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Summary

How two of America's greatest authors took on the Central Railroad monopoly The notorious Central Pacific Railroad riveted the attention of two great American writers: Ambrose Bierce and Frank Norris. In The Great American Railroad War,Drabelle tells a classic story of corporate greed vs. the power of the pen. The Central Pacific Railroad accepted US Government loans; but, when the loans fell due, the last surviving founder of the railroad avoided repayment. Bierce, at the behest of his boss William Randolph Hearst, swung into action writing over sixty stinging articles that became a signal achievement in American journalism. Later, Norris focused the first volume of his trilogy, The Octopus,on the freight cars of a thinly disguised version of the Central Pacific. The Great American Railroad War is a lively chapter of US history pitting two of America's greatest writers against one of A merica's most powerful corporations.

Author Biography

DENNIS DRABELLE is author of Mile-High Fever. He has written for multiple publications and is currently a contributing editor and a mysteries editor for The Washington Post Book World. In 1996 he won the National Book Critics Circle’s award for excellence in reviewing. He lives in Washington, D.C.

one

Working on the Railroad

Trains chuffed into the world in the 1820s and ’30s, bridging physical and temporal chasms that had held humans back for millennia. The historian Walter A. McDougall has described the upheaval wrought by this revolutionary technology (with supplemental help from the telegraph): “When [Andrew] Jackson entered the White House in 1829, people, goods, and information—even in the most advanced countries—could not travel overland any faster than they did in the time of Julius Caesar. Then all concepts of space, time, and volume exploded.” In the following two decades, chain reactions to the explosion rippled through the Eastern, Southern, and Central United States. By the 1850s, almost half of the world’s railroad tracks rested on American soil.
Most of that crisscrossed soil, however, lay east of the Mississippi. As the forty-niners could testify, a trip to the West Coast was still circuitous in the extreme: typically by boat from an Eastern port to the Isthmus of Panama, across that sweltering neck of land by whatever means the traveler could afford, and then by boat again to San Francisco. (For inanimate cargo, the most economical way was even longer: around Cape Horn, at the southern tip of South America.) The solution was plain to see. The whole United States should be tied together by rails.
In addition to stimulating trade, both domestic and international (beyond California shimmered the markets of the Orient), a transcontinental line would round out the process of nation building. To leave the vast American midsection uncrossed by the most efficient mode of transportation yet devised, while the alluring West Coast stayed out of reach except via long, arduous, and costly journeys—to stagnate in this way would be to betray the great, ongoing enterprise of territorial acquisition and conquest. Why, the country’s very name seemed to cry out for the project: We must be not merely adjacent, but united. As for the work itself, annihilating distance (a catchphrase of the day) was just the sort of challenge for a people who considered themselves blessed with boundless energy and ingenuity.
By midcentury, railroad building had become not just a mission but a mania. Looking back from the vantage point of the early 1900s, Henry Adams, scion of U.S. presidents but brother of a railroad president, had this to say about the task:
[it was] so big as to need the energies of a generation, for it required all the new machinery to be created—capital, banks, mines, furnaces, shops, power-houses, technical knowledge, mechanical population, together with a steady remodelling of social and political habits, ideas and institutions to fit the new scale and suit the new conditions. The generation between 1865 and 1895 was already mortgaged to the railways, and no one knew it better than the generation itself.
Adams neglected to add, however, that before it could embark on all this remodeling and mortgaging, the railroad generation had to find start-up capital. But the transcontinental job in particular was so massive and risky—laying tracks and constructing bridges, trestles, culverts, tunnels, snowsheds, and depots over almost eighteen hundred miles of sparsely settled plains, deserts, and mountains, while often under the hostile gaze of Native Americans about to be dispossessed—that private investors tended to shy away from it. Hence the near universal opinion held by people of the time: The federal government would have to step in, either taking the initiative itself or giving ample aid to the private citizens who raised their hands to do so.
That much was clear. The railroad’s destination, however, was not so manifest. Northerners favored a northern route, from St. Louis or Omaha to somewhere on the West Coast. Southerners advocated a southern route. Behind both preferences stood an ulterior motive: to shape the future of slavery. Northerners hoped to curb the peculiar institution by running the transcontinental line through territory where slavery was unlikely to be welcomed; Southerners wanted to do just the opposite. Jefferson Davis, in his presecession capacity as President Franklin Pierce’s secretary of war, ordered a thorough investigation, complete with surveys of five distinct routes. The fieldwork culminated in a report submitted to Congress in 1855 and later published in thirteen quarto volumes. Naturally, it opted for a southern route. (Davis’s imprimatur wasn’t the only thing the southern option had going for it. Among justifications cited for a major land purchase two years earlier had been the Gadsden strip’s potential tie-in with a southern right of way.) While the report assembled scads of information and spurred the growth of local lines, it failed to move Congress to act. A sectional stalemate had developed. It persisted until the outbreak of the Civil War ensured that the Southern Express would not be leaving the station.
By then a visionary named Theodore Judah was lending his considerable talents to planning the project’s western leg. The Connecticut-born son of an Episcopal clergyman, Judah had studied engineering at the upstate New York school that has since evolved into Rensselaer Polytechnic Institute. But after the death of his father when the boy was thirteen, his formal education ended, and he went to work for the Schenectady and Troy Railroad. He leapfrogged from project to project and firm to firm, rising so rapidly that while Jefferson Davis’s crews were in the field compiling their report, Judah, still in his twenties, was put in charge of a daunting task: threading a railroad through the gorge of the Niagara River. He did so well at that and other assignments that in 1854 he was tapped to go west and help launch the first California railroad, the Sacramento Valley. Already, however, he was daydreaming of a transcontinental line. The necessity for him and his wife, Anna, to reach California the old, halting way (in their case, overland through Nicaragua to reach the Pacific) could only have whetted his appetite.
Judah’s Eastern know-how proved adaptable to Western conditions, and on the subject of a continent-spanning railroad he became a zealot, called “Crazy Judah” behind his back. To those with the patience to hear him out, though, he exhibited an impressive mastery of facts and figures. He might be a bit dewy-eyed—in an 1857 pamphlet printed at his own expense, he called for “a people’s railroad … not a stupendous speculation for a few to enrich themselves with … [but] a clean thing, built and owned by the people, for its actual cost and no more”—but he had an unrivaled knowledge of what the project would entail. He was also adept with the levers of power. In 1859, after traveling to Washington to lobby Congress on behalf of his pet cause, he wangled an office in the heart of the Capitol—the old vice president’s room, no less—where he set up maps, charts, and sketches (by Anna) in what became known as the Pacific Railroad Museum. A bill to his liking was introduced, but continued bickering kept it from going anywhere.
On returning to California, Judah set out to remedy his plan’s chief defect: the lack of a specific, practicable route, especially over its biggest obstacle, the Sierra Nevada, whose granite peaks loomed for hundreds of miles on a north-south axis. Everywhere he looked, the Sierra refused to be overcome in one push; behind each front range lay a valley and then a second thrust of peaks. But Judah got a lucky break in the form of a tip from Daniel W. “Doc” Strong, a druggist in the foothills town of Dutch Flat: Donner Pass, not far from the site of an infamous tragedy in 1847, offered a much-desired one-shot ascent—after which it was downhill all the way to Utah Territory (to which the future state of Nevada then belonged). Not only that, but the summit stood at a “mere” seven thousand or so feet, and the upgrade never exceeded a manageable hundred feet per mile.
Now that he had a feasible plan, Judah thought, rounding up the financing would be a snap. He hoped to enlist a host of small investors—would-be plutocrats need not apply. He gave the venture a name, the Central Pacific Railroad Company of California, and went proselytizing. He had some success in Sacramento, but very little in much wealthier San Francisco, where the establishment viewed the railroad as a threat to existing modes of transportation: ships, toll roads, wagons, stagecoaches, even lesser railroads. (Way up in Alaska, the Sitka Ice Company opposed the project for an equally parochial reason. Ice freighted to the Bay Area from the Sierra would undercut the price of the Alaskan product, which had to make a long north-to-south journey in the holds of ships.) Back to Sacramento went Judah, bound for a rendezvous with four men who were to prove themselves indifferent, if not outright hostile, to his vision of building and running a “clean thing.”
