Why did the government give land grants to railroad companies and how did they use them?

To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads.



People Also Ask

At the same time that homesteaders were getting free land from the government, large tracts of land were granted to railroads by both the states and the federal government. The goal was to encourage the railroads to build their tracks where few people lived, and to help settle the country.

MORE DETAILS

The second half of the nineteenth century was the era of railroad land grants. Between 1850 and 1872 extensive cessions of public lands were made to states and to railroad companies to promote railroad construction.

MORE DETAILS

The government loaned a total of $64,623,512 to the transcontinental companies. These loans were for the most part paid back at six percent interest. The law also provided that a company could be given up to twenty sections (a section is a square mile) of land for every mile of track put down.

MORE DETAILS

In 1887 Congress passed the Interstate Commerce Act, making the railroads the first industry subject to federal regulation. Congress passed the law largely in response to decades of public demand that railroad operations be regulated.

MORE DETAILS

To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads.

MORE DETAILS

Although these figures are immense and would appear to suggest that the American railroad system was built largely on the basis of government aid, this is actually not the case. In fact, only 18,738 miles of railroad line were built as a direct result of these land grants and loans.

MORE DETAILS

Approximately 130 million acres were awarded to railroad companies under the Pacific Railroad Act.

MORE DETAILS

The railroad grants helped companies raise the capital they needed to build lines into sparsely settled areas like Nebraska. In exchange, the railways agreed to carry the mail at rates set by Congress and to transport US soldiers and freight without charge.

MORE DETAILS