HISTORY OF THE GREAT AMERICAN FORTUNES

CHAPTER VI

THE ENTAILING OF THE VANDERBILT FORTUNE



The richer Commodore Vanderbilt grew, the more closely he clung to his old habits of intense parsimony.  Occasionally he might ostentatiously give a large sum here or there for some religious or philanthropic purpose, but his general undeviating course was a consistent meanness.  In him was united the petty bargaining traits of the trading element and the lavish capacities for plundering of the magnate class.  While defrauding on a great scale, pocketing tens of millions of dollars at a single raid, he would never for a moment overlook the leakage of a few cents or dollars.  His comprehensive plans for self-aggrandizement were carried out in true piratical style ;  his aims and demands were for no paltry prize, but for the largest and richest booty.  Yet so ingrained by long development was his faculty of acquisition, that it far passed the line of a passion and became a monomania.


VANDERBILT’S CHARACTERISTICS.


To such an extent did it corrode him that even when he could boast his $100,000,000 he still persisted in haggling and huckstering over every dollar, and in tricking his friends in the smallest and most underhand ways.  Friends in the true sense of the word he had none ;  those who regarded themselves as such were of that thrifty, congealed disposition swayed largely by calculation.  But if they expected to gain overmuch by their intimacy, they were generally vastly mistaken ;  nearly always, on the contrary, they found themselves caught in some unexpected snare, and riper in experience, but poorer in pocket, they were glad to retire prudently to a safe distance from the old man’s contact.  “ Friends or foes,” wrote an admirer immediately after his death, “were pretty much on the same level in his estimation, and if a friend undertook to get in his way he was obliged to look out for himself.”

On one occasion, it is related, when a candidate for a political office solicited a contribution, Vanderbilt gave $100 for himself, and an equal sum for a friend associated with him in the management of the New York Central Railroad.  A few days later Vanderbilt informed this friend of the transaction, and made a demand for the hundred dollars.  The money was paid over.  Not long after this, the friend in question was likewise approached for a political contribution, whereupon he handed out $100 for himself and the same amount for Vanderbilt.  On being told of his debt, Vanderbilt declined to pay it, closing the matter abruptly with this laconic pronunciamento, “ When I give anything, I give it myself.”  At another time Vanderbilt assured a friend that he would “ carry ” one thousand shares of New York Central stock for him.  The market price rose to $115 a share and then dropped to $90.  A little later, before setting out to bribe an important bill through the Legislature — a bill that Vanderbilt knew would greatly increase the value of the stock — the old magnate went to the friend and represented that since the price of the stock had fallen it would not be right to subject the friend to a loss.  Vanderbilt asked for the return of the stock and got it.  Once the bill became a law, the market price of the stock went up tremendously, to the utter dismay of the confiding friend who saw a profit of $80,000 thus slip out of his hands into Vanderbilt’s.1

In his personal expenses Vanderbilt usually begrudged what he looked upon as superfluous expense.  The plainest of black clothes he wore, and he never countenanced jewelry.  He scanned the table bill with a hypercritical eye.  Even the sheer necessities of his physical condition could not induce him to pay out money for costly prescriptions.  A few days before his death his physician recommended champagne for some internal trouble.  “ Champagne ! ” exclaimed Vanderbilt with a reproachful look, “ I can’t afford champagne.  A bottle every morning !  Oh, I guess sody water’ll do ! ”

From all accounts it would seem that he diffused about him the same forbidding environment in his own house.  He is described as stern, obstinate, masterful and miserly, domineering his household like a tyrant, roaring with fiery anger whenever he was opposed, and flying into fits of fury if his moods, designs and will were contested.  His wife bore him thirteen children, twelve of whom she had brought up to maturity.  A woman of almost rustic simplicity of mind and of habits, she became obediently meek under the iron discipline he administered.  Croffut says of her that she was “ acquiescent and patient under the sway of his dominant will, and in the presence of his trying moods.”  He goes on :  “ The fact that she lived harmoniously with such an obstinate man bears strong testimony to her character.”2

If we are to place credibility in current reports, she was forced time and time again to undergo the most violent scenes in interceding for one of their sons, Cornelius Jeremiah.  For the nervous disposition and general bad health of this son the father had not much sympathy ;  but the inexcusable crime to him was that Cornelius showed neither inclination nor capacity to engage in a business career.  If Cornelius had gambled on the stock exchange his father would have set him down as an exceedingly enterprising, respectable and promising man.  But he preferred to gamble at cards.  This rebellious lack of interest in business, joined with dissipation, so enraged the old man that he drove Cornelius from the house and only allowed him access during nearly a score of years at such rare times as the mother succeeded in her tears and pleadings.  Worn out with her long life of drudgery, Vanderbilt’s wife died in 1868 ;  about a year later the old magnate eloped with a young cousin, Frank A. Crawford, and returning from Canada, announced his marriage, to the unbounded surprise and utter disfavor of his children.


THE OLD MAGNATE’S DEATH.


An end, however, was soon coming to his prolonged life.  A few more years of money heaping, and then, on May 10, 1876, he was taken mortally ill.  For eight months he lay in bed, his powerful vitality making a vigorous battle for life ;  two physicians died while in the course of attendance on him ;  it was not until the morning of January 4, 1877, that the final symptoms of approaching death came over him.  When this was seen the group about his bed emotionally sang :  “ Come, Ye Sinners, Poor and Needy,” “ Nearer, My God, To Thee,” and “ Show Ye Pity, Lord.”  He died with a conventional religious end of which the world made much ;  all of the proper sanctities and ceremonials were duly observed ;  nothing was lacking in the piety of that affecting deathbed scene.  It furnished the text for many a sermon, but while ministerial and journalistic attention was thus eulogistically concentrated upon the loss of America’s greatest capitalist, not a reference was made in church or newspaper to the deaths every year of a host of the lowly, slain in the industrial vortex by injury and disease, and too often by suicide and starvation.  Except among the lowly themselves this slaughter passed unprotested and unnoticed.


