Railroads were expensive to build and operate, and the Civil War had resulted in the destruction of a great deal of track. After the war, North Carolina’s railroads asked the state for help. Believing that the state needed better transportation, Republicans agreed. The trouble was the way the legislature helped the railroads.

The legislature issued state bonds and let the railroads sell the bonds themselves. A bond is a certificate sold by a government. The certificate states that the government (the issuer of the bond) will pay back the value of the bond, with interest, at some later date. Bonds can be bought and sold, and the bondholder is the person who holds the bond or certificate at any given time.

Essentially, then, the state was agreeing to pay back railroads’ debts. In 1868, the state issued about $28 million in bonds — a tremendous amount of money for the time. Taking on that much debt damaged the state’s credit, and people doubted that the state could ever repay it. As the bonds were bought and sold, the price of the bonds dropped.

At this point, the state had to issue more bonds to pay off the first bonds. The constitution of 1868 prohibited that; it said that the state could not issue new bonds if the old ones were selling at less than face value (the original purchase price) unless a special tax was raised to pay the interest. The constitution was designed to protect the state’s credit and reputation, and the Republican legislature ignored this provision.

Worse, some politicians and businessmen used the bonds as a way to make money for themselves. The money from the sale of bonds was supposed to be used only for building railroads, but complicated frauds channeled the bond money to individuals for private purposes. There’s no reason to believe that most legislators and businessmen were involved in these schemes, but enough were that Conservatives succeeded in painting Republican rule as a period of wild spending, fraud, and corruption. In 1870, they regained control of the state legislature.

Below is an excerpt from an April 1969 edition of  Daily Sentinel, a newspaper published in Raleigh. 

The history of legislation in North Carolina would form one of the strangest books that has ever been published. It would reveal an amount of fraud, venality and recklessness perfectly unparalleled, we venture to say, in the history of legislation in any age or country. If ever before there was a time demanding the most scrupulous and watchful economy, it is the present. If there was ever a time when the most careful reform and the most jealous retrenchment were imperatively necessary it is the present. And yet, in the face of wide-spread ruin and dismay; in the face of repeated failures in crops and a disorganized system of labor; with depression and anxiety in every house-hold, the members of the present Legislature have exhibited the utmost disregard of the actual condition of our people, and have wantonly and wickedly and with malice prepense concocted a system of taxation, that not only outrages public opinion, but fastens, it may be, for all time, burdens perfectly unbearable and destructive upon the landed proprietors of the StateThat is, people who owned land. The way the sentence is written ("landed proprietors of the state") suggests that the writer believed that landowners were the owners, or proprietors, not only of the state's land but of the state itself. (Think of the Lords Proprietors.) If landowners were the rightful rulers of the state, where did that leave freed people, poor whites, and even owners of urban businesses and factories?.

These representatives of the people – these public servants "so called" – these incapable and indifferent legislators, met in Raleigh and deliberately set to work to despoil the State and add ten fold distress to her people. They enter upon a plan of spoliation as effective in its results as was the "bummingA "bummer" is a bum, someone who gets along by borrowing or taking from others or by living on charity. Soldiers in William T. Sherman's army in 1864–65 called themselves "Sherman's Bummers" because they lived off the land as they marched, taking supplies from homes and towns." of Sherman’s scoundrels. – They lend themselves to the wildest schemes, listen with itching ears to the rapacious demands of wild cat combinationsA "wildcat" business is one that has a chance of great profit but also stands a good risk of losing everything. "Combination" suggests business working together, but the writer probably means to suggest that they were scheming secretly or inappropriately., wink at corruption and profligacy, indulge in vice and immorality, and conspire to paralyze the best interests of the State, to drive away capital, to keep capital from coming into the State and to lay taxes that not only can not be borne, but which would require probably a sixth part of the actual wealth of the whole State to pay. Railroad schemes, without number – a continued waste of public funds, and taxes at once oppressive, and thoroughly ruinous are the results of their six months stay in Raleigh. They have done nothing but evil, and are an offense to every just and honest man. They deserve, and they will receive the hearty execration of a long suffering, industrious and frugal people...

We write not of those men in both Houses who had an eye single to the honor, prosperity and credit of the State – men who stood up defiantly and continually against fraud, speculation, corruption and bribery. There were such men and they deserve well of the people. They tried faithfully to avert the wrong. Their recorded votes show that they were friends of the people, lovers of country, men of fidelity and honor. But we refer to those harpies, some from Northland, but many "native and to the manor born"To the manor born" refers to someone born to the manor or, in this case, the plantation -- someone born to rule. This is a common misuse of a phrase from Shakespeare's Hamlet, meaning born to or grown up with a particular manner or custom.," who preyed upon our people, and with cormorant appetites essayed to suck the very life blood from the emaciated form of our old Mother. Carpet-baggers who came unbidden and who have fairly battened upon the political garbage that has been thrown to them; obsequious time servers and trimmersA trimmer is someone who trims between opposing political parties, moving back and forth as suits his interest. This use of the word trim comes from sailing. who have played the sycophants for filthy lucre – these are the creatures who have wickedly conspired against the people of North Carolina, and have sought to ruin them by the most oppressive taxation – these are the creatures who amid the troubling of the political waters have been spawned in our Legislative halls, and who ought to be denounced and shunned as you would a leperLeprosy is a disease that causes skin lesions, which in their severe form can be raised scaly rashes. Throughout most of history, lepers have been shunned -- avoided -- because of their appearance and because people feared infection. In the Bible, lepers are frequently referred to as unclean people who must be avoided and are used to represent the least desirable of all people.. They are political lepers and taint the whole political atmosphere.