Reconstruction and Progress: Credit Mobilier and Jay Cooke
About the same time the forest regions of Wisconsin, Michigan, and Minnesota were devastated by fires of extra-ordinary extent, many villages being burned, while fifteen hundred persons perished in Wisconsin alone. To complete this carnival of fire a disastrous conflagration broke out in the business district of Boston on November 9, 1872. The loss amounted to seventy-five million dollars, nearly eight hundred buildings, many of them large and costly, being consumed. These conflagrations gave occasion for one of the most striking examples of American enterprise that has ever been shown. Almost without delay the process of rebuilding the burned districts began, and in a few years scarcely a trace of the disasters remained. The ruined cities rose again from their ashes more grand, massive, and imposing than before.
Of the Congressional questions that arose during Grant's first term, one of the most important was that concerning the acquisition of San Domingo. This republic, comprising a large part of the island of Hayti, applied for admission to the United States, an application which was warmly favored by the President. It met, however, with strong opposition in Congress, particularly from Senator Sumner, and the bill for its acceptance was defeated. Another important event of the same term was the exposure of the "Credit Mobilier" scheme, which occurred in 1872. This consisted in an effort to bribe Congress in favor of legislation to the advantage of the Central Pacific Railroad Company. Stock of the railroad was secretly transferred at a nominal price to various members of Congress, for the purpose of influencing their votes, and the exposure of the illegal scheme seriously injured the reputations of many members.
In 1872, General Grant was again elected to the Presidency, with Henry Wilson for Vice-President. Horace Greeley, the nominee of the "Liberal Republican" party, was supported by the Democratic vote, but was defeated by a majority of two hundred and twenty-three electoral votes. This second administration of President Grant was marked by exhibitions of public dishonesty not less discreditable than that of the "Credit Mobilier." In 1875 Secretary Belknap was impeached by Congress on a charge of fraud and peculation in the disposal of Indian posttraderships. He was acquitted by the Senate. About the same time great revenue frauds were discovered, in which persons connected with the government were implicated. This were perpetrated by the "Whiskey Ring" in several western cities. The trials of the accused parties were conducted with so manifest an effort on the part of the Government authorities to shield certain persons as to cause great public distrust and dissatisfaction. The "Star-Route" frauds in the transportation of the mails, and the exposure of the gigantic robberies of the "Tweed Ring" in New York, and of instances of pubic dishonesty in Philadelphia, Chicago, and other cities, were other evidences of political corruption that did not indicate a high standard of political corruption that did not indicate a high standard of political honesty in the United States at the conclusion of its first century of national existence.
Of the events of this Presidential term, however, the most important was the severe financial depression by which it was marked. The era of high prices and business activity which had followed the war yielded its legitimate effect in an abnormal growth of the spirit of speculation. The inevitable consequence followed. In 1873 came a financial crash that carried ruin far and wide throughout the country. It began on October 1, in the disastrous failure of the banking firm of Jay Cooke & Co., of Philadelphia, the financiers of the Northern Pacific Railroad. Failure after failure succeeded, panic spread through the whole community, and the country was thrown into a condition resembling that of 1837, but more disastrous from the fact that much greater wealth was affected. Years passed before business regained its normal proportions. A process of contraction set in, the natural change fron high war-prices to low peace-prices, and it was not till 1878 that the timidity of capital was fully overcome and business once more began to thrive.
Industry and trade had flourished beyond precedent during the first years after the war. The high protective tariff contributed its share to the general rush of enterprise. In 1873 railroad mileage had doubled itself since 1860, and this was a prolific cause of rash speculation. While business was expanding the currency was contracting. Paper money had depreciated, and the conditions foreboded a crash. The Jay Cooke firm stood at the head of the great banking concerns. This house had handled most of the government loans during the war, and as already stated, were financing the doubtful Northern Pacific scheme. When this firm broke, strong institutions tottered and thousands of people in every rank of life were stricken with absolute ruin or sufferings that were none the less poignant for being outside the category of direct financial failures. The blow was felt for years in impaired credit, pressure for payment of dues, the lowering of securities and general dread of even safe enterprises. United States bonds fell from five to ten per cent. Savings were exhausted and many banks went under. Labor felt the cruel stroke for long after in the shutting down of factories and the half-time employment. The country was in a state of alarm and disgust at the bitter consequences of questionable acts in Congress, by the Administration, and in the realm of finance, and its indignant resolve to change things for the better was expressed in the heated contest which replaced the Grant administration with that of President Hayes, in 1876.