To appreciate the temper of the time which allowed—even encouraged—Collis Huntington, Mark Hopkins, Leland Stanford, and Charles Crocker to pile up whopping fortunes at public expense, it might help to know how a bellwether of the era characterized the economic order. Henry Ward Beecher, a man of the cloth famous for his charisma and abolitionist sermons (and also for his adultery), traced the Gilded Age economic-might-equals-right ethic to a divine origin. In an 1877 article commenting on a strike, Beecher asked rhetorically:
Are the working men of the world oppressed? Yes, undoubtedly, by governments, by rich men, and by the educated classes—not because of selfishness and injustice but because it must be so. Only in the household is it possible for strength and knowledge and power not to oppress weakness and ignorance and helplessness.
Not only that, Beecher went on, but the Christian God was a laissez-faire deity, who “gave me my right to liberty when he gave me myself; and the business of government is to see that nobody takes it away from me unjustly—that is all.” (In that case, a sharp observer might have wondered, wasn’t the government overreaching when it extended a helping hand to private enterprise? Any such objection, however, would probably have been dismissed as pettifoggery.) The human hierarchy, Beecher insisted, reflected “natural law”—a term employed, then as now, to close off debate. It means little more than “the law that comes naturally to people like me.” On another occasion, Beecher gave a sermon in which he said, “God has intended the great to be great, and the little to be little.” (Beecher, incidentally, has a direct connection with the Central Pacific. In 1884, when the widowed Collis Huntington married for the second time, Beecher officiated.)
Four of the ruggedest individuals to flourish in this God-given, don’t-tread-on me world had migrated west around the time of the Gold Rush and quickly noticed something to which most of their fellow fortune hunters were blind: Prospecting was a hit-or-miss occupation, but selling supplies was a sure thing. The most forceful member of the group, Collis Potter Huntington, was such a natural-born entrepreneur that, en route in 1849, he’d made lucrative use of his purgatory on the Isthmus of Panama. While most travelers cooled their heels and fanned their torsos as they waited for passage on a ship to California, Huntington went into action. With money saved by crossing the twenty-four-mile-wide isthmus on foot, the Connecticut native bought items from local suppliers and sold them to his fellow argonauts. After six weeks of dealing, he boarded a boat to San Francisco with $3,000 more in his pockets than when he’d arrived.
Settling in Sacramento, Huntington took advantage of that town’s proximity to the Gold Rush by trading in anything the forty-niners might need or want, from grub to blasting powder. Soon, however, he specialized, going partners in a hardware store with Mark Hopkins, an analytical introvert from New York State by way of Michigan who was a whiz at bookkeeping and a scrawny physical contrast to the ursine Huntington.
A decade later, in November of 1860, Judah made a presentation on his favorite subject at a Sacramento hotel. Among his listeners were Huntington and Hopkins; Leland Stanford, a portly, glad-handing wholesale grocer; and Charles Crocker, a hardworking but tactless dry goods merchant—also corpulent. (Assemble the Big Four for a photo, and you would have had to warn the three bossy bears not to crowd out the retiring string bean.) Stanford had been born near Albany, New York, and Crocker in Troy, meaning that the quartet—and Judah, too—all hailed from basically the same part of the world. They had in common, too, their opposition to slavery and loyalty to the Republican Party, which for Huntington included a fascination with backstage political maneuvering and for Stanford a yen to step out front and be a player. (Crocker had just been elected to the state assembly, but just what he might be keen on, or good at, was as yet unknown.) Three of the four were roughly the same age—late thirties—with Hopkins a decade older. Stanford had made a bundle as a mine owner, and the other three had prospered as storekeepers. But none of them was cash rich (Huntington later estimated that he was worth about $200,000 in 1862—a lot of money, to be sure, but most of it was tied up in property); nor, as they later admitted, did they know beans about railroading. Yet they were all gifted with the same ability: to make the most of such opportunities as came their way.
Judah had learned something from his rebuff in San Francisco: Tailor your message to your audience. The sky might be the limit for this project, but why look heavenward when you can point to something much closer and almost as big—the Comstock Lode?
Wedged inside a mountain in the western elbow of Nevada, the lode was yielding great quantities of silver and gold. The rush had started in the late 1850s, when word got out that the “blue stuff” being discarded by scattered gold prospectors as they worked the gulches of Sun Mountain (later Mt. Davidson) was actually silver-bearing ore. Hopefuls by the thousands surged east over the Sierra by stagecoach or on foot, seeking a replay of 1849, albeit one with more staying power. Which is to say that many forty-niners had been victimized by a kind of geological trick. After a year or two of strikes made by small-scale operators using minimal equipment—a pick, a pan, in some cases a rocker—the gold in the California hills had transferred its favors to the well-off. With the easy pickings exhausted, the remaining ore was to be found imbedded in rock, from which it had to be blasted loose by pressurized water shot through canvas hoses. This was hydraulic mining, and it required far more capital than the average roughneck could scrape up. The “little guy” was soon out of his depth in California gold country; but Virginia City, the town that sprang up directly above the Comstock mines, offered a second chance.
Unfortunately, that chance, too, was to pan out for only a few. Comstock silver, it turned out, was even harder to separate from the matrix than second-stage California gold. After being chiseled and hauled out of deep mines, ore-bearing Comstock rock had to be carted to mills: factory-like buildings where it was crushed by steam-driven stamps and subjected to complex chemical processes that ultimately yielded pure silver. All this took capital and organization and a large work force—along with materiel and tools for building and servicing the machines, as well as supplies for booming Virginia City itself. The Comstock frenzy ultimately disappointed almost everyone except a small group of owners and investors (most of them represented by the Bank of California); speculators in mining stocks and especially their San Francisco brokers; and those who had settled into the unglamorous niche of tradesman, including, in the early days, Huntington, Hopkins, Stanford, and Crocker.
That Comstock collision between revived hopes and harsh reality still lay in the future, however. As Judah made his pitch, the wave of mill building was just forming, and would-be prospectors were still converging on Nevada (recently split off from Utah as a territory unto itself), unaware that their lot would almost surely be not to strike it rich but rather to work for someone else at $4 a day. There was no sign of a letup in the influx of either machinery or men, and that night in Sacramento Judah mentioned his railroad’s potential as a link in the supply line to Comstock country. Whether and how the new enterprise would plug into a transcontinental route need not be decided now because its first leg would be a bully investment in its own right.
Judah knew railroads, and he seemed well-versed in Washington politics. Several attendees at that first gathering bought small amounts of stock in his fledgling enterprise; Huntington, however, hung back. But he did invite Judah to make a follow-up pitch, which took place the next evening, probably in a spare room above the Huntington-Hopkins store. This time the engineer refined an argument that seems to have tipped the balance: A wagon road running from the Comstock mines to the railroad right-of-way could be built almost immediately, and the tolls collected would reward investors whether the transcontinental phase of the project succeeded or not. The more Huntington mulled it over, the more he warmed to the idea, and it didn’t hurt that Abraham Lincoln, the Illinoisan who had just won election as the first Republican president of the United States, was a former railroad lawyer, on record as supporting a transcontinental line. But Huntington came around on his own terms. He urged Judah to concentrate less on rounding up small subscribers and more on lining up a reliable coterie of hands-on investors who would stick with him through adversity. Judah was amenable. His idea had been rattling around inside his head too long, and he was becoming less picky about the means to his end. With contributions from Huntington and a few others, he was ready to take the first step—a field survey. As Anna Judah commented, “It’s about time somebody else helped.”
In a foretaste of the epic toil to come, the survey proved quite challenging. In June of 1861, Judah wrote to Anna, describing a day’s work that beat anything he’d supervised in the Niagara River Gorge. Partway up the Sierra, his men were strung out on a slope he called “the worst place I ever saw”:
the river is 1,200 feet below us, and the top of [the] ridge 700 feet above, in places so steep that if you once slip it is all over. To day the boys carried out ropes, the only way for them to get along being to fasten one end of a long rope around their waists, with a man above holding on with a turn around a tree.… They make only a mile all day.
As his party inched forward, Judah tried to rationalize away signs (such as the bent angles of tree trunks) that winter snows might bury the right of way. Finishing up in July, he reported to his backers that getting the railroad to the Nevada border would entail carving out eighteen tunnels and cost an average of $88,000 per mile, for a staggering total of $12 million.