Even as Vanderbilt lay moribund, speculation was busy as to the disposition of his fortune.  Who would inherit his aggregation of wealth ? The probating of his will soon disclosed that he had virtually entailed it.  About $90,000,000 was left to his eldest son, William H., and one-half of the remaining $15,000,000 was bequeathed to the chief heir’s four sons.3  A few millions were distributed among the founder’s other surviving children, and some comparatively small sums bequeathed to charitable and educational institutions.  The Vanderbilt dynasty had begun.


PERSONALITY OF THE CHIEF HEIR.


William Henry Vanderbilt, (1821-85), He Inherited the Bulk of His Fathers Fortune and Doubled It

At this time William H. Vanderbilt was fifty-six years old.  Until 1864 he had been occupied at farming on Staten Island ;  he lived at first in “ a small, square, plain two-story house facing the sea, with a lean-to on one end for a kitchen.”  The explanation of why the son of a millionaire betook himself to truck farming lay in these facts :  The old man despised leisure and luxury, and had a correspondingly strong admiration for “ self-made ” men.  Knowing this, William H. Vanderbilt made a studious policy of standing in with his father, truckling to his every caprice and demand, and proving that he could make an independent living.  He is described as a phlegmatic man of dull and slow mental processes, domestic tastes and of kindly disposition to his children.  His father (so the chronicles tell) did not think that he “ would ever amount to anything,” but by infinite plodding, exacting the severest labor from his farm laborers, driving close bargains and turning devious tricks in his dealings, he gradually won the confidence and respect of the old man, who was always pleased with proofs of guile.  Croffut gives a number of instances of William’s craft and continues :  “From his boyhood he had given instant and willing submission to the despotic will of his father, and had made boundless sacrifices to please him.  Most men would have burst defiantly away from the repressive control and imperious requirements ;  but he doubtless thought that for the chance of becoming heir to $100,000,000 he could afford to remain long in the passive attitude of a distrusted prince.” (sic.)

The old autocrat finally modified his contemptuous opinion, and put him in an executive position in the management of the New York and Harlem Railroad.  Later, he elevated him to be a sort of coadjutor by installing him as vice president of the New York Central Railroad, and as an associate in the directing of other railroads.  It was said to be painful to note the exhausting persistence with which William H. Vanderbilt daily struggled to get some perceptions of the details of railroad management.  He did succeed in absorbing considerable knowledge.  But his training at the hands of his father was not so much in the direction of learning the system of management.  Men of ability could always be hired to manage the roads.  What his father principally taught him was the more essential astuteness required of a railroad magnate ;  the manipulation of stocks and of common councils and legislatures ;  how to fight and overthrow competitors and extend the sphere of ownership and control ;  and how best to resist, and if possible to destroy, the labor unions.  In brief, his education was a duplication of his father’s scope of action :  the methods of the sire were infused into the son.

The Original Vanderbilt Homestead Near New Dorp, Staten Island, N.Y.

From the situation in which he found himself, and viewing the particular traits required in the development of capitalistic institutions, it was the most appropriate training that he could have received.  Book erudition and the cultivation of fine qualities would have been sadly out of place ;  his father’s teachings were precisely what were needed to sustain and augment his possessions.  On every hand he was confronted either by competitors who, if they could get the chance, would have stripped him without scruple, or by other men of his own class who would have joyfully defrauded him.  But overshadowing these accustomed business practices, new and startling conditions that had to be met and fought were now appearing.

Instead of a multitude of small, detached railroads, owned and operated by independent companies, the period was now being reached of colossal railroad systems.  In the East the small railroad owners had been well-nigh crushed out, and their properties joined in huge lines under the ownership of a few controlling men, while in the West, extensive systems, thousands of miles long, had recently been built.  Having stamped out most of the small owners, the railroad barons now proceeded to wrangle and fight among themselves.  It was a characteristic period when the railroad magnates were constantly embroiled in the bitterest quarrels, the sole object of which was to outdo, bankrupt and wreck one another and seize, if possible, the others’ property.


THE RISE OF THE FIRST TRUST.


It was these conflicts that developed the auspicious time and opportunity for a change of the most worldwide importance, and one which had a stupendous ultimate purport not then realized.  The wars between the railroad magnates assumed many forms, not the least of which was the cutting of freight rates.  Each railroad desperately sought to wrench away traffic from the others by offering better inducements.  In this cutthroat competition, a coterie of hawk-eyed young men in the oil business, led by John D. Rockefeller, saw their fertile chance.

The drilling and the refining of oil, although in their comparative infancy, had already reached great proportions.  Each railroad was eager to get the largest share of the traffic of transporting oil.  Rockefeller, ruminating in his small refinery at Cleveland, Ohio, had conceived the revolutionary idea of getting a monopoly of the production and distribution of oil, obliterating the middleman, and systematizing and centralizing the whole business.

