The Union Pacific Railroad was the nation’s largest corporation and the Central Pacific the second largest, but as the transcontinental railroad was constructed, their business affairs were conducted in a very convoluted manner. Constructing the railroad was such a gigantic and highly risky venture that very few invested in railroad stock.
Despite enormous land grants and construction incentives from the U.S. government, both companies struggled under enormous financial burdens. Both corporations funneled most of their profits to private stockholders of their construction companies, (UP’s Financial Mobilier and CP’s Charles Crocker Contract and Finance Company.) Delivering huge dividends through their construction entities enabled those entities to lure investments from stockholders. Both railroads amassed terrific debts, often leaving a trail, rife with unpaid bills and charges of graft and corruption.
“Brigham Young, leader of the Mormons, was easily the biggest buyer ($50,000 in cash of Union Pacific stock), and the only one to pay in full, for his five shares, which made him the UP’s first—and for a long time only—stockholder “in good standing.”
“Brigham Young was a six-foot, two-hundred-pound individual, quite tall and heavyset by mid-nineteenth-century standards. He had a commanding presence. “He was a firm supporter of the benefits of having a transcontinental railroad. As it was, he founded Salt Lake City and made it and his Mormon religion into a great city and religion. In the process he played a major role in building the UP and CP. Pg. 278
In 1867, “As the railroad got closer to Salt Lake City, Young said, “This gigantic work will increase intercourse, and it is to be hoped, soften prejudices and hold this country together. As the head of the church and the power behind politics in a territory that was heavily Mormon, Young had nothing to fear as he well knew. If it was not true that nothing happened in Utah until Young had given it his blessing, it almost was. Pg 280
“By the spring of 1868, the UP was beginning to push across Wyoming. The UP’s need for competent, trustworthy workers was critical. For the Mormons, meanwhile, with lots of young men who were eager for work and desperately short of money, the spring brought another plague of grasshoppers…(that) were consuming their newly planted crops.’
Brigham and the Mormons were actively wooed by both railroads. They had much to offer, given their strategic position and their ready resources in manpower. Doc Durant, President of the UP, sent Young a telegram, asking for the help of the Mormons in building the railroad. “The telegram to Young began, ‘Are you disposed to take contract for a portion or all our grading between head of Echo Canyon and Salt Lake if so please name price per cubic yard.’ If Young’s replay was affirmative, Doc said he would send Reed and Seymour to Salt Lake to arrange details. “so that work may be commenced at once.” Pg 282 The contract was quickly negotiated, signed and work completed. But that didn’t mean cash would be forthcoming. While the Mormons’ work was high quality, getting paid for the work was an entirely different matter. When payment was slow, Brigham and other church leaders advanced funds to pay expenses, but Union Pacific continually refused to pay, causing huge problems for church leaders who had urged members’ participation. The sad truth is that the railroad literally had no money.
Meanwhile, the UP’s construction entity, “Credit Mobilier had been paying enormous dividends to their stockholders, paying over $12.8 million in cash, plus $4 million in UP stock, bringing the total stock distributed since 1867 to $28.8 million.’
“To Brigham Young this was outrageous. Beginning in January and continuing through the year, he would dun Doc to pay up. ‘I have expended all my available funds in forwarding the work,” he wrote on January 16. “The men are very clamorous for their pay,” Young informed Durant.’ Pg 294
“The UP had no money, but it did have equipment left over and Young was desperate to have a branch line, to be owned and controlled by the Mormons, running from Ogden to Salt Lake City. Finally, in September, 1869 a deal was struck. The UP gave the Mormons four thousand tons of steal rail ($480,000), 144 tons of spikes ($20,000), thirty-two tons of bolts ($5,600), four first-class passenger cars ($5,000 each), second-class cars, mail cars, flatcars, and flatcars. The total value that Young signed for was $599,460. The Mormons got started on their railroad immediately and had it in service in a few months.”
Source: “Nothing Like It In the World by Stephen E. Ambrose.