Editing First transcontinental railroad (section)

==Authorization and funding==
{{Main|Pacific Railroad Acts}}

In February 1860, Iowa Representative [[Samuel Ryan Curtis|Samuel Curtis]] introduced a bill to fund the railroad. It passed the [[United States House of Representatives|House]] but died when it could not be reconciled with the Senate version because of opposition from southern states who wanted a southern route near the [[42nd parallel north|42nd parallel]].<ref name="judah"/>{{clarify|date=September 2020}} Curtis tried and failed again in 1861. After the southern states seceded from the Union, the House of Representatives approved the bill on May 6, 1862, and the Senate on June 20. Lincoln signed the [[Pacific Railway Acts|Pacific Railroad Act of 1862]] into law on July 1. It authorized creation of two companies, the [[Central Pacific Railroad|Central Pacific]] in the west and the [[Union Pacific]] in the mid-west, to build the railroad. The legislation called for building and operating a new railroad from the Missouri River at [[Council Bluffs, Iowa]], west to [[Sacramento, California]], and on to [[San Francisco Bay]].<ref>[http://www.cprr.org/Museum/Pacific_Railroad_Acts.html "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] 12 Stat. 489, July 1, 1862.</ref> Another act to supplement the first was passed in 1864.<ref>[http://www.cprr.org/Museum/Pacific_Railroad_Acts.html#1862-03 Pacific Railroad Acts] accessed March 25, 2013.</ref> The [[Pacific Railroad Act]] of 1863 established the [[standard gauge]] to be used in these federally financed railways.

===Federal financing===
To finance the project, the act authorized the federal government to issue 30-year U.S. [[government bond]]s (at 6% interest). The railroad companies were paid $16,000 per mile (approximately ${{formatnum:{{inflation|US|16000|1861|r=-3}}}} per mile today) for track laid on a level grade, $32,000 per mile (about ${{formatnum:{{inflation|US|32000|1861|r=-3}}}} per mile today) for track laid in foothills, and $48,000 per mile (or about ${{formatnum:{{inflation|US|48000|1861|r=-3}}}} per mile today) for track laid in mountains. The two railroad companies sold similar amounts of company-backed bonds and stock.<ref name="klein">{{cite web|last1=Klein|first1=Maury|title=Financing the Transcontinental Railroad|url=https://www.gilderlehrman.org/history-by-era/development-west/essays/financing-transcontinental-railroad|publisher=The Gilder Lehrman Institute of American History|access-date=4 October 2016|location=New York City, New York}}</ref>

===Union Pacific financing===
While the federal legislation for the Union Pacific required that no partner was to own more than 10 percent of the stock, the Union Pacific had problems selling its stock. One of the few subscribers was [[the Church of Jesus Christ of Latter-day Saints]] leader [[Brigham Young]], who also supplied crews for building much of the railroad through Utah.<ref>Stewart, John J. [http://cprr.org/Museum/Stewart-Iron_Trail.html "The Iron Trail to the Golden Spike"] Chapter 7 "Utah's Role in the Pacific Railroad" p. 175, Salt Lake City, Utah: Deseret Book Co. (1969).</ref>

Durant manipulated market prices on his stocks by spreading rumors about which railroads he had an interest in were being considered for connection with the Union Pacific. First he touted rumors that his fledgling M&M Railroad had a deal in the works, while secretly buying stock in the depressed [[Cedar Rapids and Missouri Railroad]]. Then he circulated rumors that the CR&M had plans to connect to the Union Pacific, at which point he began buying back the M&M stock at depressed prices. It is estimated his scams produced over $5&nbsp;million in profits for him and his cohorts.<ref>{{cite web|url=https://www.pbs.org/wgbh/amex/tcrr/peopleevents/p_durant.html|title=PBS American Experience – Transcontinental Railroad – Durant Biography|website=[[PBS]]}}</ref>

===Central Pacific financing===
[[Collis Huntington]], a Sacramento [[Household hardware|hardware]] merchant, heard Judah's presentation about the railroad at the St. Charles Hotel in November 1860. He invited Judah to his office to hear his proposal in detail. Huntington persuaded Judah to accept financing from himself and four others: [[Mark Hopkins (railroad)|Mark Hopkins]], his business partner; James Bailey, a jeweler; [[Leland Stanford]], a grocer; and [[Charles Crocker]], a dry-goods merchant. They initially invested $1,500 each and formed a board of directors. These investors became known as [[Big Four (Central Pacific Railroad)|The Big Four]], and their railroad was called the [[Central Pacific Railroad]]. Each eventually made millions of dollars from their investments and control of the Central Pacific Railroad.

