In 1869 Jay Cooke & Company were appointed financial agents of the Northern Pacific Railroad Company. On July 1, 1870, issues of $100,000,000 in 7.3 per cent first mortgage bonds and $100,000,000 in stock were authorized. The bonds were to be sold to the agents at 88; the bulk of the stock was to go to the agents as bonus or to the syndicate interested with them. The same parties agreed to raise $5,000,000 in cash within thirty days, in order to commence the building of the line. This made a fair start possible, and by May, 1873, over five hundred miles had been completed. The situation was nevertheless a difficult one because of the reluctance of capitalists to invest in the new first mortgage bonds. In 1870 extensive plans were made to interest the European markets, but all in vain because of the outbreak of the Franco-Prussian war. In America a similar campaign was not much more successful.[545] The high price asked for the bonds,[546] the uncertain nature of the enterprise, the not altogether ill-founded rumors of extravagance and mismanagement of the construction actually under way, the presidential election of 1872, all hindered rapid sales. Failure to sell bonds meant financial stringency for the Northern Pacific. Operating expenses were high, and the interest on outstanding indebtedness was considerable. On the other hand, earnings were very small. No through business could be secured till the completion of the road at least to the Snake River, and local traffic was yet to be developed. As a result, the company borrowed more and more from Jay Cooke & Co., and that firm soon found itself heavily involved. On September 18, 1873, Jay Cooke & Co. closed its doors. The shock to the railroad was great. The quotations of first mortgage bonds dropped from par to about 11. For a time the company struggled on. In December, 1873, a funding of interest was carried through, whereby all coupons up to and including that of January 1, 1875, were made exchangeable for five-year 7 per cent coupon bonds, convertible into the company’s first mortgage bonds at par, and into the company’s lands at 25 per cent off from the regular prices.[547] In April, 1874, settlement was made with Jay Cooke & Co. by the transfer of the railroad’s first mortgage bonds and other securities.[548] These measures offered only temporary relief. Business was at a standstill throughout the country. Gross earnings for the year ending June 30, 1874, were reported to be $988,131, while $30,780,904 7.3 per cent bonds had been issued, and the floating debt stood at $777,335. The Northern Pacific was not only unable to meet its fixed charges, but was in default by a margin which it was hopeless to attempt to overcome. The original project had completely failed; and the only means of continuing the enterprise seemed to lie in a government guarantee of the railroad’s bonds, or in a reorganization so drastic as to sweep away fixed charges and to give the company a fresh start.