Nothing Like It in the World The Men Who Built the Transcontinental Railroad 1863-1869 (16 page)

B
Y
that December, engineer Dey had graded and spent $100,000 on twenty-three miles of line from Omaha west to the Platte Valley. And he exploded when Silas Seymour, the consulting engineer, demanded that it be abandoned. Seymour—and his backer, Durant—favored a route up Mud Creek, a detour to the south in the shape of an oxbow, which added nine miles. It would bring in an extra $144,000 in government and company bonds, plus 115,200 acres of federal land grants, and more profits for the Crédit Mobilier.

There was another dispute. Dey had estimated $30,000 per mile as the
cost out of Omaha and up the Platte Valley, But in the fall of 1864, the UP had accepted a proposal from Herbert “Hub” Hoxie, an Iowa politician selected by Durant as a front man—meaning most of all that he was willing to carry out Doc's intentions. Hoxie said he would build the road for $50,000 to $60,000 per mile for the first 247 miles. On September 23, the contract was signed, and almost immediately turned over to Crédit Mobilier. Durant then instructed Dey to resubmit his own proposal and make it $60,000 per mile. Dey brooded over Durant's order for five weeks before writing Durant that he believed that amount “would so cripple the road that it would be impossible to ever build [it].”

Dey thought about it some more, and on December 7, one day after Lincoln's triumphal speech to Congress, he wrote President Dix to tender his resignation. “My reasons,” he said, “are, simply, that I do not approve of the contract made with Mr. Hoxie … and I do not care to have my name so connected with the railroad that I shall appear to endorse this contract.” He wanted no part of the whole thing, and so, reluctantly, he “resigned the best position in my profession this country has ever offered to any man.”
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When Dey left Omaha on the last day of 1864, the Union Pacific had yet to lay a single rail. The corporation had graded just over twenty miles of roadbed and put down not one tie, much less rail.

F
OR
all its problems and travail in getting started, the UP and its western mate the CP were about to become the biggest businesses in America. The Erie, the New York Central, the Pennsylvania, the Baltimore and Ohio, the Illinois Central, the Michigan Central, and the Michigan Southern, all railroads built before the war, were then the largest business enterprises in the nation. Running them required wholly new methods, just as financing and building the UP and the CP did, and the last two were destined to be much larger than their predecessors.

The general superintendent of the Erie, Daniel C. McCallum, described his problems and practices in dealing with the new methods of management brought on by the sheer size of the railroads:

A Superintendent of a road fifty miles in length can give its business his personal attention and may be constantly on the line engaged in the direction of its details; each person is personally known to him, and all questions
in relation to its business are at once presented and acted upon….

In the government of a road five hundred miles in length a very different state exists. Any system which might be applicable to the business and extent of a short road would be found entirely inadequate to the wants of a long one.
43

The UP and the CP and the other, lesser railroads were about to bring a revolution to America. As historian Alfred D. Chandler says, “As the first private enterprises in the United States with modern administrative structures, the railroads provided industrialists with useful precedents for organization building…. More than this, the building of the railroads, more than any other single factor, made possible this growth of the great industrial enterprise. By speedily enlarging the market for American manufacturing, mining, and marketing firms, the railroads permitted and, in fact, often required that these enterprises expand and subdivide their activities.”
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Alexander Hamilton and Henry Clay had wanted American manufacturing to grow, but they could imagine nothing like what happened after the Civil War. Nor could Lewis and Clark, who had led the way west. Nor Thomas Jefferson. And none could foresee the way in which the UP and the CP created a precedent for government aid to business, or how the government could create a new class of capitalists. Men of great fortune, already tied to the Republican Party. Men ready to take great risks and to accept great profits.

*
As Representative William Holman of Indiana said during the debate over the original Pacific Railroad Bill, “This road could never be constructed on terms applicable to ordinary roads…. It is to be constructed through almost impassable mountains, deep ravines, canyons, gorges, and over arid and sandy plains. The Government must come forward with a liberal hand, or the enterprise must be abandoned forever.”

