The Populist Businessman

Albert May Todd's speech in Congress, 1898.

You can also listen to (most of) this text as a podcast episode here: https://anchor.fm/dan-allosso/episodes/The-Populist-Businessman-eirdtv

Often, when we read about Populists in nineteenth-century America, we are told stories about poor farmers, struggling to make ends meet. It’s important to note, though, that many of the people who opposed monopoly power and the abuse of government by lobbies were community leaders and successful businesspeople in their own right. There was a similar split between small business and immense corporate power in the past as there is today. For example, America’s leading producer of essential oils in at the turn of the twentieth century was a populist and briefly, a legislator.

In December, 1898, Michigan Congressman Albert May Todd made a speech on the floor against an anti-scalping bill that he claimed was part of a campaign by the railroad companies to rob and defraud the public. As a part of the speech titled “The Railways and the Republic”, which covers the first sixteen pages of the Appendix to the 55th Congressional Record, Todd said:

I call your attention to the famous “Crédit Mobilier” report. (House of Representatives, Forty-second Congress, third session, No. 77. Report of the select committee No. 1 to investigate the alleged Crédit Mobilier bribery, February 18, 1873.) This report created intense excitement at the time, implicating, as it did, among other public officials, one member of Congress who afterwards became President of the United States; one Speaker of the House of Representatives, afterwards Vice-President of the United States: two other members of Congress who afterwards became Vice-Presidents of the United States, besides several United States Senators. This report is exceedingly difficult to procure, copies having been destroyed as far as possible to remove from public view the great crime committed. I was told by an official of unquestioned integrity, whose office gave him knowledge of the fact, that within less than one hour after Mr. Garfield's nomination for the Presidency nearly every copy had been sequestered from the Capitol, he being among the number implicated.

Todd provided a brief synopsis of the scandal, to remind Congressman who may not have been there at the time and to have the details which he believed had been swept under the rug published once again in the record:

The facts, briefly stated, are these: The company called the Crédit Mobilier of America was incorporated in Pennsylvania and in 1864 control of its charter and franchises had been obtained by persons interested in the Union Pacific Railroad Company for the purpose of using its powers as a construction company to build the Union Pacific road. In September of the same year a contract was made between the directors of the Union Pacific Company and one H. M. Hoxie (whom the evidence shows was used as a “stool pigeon” of the Pacific directors) for building 100 miles of the road at extravagant and fictitious rates, the profits of which were to be stolen from the public by the railroad directors, who themselves had also become the directors of the Crédit Mobilier.

There were pending at the time in Congress bills for granting aid to the Pacific roads in money, land, and other concessions to the value of over $100,000,000, and the directors of the railroad company wished to procure these immense grants, so that they, by dishonest contracts with their railroad company, could appropriate to themselves, as directors of the “Crédit Mobilier,” these countless millions by criminal practices in dishonest contracts, by which all the money appropriated from the people to Congress could be stolen by these half dozen men, thus not only plundering the people, but also wrecking the great enterprise which had been authorized by Congress for the public good.

In order to accomplish these purposes Mr. Oakes Ames, a member of Congress, and one of the directors of both the companies mentioned, for the purpose of influencing their legislative action, distributed large quantities of the Crédit Mobilier stock to various Senators and Congressmen, some of which he received nominal pay for at less than quarter of its real value and for some of which he received no pay, telling them “that he would hold it for them as trustee until the profits would pay for the stock in full.” So enormous were the profits by means of the dishonest contracts, that in less than two months the entire stock had paid for itself, with several hundred dollars additional. The following photographic reproduction from page 459 of the report mentioned shows how Hon. James A. Garfield, afterwards President of the United States, received $1,271 in profits upon his thousand dollars of stock.

The copies of accounts exhibited herein were taken by the investigating committee from the famous “Private Memorandum Book of Oakes Ames,” and were reproduced in the official report of the committee. An explanation of the account of Mr. Garfield as above is given by the committee on page VII of their report, from which I quote verbatim: “Mr. James A. Garfield, of Ohio. The facts in regard to Mr. Garfield as found by the committee are identical with the case of Kelley to the point of reception of the check for $329. He agreed with Mr. Ames to take ten shares of Crédit Mobilier stock, but did not pay for the same. Mr. Ames received the 80 per cent dividend in bonds and sold them for 97 per cent, and also received the 60 per cent cash dividend, which together paid the price of the stock and interest and left a balance of $329. This sum was paid over to Mr. Garfield by a check on a sergeant-at-arms, and Mr. Garfield then understood this sum was the balance of dividends after paying for the stock.”

A more complete detail of the similar transaction with Congressman Kelley is given on the same page.

Todd described several Congressional investigations into the scandal, including:

A THIRD INVESTIGATING COMMITTEE'S STARTLING DISCLOSURES–THE PATTISON REPORT.