Back East, the Civil War had broken out in earnest (and, in the early going, not much to the liking of the overconfident Union). With Congress bereft of Southerners, the way was clear for passage of a Pacific railroad bill, an idea that seemed more attractive than ever thanks to the new importance of Nevada. The more accessible the territory’s silver could be made, the stronger the Union would look, especially when it came to obtaining war loans from European bankers. (In recognition of its economic prowess and solidly pro-Union constituency, Nevada was on its way to premature statehood, which it received in 1864.) The Central Pacific incorporated, with a directorate composed of Stanford as president, Huntington as vice president, Hopkins as treasurer, a Sacramento jeweler named James W. Bailey as secretary, Judah as chief engineer, and Crocker as a member of the board. Stanford had run for governor of California once before and lost; he now threw his hat in the ring again, and his chances looked good. It was a propitious time for Judah to consolidate what he had learned from the survey, return to Washington, and make his best case to Congress.
* * *
Backed by so many prominent California Republicans, Judah was soon better-placed in Washington than ever. Not only did he reopen the Pacific Railroad Museum at its old stand in the Capitol, but he had himself appointed clerk to the House subcommittee with jurisdiction over Pacific railroad legislation, secretary to the full House committee, and secretary to the Senate committee—an insider’s trifecta over which twenty-first-century lobbyists can only drool. A California congressman marveled at Judah’s winning personality: “His manners were so gentle and insinuating, his conversation on the subject so entertaining, that few resisted his appeals.” Those appeals may well have been seasoned with boodle. Judah had brought along Central Pacific stock with a face value of $100,000, though actually worth far less. We don’t know for sure whether he gave some of it away in an attempt to sway votes, but he wasn’t a choirboy anymore. (Even if he did compromise his integrity in this case, however, he wasn’t ready to go along with any old thing the Big Four proposed; it wasn’t long before they had pushed him too far.) Out in California, the election results were in, and the president of the Central Pacific and the governor of the state were about to be one and the same. Some observers looked askance at this welter of power sharing, insider privileges, and bribes—the label “Railroad Congressmen” was already being applied to certain not-so-esteemed gentlemen on Capitol Hill—but others argued that the main thing was to get tracks on the ground, never mind the niceties of political morality. One of the bill’s supporters in the House argued that “the Government must come forward with a liberal hand, or the enterprise must be abandoned forever.”
Even with Judah maneuvering as a Congressional insider, it took the better part of a year for a railroad bill to wriggle through the legislative process. The one that emerged, in 1862, treated the Central Pacific as rather an afterthought. Entitled “An Act to Aid in the Construction of a Railroad and Telegraph Line from the Missouri River to the Pacific Ocean, and to Secure to the Government the Use of the Same for Postal, Military, and Other Purposes,” the law chartered the Union Pacific Company, which presumably would take the lead in building the new railroad westward (it had a potential competitor, however: the Leavenworth, Pawnee & Western, which ultimately became the Union Pacific’s Eastern Division). The starting point would be either Omaha, Nebraska Territory, or Council Bluffs, Iowa (St. Louis had fallen out of contention because of its proximity to the war zone). The choice was left to the president of the United States, and Omaha won out. As an already existing entity, the Central Pacific escaped the detailed oversight to which the law subjected the Union Pacific, and besides, the Central Pacific’s share of the project was supposed to be limited to the stretch between Sacramento and the Nevada border. A good indication of how Easterners regarded the line’s western branch can be gleaned from a dismissive remark by Pennsylvania Congressman Thaddeus Stevens: “The Western soil is but a platform on which to lay the rails to transport the wealth of the furthest Indies to Philadelphia, Boston and Portland.”
Federal aid to the companies was to take two forms: land and bonds. For every mile of track, the railroads would receive 6,400 acres from the public domain, in sections alternating from one side of the right of way to the other. These donations had precedents. Many Eastern railroads had received similar land grants, the idea being for the recipient to divide them up and sell tracts to settlers, thereby dotting the landscape with farms and businesses to help make the railroad self-sustaining. The bonds, however, were something new. The United States would tender them as a kind of loan to the Central Pacific (and the Union Pacific), which would turn around and sell them to investors. The bonds would be issued in $1,000 certificates, and the amount periodically handed over by the government would vary with the degree of difficulty: $16,000 for each mile built across flat or gently rolling land, $32,000 per mile in high plains, and $48,000 in the mountains. Each company could sell these bonds as if they were its own instruments, using the revenues to finance construction, with the federal government paying the bondholders 6 percent interest semiannually. Each company was also entitled to issue and sell its own bonds, but the government’s lien had priority, meaning that, in the event of default, holders of government bonds would come ahead of other creditors.
After thirty years, the bill would come due. The companies would owe the government both principal and interest (simple interest, not compound) on the borrowed bonds, minus the value of certain services rendered to the government, such as toting the mail, transmitting official telegrams, and ferrying federal troops. To help the railroads meet their obligations, the Act called for “at least five per-centum of the net earnings of said road [to] be annually applied to the payment thereof.” In 1875, however, the U.S. Supreme Court found this wording too ambiguous to support the government’s contention that the specified 5 percent must be handed over periodically. Rather, the Court decided unanimously, the railroads were free to withhold all payments until the bonds had matured. (This postponement helped build momentum for the epic struggle over the so-called funding bill in the 1890s: Having gotten away with paying back nothing for so long, the railroads had fallen in love with the status quo, while the public was eager for the government to finally start getting its investment back.) In both cases—the land and the bonds—delivery was conditional. The company had to lay a certain number of miles of track and meet certain construction standards before the subsidies would flow. The United States was trying to make sure of getting a quality product.
On paper, the deal looked good for the government. All it supplied was land (of which it had plenty), credit, and the promise to make those interest payments, in return for an eventual recapture of principal and interest. True, some risk was involved, but who better than Uncle Sam to take over and finish the project if the private firms should bungle the job? But the deal looked even better for the entrepreneurs. They had three decades in which to make money by selling bonds and charging for the goods and passengers riding their trains—and, of course, they would each end up owning a railroad.
The law was intricate, to be sure, but at least it was finally on the books. After President Lincoln signed it on July 1, 1862, a jubilant Judah wired his Sacramento backers: “WE HAVE DRAWN THE ELEPHANT. NOW LET US SEE IF WE CAN HARNESS HIM UP.”
Congressmen Stevens had added to the difficulty of elephant harnessing by inserting a burdensome clause into the new law: The builders of the Pacific railroad had to use American iron only. This proviso forced the companies to bid against their own government, which needed great quantities of iron (along with locomotives and all the other components of a railroad) for the war. Prices went up accordingly, Judah’s cost estimates and engineering decisions were looking dubious, and the Central Pacific’s bonds became a hard sell. Even after being discounted, sometimes to as low as 19 cents on the dollar, they weren’t moving.
Huntington went to New York on a daunting mission—to convince investors that the Central Pacific was a tolerable risk. After being turned down on Wall Street, he had the wit to approach an old supplier of his store: Ames & Sons, shovel manufacturers whose wares Huntington had peddled to California miners—and with which he had a spotless credit record. To jump-start the railroad, Huntington asked the Ameses for a $200,000 loan. Oliver Ames agreed (think of all the shovels the project would need!), but only after extracting personal guarantees from Huntington and his partners that the interest would be paid. These and other pledges—conjured almost out of thin air thanks to the arm-twisting and self-confidence that soon became Huntington trademarks—enabled him to start buying rails and locomotives and shipping them west via Cape Horn. His success also anointed him as first among equals in the Big Four, who were already conferring separately from the board that supposedly ran the Central Pacific (the insiders’ term for themselves was “the Associates”). Out West, however, the Central Pacific was still a cash-strapped vision for which ground had yet to be broken. Its prospects improved when Stanford stepped in, using his clout as governor to persuade several counties and the state itself to invest in and subsidize the line. In San Francisco, the tactics included vote buying to sway the outcome of a referendum on whether the city should invest. Stanford’s brother Philip was reported to have gone around distributing $5 gold pieces so wantonly that voters mobbed his buggy. The election went the railroad’s way—but at a hidden cost. Resentful San Franciscans had it in for the Central Pacific almost from its inception.