†
Which made it the first corporation chartered by the national government since the Second Bank of the United States (created in 1816, it lost its charter in 1836).

*
The easternmost thrust of the Rocky Mountains, in eastern Wyoming, not to be confused with today's Black Hills of South Dakota.

I
MMEDIATELY
after the Pacific Railroad Act of 1862 had passed the Congress and been signed by the President, Judah had gone to New York to purchase materials and supplies for the Central Pacific. Three weeks later, on July 21, he had left matters in the hands of an agent and, together with Anna, set sail for California. His intention had been to make certain that the merchants from Sacramento who owned or controlled most of the bonds and stock of the Central Pacific Railroad Company—Crocker, Huntington, Stanford, and Hopkins (the Big Four, as they were beginning to be called) could indeed harness the elephant.

They couldn't do it without Judah. As he had told them in his report, “The principles which produced this result were control and
harmony.”
On June 30, 1862, he had already filed with the secretary of the interior a map of the route he had picked, because the bill provided that, upon such filing, the federally owned lands for fifteen miles on either side of the projected route would be withdrawn from pre-emption, meaning that a citizen could not buy or make a claim on them. This was a first step in clinching the bargain between the CP and the federal government.
1
Judah had gotten started.

There were many people depending on him. Word of the passage of the Pacific Railroad Bill had spread through Sacramento, causing great excitement. On July 12, the
Sacramento Union
reported that “the firemen's parade last evening in honor of the passage of the bill was the most
brilliant affair of its kind that has ever taken place in this city. The procession was a mile long and the route was one blaze of torches and fireworks … and there were 100 mottoes carried in the line, all of them appropriate and pithy.” One read, “Little Indian Boy, Step Out of the Way for the Big Engine.” Another said, “The Pacific Railroad—Uncle Sam's Waistband.” And a third: “Fresh No. 4 Mackerel, Six Days from Belfast.”
2

On his way to California, Judah had written a report on his activities in New York after the bill passed. He said he had found that prices had advanced rapidly with the coming of war. Iron rails, for example, that went for $55 a ton in 1860 now cost $115 a ton and were going up. Common spikes had climbed from 2.5 cents per pound to 6.5. Blasting powder had risen from $2.50 to $15 a keg. Shipping was costing much more: each ton of rails fetched $17.50 in shipping charges to San Francisco. Insurance premiums had also soared. Huntington had gone to New York to handle purchases “upon the best terms he could get, before further advances [in prices] took place.”
3

Judah hoped to lay the first fifty miles of track by the fall of 1863, more than a year away. His agent had managed to get a contract for eight locomotives, deliverable in January 1863, to be paid for entirely in government bonds—when these were issued. Also a contract for five thousand tons of rail, and for eight passenger, four baggage, and sixty freight cars. Huntington had paid for all this with pledges from himself and the others, relying on his and the other members of the Big Four's reputations for never walking away from a debt. But although he had fistfuls of stocks and bonds, he had no buyers. Besides, the federal law making paper money (“greenbacks”) legal tender almost killed the bonds: the value of the paper money sank with each Union Army reverse, sometimes to as low as 35 cents on the dollar, and in California, by legislative fiat, only silver or gold could be used in contracts, to pay workers, or to buy goods.

Huntington was described by an acquaintance as a man who was “something tigerish and irrational in his ravenous pursuit. He was always on the scene, incapable of fatigue, delighting in his strength and the use of it, and full of love of combat…. If the Great Wall of China were put in his path, he would attack it with his nails.”
4
But he still couldn't get anyone in the East to buy his railroad bonds.

