This is my favorite period of US history to read about.

> "As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business. Railroad owners often made more money on construction, land and mineral rights than they did on operating the tracks themselves."

To elaborate:

- The people who ran the railroads would also own the companies constructing the railroads. They would charge ridiculous fees and profit at the expense of shareholders and creditors when they inevitably went bankrupt. In the Credit Mobilier case, tens of millions of (1860) dollars in government money given to the Union Pacific ended up in the hands of the construction company Credit Mobilier because construction costs were inflated by a factor of 2. Of course, some congressmen also secretly had stakes in Credit Mobilier. The looting at the Union Pacific puts PDVSA to shame!

- Land grant gamesmanship: "Land grants to railroads were made in broad belts along the proposed route. Within these belts the railroads were allowed to choose alternate mile-square sections in checkerboard fashion. But until they determined the precise location of their tracks and decided which sections were the choicest selections, the railroads withheld all the land from other users"

- The fact that the people running the railroads were often promoters and had none of their own money at stake resulted in highly inefficient routes being built. They didn't care because they got paid either way, and in fact preferred more construction even if it made the company less profitable.

- Routinely diluting investors to nothing.

- Bankruptcy plans that favored shareholders and directors over creditors (JP Morgan's restructuring plan for the Erie).

The "Erie War" is a combination of a lot of these that is just insane:

It's also worth noting that while there were plenty of opportunists and promoters there were people who were interested in actually building economical railroads like Vanderbilt and the lesser known Ned Harriman.

Also lots of interesting parallels to how privatization in post Soviet states unfolded. Arguably, in the long run (in both cases), the more "rational" operators who weren't just looting and bankrupting ended up with control of the major assets. Though you could also say that in the case of Russia guys like Deripaska got their start from looting.

Article doesn't mention this, but the previous year, 1872, the there was a massive financial panic due to equine influenza, which brought the transport system to a halt. Which could be a good reason for overinvestment in "iron horses"
My perception of the history of long-distance American railroads (not ones that were built for a specific task like connecting a mine to a market) is that many of them -- maybe even most of them -- were failures in their first iteration. After going bankrupt and ruining a lot of investors, others bought the assets at fire-sale prices, and the opportunity to avoid the massive capital outlay of actually building the lines is what made them profitable in the long run.
Railroads are critical infrastructure and need to be public. They are massively mismanaged, inefficient and that's all on purpose.
Antecedents from the UK include the Railway Mania of the 1840s[0] and (to a lesser extent) the Canal Mania of the 1790s to 1810s[1].



If only we could be investing so much in railroads once again!
Railroads’ early days is what I think of in this current early days of crypto/blockchain. So many scams, but the innovation is there waiting to be utilised well.

“As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business”

When you owe the bank enough money, and you can't pay... you don't have a problem. The bank has a problem.
The article is overly-hard on Jay Cooke. He was just getting started on the NPR when ...

The 1873 Depression started with the Vienna Stock Exchange. Article completely fails to mention Oakes Ames, the Lincoln-recruited boss of the Union Pacific Railroad, which precipated the Crédit Mobilier scandal (i.e. charging the US $94M for the $50M railroad.)

Today a monument to Ames and his brother still exists on the empty open plains of southern Wyoming: a 60x60x60-foot granite pyramid, 20 miles from Laramie. The UP board hired 85 men to build it in 1875; President Hayes attended the dedication ceremony.

Tangentially related, but if you're into videogames, the really old Sid Meyer's "Railroad Tycoon" was a game that made me so curious about these barons, and made me learn a lot about trains and the 1800s US.
For those into board games, financial misconduct of early american railroad companies inspired the renown game "1830: The Game of Railroads and Robber Barons" and the 18xx game series.
Here is real journalism about these kind of humans.


    Gordon says. “We get crashes on Wall Street about every 20 years, because that’s how long it takes people to forget what happened the last time. A generation of new guys think they’re as smart as they come, and then it turns out that they’re human, like the rest of us.”
Sounds familiar, just can’t put my finger on it.
> It was like selling to crypto investors today

this is like saying that electricity was like crypto.

Railroads had an undeniable economic value. So did all the optical fiber that was laid during the dot-com boom. Eventually it got used.

I have fiber to my house now. Crypto, on the other hand, is more like 8-track tape. Or laser disks.