KAY GALLANT: A few months later, members of Congress voted a pay raise for themselves and the executive branch of government. The pay raise would be retroactive. This meant the extra money would be paid for the two years already past.

Newspapers and citizens raised a storm of protest. Some lawmakers were afraid they would not be re-elected. So they refused to accept the pay raise.

Within six months, another shameful incident was uncovered. This one involved Jay Cooke, one of the richest bankers in the country. He also was a good friend of President Grant.

In eighteen sixty-nine, Cooke began raising money to build another railroad across America's west. He planned to sell one hundred million dollars' worth of railroad bonds.

Many people invested all the money they had in Cooke's railroad. But Cooke was unable to sell as many bonds as he expected. Soon, his banks had no money left. They could return no money to the thousands of people who had bought railroad bonds.

HARRY MONROE: People hurried to other banks to withdraw their savings. Within hours, many of these other banks had to close. They, too, were out of money. Within a month, more than five thousand banks across the country failed and closed their doors. This created an economic crisis.

The New York Stock Exchange closed for ten days. Factories closed. Thousands of people lost their jobs. Investigations showed that many of the banks that failed had violated banking laws. The laws often were not enforced, because so many bankers had given money to the ruling Republican Party.