On April 15, 1887, President Cleveland appointed a third commission to investigate the affairs of such railroads as had received aid from the United States. A most interesting report, astounding in its revelations, was made by Hon. Robert E. Pattison, of Pennsylvania, chairman of the committee, from which the following extracts are made:

“The construction companies or inside combinations that built five of the six roads have destroyed or concealed their books, the exception being the Central Branch, and the commission has been embarrassed in its work by the refusal or failure of the companies to produce the accounts relating to the actual cost of construction or to exhibit any paper or documents that would enable the commission to ascertain the truth as to this most important factor in the investigation. The books of the Crédit Mobilier, which built the Union Pacific from Omaha to Ogden; the books of the Contract and Finance Company, which built the Western Pacific from San Jose to Sacramento and the Central Pacific from Sacramento to Ogden; the books of Shoemaker & Co., who built the Kansas Pacific, and the accounts of John I. Blair, who built the Sioux City and Pacific Railroad—all these are missing.

“Their management has been a national disgrace. Since the date of their inception they have been conducted upon a purely speculative basis. Their permanent prosperity has been lost sight of while their managers greedily strove for temporary advantage. For fourteen years the Union Pacific and the Central Pacific were practically free from competition for a stretch of 1,800 miles across the continent. They were independent of many of those disturbing elements which have been pleaded in extenuation of the vicious practices of railroads in other parts of the country; and yet they injected secrecy into their affairs, inaugurated favoritism and corruption into their management, and attempted to destroy competition. They organized pools for the professed purpose of securing certainty, uniformity, and permanency in freight rates, but they did not respect the pools which they entered into when immediate advantages could be obtained by a breach of good faith.

“Mr. Huntington testified before the commission that “competition is killing,” and that there ought to be only one railroad for the whole country. The aided companies combined with others to tax the communities which they served, and they forced the consuming classes in all sections of the country to contribute to the payment of interest and dividend upon the fictitious capital which they had created. They increased the cost of living. They laid proprietary claim to the traffic of large sections of the country. They squandered millions of their money to ‘protect’ their territorial claims, while expending other millions in encroachments upon the territory claimed by other companies. They constituted themselves the arbiters of trade. They attempted to dictate the channels that trade should follow, and fixed rates of transportation that were extortionate. They charged all that the traffic would bear, and appropriated a share of the profits of every industry by charging the greater part of the difference between actual cost of production and the price of the article in the market. They discriminated between individuals, between localities, and between articles. They favored particular individuals and companies. They destroyed possible competitors, and they built up particular localities to the injury of other localities, until matters had reached such a pass that no man dared engage in any business in which transportation largely entered without first soliciting and obtaining the permission of a railroad manager. They departed from their legitimate sphere as common carriers and engaged in mining articles for transportation over their own lines. They exerted a terrorism over merchants and over communities, thus interfering with the lawful pursuits of the people. They participated in election contests. By secret cuts and violent and rapid fluctuations in rates they menaced business, paralyzed capital, and retarded investment and development.

Finally, Todd discussed the public cost of the railroad companies’ fraud and collusion:

“Had the Pacific railroads been built and managed upon honest methods, had the Government loan been properly applied, these companies, regarded as a whole, could have declared dividends at the rate of 6 per cent per annum for eighteen years, from the date of actual completion to the present time, upon all the moneys that they would have been required to pay in to complete and equip the roads; they would have owned 2,495 miles of roads free from all debt, and worth $124,600,000, upon an original outlay of less than $35,490,381.44; three of them, the Union Pacific, Central Pacific, and Central Branch, could have repaid every cent of the principal and interest advanced by the Government to date, and could have reduced their charges to shippers to the extent of over $140,000,000, or nearly $8,000,000 per year.

“But they chose dishonest methods. At the outset they divided $172,347,115 of fictitious capital, they dissipated over $107,000,000 which should have been applied to the payment of the principal and interest of the Government debt, and they taxed shippers to the extent of over $140,000,000, or nearly $8,000,000 a year, to pay for the inflation of the capital of these companies and for the vicious practices that crept into their management.

While Todd’s opponents in Congress couldn’t persuade the speaker to prevent the speech on a point of order, Todd’s remarks didn’t change anything. The anti-scalping bill he was standing to oppose, aimed at preventing the buyers of rail tickets from selling or transferring them to others, passed easily, despite nearly universal opposition by the constituents of the Representatives who passed it. Unfortunately, these Congressmen were solidly bought and paid for by the railroad lobby.

Todd was a businessman from Kalamazoo, Michigan, who was the leading manufacturer of peppermint and spearmint oil in America. You can read about him in my book, Peppermint Kings. Todd had extensive personal experience as a shipper facing exorbitant freight rates. When he complained that the railroad companies tried to take the lion’s share of the difference between the cost of a product’s production and its retail price, he had the receipts to back up his claim.

Todd served only one term in Congress, but he went on to found the national Public Ownership League, which argued for public ownership of municipal utilities such as streetcars, gas, electric, and telephone services; and also for nationalizing the railroads.