In 1872-73 Canadian syndicates were competing for the Pacific railway charter. The "Pacific Scandal" destroyed Sir Hugh Allen's Canadian Pacific Railway Company and forced the resignation of the Conservative government in November of 1873.
Under Alexander Mackenzie the railway was to be built piecemeal because a world depression had set in. British Columbia had become a province in 1871 after the Canadian government had promised to take over the colony's debt, to provide a federal subsidy much larger than the population should have warranted, and to begin a railway in two years that was to be finished in ten. Now the province was threatening succession. A section of railway line from Winnipeg to Pembina and the U.S. border would connect with American railways to St. Paul, Minnesota and Chicago, Illinois.
Macdonald was back as head of government in 1878. A new railway charter was negotiated with George Stephen, president of the Bank of Montreal, and Donald Smith, Chief Commissioner of the Hudson Bay Company, who had been envoy to the Red River previously. Smith already had control of an American line having a feeder line to Winnipeg. With the two men's finances and railway knowledge it was back to the old plan of "a railway from coast to coast."
Quebec viewed the West as poverty-stricken. She encouraged charity but discouraged emigration. Manitoba was far away and memories of the 1869-70 Red River events remained. Ontario, though, seemed enthusiastic about the West.
