 5th, 1866.
The second contract made was with a Mr. Boomer for one hundred and
fifty-three and thirty-five hundredths miles from the hundredth
Meridian west, at the rate of nineteen thousand five hundred dollars
per mile for that part of the distance East of the North Platte River
and twenty thousand dollars per mile west thereof. Bridges, station
buildings, and equipment to be additional. This contract was also
assigned to the Credit Mobilier. On this, fifty-eight miles were
completed when dissensions arose, occasioned by financial stringency
among the stockholders of the Credit Mobilier. Vice-President Durant
going into court, compelled suspension of action on the third
contract, made March 1st, 1867, with one J. M. Williams who had
assigned it to the Credit Mobilier. This covered two hundred and
sixty-six and fifty-two hundredths miles, commencing at the hundredth
Meridian at the rate of fifty thousand dollars per mile. For a time
matters were at a standstill, injunctions preventing the completion of
present or the making of new contracts.
Finally a compromise was affected between the two factions, Durant and
his friends on the one side, and the Ames interests on the other.
Under this, a fourth contract was made with Oakes Ames for which he
was to receive from forty-two thousand to ninety-six thousand dollars
per mile or forty-seven million nine hundred and fifteen thousand
dollars for six hundred and sixty-seven miles, commencing at the
hundredth Meridian. This it is supposed is the largest contract ever
made by one individual. It was later transferred by Oakes Ames to
seven trustees acting for the Credit Mobilier, he and his brother
Oliver Ames being among the number. This last contract carried the
line to nine hundred and fourteen miles from Omaha.
The fifth contract was made with J. W. Davis for one hundred and
twenty-two miles at twenty-three million four hundred thousand
dollars, and was in turn assigned to the same seven trustees for
completion. In adjustment of accounts the Union Pacific Railroad
Company would turn over to the Credit Mobilier or the Trustees for the
Credit Mobilier in payment for the work as fast as it was completed
First Mortgage (Union Pacific Railroad) Bonds, Government Bonds, Union
Pacific Railroad Income Bonds and Union Pacific Railroad Stock, these
being sold or hypothecated by the trustees, furnished them the
necessary funds required to pay for the construction work.
As the Union Pacific Stock could only be sold for cash at par
according to act of Congress, notwithstanding it was only worth thirty
cents on the market, the Railroad Company would give their check to
the Credit Mobilier on construction account and this check could then
be used in payment of stock, making it a cash transaction.
In settlement of the several contracts, the Union Pacific Railroad
Company paid the Credit Mobilier:
Hoxie Contract Miles
Omaha to 100th Meridian 247 $12,974,416.24
Ames Contract
100th Meridian West 667 57,140,102.94
Davis Contract
To point five miles west of Ogden 125 23,431,768.10
______________
1039 $93,546,287.28
These figures represent stocks and bonds at par and deducting amount
of depreciation, would bring the actual cost of the Main Line Omaha to
Ogden to about seventy-three million dollars.
There were issued in payment for this construction, equipment, station
building, and the expense of the Company during the construction
period.
Government Bonds $ 27,236,512.00
First Mortgage Bonds 27,213,000.00
Income Bonds 9,355,000.00
Land Grant Bonds 9,224,000.00
Union Pacific Stock 36,000,000.00
_______________
$109,028,512.00
There were granted to the Union Pacific Railroad Company under its
Charter land grants of eleven million three hundred and nine thousand
eight hundred and forty-four acres. Up to December 31st, 1866, sales
of this land had brought in nineteen million ninety thousand six
hundred and seventy-two dollars and forty-two cents and unsold land
was then valued at two million three hundred and ninety five thousand
five hundred and seven dollars.
During the palmy days of the Credit Mobilier following the adjustment
of the differences with the Durant faction, thousands of dollars were
spent in advertising and placing the stock. Display advertisements
were inserted in all the prominent newspapers and paid agents located
in all the important cities. The result demonstrated the wisdom of the
expenses, as not only were large quantities of its stock sold but the
prices obtained for it were greatly advanced.
No sooner was the completion of the road assured than did antagonism
and hostility appear. For instance in 1867 a government inspector
appointed for the purpose of examining and accepting completed
sections of the road, refused to do so, until he received "his fee"
(?) which he put at twenty-five thousand dollars, he being in no way
entitled to anything from the Company. By his refusal he tied up the
issue of the Government bonds, seriously affecting the credit of the
Company at a critical time.
In Washington the lobbyists were demanding blackmail with threats of
organized hostility. Speculators in Well Street were a unit in bearing
the stock and in attacking the credit of the Company.
The stock of the Credit Mobilier up to the assignment by Ames to the
seven trustees, had not met with anything like a ready sale. For
reasons of policy, some of this was assigned to members of Congress,
Senators, and other public men. Some being paid for, others had it
carried on their account. After the crisis had passed, the value of
the stock rapidly appreciated and in the forthcoming political
campaign the subornation of Congress in the interest of the Credit
Mobilier by the use of this stock was made an issue and occasioned a
great outcry. The accusation was thoroughly investigated by two
committees during the next session and it was clearly proven to have
been unfounded, so far as members of Congress having received the
stock as bribes, it being demonstrated that the Company had no further
favors to ask from Congress and that the members receiving it had paid
the market value therefor. Notwithstanding, Oakes Ames was called to
the bar of the House and severely censured for having sold it to them.
The facts were, popular clamor demanded a scapegoat and Ames was
selected. This, and the anxiety and strain of the load he had been
carrying proved too much for him and he died May 8th, 1873. After his
death the voice of calumny silenced, his work and character received
the recognition it so well deserved.
The cost of material used in the construction of the road was
enormous, thus the ties brought from the East ran as high as two
dollars and fifty cents laid down in Omaha. The rails for the first
four hundred and forty miles one hundred and thirty-five dollars per
ton. This was before railroad connection was established between
Council Bluffs and the East. After that the price got down to
ninety-seven dollars and fifty cents per ton.
The pay of laborers ran from two dollars and twenty-five cents to
three dollars and fifty cents per day. Train men two hundred dollars
per month for conductors, one hundred and twenty-five dollars for
brakemen, two hundred dollars to two hundred and fifty dollars for
engineers, and one hundred and fifty dollars to one hundred and
seventy-five dollars for firemen. Telegraph operators eighty dollars
to a hundred dollars.
At times the Company (Credit Mobilier) was paying as high as five
hundred thousand dollars per month interest. And in fact it was
claimed by several of the directors that the paramount reason for the
haste displayed in building the road was not so much the competition
with the Central Pacific as it was to get rid of the enormous interest
charges they were paying and which they would cut off upon the road
being accepted by the Government and the consequent receipt of
Government Bonds.