Then and there was the modern trust born ;  and from the very inception of the Standard Oil Company Rockefeller and his associates tenaciously pursued their design with a combined ability and unscrupulousness such as had never before been known since the rise of capitalism.  One railroad after another was persuaded or forced into granting them secret rates and rebates against which it was impossible to compete.  The railroad magnates — William H. Vanderbilt, for instance — were taken in the fold of the Standard Oil Company by being made stockholders.  With these secret rates the Standard Oil Company was enabled to crush out absolutely a myriad of competitors and middlemen, and control the petroleum trade not only of the United States but of almost the entire world.  Such fabulous profits accumulated that in the course of forty years, after one unending career of industrial construction on the one hand, and crime on the other, the Standard Oil Company was easily able to become owners of prodigious railroad and other systems, and completely supplant the scions of the magnates whom three or four decades before they had wheedled or browbeaten into favoring them with discriminations.


CORPORATE WEALTH AND LABOR UNIONS.


The effects of this great industrial transition were clearly visible by 1877, so much so that two years later, Vanderbilt, more prophetically than he realized, told the Hepburn Committee that “ if this thing keeps up the oil people will own the roads.”  But other noted industrial changes were concurrently going on.  With the upspringing and growth of gigantic combinations or concentrations of capital, and the gradual disappearance of the small factors in railroad and other lines of business, workers were compelled by the newer conditions to organize on large and compact national lines.

At first each craft was purely local and disassociated from other trades unions.  But comprehending the inadequacy and futility of existing separately, and of acting independently of one another, the unions had some years back begun to weld themselves into one powerful body, covering much of the United States.  Each craft union still retained its organization and autonomy, but it now became part of a national organization embracing every form of trades, and centrally officered and led.  It was in this way that the workers, step by step, met the organization of capital ;  the two forces, each representing a conflicting principle, were thus preparing for a series of great industrial battles.

Capital had the wealth, resources and tools of the country ;  the workers their labor power only.  As it stood, it was an uneven contest, with every advantage in favor of capital.  The workers could decline to work, but capital could starve them into subjection.  These, however, were but the apparent differences.  The real and immense difference between them was that capital was in absolute control of the political governing power of the nation, and this power, strange to say, it secured by the votes of the very working class constantly fighting it in the industrial arena.  Many years were to elapse before the workers were to realize that they must organize and vote with the same political solidarity that they long had been developing in industrial matters.  With political power in their hands the capitalists could, and did, use its whole weight with terrific effect to beat down the working class, and nullify most of the few concessions and laws obtained by the workers after the severest and most self-sacrificing struggles.

One of the first memorable battles between the two hostile forces came about in 1877.  In their rate wars the railroad magnates had cut incisively into one another’s profits.  The permanent gainers were such incipient, or fairly well developed, trusts or combinations as the Standard Oil Company.  Now the magnates set about asserting the old capitalist principle of recouping themselves by forcing the workers to make up their losses.

But these deficits were merely relative.  Practically every railroad had issued vast amounts of bonds and watered stock, on which fixed charges and dividends had to be paid.  Judged by the extent of this inflated stock, the profits of the railroads had certainly decreased.  Despite, however, the prevailing cutthroat competition, and the slump in general business following the panic of 1873, the railroads were making large sums on their actual investment, so-called.  Most of this investment, it will be recalled, was not private money but was public funds, which were later stolen by corrupt legislation.  It was shown before the Hepburn Committee in 1879, as we have noted, that from 1869 the New York Central Railroad had been making sixteen, and perhaps more than twenty per cent., on the actual cost of the road.

Moreover, apart from the profits from ordinary traffic, the railroads were annually fattening on immense sums of public money gathered in by various fraudulent methods.  One of these — and is well worth adverting to, for it exists to a greater degree than ever before — was the robbery of the people in the transportation of mails.  By a fraudulent official construction, in 1873, of the postal laws, the railroads without cessation have cheated huge sums in falsifying the weight of mail carried, and since that time have charged ten times as much for mail carrying as have the express companies (the profits of which are very great) for equal haulage.  But these are simply two phases of the postal plunder.  In addition to the regular mail payments, the Government has long paid to the railroad companies an extra allowance of $6,250 a year for the rent of each postal car used, although official investigation has proved that the whole cost of constructing such a car averages but from $2,500 to $5,000.  In rent alone, five millions a year have been paid for cars worth, all told, about four millions.  From official estimates it would clearly seem that the railroads have long cheated the people out of at least $20,000,000 a year in excess rates — a total of perhaps half a billion dollars since 1873.  The Vanderbilt family have been among the chief beneficiaries of this continuous looting.4  Occasionally the postal officials have made pretences at stopping the plunder, but with no real effect.


THE GREAT STRIKE OF 1877.


Making a loud and plaintive outcry about their declining revenues, some of the railroad systems prepared to assess their fictitious losses upon the workers by cutting down wages.  They had already reduced wages to the point of the merest subsistence ;  and now they decreed that wages must again be curtailed ten cents on every dollar.  The Baltimore and Ohio Railroad, then in the hands of the Garrett family, with a career behind it of consecutive political corruption and fraud, in some ways surpassing that of the Vanderbilts, led in reducing the wages of its workers.  The Pennsylvania Railroad followed, and then the Vanderbilts gave the order for another reduction.

At once the Baltimore and Ohio Railroad employes retaliated by declaring a strike ;  the example was followed by the Pennsylvania men.  In order to alienate the sympathy of the general public and to have a pretext for suppressing the strike with armed force, the railroads, it is quite certain, instigated riots at Martinsburg, W. Va., and at Pittsburg.  Troops were called out and the so-called mobs were fired on, resulting in a number of strikers being killed and many wounded.

That the railroads deliberately destroyed their own property and then charged the culpability to the strikers, was common report.  So conservative an authority as Carroll D. Wright, for a long tine United States Commissioner of Labor, tells of the railroad agents setting a large number of old, decayed, worthless freight cars at Pittsburg on fire, and accusing the strikers of the act.  He further tells of the Pennsylvania Railroad subsequently extorting millions of dollars from the public treasury on the ground that the destruction of these cars resulted from riot.  Wright says that from all that he has been able to gather, he believes the reports of the railroads manufacturing riots to have been true.5  Vanderbilt acted with greater wisdom than his fellow magnates.  Adopting a conciliatory stand, he averted a strike on his lines by restoring the old rate of wages and by other mollifying measures.

