During the second term, scandal rocked the Grant administration. Before the second inauguration came the exposure of Crédit Mobilier, a scheme to siphon off the profits made in building the transcontinental railroad, which soiled both Vice President Colfax and his successor, Henry Wilson. Regardless of the fact that the bribery of congressmen took place under Johnson and involved Democrats also, airing the details in 1872 stung the Grant administration. Congressman Benjamin F. Butler's scandalous salary grab paired a reasonable pay increase for government officials (the president's salary was doubled to $50,000) with an outrageous provision making the increase retroactive for two years for congressmen, including those defeated in the last election.
Grant's persistent problems in making suitable appointments were exacerbated by his increased self-confidence after reelection. In this spirit, he re-appointed his brother-in-law as collector of the port of New Orleans although the appointee's initial term had drawn criticism. Charges of corruption against "Boss" Alexander R. Shepherd, director of public works for the District of Columbia, did not prevent Grant from appointing him territorial governor. When Chase died, Grant first asked Conkling to serve as chief justice, influenced both by gratitude for his political support and Julia Grant's belief that black robes would set off Conkling's blond curls. When Conkling declined, Grant went to the opposite extreme by approaching Fish, who also declined. Grant finally nominated Attorney General George H. Williams, whose name was withdrawn after discovery that he had used government funds to supply his wife's carriage. Grant next nominated Caleb Cushing of Massachusetts, whose name was then withdrawn because Cushing had written a letter to Jefferson Davis in March 1861, recommending someone for a position in the Confederate government. Grant eventually came up with Morrison R. Waite of Ohio, who served ably.
Unfortunately, Grant had to make a great many appointments. In all, twenty-five men served in seven cabinet posts, and the frequency of changes increased as the administration reached its conclusion: there were five new department heads in 1876. Even good appointments backfired, as Grant learned when he chose Benjamin F. Bristow as secretary of the treasury in 1874. Scrupulously honest, Bristow pursued the trail of fraud wherever it led, even into the White House. His investigators uncovered the "Whiskey Ring," which schemed to avoid taxes on liquor by bribing the agents who should have collected them; some of the payments ended up in Republican party coffers. An especially odious degree of corruption existed in St. Louis, involving men who had known Grant before the Civil War and who traded on his friendship. Informed of this, Grant wrote, "Let no guilty man escape if it can be avoided."
Further probing revealed that Grant's secretary Babcock had dealings with some of the chief culprits in St. Louis. Grant's belief in Babcock's innocence was so strong that he initially refused to believe that one of the ringleaders in St. Louis was guilty, simply because the man was a close friend of Babcock. Even convictions in St. Louis did not shake this faith. As evidence emerged of Babcock's role, Grant believed that political manipulators had devised a plot to strike at him through his trusted secretary, and he blamed Bristow. Grant acquiesced when Babcock, who had retained military status, demanded a court of inquiry to forestall indictment in St. Louis, but the grand jury acted too quickly and refused to surrender its papers to a military tribunal. When Babcock went to the city to stand trial, Grant intended to accompany him to testify in his behalf. Dissuaded by his cabinet, Grant instead prepared a deposition in Babcock's defense before Chief Justice Waite. Although Babcock eventually won acquittal, enough evidence emerged to require his dismissal from the White House, a move Grant made tardily and only after prodding by Fish. Grant eventually forced Bri-stow to resign, blaming him unfairly for the ruin of Babcock.
A worse scandal followed. William W. Belknap, who had succeeded Rawlins as secretary of war, was charged with receiving bribes from a man who had been appointed to a lucrative tradership at a western army post and who, in turn, let another man actually conduct the business in return for regular cash payments. The case was complicated by the fact that the money paid to Belknap was given to his wife, who died in 1874, and when Belknap married his deceased wife's sister, the payments went to her. As Congress investigated, Belknap realized that he must resign and hurried to the White House one morning, babbling something to the president about protecting a woman's honor, words inducing Grant to accept the resignation immediately. Two Republican senators hurried in, too late, to advise Grant not to accept the resignation. That afternoon the House voted to impeach Belknap. In the ensuing trial, the fact that Grant had accepted the resignation before impeachment played a role in acquittal; even then the Senate voted 37–25 for conviction, which required a two-thirds vote. During the trial, Mrs. Grant continued to receive Mrs. Belknap at the White House; afterward both Belknaps called on the Grants, who received them cordially and continued to express belief in the former secretary's innocence.
Grant believed that the prosecution of Belknap was politically motivated, and surely the fact that 1876 was a presidential election year had not escaped the notice of the Democratic majority in the House, which also investigated the minister to Great Britain, Robert C. Schenck, who had used his position to peddle stock in a dubious silver mine to English investors, and Secretary of the Navy George M. Robeson, who was accused of profiting by awarding contracts to a specially favored firm. Grant had already nipped a budding third-term movement in 1875 by writing a public letter, carrying it to the mailbox himself, and then informing his wife, who would have tried to dissuade him. Republicans nominated Hayes, whose two terms as governor of Ohio gave him a reputation for integrity and kept him away from Washington. Grant somewhat resented Hayes for running as a reformer but consoled himself with the thought that Bristow had not been nominated. The scandals of the Grant administration, however salient in retrospect, appear to have had little influence on the presidential election.