The toll road, meanwhile—the Dutch Flat and Donner Lake Wagon Road, to give it its full name—was coming along swimmingly. This contrast between the slowly stirring railroad and the burgeoning turnpike gave rise to rumors that all the Associates really cared about was hogging transportation routes to and from the Nevada mines. In this reading, they would lay just enough rails to make the most of their wagon road and then give up. “The Dutch Flat Swindle,” detractors were calling it—notably the Alta California, a newspaper published in San Francisco. This disdain found some support in the Big Four’s history. The shopkeepers had proved their mettle as hunters and hagglers—experts at getting hold of what the customer wanted and selling it to him promptly and heavily marked-up. Nothing in their pasts suggested they might have the vision and stamina to construct a railroad. (As it turned out, the naysayers misjudged the Big Four. Their own greatest leap of imagination was not to see themselves as builders of a new railroad, but as owners of a mature one.) The Associates fought back, with Stanford using his gubernatorial clout to champion the railroad as best he could—until his two-year term ran out (he was not nominated for a second one). His actions helped ensure that the railroad came into being under a cloud of cynicism that was to hover over it throughout its existence.
Judah was beginning to think he’d thrown in his lot with the wrong fellows. His misgivings deepened as the construction phase got underway. “I knew how to manage men,” Charles Crocker asserted. “I had worked them in ore-beds, in the coal-pits, and … had worked myself along with them.” On the basis of these flimsy credentials, his brethren in the Central Pacific hierarchy awarded the contract to build one of the railroad’s first stretches to Charles Crocker & Company, a new entity of which its namesake took charge after resigning from the Central Pacific board to avoid charges of conflict of interest. (This noble gesture was vitiated, however, by the identity of his replacement on the board: his brother.) Crocker later admitted there was no “& Company.” There was, however, a potential for sizable profits, along with a tacit commitment to share these with the other Associates.
Since this self-contracting page in the Central Pacific’s playbook was soon to be copied by other robber barons—including, most scandalously, the Central Pacific’s rival the Union Pacific, which created and funneled contracts to a construction firm called Crédit Mobilier—we had better look more closely at its genesis. The desire to control every aspect of the transcontinental project undoubtedly played a part in the Big Four’s thinking, but in his magisterial Empire Express: Building the First Transcontinental Railroad, David Haward Bain offers another theory, less obvious but quite sensible. Undercapitalization was a common predicament among fledgling railroads, and a standard remedy had developed: The cash-poor railroad would pay the construction company partly in railroad stock. This ploy held a potential danger, though. The construction firm might go out and buy more shares of stock, eventually accumulating enough to take over the railroad. That very thing had happened to the Sacramento Valley Railroad, and to keep it from happening to them the Big Four hit upon the idea of contracting with themselves.
Judah felt, however, that the arrangement offered Crocker too many temptations: to pad costs, skimp on quality, and indulge in bookkeeping sleight of hand. (All these hunches were eventually borne out, though Judah didn’t live to see the damage.) But the energized Crocker waxed eloquent at the groundbreaking ceremony, when it finally took place in Sacramento, on January 8, 1863. “All that I have,” he said, “—all of my own strength, intellect and energy—are devoted to the building of this section which I have undertaken.” How effective an “all” this might be was still anybody’s guess.
Judah was often out of the loop now because he had to be up in the mountains so much of the time, redoing his preliminary surveys. His animosity toward the other board members increased as they made decisions without consulting him. One in particular galled him: a decree that all board members share equally in the costs of building the railroad—and pay up immediately. The trouble was that Judah couldn’t command the kind of the assets that his brethren did. The mutual animosity came out in the open, as Judah acknowledged in a letter to that Sierra pathfinder, Doc Strong.
I had a blowout about two weeks ago and freed my mind, so much that I looked for instant decapitation. I called things by their right name and invited war; but counsel of peace prevailed and my head is still on; my hands are tied, however. We have no meetings of the board nowadays; except the regular monthly meeting, which, however, was not had this month; but there have been any quantity of private conferences to which I have not been invited.
In this fraught climate, another contentious issue arose—the three-tiered bond payments prescribed by the 1862 Act. Judah had his own idea as to where the Sierra Nevada range began (and thus where the top subsidy-rate of $48,000 per mile would kick in): in the foothills, which first revealed themselves in a lift of land twenty-two miles east of Sacramento. And even that, he thought, might be too generous a call. Some years back the California Supreme Court had ruled in a mining case that the range started thirty-one miles out. Neither of these spots suited the Associates. They were angling for a ruling that the mountains came into being a good deal closer to Sacramento, and Stanford, who was still governor at the time, thought he might be able to get it for them. After all, didn’t the state geologist report to him?
It was Crocker, however, who escorted that official on a field trip one day late in the winter of 1863 and, as Crocker recollected, “did not ask him to do anything except that I wished him to decide where true justice would place the western base of the Sierra Nevadas.” Note that wording: not where the Sierra actually began its majestic climb, but where in “true justice” it ought to. The geologist decided that as good a place as any for the birth of the range was Arcade Creek, a mere seven miles east of Sacramento, where the dark soil of the Central Valley touches the red soil of, arguably, the Sierra Nevada—never mind that the landscape, as a commentator wryly put it, is one that “a casual observer would not be likely to call mountainous.” Two federal surveyors approved the choice of mile seven, and in September Huntington sent a report to Washington, asking the secretary of the interior and President Lincoln to go along with The Sudden Sierra. Although the report bore the endorsements of that state geologist and those two federal surveyors, it lacked Judah’s—he’d been asked to sign on but had refused. (As an experienced engineer, he knew his topography; to have signed would have betrayed his self-image as a professional.) Historian John Hoyt Williams has calculated what this fiddling with the starting line meant to the Central Pacific: $480,000 more in government bonds than Judah would have awarded his own company and $768,000 more than the state supreme court would have permitted. Helping to pay for the first stretch of construction, these bonds were of crucial importance to the cash-poor company.” Not that the bonds would find their way into the Central Pacific’s coffers anytime soon. The United States was holding them back until the railroad hit the prescribed marks of progress and quality. But once the president accepted the new geography, as he did the following January, the Central Pacific’s prospects brightened considerably.
Stanford and his cronies had scored a coup. A mountain range had slid more than twenty miles west to enhance their financial position. (In Washington, the Big Four’s favorite California congressman joked about his successful lobbying of the president: “my pertinacity and Abraham’s faith moved mountains.”) Yet for all Judah’s dudgeon, a charitable analyst might not blame the Associates too severely for this move. Private investment still lagged, the Associates seemed to have bitten off more than they could chew, and weren’t those levels of payment in the 1862 law rather arbitrary, especially since it was obvious by now that not even the top rate of $48,000 per mile would suffice to pay for construction in the alpine High Sierra? The nation really did stand to benefit from faster, more reliable coast-to-coast transportation, and three experts had agreed that the mountains might be deemed to begin closer to town than previously supposed. Among the many sins committed by the Central Pacific, this one might be considered venial—not to mention a clever stroke on the part of Stanford and Crocker. On the other hand, Judah had to work with the Associates every day (or at least every day in which they let him know what they were doing), and he probably sensed that this lesser instance of cheating was a harbinger of greater ones to come. However you come out on the Case of the Moving Mountains, though, the Associates had served notice. In the coming scramble, they weren’t likely to miss a trick.
By now Judah, however, was fed up with them. He and fellow board member James Bailey tried to coax a San Francisco banker, Charles McLaughlin, into buying controlling interest in the Central Pacific. McLaughlin, who had also sunk money into another unbuilt California railroad, was tempted—until he learned that Huntington was willing to be bought out. “If old Huntington is going to sell out,” he explained, “I am not going in.” Whereupon Bailey himself sold out. In a rancorous meeting, Judah blasted the Associates for their ethical shortcomings, and they were sufficiently chastened to make a promise: Each would sell his share in the firm for $100,000 if any other director could raise the money. Either they were bluffing, or the railroad had become a hot potato that none of them wanted to hold. Judah and his wife left for the East, where he hoped to line up new-blood investors in what he still liked to think of as “his” railroad. He regarded transportation mogul Cornelius Vanderbilt as the man to see.
Sailing south, the Judahs passed a northbound vessel with a momentous cargo in its hold: the first locomotive destined for the Central Pacific. Farther on, however, Theodore Judah fell victim to one of the hazards of tropical travel—yellow fever. He hung on through the rest of the voyage, even managing to get off a note to Doc Strong. In it, Judah warned that if he failed in his mission to find a white knight with “experience and capital,” the Big Four would “rue the day they ever embarked in the Pacific Railroad.” Judah clung to life all the way to New York City, but by then he was beyond help. (Note the irony. Had the engineer been able to travel via the railroad he was trying to build, he would have skirted the fever zone.) Not only did his death on November 2, 1863, at age thirty-seven, leave the Associates stuck with carrying out a project toward which they had cooled. It also removed the main obstacle to a number of practices they were soon to adopt on a grand scale: lying, bribery, shoddy construction, looting of the federal treasury, and monopolization.