He was now assailed from a different direction.  The long gathering anger and enmity of the various sections of the middle class against the corporate wealth which had possessed itself of so dictatorial a power, culminated in a manner as instructive as it was ineffective.

In New York State, the Legislature was prevailed upon, in 1879, to appoint an investigating committee.  Vanderbilt and other railroad owners, and a multitude of complaining traders were haled up to give testimony ;  the stock-jobbing transactions of Vanderbilt and Gould were fully and tediously gone into, as also were the methods of the railroads in favoring certain corporations and mercantile establishments with secret preferential freight rates.

Not in the slightest did this long-drawn investigation have any result calculated to break the power of the railroad owners, or their predominant grip upon governmental functions.

The magnate class preferred to have no official inquiries ;  there was always the annoying possibility that in some State or other inconvenient laws might be passed, or harrassing legal actions begun ;  and while revocation or amendment of these laws could be put through subsequently when the popular excitement had died away, and the suits could be in some way defeated, the exposures had an inflaming effect upon a population as yet ill-used to great one-man power of wealth.  But if the middle class insisted upon action against the railroad magnates, there was no policy more suitable to these magnates than that of being investigated by legislative committees.  They were not averse to their opponents amusing themselves, and finding a vent for their wrath, in volumes of talk which began nowhere and ended nowhere.  In reply to charges, the magnates could put in their skillful defense, and inject such a maze of argument, pettifoggery and technicalities into the proceedings, that before long the public, tired of the puzzle, was bound to throw up its hands in sheer bewilderment, unable to get any concrete idea of what it was all about.


FRAUD BECOMES RESPECTABLE WEALTH.


So the great investigation of 1879 passed by without the least deterrent effect upon the constantly-spreading power and wealth of such men as Vanderbilt and Gould.  Every new development revealed that the hard-dying middle class was being gradually, yet surely, ground out.  But the investigation of 1879 had one significant unanticipated result.

What William H. Vanderbilt now did is well worth noting.  As the owner of four hundred thousand shares of New York Central stock he had been rabidly denounced by the middle class as a plutocrat dangerous to the interests of the people.  He decided that it would be wise to sell a large part of this stock ;  by this stroke he could advantageously exchange the forms of some of his wealth, and be able to put forward the plausible claim that the New York Central Railroad, far from being a one-man institution, was owned by a large number of investors.  In November, 1879, he sold through J. Pierpont Morgan more than two hundred thousand shares to a syndicate, chiefly, however, to British aristocrats.

This sale in no way diminished his actual control of the New York Central Railroad ;  not only did he retain a sufficient number of shares, but he owned an immense block of the railroad’s bonds.  The sale of the stock brought him $35,000,000.  What did he do with this sum ?  He at once reinvested it in United States Govermnent bonds.  Thus, the proceeds of a part of the stock obtained by outright fraud, either by his father or himself, were put into Government bonds.  This surely was a very sagacious move.  Stocks do not have the solid, honest air that Government bonds do ;  nothing is more finely and firmly respectable than a Government bondholder.

From the blackmailer, corruptionist and defrauder of one generation to the stolid Government bondholder of the next, was not a long step, but it was a sufficient one.  The process of investing in Government bonds Vanderbilt continued ;  in a few years he owned not less than $54,000,000 worth of four per cents.  In 1884 he had to sell $10,000,000 of them to make good the losses incurred by his sons on the Stock Exchange, but he later bought $10,000,000 more.  Also he owned $4,000,000 in Government three and one-half per cent. bonds, many millions of State and city bonds, several millions of dollars in manufacturing stocks and mortgages, and $22,000,000 of railroad bonds.  The same Government of which his father had defrauded millions of dollars now stood as a direct guarantee behind at least $70,000,000 of his bonded wealth, and the whole population of the United States was being taxed to pay interest on bonds, the purchase of which was an outgrowth of the theft of public money committed by Cornelius Vanderbilt.

In the years following his father’s death, William H. Vanderbilt found no difficulty in adding more extended railroad lines to his properties, and in increasing his wealth by tens of millions of dollars at a leap.


MORE RAILROADS ACQUIRED.


The impact of his vast fortune was well-nigh resistless.  Commanding both financial and political power, his money and resources were used with destructive effect against almost every competitor standing in his way.  If he could not coerce the owners of a railroad, the possession of which he sought, to sell to him at his own price, he at once brought into action the wrecking tactics his father had so successfully used.

The West Shore Railroad, a competing line running along the west bank of the Hudson River, was bankrupted by him, and finally, in 1883, bought in under foreclosure proceedings.  By lowering his freight rates he took away most of its business ;  through a series of years he methodically caused it to be harrassed and burdened by the exercise of his great political power ;  he thwarted its plans and secretly hindered it in its application for money loans or other relief.  Other means, open and covert, were employed to insure its ruination.  When at last he had driven its owners into a corner, he calmly stepped in and bought up its control cheaply, and then turned out many millions of dollars of watered stock.

He attempted to break in upon the territory traversed by the Pennsylvania Railroad by building a competing line, the South Pennsylvania Railroad.  In the construction of this road he had an agreement with the Philadelphia and Reading Railroad, an intense competitor of the Pennsylvania ;  and, as a precedent to building his line, he obtained a large interest in the Reading Railroad.  Out of this arrangement grew a highly important sequence which few then foresaw — the gradual assumption by the Vanderbilt family of a large share of the ownership and control of the anthracite coal mines of Pennsylvania.