Before major construction could begin, Judah traveled back to New York City to raise funds to buy out The Big Four. Shortly after arriving in New York, Judah died on November 2, 1863, of [[yellow fever]] that he had contracted while traveling over the [[Panama Railroad]]'s transit of the [[Isthmus of Panama]].<ref>{{cite web|url=http://cprr.org/Museum/Ephemera/Judah%20Memoriam%20BCC.html|title=''In Memoriam, Theodore D. Judah, Died November 2, 1863''}}</ref> The CPRR Engineering Department was taken over by his successor Samuel S. Montegue, as well as Canadian trained Chief Assistant Engineer (later Acting Chief Engineer) Lewis Metzler Clement who also became Superintendent of Track.<ref name="judah"/><ref name="lmc"/>

===Land grants===
To allow the companies to raise additional capital, Congress granted the railroads a {{convert|200|ft|m|adj=on|abbr=}} [[Right-of-way (transportation)|right-of-way]] corridor, lands for additional facilities like sidings and maintenance yards. They were also granted alternate [[section (land)|sections]] of government-owned lands—{{convert|6400|acre|ha}} per mile (1.6&nbsp;km)—for {{convert|10|mi|km}} on both sides of the track, forming a [[Checkerboarding (land)|checkerboard pattern]]. The railroad companies were given the odd-numbered sections while the federal government retained the even-numbered sections. The exception was in cities, at rivers, or on non-government property.<ref name="walton">{{cite book |last=Walton |first=Gary M. |author2=Rockoff, Hugh |title=History of the American Economy |edition=10th |year=2005 |publisher=South-Western |location=United States |isbn=0324226365 |pages=313–314 |chapter=Railroads and Economic Change}}</ref> The railroads sold bonds based on the value of the lands, and in areas with good land like the Sacramento Valley and Nebraska<ref>Ambrose, Stephen, 2000, p. 376.</ref> sold the land to settlers, contributing to a rapid settlement of the West.<ref>[https://web.archive.org/web/20050228222737/http://memory.loc.gov/cgi-bin/displayPhoto.pl?path=/award/mhsdalad/120000/&topImages=120033r.jpg&topLinks=120033v.jpg&displayProfile=1 Map of Land Grants to Railroads] linked to archived version, page not available as of February 2023. Originally accessed 2009</ref>{{verify source|date=October 2016}} The total area of the land grants to the Union Pacific and Central Pacific was larger than the area of the state of Texas: federal government land grants totaled about 130,000,000 acres, and state government land grants totaled about 50,000,000 acres.<ref>The Silent Spikes: Chinese Laborers and the Construction of North American Railroads, comp. and ed. Huang Annian, trans. Zhang Juguo (n.p.: China Intercontinental Press, 2006), p. 36.</ref>{{verify source|date=February 2023}}

It was far from a given that the railroads operating in the thinly-settled west would make enough money to repay their construction and operation. If the railroad companies failed to sell the land granted them within three years, they were required to sell it at prevailing government price for homesteads: {{convert|1.25|$/acre|$/ha|2}}. If they failed to repay the bonds, all remaining railroad property, including trains and tracks, would revert to the U.S. government.{{citation needed|date=October 2016}} To encourage settlement in the west, [[37th United States Congress|Congress]] (1861–1863) passed the [[Homestead Acts]] which granted an applicant {{convert|160|acre|ha}} of land with the requirement that the applicant improve the land. This incentive encouraged thousands of settlers to move west.<ref>{{Cite web |date=2022-09-13 |title=Homestead Act: 1862 Date & Definition |url=https://www.history.com/topics/american-civil-war/homestead-act |access-date=2025-01-03 |website=HISTORY |language=en}}</ref>

