Thomas Alexander Scott . Engraving from a photograph by F . Gutekunst , author ’ s collection .
Trouble Ahead
The glow soon faded from the St . Louis Bridge Company and its securities . Far from opening in December 1871 , the first trains crossed in May 1874 . Maddening obstacles slowed the work : a tornado , Eads ’ s perfectionism , difficulties in procuring quality steel and problems fabricating the components . Those issues triggered bitter conflicts with the prime contractor responsible for erecting the superstructure : the Keystone Bridge Company , covertly controlled by Tom Scott .
The delays demolished the promises of Eads ’ s 1869 prospectus . As problems metastasized , shareholders were dunned for 100 % of their stock subscriptions , not the 40 % originally envisioned . Even that proved insufficient . In September 1873 , Eads was in London seeking fresh capital from banker Morgan . He came through , making cash loans of £ 90,000 a month for three months , adding $ 1.5 million in exposure for the bank .
The new money came with strict deadlines for completing the arches , targets met with just hours to spare . Once the arches were up , Morgan believed ( correctly ) that he could make a market for a $ 2 million issue of the bridge company ’ s second mortgage bonds . Those proceeds would pay off his cash loans . Eads ’ s 1869 prospectus had promised the seconds as gifts to stockholders . By 1873 , they became a lifeline to complete the bridge .
Through it all , Morgan proved a stalwart backer of his far-off bridge . Not that he had much choice ; no other financier
With the bridge ’ s steel superstructure much delayed , many St . Louisans chose to walk across the frozen Mississippi in December 1872 . Engraving by E . A . Abbey , “ Ice Bridge ,” Harper ’ s Weekly , January 18 , 1873 , 52 .
would go near it . If he shut off the cash , the half-built structure would fetch little in a foreclosure sale .
Then the Panic of 1873 wounded the entire American economy . By November 1873 , 55 railroads had defaulted on their bonds . As the economy slowed , unemployment among urban workers reached 25 %.
Against this dismal backdrop , the St . Louis Bridge opened for business in July 1874 — and Eads left for a greener pasture . His latest bold engineering project sought to improve navigation through the Mississippi River Delta .
At that moment , Scott switched from ally to enemy . After becoming president of the Pennsylvania Railroad in May 1874 , he engineered a boycott of the bridge by the eastern carriers reaching St . Louis . His motive is unknown , but inference suggests one compelling answer . If driven into foreclosure , the bridge could become PRR property at a bargain price . Scott , however , had not reckoned on the Morgans .
In 1869 , Eads predicted the bridge would cost $ 4 million . The actual figure totaled $ 12.5 million . The approaches to the structure ( including a cross-town tunnel ) added $ 1.5 million . It all translates to $ 422 million in today ’ s currency — with two-thirds underwritten or lent directly by J . S . Morgan & Company .
Eads built it . Morgan paid for it . And British investors bought it . But few customers used it . In the first year , a daily average of just 64 loaded freight cars and no passenger trains crossed the bridge .
Scott ’ s boycott succeeded , thanks to a self-interested ally . The Wiggins Ferry Company had long enjoyed a monopoly ( also granted by Illinois legislators ) on freight and passenger traffic crossing the Mississippi on its boats and barges . Wiggins , eastern railroads and St . Louis merchants simply continued the arrangements that had worked adequately for years .
James Eads moved on , but Junius Morgan had to stick with the bridge . His British investors would spurn his new offerings if this one failed to pay . To retain their faith in the bank and the bridge , J . S . Morgan & Company made cash loans to cover the interest due its bondholders — over $ 280,000 a year . In December 1874 , with the US economy collapsing , the bonds of the St . Louis Bridge traded on the London Stock Exchange at par — testament to the banker ’ s reputation .
By then , he had investigated matters personally . During his September 1874 visit to America , the St . Louis Bridge took a worrying primacy . Letters to his partners conveyed bad news : “ There does not seem to be anyone in the business with brains enough to organize some plans ” to manage the financial obligations while developing the rail business . “ I am thoroughly despondent .”
A month later , he saw the great
Missouri Historical Society , N 45660 www . MoAF . org | Summer 2024 | FINANCIAL HISTORY 35