Vanderbilt, aiming at sharing in the profits from the rich coal, oil and manufacturing traffic of Pennsylvania, went ahead with his building of the South Pennsylvania line.  But there was an easy way of getting millions of dollars before the road was even opened.  This was the fraudulent one, so widely practiced, of organizing a bogus construction company, and charging three and four times more than the building of the railroad actually cost.  Vanderbilt got together a dummy construction company composed of some of his clerks and brokers, and advanced the sum, about $6,500,000, to build the road.  In return, he ordered this company to issue $20,000,000 in bonds, and the same amount in stock.  Of this $40,000,000 in securities, more than $30,000,000 was loot.6

If, however, Vanderbilt anticipated that the Pennsylvania Railroad would remain docile or passive while his competitive line was being built, he soon learned how sorely mistaken he was.  This time he was opposing no weak, timorous or unsophisticated competitors, but a group of the most powerful and astute organizers and corruptionists.  Their methods in Pennsylvania and other States were exactly the same as Vanderbilt’s in New York State ;  their political power was as great in their chosen province as his in New York.  His incursion into the territory they had apportioned to themselves for exploitation was not only resented but was fiercely resisted.  Presently, overwhelmed by the crushing financial and political weapons with which they fought him, Vanderbilt found himself compelled to compromise by disposing of the line to them.


THE SEQUEL TO A “GENTLEMEN’S AGREEMENT.”


Vanderbilt’s methods and his duplicity in the disposition of this project were strikingly revealed in the court proceedings instituted by the State of Pennsylvania.  It appeared from the testimony that he had made a “ gentlemen’s agreement ” with the Reading Railroad, the bitterest competitor of the Pennsylvania Railroad, for a close alliance of interests.  Vanderbilt owned eighty-two thousand shares of Reading stock, much of which he had obtained on this agreement.  Strangely confiding in his word, the Reading management proceeded to expend large sums of money in building terminals at Harrisburg and elsewhere to make connections with his proposed South Pennsylvania Railroad.

The Pennsylvania Railroad, however, set about retaliating in various effective ways.  At this point, J. Pierpont Morgan — whose career we shall duly describe — stepped boldly in.  Morgan was Vanderbilt’s financial agent ;  and it was he, according to his own testimony on October 13, 1885, before the court examiner, who now suggested and made the arrangements between Vanderbilt and the Pennsylvania Railroad magnates, by which the South Pennsylvania Railroad was to become the property of the Pennsylvania system, and the Reading Railroad magnates were to be as thoroughly thrown over by as deft a stroke of treachery as had ever been put through in the business world.

To their great astonishment, the Reading owners woke up one morning to find that Vanderbilt and his associates had completely betrayed them by disposing of a majority of the stock of the partly built South Pennsylvania line to the Pennsylvania Railroad system for $5,600,000 in three per cent. railroad debenture bonds.  It is interesting to inquire who Vanderbilt’s associates were in this transaction.  They were John D. Rockefeller, William Rockefeller, D.O. Mills, Stephen B. Elkins, William C. Whitney and other founders of large fortunes.  For once in his career, Vanderbilt met in the Pennsylvania Railroad a competitor powerful enough to force him to compromise.

Elsewhere, Vanderbilt was much more successful.  Out through the fertile wheat, corn and cattle sections of Wisconsin, Minnesota, Iowa, Dakota and Nebraska ran the Chicago and Northwestern Railroad, a line 4,000 miles long which had been built mostly by public funds and land grants.  Its history was a succession of corrupt acts in legislatures and in Congress, and comprised the usual process of stock watering and exploitation.  By a series of manipulations ending in 1880, Vanderbilt secured a controlling interest in this railroad, so that he had a complete line from New York to Chicago, and thence far into the Northwest.  During these years he also secured control of other railroad lines.


HE EXPANDS IN SPLENDOR.


Palaces built by William Vanderbilt, And Resided in by Him and His Descendants. It was at this time that he, in accord with the chrysalid tendency manifested by most other millionaires, discarded his long-followed sombre method of life, and invested himself with a gaudy magnificence.  On Fifth avenue, at Fifty-first and Fifty-second streets, he built a spacious brown-stone mansion.  In reality it was a union of two mansions ;  the southern part he planned for himself, the northern part for his two daughters.  For a year and a half more than six hundred artisans were employed on the interior ;  sixty stoneworkers were imported from Europe.  The capaciousness, the glitter and the cluttering of splendor in the interior were regarded as of unprecedented lavishness in the United States.

All of the luxury overloading these mansions was, as was well known, the fruit of fraud piled upon fraud ;  it represented the spoliation, misery and degradation of the many ;  but none could deny that Vanderbilt was fully entitled to it by the laws of a society which decreed that its rulers should be those who could best use and abuse it.  And rulers must ever live imperiously and impressively ;  it is not fitting that those who command the resources, labor and Government of a nation should issue their mandates from pinched and meager surroundings.  Mere pseudo political rulers, such as governors and presidents, are expected to be satisfied with the plain, unornamental official residences provided by the people ;  thereby they keep up the appearance of that much-bespoken republican simplicity which is part of the mask of political formulas.  Luckily for themselves, the financial and industrial rulers are bound by no circumscribing tradition ;  hence they have no set of buckramed rules to stick close to for fear of an indignant electorate.