Copyright © 2012 by Dennis Drabelle

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Excerpts

one

Working on the Railroad

Trains chuffed into the world in the 1820s and ’30s, bridging physical and temporal chasms that had held humans back for millennia. The historian Walter A. McDougall has described the upheaval wrought by this revolutionary technology (with supplemental help from the telegraph): “When [Andrew] Jackson entered the White House in 1829, people, goods, and information—even in the most advanced countries—could not travel overland any faster than they did in the time of Julius Caesar. Then all concepts of space, time, and volume exploded.” In the following two decades, chain reactions to the explosion rippled through the Eastern, Southern, and Central United States. By the 1850s, almost half of the world’s railroad tracks rested on American soil.
Most of that crisscrossed soil, however, lay east of the Mississippi. As the forty-niners could testify, a trip to the West Coast was still circuitous in the extreme: typically by boat from an Eastern port to the Isthmus of Panama, across that sweltering neck of land by whatever means the traveler could afford, and then by boat again to San Francisco. (For inanimate cargo, the most economical way was even longer: around Cape Horn, at the southern tip of South America.) The solution was plain to see. The whole United States should be tied together by rails.
In addition to stimulating trade, both domestic and international (beyond California shimmered the markets of the Orient), a transcontinental line would round out the process of nation building. To leave the vast American midsection uncrossed by the most efficient mode of transportation yet devised, while the alluring West Coast stayed out of reach except via long, arduous, and costly journeys—to stagnate in this way would be to betray the great, ongoing enterprise of territorial acquisition and conquest. Why, the country’s very name seemed to cry out for the project: We must be not merely adjacent, but united. As for the work itself, annihilating distance (a catchphrase of the day) was just the sort of challenge for a people who considered themselves blessed with boundless energy and ingenuity.
By midcentury, railroad building had become not just a mission but a mania. Looking back from the vantage point of the early 1900s, Henry Adams, scion of U.S. presidents but brother of a railroad president, had this to say about the task:
[it was] so big as to need the energies of a generation, for it required all the new machinery to be created—capital, banks, mines, furnaces, shops, power-houses, technical knowledge, mechanical population, together with a steady remodelling of social and political habits, ideas and institutions to fit the new scale and suit the new conditions. The generation between 1865 and 1895 was already mortgaged to the railways, and no one knew it better than the generation itself.
Adams neglected to add, however, that before it could embark on all this remodeling and mortgaging, the railroad generation had to find start-up capital. But the transcontinental job in particular was so massive and risky—laying tracks and constructing bridges, trestles, culverts, tunnels, snowsheds, and depots over almost eighteen hundred miles of sparsely settled plains, deserts, and mountains, while often under the hostile gaze of Native Americans about to be dispossessed—that private investors tended to shy away from it. Hence the near universal opinion held by people of the time: The federal government would have to step in, either taking the initiative itself or giving ample aid to the private citizens who raised their hands to do so.
That much was clear. The railroad’s destination, however, was not so manifest. Northerners favored a northern route, from St. Louis or Omaha to somewhere on the West Coast. Southerners advocated a southern route. Behind both preferences stood an ulterior motive: to shape the future of slavery. Northerners hoped to curb the peculiar institution by running the transcontinental line through territory where slavery was unlikely to be welcomed; Southerners wanted to do just the opposite. Jefferson Davis, in his presecession capacity as President Franklin Pierce’s secretary of war, ordered a thorough investigation, complete with surveys of five distinct routes. The fieldwork culminated in a report submitted to Congress in 1855 and later published in thirteen quarto volumes. Naturally, it opted for a southern route. (Davis’s imprimatur wasn’t the only thing the southern option had going for it. Among justifications cited for a major land purchase two years earlier had been the Gadsden strip’s potential tie-in with a southern right of way.) While the report assembled scads of information and spurred the growth of local lines, it failed to move Congress to act. A sectional stalemate had developed. It persisted until the outbreak of the Civil War ensured that the Southern Express would not be leaving the station.
By then a visionary named Theodore Judah was lending his considerable talents to planning the project’s western leg. The Connecticut-born son of an Episcopal clergyman, Judah had studied engineering at the upstate New York school that has since evolved into Rensselaer Polytechnic Institute. But after the death of his father when the boy was thirteen, his formal education ended, and he went to work for the Schenectady and Troy Railroad. He leapfrogged from project to project and firm to firm, rising so rapidly that while Jefferson Davis’s crews were in the field compiling their report, Judah, still in his twenties, was put in charge of a daunting task: threading a railroad through the gorge of the Niagara River. He did so well at that and other assignments that in 1854 he was tapped to go west and help launch the first California railroad, the Sacramento Valley. Already, however, he was daydreaming of a transcontinental line. The necessity for him and his wife, Anna, to reach California the old, halting way (in their case, overland through Nicaragua to reach the Pacific) could only have whetted his appetite.
Judah’s Eastern know-how proved adaptable to Western conditions, and on the subject of a continent-spanning railroad he became a zealot, called “Crazy Judah” behind his back. To those with the patience to hear him out, though, he exhibited an impressive mastery of facts and figures. He might be a bit dewy-eyed—in an 1857 pamphlet printed at his own expense, he called for “a people’s railroad … not a stupendous speculation for a few to enrich themselves with … [but] a clean thing, built and owned by the people, for its actual cost and no more”—but he had an unrivaled knowledge of what the project would entail. He was also adept with the levers of power. In 1859, after traveling to Washington to lobby Congress on behalf of his pet cause, he wangled an office in the heart of the Capitol—the old vice president’s room, no less—where he set up maps, charts, and sketches (by Anna) in what became known as the Pacific Railroad Museum. A bill to his liking was introduced, but continued bickering kept it from going anywhere.
On returning to California, Judah set out to remedy his plan’s chief defect: the lack of a specific, practicable route, especially over its biggest obstacle, the Sierra Nevada, whose granite peaks loomed for hundreds of miles on a north-south axis. Everywhere he looked, the Sierra refused to be overcome in one push; behind each front range lay a valley and then a second thrust of peaks. But Judah got a lucky break in the form of a tip from Daniel W. “Doc” Strong, a druggist in the foothills town of Dutch Flat: Donner Pass, not far from the site of an infamous tragedy in 1847, offered a much-desired one-shot ascent—after which it was downhill all the way to Utah Territory (to which the future state of Nevada then belonged). Not only that, but the summit stood at a “mere” seven thousand or so feet, and the upgrade never exceeded a manageable hundred feet per mile.
Now that he had a feasible plan, Judah thought, rounding up the financing would be a snap. He hoped to enlist a host of small investors—would-be plutocrats need not apply. He gave the venture a name, the Central Pacific Railroad Company of California, and went proselytizing. He had some success in Sacramento, but very little in much wealthier San Francisco, where the establishment viewed the railroad as a threat to existing modes of transportation: ships, toll roads, wagons, stagecoaches, even lesser railroads. (Way up in Alaska, the Sitka Ice Company opposed the project for an equally parochial reason. Ice freighted to the Bay Area from the Sierra would undercut the price of the Alaskan product, which had to make a long north-to-south journey in the holds of ships.) Back to Sacramento went Judah, bound for a rendezvous with four men who were to prove themselves indifferent, if not outright hostile, to his vision of building and running a “clean thing.”
To appreciate the temper of the time which allowed—even encouraged—Collis Huntington, Mark Hopkins, Leland Stanford, and Charles Crocker to pile up whopping fortunes at public expense, it might help to know how a bellwether of the era characterized the economic order. Henry Ward Beecher, a man of the cloth famous for his charisma and abolitionist sermons (and also for his adultery), traced the Gilded Age economic-might-equals-right ethic to a divine origin. In an 1877 article commenting on a strike, Beecher asked rhetorically:
Are the working men of the world oppressed? Yes, undoubtedly, by governments, by rich men, and by the educated classes—not because of selfishness and injustice but because itmustbe so. Only in the household is it possible for strength and knowledge and power not to oppress weakness and ignorance and helplessness.