In 1862, Huntington worked New York, Washington, and Boston, spending three days in New York, two in Boston, and two in the capital,
where he “borrowed, hocked and huckstered.” In Boston, he walked into the office of Oliver Ames, older brother of Representative Oakes Ames and fellow owner of the Ames shovel factory, the biggest and best in the country, from whom Huntington, Crocker, and Hopkins had bought thousands of shovels for California's gold miners. The Ames shovel was declared to be “legal tender in every part of the Mississippi Valley” and was known even in South Africa. At the beginning of the Civil War, the business was valued at $4 million, and the war enormously increased its prosperity.

Huntington didn't try to sell Ames any bonds. Instead he offered a fistful of them as security for a loan of $200,000, promising that he and his partners would guarantee the interest payments on the bonds if the CP failed to meet its semiannual obligations. Huntington had with him “a paper testifying to our responsibility and our honor, as men and merchants, that whatever we agreed to we would faithfully adhere to.”

Ames told Huntington to come back tomorrow. Meanwhile, he checked on the record and found not a single instance of an overdue bill. The next morning he made the loan and gave Huntington a letter of introduction. On a similar promise, Huntington managed to purchase $721,000 worth of rolling stock.
5

I
N
mid-August 1862, Judah arrived at Sacramento. McClellan was pulling the Union troops out of the Virginia Peninsula, and the Second Battle of Bull Run was less than two weeks away. Still, two pieces of good news greeted Judah. First, the secretary of the interior had telegraphed the government's acceptance of his location map and withdrawn from sale, pre-emption, or private entry the federal land and the promised land-grant acreage along the route. Second, the city of Sacramento had given to the CP thirty acres along its levee (thirteen hundred feet of riverfront) for the company's headquarters, depots, shops, and roundhouse.

That gift brought on the first dispute between the Big Four and their chief engineer. Judah insisted that the company build a handsome office building in Sacramento, and he personally designed an impressive brick edifice that he claimed could be built for $12,000. He was peremptorily voted down at a board meeting. Instead, at Huntington's telegraphed orders, an unpainted shack was raised in one working day at a cost of $150.
CP business was as always conducted in an office over Stanford's grocery store on K Street.
6

At the same time Judah was disagreeing with Huntington and Stan-ford, the Central Pacific was being criticized by men who had a monopolistic interest in this or that aspect of the railroad. For example, the company that brought ice from Alaska to the San Francisco market feared that the CP might replace it with ice from the Sierra Nevada. Those who ran freight lines within the state, most especially the Sacramento Valley Railroad, jumped on various aspects of the CP. A major criticism, repeated by the state's most prestigious newspaper, the
Daily Alta California,
charged that all the CP intended to do was build its line to Dutch Flat, where it would end, and from which everyone would have to use the wagon road owned by the Big Four to get to the sprawling markets in Nevada. On August 22, 1862, just after arriving, Judah took out an advertisement in the
Sacramento Union
asking anyone who knew of a better route over the mountains to step forward with the facts. No one did.
7

J
UDAH
spent the early fall working on his annual report. Meanwhile, the Battle of Antietam had been won by the Union, but the Confederate Army of Northern Virginia had escaped. And on September 22, 1862, Lincoln had issued the Emancipation Proclamation.

Judah issued his report on October 22, 1862. It was primarily a puff piece designed to sell shares and bonds. He claimed, for example, that the government's use of the road would be so great as to repay the company's own bonds, along with other stretchers. He badly underestimated the cost of driving tunnels through mountains ($50 a foot, he said; $1,000 per foot was closer to the reality). He said that the CP had been given the privilege from Congress of building its line easterly from the California-Nevada line until it met the UP's line coming from Omaha, which wasn't true but allowed him to write, “I am positive in the opinion, that it will be found advisable to undertake the construction of about 300 miles easterly”—that is, halfway to Salt Lake City. He also noted that the CP would make a fortune from the business within California and from the Nevada trade. “The conditions which produce these results are extraordinary,” he admitted, “unlike those which govern the business conditions of any other railroad ever built.”
8