The same populace that glowers and mutters whenever its political officials show an inclination to pomp, regards it as perfectly natural that its financial and industrial rulers should body forth all of the most obtrusive evidences of grandeur.  Those Vanderbilt twin palaces, still occupied by the Vanderbilt family, were appropriately built and fitted, and are more truly and specifically historic as the abode of Government than official mansions ;  for it is the magnates who have in these modern times been the real rulers of nations ;  it is they who have usually been able to decide who the political rulers should be ;  political parties have been simply their adjuncts ;  the halls of legislation and the courts their mouthpieces and registering bureaus.  Theirs has been the power, under cover though it has lurked, of elevating or destroying public officials, and of approving or cancelling legislation.  Why, indeed, should they not have their gilded palaces ?


A SUDDEN TRANSFORMATION.


The President of the United States lived in the subdued simplicity of the White House.  But William H. Vanderbilt ate in a great, lofty dining room, twenty-six by thirty-seven feet, wrought in Italian Renaissance, with a wainscot of golden-hued, delicately-carved English oak around all four sides, and a ceiling with richly-painted hunting-scene panels.  When he entertained it was in a vast drawing-room, palatially equipped, its walls hung with flowing masses of pale red velvet, embroidered with foliage flowers and butterflies, and set with crystals and precious stones.

It was his art gallery, however, which flattered him most.  He knew nothing of art, and underneath his pretentions cared less, for he was a complete utilitarian ;  but it had become fashionable to have an elaborate art gallery, and he forthwith disbursed money right and left to assemble an aggregation of paintings.

He gave orders to agents for their purchase with the same equanimity that he would contracts for railroad supplies.  And, as a rule, the more generous in size the canvasses, the more satisfied he was that he was getting his money’s worth ;  art to him meant buying by the square foot.  Not a few of the paintings unloaded upon him were, despite their high-sounding reputations, essentially commonplace subjects, and flashy and hackneyed in execution ;  but he gloried in the celebrity that came from the high prices he was decoyed into paying for them.  For one of Meissionier’s paintings, “ The Arrival at the Chateau,” he paid $40,000, and on one of his visits to Paris he enriched Meissionier to the extent of $188,000 for seven paintings.  Not until his corps of art advisers were satisfied that a painter became fashionably talked about, could Vanderbilt be prevailed upon to buy examples of his work.  There was something intensely magical in the ease and cheapness with which he acquired the reputation of being a “ connoisseur of art.”  Neither knowledge nor appreciation were required ;  with the expenditure of a few hundred thousand dollars he instantaneously transformed himself from a heavy-witted, uncultured money hoarder into the character of a surpassing “ judge and patron of art.” And his pretensions were seriously accepted by the uninformed, absorbing their opinions from the newspapers.


“THE PUBLIC BE DAMNED.”


If he had discreetly comported himself in other respects he might have passed tolerably well as an extremely public-spirited and philanthropic man.  After every great fraud that he put through he would usually throw out to the public some ostentatious gift or donation.  This would furnish a new ground to the sycophantic chorus for extolling his fine qualities.  But he happened to inherit his father’s irascibility and extreme contempt for the public whom he exploited.  Unfortunately for him, he let out on one memorable occasion his real sentiments.  Asked by a reporter why he did not consider public convenience in the running of his trains, he blurted out, “ The public be damned !”

It was assuredly a superfluous question and answer ;  but expressed so sententiously, and published, as it was, throughout the length and breadth of the land, it excited deep popular resentment.  He was made the target for general denunciation and execration, although unreasonably so, for he had but given candid and succinct utterance to the actuating principle of the whole capitalist class.  The moral of this incident impressed itself sharply upon the minds of the masterly rich, and to this day has greatly contributed to the politic manner of their exterior conduct.  They learned that however in private they might safely sneer at the mass of the people as created for their manipulation and enrichment, they must not declare so publicly.  Far wiser is it, they have come to understand, to confine spoliation to action, while in outward speech affirming the most mellifluous and touching professions of solicitude for public interests.


ADDS $100,000,000 IN SEVEN YEARS.


But William H. Vanderbilt was little affected by this outburst of public rage.  He could well afford to smile cynically at it, so long as no definite move was taken to interfere with his privileges, power and possessions.  Since his father’s death he had added fully $100,000,000 to his wealth, all within a short period.  It had taken Commodore Vanderbilt more than thirty years to establish the fortune of $105,000,000 he left.  With a greater population and greater resources to prey upon, William H. Vanderbilt almost doubled the amount in seven years.  In January, 1883, he confided to a friend that he was worth $194,000,000.  “ I am the richest man in the world,” he went on.  “ In England the Duke of Westminster is said to be worth $200,000,000, but it is mostly in land and houses and does not pay two per cent.”7  In the same breath that he boasted of his wealth he would bewail the ill-health condemning him to be a victim of insomnia and indigestion.

Having a clear income of $10,350,000 a year, he kept his ordinary expenses down to $200,000 a year.  Whatever an air of indifference he would assume in his grandee rôle of “art collector,” yet in most other matters he was inveterately closefisted.  He had a delusion that “ everybody in the world was ready to take advantage of him,” and he regarded “ men and women, as a rule, as a pretty bad lot.”8    This incident — one of many similar incidents narrated by Croffut — reveals his microscopic vigilance in detecting impositions :

When in active control of affairs at the office he followed the unwholesome habit of eating the midday lunch at his desk, the waiter bringing it in from a neighboring restaurant.

He paid his bill for this weekly, and he always scrutinized the items with proper care.  “Was I here last Thursday ?” he asked of a clerk at an adjoining desk.

“No, Mr. Vanderbilt ;  you stayed at home that day.”

“So I thought,” he said, and struck that day from the bill.  Another time he would exclaim, sotto voce, “ I didn’t order coffee last Tuesday,” and that item would vanish.