Not only that, Beecher went on, but the Christian God was a laissez-faire deity, who “gave me my right to liberty when he gave me myself; and the business of government is to see that nobody takes it away from me unjustly—that is all.” (In that case, a sharp observer might have wondered, wasn’t the government overreaching when it extended a helping hand to private enterprise? Any such objection, however, would probably have been dismissed as pettifoggery.) The human hierarchy, Beecher insisted, reflected “natural law”—a term employed, then as now, to close off debate. It means little more than “the law that comes naturally to people like me.” On another occasion, Beecher gave a sermon in which he said, “God has intended the great to be great, and the little to be little.” (Beecher, incidentally, has a direct connection with the Central Pacific. In 1884, when the widowed Collis Huntington married for the second time, Beecher officiated.)
Four of the ruggedest individuals to flourish in this God-given, don’t-tread-on me world had migrated west around the time of the Gold Rush and quickly noticed something to which most of their fellow fortune hunters were blind: Prospecting was a hit-or-miss occupation, but selling supplies was a sure thing. The most forceful member of the group, Collis Potter Huntington, was such a natural-born entrepreneur that, en route in 1849, he’d made lucrative use of his purgatory on the Isthmus of Panama. While most travelers cooled their heels and fanned their torsos as they waited for passage on a ship to California, Huntington went into action. With money saved by crossing the twenty-four-mile-wide isthmus on foot, the Connecticut native bought items from local suppliers and sold them to his fellow argonauts. After six weeks of dealing, he boarded a boat to San Francisco with $3,000 more in his pockets than when he’d arrived.
Settling in Sacramento, Huntington took advantage of that town’s proximity to the Gold Rush by trading in anything the forty-niners might need or want, from grub to blasting powder. Soon, however, he specialized, going partners in a hardware store with Mark Hopkins, an analytical introvert from New York State by way of Michigan who was a whiz at bookkeeping and a scrawny physical contrast to the ursine Huntington.
A decade later, in November of 1860, Judah made a presentation on his favorite subject at a Sacramento hotel. Among his listeners were Huntington and Hopkins; Leland Stanford, a portly, glad-handing wholesale grocer; and Charles Crocker, a hardworking but tactless dry goods merchant—also corpulent. (Assemble the Big Four for a photo, and you would have had to warn the three bossy bears not to crowd out the retiring string bean.) Stanford had been born near Albany, New York, and Crocker in Troy, meaning that the quartet—and Judah, too—all hailed from basically the same part of the world. They had in common, too, their opposition to slavery and loyalty to the Republican Party, which for Huntington included a fascination with backstage political maneuvering and for Stanford a yen to step out front and be a player. (Crocker had just been elected to the state assembly, but just what he might be keen on, or good at, was as yet unknown.) Three of the four were roughly the same age—late thirties—with Hopkins a decade older. Stanford had made a bundle as a mine owner, and the other three had prospered as storekeepers. But none of them was cash rich (Huntington later estimated that he was worth about $200,000 in 1862—a lot of money, to be sure, but most of it was tied up in property); nor, as they later admitted, did they know beans about railroading. Yet they were all gifted with the same ability: to make the most of such opportunities as came their way.
Judah had learned something from his rebuff in San Francisco: Tailor your message to your audience. The sky might be the limit for this project, but why look heavenward when you can point to something much closer and almost as big—the Comstock Lode?
Wedged inside a mountain in the western elbow of Nevada, the lode was yielding great quantities of silver and gold. The rush had started in the late 1850s, when word got out that the “blue stuff” being discarded by scattered gold prospectors as they worked the gulches of Sun Mountain (later Mt. Davidson) was actually silver-bearing ore. Hopefuls by the thousands surged east over the Sierra by stagecoach or on foot, seeking a replay of 1849, albeit one with more staying power. Which is to say that many forty-niners had been victimized by a kind of geological trick. After a year or two of strikes made by small-scale operators using minimal equipment—a pick, a pan, in some cases a rocker—the gold in the California hills had transferred its favors to the well-off. With the easy pickings exhausted, the remaining ore was to be found imbedded in rock, from which it had to be blasted loose by pressurized water shot through canvas hoses. This was hydraulic mining, and it required far more capital than the average roughneck could scrape up. The “little guy” was soon out of his depth in California gold country; but Virginia City, the town that sprang up directly above the Comstock mines, offered a second chance.
Unfortunately, that chance, too, was to pan out for only a few. Comstock silver, it turned out, was even harder to separate from the matrix than second-stage California gold. After being chiseled and hauled out of deep mines, ore-bearing Comstock rock had to be carted to mills: factory-like buildings where it was crushed by steam-driven stamps and subjected to complex chemical processes that ultimately yielded pure silver. All this took capital and organization and a large work force—along with materiel and tools for building and servicing the machines, as well as supplies for booming Virginia City itself. The Comstock frenzy ultimately disappointed almost everyone except a small group of owners and investors (most of them represented by the Bank of California); speculators in mining stocks and especially their San Francisco brokers; and those who had settled into the unglamorous niche of tradesman, including, in the early days, Huntington, Hopkins, Stanford, and Crocker.
That Comstock collision between revived hopes and harsh reality still lay in the future, however. As Judah made his pitch, the wave of mill building was just forming, and would-be prospectors were still converging on Nevada (recently split off from Utah as a territory unto itself), unaware that their lot would almost surely be not to strike it rich but rather to work for someone else at $4 a day. There was no sign of a letup in the influx of either machinery or men, and that night in Sacramento Judah mentioned his railroad’s potential as a link in the supply line to Comstock country. Whether and how the new enterprise would plug into a transcontinental route need not be decided now because its first leg would be a bully investment in its own right.
Judah knew railroads, and he seemed well-versed in Washington politics. Several attendees at that first gathering bought small amounts of stock in his fledgling enterprise; Huntington, however, hung back. But he did invite Judah to make a follow-up pitch, which took place the next evening, probably in a spare room above the Huntington-Hopkins store. This time the engineer refined an argument that seems to have tipped the balance: A wagon road running from the Comstock mines to the railroad right-of-way could be built almost immediately, and the tolls collected would reward investors whether the transcontinental phase of the project succeeded or not. The more Huntington mulled it over, the more he warmed to the idea, and it didn’t hurt that Abraham Lincoln, the Illinoisan who had just won election as the first Republican president of the United States, was a former railroad lawyer, on record as supporting a transcontinental line. But Huntington came around on his own terms. He urged Judah to concentrate less on rounding up small subscribers and more on lining up a reliable coterie of hands-on investors who would stick with him through adversity. Judah was amenable. His idea had been rattling around inside his head too long, and he was becoming less picky about the means to his end. With contributions from Huntington and a few others, he was ready to take the first step—a field survey. As Anna Judah commented, “It’s about time somebody else helped.”
In a foretaste of the epic toil to come, the survey proved quite challenging. In June of 1861, Judah wrote to Anna, describing a day’s work that beat anything he’d supervised in the Niagara River Gorge. Partway up the Sierra, his men were strung out on a slope he called “the worst place I ever saw”:
the river is 1,200 feet below us, and the top of [the] ridge 700 feet above, in places so steep that if you once slip it is all over. To day the boys carried out ropes, the only way for them to get along being to fasten one end of a long rope around their waists, with a man above holding on with a turn around a tree.… They make only a mile all day.
As his party inched forward, Judah tried to rationalize away signs (such as the bent angles of tree trunks) that winter snows might bury the right of way. Finishing up in July, he reported to his backers that getting the railroad to the Nevada border would entail carving out eighteen tunnels and cost an average of $88,000 per mile, for a staggering total of $12 million.
Back East, the Civil War had broken out in earnest (and, in the early going, not much to the liking of the overconfident Union). With Congress bereft of Southerners, the way was clear for passage of a Pacific railroad bill, an idea that seemed more attractive than ever thanks to the new importance of Nevada. The more accessible the territory’s silver could be made, the stronger the Union would look, especially when it came to obtaining war loans from European bankers. (In recognition of its economic prowess and solidly pro-Union constituency, Nevada was on its way to premature statehood, which it received in 1864.) The Central Pacific incorporated, with a directorate composed of Stanford as president, Huntington as vice president, Hopkins as treasurer, a Sacramento jeweler named James W. Bailey as secretary, Judah as chief engineer, and Crocker as a member of the board. Stanford had run for governor of California once before and lost; he now threw his hat in the ring again, and his chances looked good. It was a propitious time for Judah to consolidate what he had learned from the survey, return to Washington, and make his best case to Congress.