In return for the land grants, the railroads were required to haul government personnel and cargo at significantly reduced rates (generally half of the normal rate).  In addition, the land was granted in a checkerboard fashion, with the government retaining every other section.  The land that the government retained typically doubled in value as a result of the railroad being built.  The land grants were a good deal for the government.<ref>Holbrook, Stewart H.  ''The Story of American Railroads,'' pp. 156-7, 161-2, Bonanza Books, New York, New York, 1947.</ref><ref>Locklin, D. Philip.  ''Economics of Transportation,'' pp. 134, 136-7, Richard D. Irwin, Inc., Homewood, Illinois, 1972.</ref>

The government guaranteed loans to several Pacific railroads, which were all paid off by 1899 ($63 million in principal, and $105 million in interest).  After receiving rate discounts of approximately 50% on government personnel and cargo for 80 years (including during two world wars), Congress finally discontinued the rate reductions at the end of World War II.  The land grants had been more than paid for (several times over).<ref>Holbrook, Stewart H.  ''The Story of American Railroads,'' pp. 156-7, 161-2, Bonanza Books, New York, New York, 1947.</ref><ref>Locklin, D. Philip.  ''Economics of Transportation,'' pp. 134, 136-7, Richard D. Irwin, Inc., Homewood, Illinois, 1972.</ref>

===Railroad self-dealing===
The federal legislation lacked adequate oversight and accountability. The two companies took advantage of these weaknesses in the legislation to manipulate the project and produce extra profit for themselves. Despite the generous subsidies offered by the federal government, the railroad capitalists knew they would not turn a profit on the railroad business for many months, possibly years. They determined to make a profit on the construction itself. Both groups of financiers formed independent companies to complete the project, and they controlled management of the new companies along with the railroad ventures. This self-dealing allowed them to build in generous profit margins paid out by the railroad companies. In the west, the four men heading the Central Pacific chose a simple name for their company, the "Contract and Finance Company." In the east, the Union Pacific selected a foreign name, calling their construction firm "Crédit Mobilier of America."<ref name="klein"/> The latter company was later implicated in a far-reaching scandal which would greatly affect the railroad's purpose, described later.

Also, the lack of federal oversight provided both companies with incentives to continue building their railroads past one other, since they were each being paid, and receiving land grants, based on how many miles of track they laid, even though only one track would eventually be used. This tacitly-agreed profiteering activity was captured (probably accidentally) by Union Pacific photographer [[Andrew J. Russell]] in his images of the Promontory Trestle construction.<ref>{{cite book|title=This Radical Land: A Natural History of American Dissent|first=Daegan|last=Miller|publisher=The University of Chicago Press|date=2018}}</ref>

===Labor and wages===
{{Hatnote|See this list for names of [[List of Union Pacific railroad civil engineers (1863–1869)|Union Pacific civil engineers]] (1863–1869)}}
{{See also|Chinese Labor Strike of 1867}}

Many of the [[civil engineer]]s and surveyors who were hired by the Union Pacific had been employed during the [[American Civil War]] to repair and operate the over {{convert|2000|mi|km}} of railroad line the [[U.S. Military Railroad]] controlled by the end of the war. The Union Pacific also utilized their experience repairing and building [[truss bridge]]s during the war.<ref>{{cite book |title=Military Bridges: With Suggestions for New Expedients and Constructions for Crossing Streams and Chasms; Including, Also, Designs for Trestle and Truss Bridges for Military Railroads, Adapted Especially to the Wants of the Service in the United States |url=https://books.google.com/books?id=vKZBAAAAIAAJ&pg=PP9 |access-date=August 1, 2013 |via=[[Google Books]] |last1 = Haupt|first1 = Herman|year = 1864}}</ref> Most of the semi-skilled workers on the Union Pacific were recruited from the many soldiers discharged from the [[Union Army|Union]] and [[Confederate Army|Confederate]] armies along with emigrant [[Irish Americans|Irishmen]].<ref>[https://www.pbs.org/wgbh/americanexperience/features/general-article/tcrr-uprr/ Workers of the Union Pacific Railroad] {{Webarchive|url=https://web.archive.org/web/20170323071331/https://www.pbs.org/wgbh/americanexperience/features/general-article/tcrr-uprr/ |date=March 23, 2017 }} accessed March 28, 2013.</ref>

