It was Cornelius “The Commodore” Vanderbilt who first created the extraordinary wealth of his family. After entering the world into considerable poverty in 1794, he died the richest man in the United States in 1877, with a railroad network and shipping the main sources of his income. Then his son William carried on making money, and he too was the richest man in the country when he died in 1885. But after that, things went off the rails for the Vanderbilts. Read on to find out how one of America’s most fabulous fortunes evaporated over the years.
10. The Breakers
It may have seemed to the various Vanderbilts that the money tree would never cease to produce its rich fruit. Perhaps this very thought was in the mind of Cornelius Vanderbilt II when he built his enormous Italian Renaissance-style pile in Newport, Rhode Island. He was one of the third generation of wealthy Vanderbilts, having inherited $70 million from his father, William Henry. Boasting 70 rooms and spectacular ocean views, The Breakers was completed in 1895.
And this palatial joint wasn’t even the main residence of Cornelius II and his family; it was merely a summer home. Building the house, though, cost what would be around $150 million today, and while this sum wasn’t enough to break the bank for the Vanderbilts back then, it can be seen as a first extravagant step in their ultimate downfall. Cornelius II only had four years in which to enjoy The Breakers, too, as he died in 1899.
9. Marble House
Ludicrously lavish homes were somewhat of a family trademark, and Cornelius II’s elder brother William Kissam also had his own little construction project. This was Marble House, a Beaux-Arts monster that was purportedly meant to have been a cottage. And as was the case with The Breakers, William’s summer house was in Newport, Rhode Island.
Marble House was costly, too, since William spent a fifth of his $55 million inheritance on its construction, which was completed in 1892. But just like his brother with The Breakers, William didn’t get much time to enjoy his summer residence. He had given it to his wife, Alva, as a birthday present, but she divorced him in 1895 and subsequently took her gift for herself.
8. Buying social cachet
Determined to take what she saw as her rightful position alongside the crème de la crème of New York high society, Alva put on a masquerade ball in spring 1883. And over 1,000 people were invited to her new home, Le Petit Chateau – the Little Castle – on Manhattan’s Fifth Avenue. The residence was far from little, however.
Alva was reputed to have spent $3 million on her housewarming party – a lot of money, but she and her Vanderbilt husband could afford it. However, some believe that this extravagance filtered through to other family members, putting ideas into their heads about how they could quickly unload large amounts of cash. If that’s true, then Alva’s ball was one factor in the depletion of the Vanderbilt fortune.
7. Their railroad business veers off the tracks
One of the principal sources of the Vanderbilt millions was the New York Central Railroad. This vast network of lines joined New York and Boston with the Midwest cities of St. Louis and Chicago, along with many destinations in between. Cornelius, the original creator of the family wealth, grabbed control of the Central Railroad in 1867 after a crafty bout of stock manipulation.
But from the 1920s, the fortunes of the railroad went into decline. Increasing competition from other transport modes such as buses and private automobiles cut into revenues. And the decline gathered pace after World War II with affordable air travel added to the mix of transport options in the ensuing decades. As a result, then, one of the geese that had laid golden eggs for the Vanderbilts sickened and died.
6. Spending instead of earning
To stay wealthy, you have to either keep earning more money than you spend or curtail any frivolous purchases. The original Vanderbilt millionaire, Cornelius, seemed to understand this. So too, it appeared, did his son and main heir William Henry, who managed to double his riches. But other family members who inherited vast sums seemed to have had neither the work ethic nor the business savvy of Cornelius and William.
Indeed, Alva’s ludicrously expensive Fifth Avenue ball in 1893 may have been the catalyst for an avalanche of extravagant spending by the family. For example, George Washington II purchased two Fifth Avenue mansions plus the massive Biltmore House, which was finished in 1895 at a cost of $5 million – or around $146 million now. And George preferred to spend and pursue his pleasures rather than use his money to make more.
5. The death of Alfred Gwynne Vanderbilt
Alfred Gwynne was a member of the fourth generation of the dynasty, born to Cornelius II. And Alfred was one of the industrious family members, since he started out as a clerk with the New York Central Railroad. He had a keen eye for real estate deals, too, as it was he who constructed the Vanderbilt Hotel on Manhattan’s Park Avenue. Sadly, though, he died in 1915 aged 37; he had been a passenger aboard the RMS Lusitania when it was sunk by a German U-boat.
After his death, some of Alfred’s considerable wealth went to his brothers Cornelius “Neily” III and Reginald Claypoole. But while Alfred had been ready to work, Neily and Reginald had no such inclination. Neily and his wife Grace loved spending money and consorting with European royalty; Reginald, on the other hand, was a boozer and gambler who succumbed to cirrhosis in 1925.
4. Squandering it
Neily and Reginald were two of the most profligate of the Vanderbilts, but it was a competitive field. One outstanding spendthrift was Frederick William, who was born in 1856 as another of The Commodore’s grandchildren. And after he’d graduated from Yale, he started out well enough by working for the New York Central Railroad.
But the attractions of having a job seemingly paled after a while, and so Frederick subsequently devoted himself to spending money. His cash went on several properties in New York City, another Vanderbilt mansion in Newport and on Pine Tree Point – a Japanese-style lavish estate in the Adirondacks. And Frederick filled his days with yachting and travel rather than attending to the family business.
As the Vanderbilts built their great wealth in the 19th and early 20th centuries, they were little troubled by tax. However, in 1913 Congress took the radical step of introducing an income tax. Those earning more than $3,000 were therefore required to pay over 1 percent of their income, while earners of $500,000 or more had to give up 6 percent. And World War I saw further increases: tax went up to a punishing 77 percent on incomes over $1 million by 1918.
In theory, the Vanderbilts should have had no problem with paying their taxes given the massive amount of wealth they had. But it was yet another factor that was chipping away at the family millions. And this was at a time when many members of the dynasty were spending money hand over fist – especially on lavish homes.
2. Their extravagant philanthropy
Thanks to their huge wealth, the Vanderbilts were much given to philanthropy. The Commodore had set the ball rolling, having donated $1 million towards the establishment of Vanderbilt University in Nashville, Tennessee. Yet while it seems that many of the later family members were also happy to be philanthropists, they paid less attention to increasing the family wealth in order to sustain this generosity.
And the list of gifts went on. Frederick William gave $500,000 to the Sheffield Scientific School at Yale in 1902. William Kissam also donated large sums to the YMCA and Columbia University, plus $1 million towards the construction of tenement homes in New York City. And so the money went out – but it was not sufficiently replenished.
1. There were too many Vanderbilts
Of course, if you found a dynasty – as Cornelius did in the 19th century – it has a tendency to increase in size with each succeeding generation. And for the family, that meant the wealth was spread increasingly thinly as the years went by. That would have been fine, however, if the later Vanderbilts had dedicated themselves to increasing the family riches rather than just spending the money.
But as we’ve seen, all too many of the 20th century Vanderbilts were a lot better at spending than earning. And by the 1970s, their spectacular wealth was all but gone. In 1973 a family reunion at Vanderbilt University attracted 120 of Cornelius’ descendants, with not a single one of them having seven figures in the bank.