* * *
Backed by so many prominent California Republicans, Judah was soon better-placed in Washington than ever. Not only did he reopen the Pacific Railroad Museum at its old stand in the Capitol, but he had himself appointed clerk to the House subcommittee with jurisdiction over Pacific railroad legislation, secretary to the full House committee, and secretary to the Senate committee—an insider’s trifecta over which twenty-first-century lobbyists can only drool. A California congressman marveled at Judah’s winning personality: “His manners were so gentle and insinuating, his conversation on the subject so entertaining, that few resisted his appeals.” Those appeals may well have been seasoned with boodle. Judah had brought along Central Pacific stock with a face value of $100,000, though actually worth far less. We don’t know for sure whether he gave some of it away in an attempt to sway votes, but he wasn’t a choirboy anymore. (Even if he did compromise his integrity in this case, however, he wasn’t ready to go along with any old thing the Big Four proposed; it wasn’t long before they had pushed him too far.) Out in California, the election results were in, and the president of the Central Pacific and the governor of the state were about to be one and the same. Some observers looked askance at this welter of power sharing, insider privileges, and bribes—the label “Railroad Congressmen” was already being applied to certain not-so-esteemed gentlemen on Capitol Hill—but others argued that the main thing was to get tracks on the ground, never mind the niceties of political morality. One of the bill’s supporters in the House argued that “the Government must come forward with a liberal hand, or the enterprise must be abandoned forever.”
Even with Judah maneuvering as a Congressional insider, it took the better part of a year for a railroad bill to wriggle through the legislative process. The one that emerged, in 1862, treated the Central Pacific as rather an afterthought. Entitled “An Act to Aid in the Construction of a Railroad and Telegraph Line from the Missouri River to the Pacific Ocean, and to Secure to the Government the Use of the Same for Postal, Military, and Other Purposes,” the law chartered the Union Pacific Company, which presumably would take the lead in building the new railroad westward (it had a potential competitor, however: the Leavenworth, Pawnee & Western, which ultimately became the Union Pacific’s Eastern Division). The starting point would be either Omaha, Nebraska Territory, or Council Bluffs, Iowa (St. Louis had fallen out of contention because of its proximity to the war zone). The choice was left to the president of the United States, and Omaha won out. As an already existing entity, the Central Pacific escaped the detailed oversight to which the law subjected the Union Pacific, and besides, the Central Pacific’s share of the project was supposed to be limited to the stretch between Sacramento and the Nevada border. A good indication of how Easterners regarded the line’s western branch can be gleaned from a dismissive remark by Pennsylvania Congressman Thaddeus Stevens: “The Western soil is but a platform on which to lay the rails to transport the wealth of the furthest Indies to Philadelphia, Boston and Portland.”
Federal aid to the companies was to take two forms: land and bonds. For every mile of track, the railroads would receive 6,400 acres from the public domain, in sections alternating from one side of the right of way to the other. These donations had precedents. Many Eastern railroads had received similar land grants, the idea being for the recipient to divide them up and sell tracts to settlers, thereby dotting the landscape with farms and businesses to help make the railroad self-sustaining. The bonds, however, were something new. The United States would tender them as a kind of loan to the Central Pacific (and the Union Pacific), which would turn around and sell them to investors. The bonds would be issued in $1,000 certificates, and the amount periodically handed over by the government would vary with the degree of difficulty: $16,000 for each mile built across flat or gently rolling land, $32,000 per mile in high plains, and $48,000 in the mountains. Each company could sell these bonds as if they were its own instruments, using the revenues to finance construction, with the federal government paying the bondholders 6 percent interest semiannually. Each company was also entitled to issue and sell its own bonds, but the government’s lien had priority, meaning that, in the event of default, holders of government bonds would come ahead of other creditors.
After thirty years, the bill would come due. The companies would owe the government both principal and interest (simple interest, not compound) on the borrowed bonds, minus the value of certain services rendered to the government, such as toting the mail, transmitting official telegrams, and ferrying federal troops. To help the railroads meet their obligations, the Act called for “at least five per-centum of the net earnings of said road [to] be annually applied to the payment thereof.” In 1875, however, the U.S. Supreme Court found this wording too ambiguous to support the government’s contention that the specified 5 percent must be handed over periodically. Rather, the Court decided unanimously, the railroads were free to withhold all payments until the bonds had matured. (This postponement helped build momentum for the epic struggle over the so-called funding bill in the 1890s: Having gotten away with paying back nothing for so long, the railroads had fallen in love with the status quo, while the public was eager for the government to finally start getting its investment back.) In both cases—the land and the bonds—delivery was conditional. The company had to lay a certain number of miles of track and meet certain construction standards before the subsidies would flow. The United States was trying to make sure of getting a quality product.
On paper, the deal looked good for the government. All it supplied was land (of which it had plenty), credit, and the promise to make those interest payments, in return for an eventual recapture of principal and interest. True, some risk was involved, but who better than Uncle Sam to take over and finish the project if the private firms should bungle the job? But the deal looked even better for the entrepreneurs. They had three decades in which to make money by selling bonds and charging for the goods and passengers riding their trains—and, of course, they would each end up owning a railroad.
The law was intricate, to be sure, but at least it was finally on the books. After President Lincoln signed it on July 1, 1862, a jubilant Judah wired his Sacramento backers: “WE HAVE DRAWN THE ELEPHANT. NOW LET US SEE IF WE CAN HARNESS HIM UP.”
Congressmen Stevens had added to the difficulty of elephant harnessing by inserting a burdensome clause into the new law: The builders of the Pacific railroad had to use American iron only. This proviso forced the companies to bid against their own government, which needed great quantities of iron (along with locomotives and all the other components of a railroad) for the war. Prices went up accordingly, Judah’s cost estimates and engineering decisions were looking dubious, and the Central Pacific’s bonds became a hard sell. Even after being discounted, sometimes to as low as 19 cents on the dollar, they weren’t moving.
Huntington went to New York on a daunting mission—to convince investors that the Central Pacific was a tolerable risk. After being turned down on Wall Street, he had the wit to approach an old supplier of his store: Ames & Sons, shovel manufacturers whose wares Huntington had peddled to California miners—and with which he had a spotless credit record. To jump-start the railroad, Huntington asked the Ameses for a $200,000 loan. Oliver Ames agreed (think of all the shovels the project would need!), but only after extracting personal guarantees from Huntington and his partners that the interest would be paid. These and other pledges—conjured almost out of thin air thanks to the arm-twisting and self-confidence that soon became Huntington trademarks—enabled him to start buying rails and locomotives and shipping them west via Cape Horn. His success also anointed him as first among equals in the Big Four, who were already conferring separately from the board that supposedly ran the Central Pacific (the insiders’ term for themselves was “the Associates”). Out West, however, the Central Pacific was still a cash-strapped vision for which ground had yet to be broken. Its prospects improved when Stanford stepped in, using his clout as governor to persuade several counties and the state itself to invest in and subsidize the line. In San Francisco, the tactics included vote buying to sway the outcome of a referendum on whether the city should invest. Stanford’s brother Philip was reported to have gone around distributing $5 gold pieces so wantonly that voters mobbed his buggy. The election went the railroad’s way—but at a hidden cost. Resentful San Franciscans had it in for the Central Pacific almost from its inception.
The toll road, meanwhile—the Dutch Flat and Donner Lake Wagon Road, to give it its full name—was coming along swimmingly. This contrast between the slowly stirring railroad and the burgeoning turnpike gave rise to rumors that all the Associates really cared about was hogging transportation routes to and from the Nevada mines. In this reading, they would lay just enough rails to make the most of their wagon road and then give up. “The Dutch Flat Swindle,” detractors were calling it—notably theAlta California,a newspaper published in San Francisco. This disdain found some support in the Big Four’s history. The shopkeepers had proved their mettle as hunters and hagglers—experts at getting hold of what the customer wanted and selling it to him promptly and heavily marked-up. Nothing in their pasts suggested they might have the vision and stamina to construct a railroad. (As it turned out, the naysayers misjudged the Big Four. Their own greatest leap of imagination was not to see themselves as builders of a new railroad, but as owners of a mature one.) The Associates fought back, with Stanford using his gubernatorial clout to champion the railroad as best he could—until his two-year term ran out (he was not nominated for a second one). His actions helped ensure that the railroad came into being under a cloud of cynicism that was to hover over it throughout its existence.