Up to the very last second of his life his mind was filled with a whirl of business schemes ;  it was while discussing railroad plans with Robert Garrett in his mansion, on December 8, 1885, that he suddenly shot forward from his chair and fell apoplectically to the floor, and in a twinkling was dead.  Servants ran to and fro excitedly ;  messengers were dispatched to summon his sons ;  telegrams flashed the intelligence far and wide.

The passing away of the greatest of men could not have received a tithe of the excitement and attention caused by William H. Vanderbilt’s death.  The newspaper offices hotly issued page after page of description, not without sufficient reason.  For he, although untitled and vested with no official power, was in actuality an autocrat ;  dictatorship by money bags was an established fact ;  and while the man died, his corporate wealth, the real director and center, to a large extent, of government functions, survived unimpaired.

He had abundantly proved his autocracy.  Law after law had he violated ;  like his father he had corrupted and intimidated, had bought laws, ignored such as were unsuited to his interests, and had decreed his own rules and codes.  Progressively bolder had the money kings become in coming out into the open in the directing of Government.  Long had they prudently skulked behind forms, devices and shams ;  they had operated secretly through tools in office, while virtuously disclaiming any insidious connection with politics.  But no observer took this pretence seriously.  James Bryce, fresh from England, delving into the complexities and incongruities of American politics at about this time, wrote that “ these railway kings are among the greatest men, perhaps I may say, the greatest men in America,” which term, “ greatest,” was a ludicrously reverent way of describing their qualities.  “ They have power,” he goes on in the same work, “ more power — that is, more opportunity to make their will prevail, than perhaps any one in political life except the President or the Speaker, who, after all, hold theirs only for four years and two years, while the railroad monarch holds his for life.”9  Bryce was not well enough acquainted with the windings and depths of American political workings to know that the money kings had more power than President or Speaker, not nominally, but essentially.  He further relates how when a railroad magnate traveled, his journey was like a royal progress ;  Governors of States and Territories bowed before him ;  Legislatures received him in solemn session ;  cities and towns sought to propitiate him, for had he not the means of making or marring a city’s fortunes ?  “ You cannot turn in any direction in American politics,” wrote Richard T. Ely a little later, “ without discovering the railway power.  It is the power behind the throne.  It is a correct popular instinct which designates the leading men in the railways, railroad magnates or kings. ... Its power ramifies in every direction, its roots reaching counting rooms, editorial sanctums, schools and churches which it supports with a part of its revenues, as well as courts and Legislatures.” . . .10


HIS DEATH A NOTABLE EVENT.


Vanderbilt’s death, as that of one of the real monarchs of the day, was an event of transcendent importance, and was treated so.  The vocabulary was ransacked to find adjectives glowing enough to describe his enterprise, foresight, sagacity and integrity.  Much elaborated upon was the fiction that he had increased his fortune by honest, legitimate means — a fiction still disseminated by those shallow or mercenary writers whose trade is to spread orthodox belief in existing conditions.  The underlying facts of his career and methods were purposely suppressed, and a nauseating sort of panegyric substituted.  Who did not know that he had bribed Legislature after Legislature, and had constantly resorted to conspiracy and fraud ?  Not one of his eulogists was innocent of this knowledge ;  the record of it was too public and palpable to justify doubts of its truth.  The extent of his possessions and the size of his fortune aroused wonderment, but no effort was made to contrast the immense wealth bequeathed by one man wih the dire poverty on every hand, nor to connect those two conditions.

At the very time his wealth was being inventoried at $200,000,000, not less than a million wage earners were out of employment,” while the millions at work received the scantiest wages.  Nearly three millions of people had been completely pauperized, and, in one way or another, had to be supported at public expense.  Once in a rare while, some perceptive and unshackled public official might pierce the sophistries of the day and reveal the cause of this widespread poverty, as Ira Steward did in the fourth annual report of the Massachusetts Bureau of Statistics of Labor for 1873.

“ It is the enormous profits,” he pointedly wrote, “made directly upon the labor of the wage classes, and indirectly through the results of their labor, that, first, keeps them poor, and, second, furnishes the capital that is finally loaned back to them again “ at high rates of interest.  Unquestionably sound and true was this explanation, yet of what avail was it if the causes of their poverty were withheld from the active knowledge of the mass of the wage workers ?  It was the special business of the newspapers, the magazines, the pulpit and the politicians to ignore, suppress or twist every particle of information that might enlighten or arouse the mass of people ;  if these agencies were so obtuse or recalcitrant as not to know their expected place and duty at critical times, they were quickly reminded of them by the propertied classes.  To any newspaper owner, clergyman or politician showing a tendency to radicalism, the punishment came quickly.  The newspaper owner was deprived of advertisements and accommodations, the clergyman was insidiously hounded out of his pulpit by his own church associations, the funds of which came from men of wealth, and the politician was ridiculed and was summarily retired to private life by corrupt means.  As for genuinely honest administrative officials (as distinguished from the apparently honest) who exposed prevalent conditions and sought to remedy them in their particular departments, they were eventually got rid of by a similar campaign of calumny and corrupt influences.


HIS FRAUDS IN EVADING TAXES.


As in the larger sense all criticism of conditions was systematically smothered, so were details of the methods of the rich carefully obscured or altogether passed by in silence.  At Vanderbilt’s death the newspapers laved in gorgeous descriptions of his mansion.  Yet apart from the proceeds of his great frauds, the amounts out of which he had cheated the city and State in taxation were alone much more than enough to have paid for his splendor of living.  Like the Astors, the Goelets, Marshall Field and every other millionaire without exception, he continuously defrauded in taxes.