[[File:San Francisco Pacific Railroad Bond WPRR 1865.jpg|thumb|upright=1.15|right|Pacific Railroad Bond, City and County of San Francisco, 1865]]
After 1864, the Central Pacific Railroad received the same Federal financial incentives as the Union Pacific Railroad, along with some construction bonds granted by the state of California and the city of San Francisco. The Central Pacific hired some Canadian and European civil engineers and surveyors with extensive experience building railroads, but it had a difficult time finding semi-skilled labor. Most Caucasians in California preferred to work in the mines or agriculture. The railroad experimented by hiring local emigrant Chinese as manual laborers, many of whom were escaping the poverty and terrors of the war (especially the [[Punti–Hakka Clan Wars]]) in the [[Siyi|Sze Yup districts]] in the [[Pearl River Delta]] of [[Guangdong]] province in China.<ref name="Chang Fishkin 2019">{{cite book |last1=Chang |first1=Gordon H |last2=Fishkin |first2=Shelley Fisher |title=The Chinese and the iron road: Building the transcontinental railroad |date=2019 |publisher=Stanford University Press |location=Stanford, CA |isbn=978-1503608290}}</ref>{{rp|7}}<ref name="chang">{{cite book |last1=Chang |first1=Gordon H |title=Ghosts of Gold Mountain: The epic story of the Chinese who built the transcontinental railroad |date=2019 |publisher=Houghton Mifflin Harcourt |location=Boston |isbn=978-1328618573}}</ref>{{rp|15–37}} When they proved themselves as workers, the CPRR from that point forward preferred to hire Chinese, and even set up recruiting efforts in [[Guangdong|Canton]].<ref name="Kraus Chinese 1969"/> Despite their small stature<ref>Reef, Catherine "Working in America", p. 79. New York: Infobase Publishing, 2007.</ref> and lack of experience, the Chinese laborers were responsible for most of the heavy manual labor since only a very limited amount of that work could be done by animals, simple machines, or black powder. The railroad also hired some [[black people]] escaping the aftermath of the American Civil War.<ref>{{cite web |title=Picture of black workers on the CPR |url=http://cprr.org/Museum/Exhibit/_anthony_7148.html |access-date=May 1, 2013 }}</ref> Most of the [[Black people|black]] and white workers were paid $30 per month and given food and lodging. Most Chinese were initially paid $31 per month and provided lodging, but they preferred to cook their own meals. In 1867 the CPRR raised their wage to $35 (equivalent to ${{Inflation|US|35|1867|fmt=c|r=-1}} in {{Inflation-year|US}}) per month after a strike.<ref name="Kraus Chinese 1969">{{cite journal |last=Kraus |first=George |title=Chinese Laborers and the Construction of the Central Pacific |journal=Utah Historical Quarterly |year=1969 |volume=37 |issue=1 |pages=41–57 |doi=10.2307/45058853 |jstor=45058853 |s2cid=254449682 |url=http://cprr.org/Museum/Last_Spike_is_Driven.pdf |archive-url=https://ghostarchive.org/archive/20221009/http://cprr.org/Museum/Last_Spike_is_Driven.pdf |archive-date=2022-10-09 |url-status=live }}</ref><ref>Harris, Robert L., "The Pacific Railroad&nbsp;–&nbsp;Unopen". ''The Overland Monthly,'' September 1869. pp. 244–252.</ref><ref name=Crocker>{{cite book|title=Central Pacific Railroad: Statement Made to the President of the United States, and Secretary of the Interior, of the Progress of the Work|date=October 10, 1865|publisher=H.S. Crocker & Company|location=Sacramento|pages=12}}</ref> CPRR came to see the advantage of good workers employed at low wages: "Chinese labor proved to be Central Pacific's salvation."<ref name="white 2011">{{cite book |last1=White |first1=Richard |title=Railroaded: The transcontinentals and the making of modern America |date=2011 |publisher=W W Norton & Co |location=New York |isbn=978-0393061260 |quote=Chinese labor proved to be Central Pacific's salvation.}}</ref>{{rp|30}}