Judah was beginning to think he’d thrown in his lot with the wrong fellows. His misgivings deepened as the construction phase got underway. “I knew how to manage men,” Charles Crocker asserted. “I had worked them in ore-beds, in the coal-pits, and … had worked myself along with them.” On the basis of these flimsy credentials, his brethren in the Central Pacific hierarchy awarded the contract to build one of the railroad’s first stretches to Charles Crocker & Company, a new entity of which its namesake took charge after resigning from the Central Pacific board to avoid charges of conflict of interest. (This noble gesture was vitiated, however, by the identity of his replacement on the board: his brother.) Crocker later admitted there was no “& Company.” There was, however, a potential for sizable profits, along with a tacit commitment to share these with the other Associates.
Since this self-contracting page in the Central Pacific’s playbook was soon to be copied by other robber barons—including, most scandalously, the Central Pacific’s rival the Union Pacific, which created and funneled contracts to a construction firm called Crédit Mobilier—we had better look more closely at its genesis. The desire to control every aspect of the transcontinental project undoubtedly played a part in the Big Four’s thinking, but in his magisterialEmpire Express: Building the First Transcontinental Railroad,David Haward Bain offers another theory, less obvious but quite sensible. Undercapitalization was a common predicament among fledgling railroads, and a standard remedy had developed: The cash-poor railroad would pay the construction company partly in railroad stock. This ploy held a potential danger, though. The construction firm might go out and buy more shares of stock, eventually accumulating enough to take over the railroad. That very thing had happened to the Sacramento Valley Railroad, and to keep it from happening to them the Big Four hit upon the idea of contracting with themselves.
Judah felt, however, that the arrangement offered Crocker too many temptations: to pad costs, skimp on quality, and indulge in bookkeeping sleight of hand. (All these hunches were eventually borne out, though Judah didn’t live to see the damage.) But the energized Crocker waxed eloquent at the groundbreaking ceremony, when it finally took place in Sacramento, on January 8, 1863. “All that I have,” he said, “—all of my own strength, intellect and energy—are devoted to the building of this section which I have undertaken.” How effective an “all” this might be was still anybody’s guess.
Judah was often out of the loop now because he had to be up in the mountains so much of the time, redoing his preliminary surveys. His animosity toward the other board members increased as they made decisions without consulting him. One in particular galled him: a decree that all board members share equally in the costs of building the railroad—and pay up immediately. The trouble was that Judah couldn’t command the kind of the assets that his brethren did. The mutual animosity came out in the open, as Judah acknowledged in a letter to that Sierra pathfinder, Doc Strong.
I had a blowout about two weeks ago and freed my mind, so much that I looked for instant decapitation. I called things by their right name and invited war; but counsel of peace prevailed and my head is still on; my hands are tied, however. We have no meetings of the board nowadays; except the regular monthly meeting, which, however, was not had this month; but there have been any quantity of private conferences to which I have not been invited.
In this fraught climate, another contentious issue arose—the three-tiered bond payments prescribed by the 1862 Act. Judah had his own idea as to where the Sierra Nevada range began (and thus where the top subsidy-rate of $48,000 per mile would kick in): in the foothills, which first revealed themselves in a lift of land twenty-two miles east of Sacramento. And even that, he thought, might be too generous a call. Some years back the California Supreme Court had ruled in a mining case that the range started thirty-one miles out. Neither of these spots suited the Associates. They were angling for a ruling that the mountains came into being a good deal closer to Sacramento, and Stanford, who was still governor at the time, thought he might be able to get it for them. After all, didn’t the state geologist report tohim?
It was Crocker, however, who escorted that official on a field trip one day late in the winter of 1863 and, as Crocker recollected, “did not ask him to do anything except that I wished him to decide where true justice would place the western base of the Sierra Nevadas.” Note that wording: not where the Sierra actually began its majestic climb, but where in “true justice” it ought to. The geologist decided that as good a place as any for the birth of the range was Arcade Creek, a mere seven miles east of Sacramento, where the dark soil of the Central Valley touches the red soil of, arguably, the Sierra Nevada—never mind that the landscape, as a commentator wryly put it, is one that “a casual observer would not be likely to call mountainous.” Two federal surveyors approved the choice of mile seven, and in September Huntington sent a report to Washington, asking the secretary of the interior and President Lincoln to go along with The Sudden Sierra. Although the report bore the endorsements of that state geologist and those two federal surveyors, it lacked Judah’s—he’d been asked to sign on but had refused. (As an experienced engineer, he knew his topography; to have signed would have betrayed his self-image as a professional.) Historian John Hoyt Williams has calculated what this fiddling with the starting line meant to the Central Pacific: $480,000 more in government bonds than Judah would have awarded his own company and $768,000 more than the state supreme court would have permitted. Helping to pay for the first stretch of construction, these bonds were of crucial importance to the cash-poor company.” Not that the bonds would find their way into the Central Pacific’s coffers anytime soon. The United States was holding them back until the railroad hit the prescribed marks of progress and quality. But once the president accepted the new geography, as he did the following January, the Central Pacific’s prospects brightened considerably.
Stanford and his cronies had scored a coup. A mountain range had slid more than twenty miles west to enhance their financial position. (In Washington, the Big Four’s favorite California congressman joked about his successful lobbying of the president: “my pertinacity and Abraham’s faith moved mountains.”) Yet for all Judah’s dudgeon, a charitable analyst might not blame the Associates too severely for this move. Private investment still lagged, the Associates seemed to have bitten off more than they could chew, and weren’t those levels of payment in the 1862 law rather arbitrary, especially since it was obvious by now that not even the top rate of $48,000 per mile would suffice to pay for construction in the alpine High Sierra? The nation really did stand to benefit from faster, more reliable coast-to-coast transportation, and three experts had agreed that the mountains might be deemed to begin closer to town than previously supposed. Among the many sins committed by the Central Pacific, this one might be considered venial—not to mention a clever stroke on the part of Stanford and Crocker. On the other hand, Judah had to work with the Associates every day (or at least every day in which they let him know what they were doing), and he probably sensed that this lesser instance of cheating was a harbinger of greater ones to come. However you come out on the Case of the Moving Mountains, though, the Associates had served notice. In the coming scramble, they weren’t likely to miss a trick.
By now Judah, however, was fed up with them. He and fellow board member James Bailey tried to coax a San Francisco banker, Charles McLaughlin, into buying controlling interest in the Central Pacific. McLaughlin, who had also sunk money into another unbuilt California railroad, was tempted—until he learned that Huntington was willing to be bought out. “If old Huntington is going to sell out,” he explained, “I am not going in.” Whereupon Bailey himself sold out. In a rancorous meeting, Judah blasted the Associates for their ethical shortcomings, and they were sufficiently chastened to make a promise: Each would sell his share in the firm for $100,000 if any other director could raise the money. Either they were bluffing, or the railroad had become a hot potato that none of them wanted to hold. Judah and his wife left for the East, where he hoped to line up new-blood investors in what he still liked to think of as “his” railroad. He regarded transportation mogul Cornelius Vanderbilt as the man to see.
Sailing south, the Judahs passed a northbound vessel with a momentous cargo in its hold: the first locomotive destined for the Central Pacific. Farther on, however, Theodore Judah fell victim to one of the hazards of tropical travel—yellow fever. He hung on through the rest of the voyage, even managing to get off a note to Doc Strong. In it, Judah warned that if he failed in his mission to find a white knight with “experience and capital,” the Big Four would “rue the day they ever embarked in the Pacific Railroad.” Judah clung to life all the way to New York City, but by then he was beyond help. (Note the irony. Had the engineer been able to travel via the railroad he was trying to build, he would have skirted the fever zone.) Not only did his death on November 2, 1863, at age thirty-seven, leave the Associates stuck with carrying out a project toward which they had cooled. It also removed the main obstacle to a number of practices they were soon to adopt on a grand scale: lying, bribery, shoddy construction, looting of the federal treasury, and monopolization.

Copyright © 2012 by Dennis Drabelle

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The Great American Railroad War How Ambrose Bierce and Frank Norris Took On the Notorious Central Pacific Railroad

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