The federal government in 1864–1868 had authorized and chartered the “Union Pacific Railroad,” with $100,000,000 capital, to complete a transcontinental line west from the Missouri River to the Pacific Coast. The federal government offered to assist the railroad with a loan of $16,000 to $48,000 per mile, according to location, for a total of more than $60,000,000 in all, and a land grant of 20,000,000 acres, worth $50,000,000 to $100,000,000. The offer initially attracted no subscribers for financing, as the conditions were daunting. The railroad would have to be built for 1,750 miles through desert and mountain, which would mean extremely high freight costs for supplies. In addition there was the likely risk of armed conflict with hostile tribes of Indians, who occupied many territories in the interior, and no probable early business to pay dividends.
George Francis Train and Thomas C. Durant, a vice president of the Union Pacific Railroad, formed the Crédit Mobilier in 1864. The original company, Pennsylvania Fiscal Agency, was a loan and contract company chartered in 1859. The creation of Crédit Mobilier of America was a deliberate attempt to falsely present to the Government of the United States and to the general public the appearance that a corporate enterprise (independent of the Union Pacific Railroad and its principal officers) had been impartially chosen by the Union Pacific Railroad’s officers and directors to be the principal construction contractor and construction management firm for the Union Pacific Railroad project. It was created by the officers of the Union Pacific to shield the companies’ shareholders and management from the then common charge that they were using the construction phase of the Union Pacific project (as opposed to the operating phase of carrying passengers and freight), to line their pockets in excess profits. They believed that profits could not be generated from the operation of the railroad. So, they created a sham company to charge the U.S. Government extortionate fees and expenses during construction of the line.
I swear, sometime I think I live in the stupid country on Earth.