Chauncey the Puke We have seen how the Vanderbilts seized hold of tens of millions of dollars of bonds by fraud.  Certain of their railroad stocks were exempted from individual taxation, but railroad bonds ranked as taxable personal property.  Year after year William H. Vanderbilt had perjured himself in swearing that his personal property did not exceed $500.000.  On more than this amount he would not pay.  When at his death his will revealed to the public the proportions of his estate, the New York City Commissioners of Assessments and Taxes made an apparent effort to collect some of the millions of dollars out of which he had cheated the city.  It was now that the obsequious and time-serving Depew, grown gray and wrinkled in the retainership of the Vanderbilt generations, came forward with this threat :  “ He informed us,” testified Michael Coleman, president of the commission, “ that if we attempted to press too hard he would take proceedings by which most of the securities would be placed beyond our reach so that we could not tax them.  The Vanderbilt family could convert everything they had into non-taxable securities, such as New York Central, Government and city bonds, Delaware and Lackawanna, and Delaware and Western Railroad stocks, and pay not a dollar provided they wished to do so.”12

The Vanderbilt estate compromised by paying the city a mere part of the sum owed.  It succeeded in keeping the greatest part of its possessions immune from taxation, in doing which it but did what the whole of the large propertied class was doing, as was disclosed in further detailed testimony before the New York Senate Committee on Cities in 1890.


HIS WILL TRANSMITS $200,000,000.


Unlike his father, William H. Vanderbilt did not bequeath the major portion of his fortune to one son.  He left $50,000,000 equally to each of his two sons, Cornelius and William K. Vanderbilt.  Supplementing the fortunes they already had, these legacies swelled their individual fortunes to approximately $100,000,000 each — about the same amount as their father had himself inherited.  The remaining $100,000,000 was thus disposed of in William H. Vanderbilt’s will :  $40,000,000, in railroad and other securities, was set apart as a trust fund, the income of which was to be apportioned equally among each of his eight children.  This provided them each with an annual income of $500,000.  In turn, the principal was to descend to their children, as they should direct by will.  Another $40,000,000 was shared outright among his eight children.  The remaining $20,000,000 was variously divided :  the greater part to his widow ;  $2,000,000 as an additional gift to Cornelius ;  $1,000,000 to a favorite grandson ;  sundry items to other relatives and friends, and about $1,000,000 to charitable and public institutions.

He was buried in a mausoleum costing $300,000, which he himself had ordered to be built at New Dorp, Staten Island ; and there to-day his ashes lie, splendidly interred, while millions of the living plundered and disinherited are suffered to live in the deadly congestion of miserable habitations.



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1 These and similar anecdotes are to be found incidentally mentioned in a two-rage biography, very laudatory on the whole, in the New York ” “Times,” issue of January 5, 1877.

2 “The Vanderbilts ”: 113.

3 To Cornelius J. Vanderbilt, the Commodore’s “ wayward ” son, only the income derived from $200,000 was bequeathed, upon the condition that he should forfeit even this legacy if he contested the will.  Nevertheless, he brought a contest suit.  William H. Vanderbilt compromised the suit by giving to his brother the income on $1,000,000.  On April 2, 1882, Cornelius J. Vanderbilt shot and killed himself.  Croffut gives this highly enlightening account of the compromising of the suit.
      “ At least two of the sisters had sympathized with ` Cornele’s’ suit, and had given him aid and comfort :  neither of them liking the legatee, and one of them not having been for years on speaking terms with him ;  but now, in addition to the bequests made to his sisters, William H. voluntarily [sic] added $500,000 to each from his own portion.
      “He drove around one evening, and distributed this splendid largess from his carriage, he himself carrying the bonds into each house in his arms and delivering them to each sister in turn.  The donation was accompanied by two interesting incidents.  In one case the husband said, ‘William, I’ve made a quick calculation here, and I find these bonds don’t amount to quite $500,000.  They’re $150 short, at the price quoted today.’  The donor smiled, and sat down and made out his check for the sum to balance.
      “ In another case, a husband, after counting and receipting for the $500,000, followed the generous visitor out of the door, and said, ‘ By the way, if you conclude to give the other sisters any more, you’ll see that we fare as well as any of them, won’t you ?’  The donor jumped into his carriage and drove off without replying, only saying, with a laugh, to his companions, ` Well, what do you think o’ that ?’”—“ The Vanderbilts ”:151-152.

4 Postmaster General Vilas, Annual Report for 1887:56.  In a debate in the United States Senate on February 11, 1905, Senator Pettigrew quoted Postmaster General Wanamaker as saying that “the railroad companies see to it that the representatives in Congress in both branches take care of the interests of the railway people, and that it is practically impossible to procure legislation in the way of reducing expenses.”

5 “ The Battles of Labor ”: 122.  In all, the railroad companies secured approximately $22,000,000 from the public treasury in Pennsylvania as indemnity for property destroyed during these “ riots.”  In a subsequent chapter, the corruption of the operation is described.

6 Van Oss’ “American Railroads As Investments”: 126. Professor Frank Parsons, in his “Railways, the Trusts and the People,” incorrectly ascribes this juggling to Commodore Vanderbilt.

7 Related in the New York “ Times,” issue of December 9, 1885.

8 “ The Vanderbilts ” : 127.

9 “The American Commonwealth,” First Ed.: 515.

10 “ The Independent,” issue of August 28, 1890.

11 “It is probably true,” said Carroll D. Wright in the United States Labor Report for 1886, “that this total (in round numbers 1,000,000) as representing the unemployed at any one time in the United States, is fairly representative.”

12 The New York Senate Committee on Cities, 1890, iii: 2355-2356.