Durant, Thomas Clark

views updated May 11 2018

DURANT, THOMAS CLARK

As a financier and an executive of the Union Pacific Railroad in the early 1860s Dr. Thomas C. Durant (1820–1885) was instrumental in building the first railway spanning the western United States. He ended his career, however, in scandal and financial disaster, having greatly enriched himself at the public's expense.

The Durants were a wealthy and distinguished western Massachusetts family. Bowing to the wishes of his parents, Thomas Durant graduated from Albany Medical College in upstate New York in 1840. But he never practiced medicine, choosing instead to devote his career to business.

After a period of working in his uncle's grain and flour export business, Durant moved to New York City and became involved in the stock market. The 1850s saw the wide-spread building of railways, the "superhighways" of that time. Durant recognized railroads as a good investment, and soon he began to concentrate his entire resources on financing railroad construction.

Together with engineer Henry Farnum, he orchestrated the construction of numerous major rail lines, including the Mississippi and Missouri railroad across Iowa. In 1862 he negotiated a contract with the U.S. government to build the Union Pacific. a rail line that would go westward from Omaha, Nebraska. It was expected to join the Central Pacific, which was moving eastward from California to create a transcontinental railroad. Durant joined the company as vice president and general manager mainly in order to protect and extend his own financial interests.

The Union Pacific soon fell into financial difficulties. Durant attempted to solve the problem by creating a construction and finance company called the Crédit Mobilier of America to complete the building of the railroad. The Crédit Mobilier was a complex and corrupt scheme in which a small group of financiers contracted with themselves or their associates to construct the railroad, charging exorbitant prices for their services. Durant and his cronies pocketed huge profits for construction that was often faulty. Crédit Mobilier became a symbol of corruption in an era when illegal manipulation of large contracts was often the standard operating procedure.

Durant was instrumental in obtaining support and financing at every level of government. He lobbied President Abraham Lincoln (1861–1865) and both houses of Congress and with every favorable decision he pocketed more cash. He played on the fascination with the West during the war-torn 1860s and also exploited people's ignorance of the value of the vast area of land between the Mississippi River and California, which maps called the "Great American Desert." Therefore he was able to persuade Congress to pass the Pacific Railway Act of 1862 with a promise that the railroad would receive 10 square miles of land for every mile of track it laid.

In 1864 Crédit Mobilier took over the Union Pacific's construction contracts. Durant persuaded Congress to double the size of the land grants the railroad was previously awarded. He later sold some of this land but retained much more. This land holding added greatly to his wealth as did an elaborate scheme for padding his expenses. The original estimates for construction of the Union Pacific line had accurately set the cost at around $30,000 per mile of track. The Crédit Mobilier doubled this figure, with Durant and a few others pocketing the difference. Construction methods were shoddy. Shortly after the 1869 track completion ceremonies construction crews were forced to undertake several years' worth of additional work rebuilding the tracks.

Durant's reign as the leading robber baron of the Union Pacific and Crédit Mobilier did not last long. In 1865 Durant and his associates faced a severe financial problem, which Oakes and Oliver Ames, who amassed a fortune in the pick and shovel business, promised to ameliorate. They invested more than a million dollars of their own money in the railroad and raised an additional $1.5 million upon the credit of their businesses. Shortly thereafter it was discovered that Oakes Ames, a member of Congress from Massachusetts, distributed shares of Crédit Mobilier stock as political favors. He and a colleague were censured by the House of Representatives. Vice President Schuyler Colfax, Speaker of the House James C. Blaine, and future U.S. President James A. Garfield (1881) were all implicated but were later absolved in the scandal.

Durant had managed to accumulate some $23 million by defrauding the railroad's investors with his Crédit Mobilier scheme. An associate later called him "the most extravagant man I ever knew in my life." But, deeply involved in the worst financial scandal of his time and justifiably accused of bribery and fraud, Durant saw his fortune dwindle to virtually nothing following the financial Panic of 1873. He spent his latter days living quietly on his property in upstate New York, where he died on October 5, 1885.

See also: Oakes Ames, Oliver Ames, Central Pacific Railroad, Mississippi River, Panics of the Late Nineteenth Century, Transcontinental Railroad, Union Pacific Railroad, Westward Expansion

Thomas Clark Durant

views updated May 29 2018

Thomas Clark Durant

The American Thomas Clark Durant (1820-1885), an executive of the Union Pacific Railroad, was a major force behind the first transcontinental railroad.

Thomas C. Durant was born in Lee, Mass., on Feb. 6, 1820, the son of well-to-do parents. Although he graduated from Albany Medical College, he left medicine for his uncle's firm, which exported flour and grain. Durant later moved to New York City to open a branch office and became widely known in financial circles because of his activities in stocks.

Railroads were a popular investment in the 1850s, and Durant joined with Henry Farnam in building the Michigan Southern, the Chicago, Rock Island, and Pacific, and the Mississippi and Missouri. In 1862 the Federal government designated the Central Pacific and Union Pacific railroads to construct the first transcontinental line. Durant claimed that he influenced President Abraham Lincoln to select Omaha as the line's eastern terminus, although most authorities give the credit to Grenville M. Dodge. The Union Pacific ran into early financial difficulty, and Durant, vice president of the company, persuaded Congress to double the land grant and also to allow the road to issue bonds equal to those issued by the government, which was the transcontinental's major financial backer.

When the Union Pacific ran into difficulty selling its securities at par value as was required by the charter, Durant devised a scheme whereby a group of company executives formed a construction company called the Crédit Mobilier of America. This firm was awarded the construction contracts and accepted the securities as payment. To protect the firm against loss, the contracts were high enough to offset the sale of the securities below par. Regardless of the corrupt nature of the operation, money was secured and construction continued.

In 1865 Oakes and Oliver Ames, Massachusetts manufacturers, entered the Crédit Mobilier and began a battle for control with Durant. For 2 years the rival factions, known as the "Boston Crowd" and the "New York Crowd," contended for supremacy. At stake in the struggle was not only the construction company but the entire Union Pacific. Durant was forced out of the Crédit Mobilier in 1867, but efforts to sever him from the railroad failed. An agreement then followed between the two groups for construction of some 667 miles of track; the agreement proved profitable to the Crédit Mobilier, but the Union Pacific was left with a shoddily built line and heavy overcapitalization. Losing control to the Ames brothers, Durant held on just long enough to help Leland Stanford drive in the golden spike to complete the nation's first transcontinental railroad on May 10, 1869. On May 25 Durant was dropped from the board of directors of the Union Pacific.

Durant was married and the father of a son and daughter. His last years passed uneventfully in the Adirondacks.