Chapter 16 The Era of Reconstruction, 1865–1877
Democratic Party in the South and worked tirelessly to end what they saw as an era of “negro misrule.”
By 1877, they had succeeded in bringing about the “redemption” of the South, effectively destroying the
dream of Radical Reconstruction.
Although Ulysses S. Grant won a second term in the presidential election of 1872, the Republican grip
on national political power began to slip in the early 1870s. Three major events undermined Republican
control. First, in 1873, the United States experienced the start of a long economic downturn, the result of
economic instability in Europe that spread to the United States. In the fall of 1873, the bank of Jay Cooke
& Company failed to meet its financial obligations and went bankrupt, setting off a panic in American
financial markets. An economic depression ensued, which Democrats blamed on Republicans and which
lasted much of the decade.
Second, the Republican Party experienced internal squabbles and divided into two factions. Some
Republicans began to question the expansive role of the federal government, arguing for limiting the size
and scope of federal initiatives. These advocates, known as Liberal Republicans because they followed
classical liberalism in championing small government, formed their own breakaway party. Their ideas
changed the nature of the debate over Reconstruction by challenging reliance on federal government help
to bring about change in the South. Now some Republicans argued for downsizing Reconstruction efforts.
Third, the Grant administration became mired in scandals, further tarnishing the Republicans while
giving Democrats the upper hand. One scandal arose over the siphoning off of money from excise taxes
on whiskey. The “Whiskey Ring,” as it was called, involved people at the highest levels of the Grant
administration, including the president’s personal secretary, Orville Babcock. Another scandal entangled
Crédit Mobilier of America, a construction company and part of the important French Crédit Mobilier
banking company. The Union Pacific Railroad company, created by the federal government during the
Civil War to construct a transcontinental railroad, paid Crédit Mobilier to build the railroad. However,
Crédit Mobilier used the funds it received to buy Union Pacific Railroad bonds and resell them at a huge
profit. Some members of Congress, as well as Vice President Schuyler Colfax, had accepted funds from
Crédit Mobilier in return for forestalling an inquiry. When the scam became known in 1872, Democratic
opponents of Reconstruction pointed to Crédit Mobilier as an example of corruption in the Republican-
dominated federal government and evidence that smaller government was better.
The Democratic Party in the South made significant advances in the 1870s in its efforts to wrest political
control from the Republican-dominated state governments. The Ku Klux Klan, as well as other
paramilitary groups in the South, often operated as military wings of the Democratic Party in former